Building a Million Dollar Firm: Q&A With Jeremy Allen
Jeremy Allen was part of “Building a Million Dollar Firm,” a Power Panel at QuickBooks® Connect 2017 moderated by Joe Woodard. Here are highlights from his part of the discussion.
1. Starting with "Why" – Has the goal always been to build System Six into a million dollar firm, or did that goal evolve over time?
To borrow the popular phrase TLDR (too long; didn’t read) … the short answer is yes! Building a million dollar bookkeeping firm was one of our goals from the earliest days of System Six. The longer answer is – and one that might help others think through their own journey of building a million dollar firm – how important it was for us to be able to answer the question of why build a million dollar firm.
Like Intuit® and so many other small businesses, the idea of System Six started at a kitchen table when we recognized a need in the marketplace and thought we could provide a better solution. We started System Six in 2008, around the time that Simon Sinek gave a now-famous TED talk (viewed more than 35 million times) on the power of asking why. Sinek’s talk and ideas challenged us to think through why we were forming System Six and why we should build it into a million dollar business, or not. The questions and answers we brainstormed then were eventually written down, which helped lay the foundation for what has become System Six Bookkeeping – a million dollar bookkeeping company serving more than 150 clients in two offices with 15 team members in five different states.
Early on, we decided we needed a written blueprint for building the business. Two very close friends of mine (Brett and Jordan) and I had several long conversations and took a few weekend retreats away at a cabin to think through our why. Both Brett and Jordan were top producing salesmen in Seattle (one in payroll and the other in merchant services) and one of the most repeated questions their small business owner clients would ask them was, "Do you know a good bookkeeper?"
As they heard that question over and over, we started brainstorming together and asking why business owners consistently seem to have a problem finding reliable and excellent bookkeeping services, and could we build a business to help solve the gap we were seeing in the marketplace?
The more research we did talking with business owners, the more stories we heard about the struggle to find a bookkeeping solution that was both dependable and highly skilled. And, we heard that even if a small business could find excellent bookkeeping support, many times as the business grew larger in scale (sometimes very quickly), their needs would outgrow what most individual bookkeepers could dependably handle by themselves – even if they were a very good bookkeeper.
Once we believed we were understanding the problem, there was a need for excellent bookkeeping services, and the need was often bigger than one person could handle. We started asking ourselves three more questions that were fundamental to building our business:
What mission, vision and values were we going to build the company on?
What operational blueprint (think business planning and forecasting spread sheets) would be needed to guide us toward a scalable million dollars a year and beyond type of business?
It was from those earliest "Why" questions that we eventually created the blueprint for building System Six Bookkeeping into a million dollar firm.
2. Do I need to grow my business to a million dollars a year?
One of my favorite quotes around building a million dollar business comes from speaker and author Jim Rohn. To paraphrase, Jim would often share in his talks that he believed the greatest reward for becoming a millionaire is not the amount of money a person earns, but rather, the person we become in the process of becoming a millionaire that is most important. I love that idea. Build a million dollar business not for the million, but for who we become in the process.
My own answer to "Do I need to grow my bookkeeping and accounting business to one million dollars?" was yes, but that isn’t the right answer for everyone. I joined the Seattle chapter of the Entrepreneur’s Organization’s Accelerator Program when System Six was around $100,000 in revenue with two employees and have learned a ton about the fundamentals needed to scale from startup to $1 million in revenue. Three of the most important questions consistently talked about in the Accelerator program (that have been impactful for me) are:
What are your personal goals for your life and lifestyle?
How much money do you want/need to make to support that lifestyle?
Do you need to build a million dollar business to get there?
The answers for me were one part personal philosophy and one part reverse engineering. I didn’t just want to build a million dollar company to say that I did, although ‘million dollar firm’ does have a nice ring to it! The reality is that there are a lot of businesses out there that produce a million dollars of top-line revenue, but pay the owner(s) very little. That wasn’t my goal at all.
Several years before I decided to start System Six, I had a business and life coach who helped me think through my own personal goals for how much money I wanted to earn for my family and what values were personally most important to me, such as freedom and flexibility in my schedule, working from home, and creating a stable revenue stream that didn’t rely solely on my own efforts.
Once I was confident and there was a need in the marketplace for a team-based bookkeeping and accounting business, I went to work trying to build a financial model to see if the business would align with my personal financial goals, while also supporting the values most important to me.
How many years would it take to build the business to the place where I was earning what I hoped to earn, while spending most of my workdays doing what I loved and having the flexibility of lifestyle that was important to me?
I still have many of those early spreadsheets (and would be happy to share them) where I thought through several one-, three- and five-year scenarios in terms of revenue and expenses. It was in those early financial models that I discovered that yes, building a million-dollar business was an achievable goal and, importantly, would help support my own personal goals.
Now nine years into the System Six journey, I often have the opportunity to talk with, and coach, our clients and encourage other small business owners and entrepreneurs. Whether they are thinking about a business idea or have already started a business, one of my favorite questions to ask is, "Have you thought about and written down your personal and financial goals, and what kind of business do you need to build to help you achieve them?" Then, we can talk together to see if building a million-dollar business may help them get to where they want to go.
3. Framework for Success – The four pillars we’ve focused on that have helped us build a successful business.
In the earliest days of building System Six, I was fortunate to have a friend and client – a plastic surgeon-turned-entrepreneur and small business coach – share with me (on a napkin) what he believed were the four pillars of a successful business. They were:
4. Delivery of Service
There are dozens of books that help unpack each pillar, yet it was extremely helpful for me to simply have a framework to think about as we started building our business. I often share these four pillars with our clients, small business owners and other entrepreneurs, and here’s my brief summary of them:
Leadership – Almost every great business has been built on a set of values, with a clearly defined vision for where the company is taking their clients and their team. Most often, the founder(s) of the company is responsible for articulating the vision and values, and building them into the DNA of the company culture. As the company grows, other team members become leaders and take on the responsibility of communicating those same values and vision to the team. Everything rises and falls on leadership.
Operations – Every business has necessary back-office administrative functions that aren’t revenue-generating, such as bookkeeping, accounting, bill pay, payroll and HR. To build a scalable, profitable business, it’s important to understand and define the processes that support the business. This is where System Six has built our business – helping other small businesses in the important area of financial operations.
Sales/Marketing – This is the engine that drives the business forward. Having the best product or delivering the best service in your industry doesn’t guarantee a successful business. There has to be a strategy for telling the marketplace about what you sell, and it’s crucially important to understand how best to communicate the value and positive impact your products/services will deliver to your clients. Does your business grow by paid marketing and advertising, or by referral only? What will the pricing strategy be – low price/high volume or high price/low volume?
Delivery of Service – At the heartbeat of every great company is a product/service that makes a difference in the lives of the people who purchase those products and services. The best vision and values with well-defined back office processes and operations, along with amazing sales and marketing efforts, won’t build a sustainable company if the actual product or service being delivered isn’t high quality and something that adds value to the person purchasing them.
4. If you could encourage the attendees of QuickBooks Connect 2017 to focus on one thing after this conference, what would it be?
There’s a lot of great information in the bookkeeping and accounting space, and no lack of talented teachers, coaches and companies to support our own small business journey to success. I believe that our own personal leadership development is the number one factor that will either help us lead and grow our team and company to new heights or hold it back and stunt its growth.
John Maxwell outlines why personal leadership development is so important in his leadership concept called the "Law of the Lid." Simply put, the Law of the Lid is that our own leadership ability determines our personal level of effectiveness, which will then limit our company’s or team’s effectiveness.
5. Profitability – It’s one thing for companies to grow and have a lot of top-line revenue, but are you profitable?
My own personal philosophy around small business is that most small businesses need to be profitable and pay their owners well. Most small business models aren’t built on raising capital and burning through money for a period of time before they’re profitable or acquired by another company.
Here’s a few thoughts on building and sustaining a profitable business:
One of the most important things (I believe) a leader does is find and keep great team members and find and keep great clients. This helps profitability over the long haul because the longer team members and clients work together, usually the more efficient and successful (and profitable) the relationship.
Focus on attracting and retaining ideal clients who value our work and are willing to pay for our services based on value; they don’t consider bookkeeping a commodity.
Expectation management – Talking with, and listening to, prospective clients about their needs and crafting excellent agreements that define the scope of work and that clearly outline fee structure, responsibilities, and how extra billable time or increased fees work if the scope increases or special consulting is needed.
Recurring income – Processing weekly recurring ACHs for every ongoing client, with almost no exceptions, has been a huge part of the stability and success of our firm. Cash flow is one of the biggest reasons small businesses fail, and having recurring revenue in place has made all the difference for System Six.
Reviewing profitability monthly – Even though it takes time, we invest several hours each month reviewing the previous month. We look at income earned by client, and compare that to the amount of time it takes us to serve each client. For our retainer/fixed-fee engagements, this is very important, as it allows us to continue to review our profitability and make adjustments to our weekly fee.