Have you heard of the valley of death?

If you’re in a vicious cycle where the business demands more of you, investing in new personnel and systems is draining your profits (without offering any clear returns), and you’re not too sure what it’s all for and why you’re even scaling, then keep reading.

The importance of understanding business growth milestones

Accounting and financial planning businesses go through various stages of growth as they expand their operations and increase their revenue. As firms reach various revenue milestones, naturally, their organisational structures need to change to accommodate the evolving needs of the business. Our experience dictates that this typically happens at $1M, $2.5M and again at $5M (+/- 20%) turnover.

It's important to note that having a better business means different things to different people. A better business to one person may be $3M in revenue with 40% EBIT. In contrast, for another, it may mean a four-day week and eight weeks of holidays a year while maintaining $300K in personal income.

 What’s important is understanding the sort of business you’d like to operate, and being aware that each point of scale has its own challenges and associated risks.

The valley of death: what it is and why it happens

So, what do we mean by the valley of death? Say you are a firm currently at $1.1M turnover. You’ve just had your best revenue year yet, but profit hasn’t moved forward. You also feel as though your business requires more of your time than ever before. Let’s also assume that you brought your laptop with you on your last holiday, and you continued to respond to client queries and looked after a couple of big jobs. In the past 12 months, you’ve hired another Intermediate Accountant (or Client Services Officer for a financial planning firm), they’re getting through some work but now you just find yourself putting out more operational fires. Your next questions are, should I be hiring a practice manager? How much is that going to cost me?

STOP! This is the valley of death.

1 step forward, 2 steps back and you’re probably making about the same money as when you turned over $700K. Albeit different numbers, a similar scenario appears at $2.5M and again at $5M.

The reason is the systems, processes and people that got you to that point of euphoria just before the valley are not the same ones you’ll need to get out and past it.

We often meet extremely competent and capable practitioners who find themselves in this exact point of inflection. One of the main reasons it feels like a hard time to be in business and there is no ‘light at the end of the tunnel’ is because it’s a point in time where you, as the owner, have had to take on an extraordinary number of tasks and new roles. This is due to a lack of prior planning for this level of scale. You’ve got no time to do the things your business requires to get beyond this point.

The role of planning in overcoming the valley of death

So, other than stating the obvious solution to this (which would of course be to engage Slipstream Group!), what can you do to resolve these issues?

Much of it stems back to the point made above, which is to firstly understand what sort of business you’d like to be operating.

Are you scaling just because new clients are coming in?

Do you really want growth?

Or do you love the growth but feel like it’s all just completely overwhelming because many of these challenges are presenting themselves all at once?

Taking a step back to plan at this point is more critical than ever before. We emphasise the importance of business planning because we understand its significance. At this point (when you have so much stacked up on your desk), this might seem like the last thing you have time for when in fact, it’s the only thing you should be prioritising.

You need to understand the uncreated job roles that the business requires. Same with systems, processes, and technology. Planning this out for your current revenue level is a mistake. You need to plan for your 3 – 5 year revenue targets and ensure whatever you’re implementing now, will continue to serve you as you continue to scale.

So there you have it, now you know what the valley of death is, and if you’ve read this far along, you’re probably right in the throes of it. If anything, we hope you’ve realised you’re not alone, it’s symptomatic of your current scale, but now you need to get really clear on what sort of firm you want to operate.

How Slipstream Group can help your business grow successfully

 We offer a comprehensive 2-day planning workshop where all of this can be achieved. Our coaches have all owned, operated and existed their own successful accounting and/or financial planning firms. So, if it’s just for a couple of days of planning, or you’d like to work with someone who’s sat in your seat one on one, reach out here.