Your firm’s success depends on finding the right team structure for your accounting and tax practice.
What team structure works best in an accounting practice? Go deep or wide? Ed Chan, co-founder of WIZE Mentoring and founder and non-executive chairman of Chan & Naylor managed exponential growth within his practice and credits his team structure blueprint as one of the most important factors contributing to his success. So we asked him for details.
Here is what we learned but please listen in as Ed Chan explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
How you structure your team is the secret of being able to go beyond $1m per partner. It all comes back to managing traffic flow.
There are two types of traffic – communication and production traffic. They need to be handled by two different types of people. If you are trying to find a person that can do both, you are out for a tough search. And even if you find that rare person who can do both, sooner or later you will need to allocate them to one or the other as your business grows.
Grinder v Minder
You need the grinder to do the work and the minder to talk to clients. Most people fall quite squarely into one or the other. Most grinders hate face-to-face contact with clients.
If you separate between production and communication traffic flow, it will be a lot easier to put people in the right seat on the right bus. Then you don’t need that super star than can do everything.
Grinders are a lot easier to find than minders. In a $1m practice, you might have one client manager (minder) to five grinders. This means that out of the team of six, you only got one out of that six that is hard to find. This way you reduce your difficulty in recruiting staff down to 1 out of the 6. Of course if you are a $2m dollar practice, you have two teams. Each team looking after $1m in fees. Then you got 2 client managers that are difficult to find and you have 10 grinders who are easy to find.
Your fixed overhead (rent, software and support staff etc) and operating costs should not exceed 35% of turnover. Your cost of goods sold should not exceed 40%. This leaves you with an EBIT of 25%.
The partner salary would sit either in COGS (if the practice is still relatively small and the partner is still on the tools) or operating cost (once the partner is off the tools).
The partner only goes into COGS if they charge their hours to a job since they still do the work. This applies to smaller firms. But the ideal is not to have the partner/CEO being hands on. Once you achieve that, the partner’s salary goes into fixed overhead. Partners should be growing the business.
Think of your practice as a manufacturing business. The production is your COGS. Everything else – be it marketing, support staff, office manager, CEO – is fixed overhead.
This is just a bird’s eye overview of what Ed talks about in this episode, but please listen to Ed himself since he explains all this in a lot more detail.
In the next episode – ep 200 – Ed Chan will share more insights with you about the ideal team structure.
To hear more of Ed’s business growth strategies for accounting firm owners, please visit www.wizementoring.com/taxtalks where you can download a copy of WIZE Mentoring’s free eBook – The Accountants 20 Hour Workweek.
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 29 April 2020