7 Key Diagnostic Questions to Determine If Your Firm Is a Strategy Firm or an Implementation Firm

7 Key Diagnostic Questions to Determine If Your Firm Is a Strategy Firm or an Implementation Firm

Are you wondering whether your boutique professional service firm is a strategy firm or an implementation firm? This crucial distinction can significantly impact your business growth and operational strategy. In this blog post, we will provide you with a comprehensive diagnostic tool to help you identify your firm’s true identity. Knowing whether you’re primarily focused on strategy or implementation is crucial when aiming to scale your operations effectively.

7 Step Diagnostic

    1. External Perception: Have a friend visit your website and ask them if they think you are a strategy firm or an implementation firm. Sometimes, an external perspective can reveal how your firm is perceived in the market.
    2. Billing Breakdown: Examine your billings. What percentage of your total billings come from high bill rate employees (senior strategists) versus low bill rate employees (implementers)? This ratio can indicate your firm’s primary focus.
    3. Client Titles: Review the titles of the clients you market to, sell to, and deliver for. Are they primarily in the C-suite or middle management? High-level client titles often correlate with strategy work.
    4. Project Timeline Analysis: Scrutinize your project plans. What percentage of the project timeline is dedicated to strategy versus implementation? A heavy emphasis on strategy might signal that you are a strategy firm.
    5. Client Questions: Listen to 10 recent Zoom calls that you recorded. Isolate the questions asked by the clients. What percentage of these questions are related to strategy and what percentage are related to implementation? This can provide insights into the nature of your client engagements.
    6. Competitor Analysis: Examine where your existing clients are choosing to spend with your competitors instead of your firm. Are you losing out on strategy work or implementation work? This can highlight areas for improvement.
    7. Delegation Patterns: Investigate whether clients are delegating you down to lower-level employees. If so, to which titles? Do these titles correlate with strategy work or implementation work? Understanding delegation patterns can shed light on your firm’s core competency.

In conclusion, understanding whether your boutique professional service firm is primarily a strategy firm or an implementation firm is crucial for scaling your operations effectively. It is hard(er) to scale a firm that does both. This diagnostic tool will help you gain clarity on your firm’s identity and areas for improvement. If you discover that you’re in the wrong category and want to pivot, consider joining the Collective 54 Mastermind Community. Our community can provide the guidance and resources you need to execute a successful transition. Don’t hesitate to reach out and explore how we can help you navigate this strategic shift in your business.

Episode 173 – Blueprint for Scaling: How a CPA Firm is Scaling Through Franchising – Member Case by Matthew Peterson

In this session, we delve into the strategic journey of an accounting firm that has mastered the art of scaling by franchising its proven system. Learn how they’ve transformed their business model to offer franchise opportunities that empower other entrepreneurs to build their own successful accounting firms. We explore the benefits and challenges of this approach, the critical components of their franchise system, and hear a firsthand account from a franschisor who has thrived under this model. Join us to discover how franchising can be a game-changer in the accounting industry.


Greg Alexander: Hey, everybody. This is Greg Alexander, the host of the Pro Serv Podcast, brought you by Collective 54, the first community for founders of boutique professional services firms. On this episode, we’re gonna talk about an interesting and novel way to scale a services company which is franchising, and we have with us a member of Collective 54… Matthew Peterson and he owns and operates True North Accounting, and he is pioneering. So, he is bringing franchising to the accounting space. And I thought this was such an interesting use case that I wanted him to come on the show and share it with all of you, our members and see what we might be able to learn about franchising and see if that might be an opportunity for you. So, Matthew, it’s good to see you. Would you please properly introduce yourself to the group?

Matthew Peterson: Yeah, thanks a lot, Greg. Happy to be here. And yeah, as you said, I’m Matt Peterson and I’ve been running True North Accounting for almost 10 years now and we’re really just a CPA firm focused on helping small businesses. And we’ve tried everything over the last decade on like as it relates to how to better empower entrepreneurs and how to provide a service that small business owners need. And yeah, so we’ve we kinda hit, a bit of a ceiling on our growth or at least it was going down a path that wasn’t so fun. So we started looking for other ways to grow and… we landed on, we ended up through like a kind of a zig zagging path, but we landed on franchising and it’s something that I didn’t want to really entertain at first but the more I learned about like the legal definition of it, it’s like, yeah, it became clear that was probably exactly what we wanted to do. And so we’ve bit the bullet. We’ve got all the legal paperwork done and… yeah, we’re just about to launch, our first three franchises this summer, maybe for the fourth in the fall… but yeah, it’ll be quite the adventure has been already.

Greg Alexander: So, let me, so for those that might not be familiar with franchising, I’m gonna start with the basics. So define it for us.

Matthew Peterson: Okay. There’s three things that need to be true that make you a legal franchise. And the first one is you have a brand or some IP that you’re granting somebody else the permission to use. So that’s the first thing, and the second thing is you’re getting you’re charging for the use of that. So you’re getting revenue from it. At this point, it’s basically like a licensing agreement. The third thing that makes it that kind of separates it from a licensing agreement is that you retain some sort of control over the people that are using your brand or your IP. And that’s if you do want to maintain that control, then you’re a franchise. And that falls into just another realm of legal kind of oversight and rules around there. So yeah, for us, we have our brand and our operating system that we’re offering our france are our licenses and we will be taking a royalty from them. And so we’re getting paid for it. And we do want to, we want them to use our app stack and our data structure. And… and so we can like really help them and coach them and keep tabs on them. So that’s, the control part that is really important to ensure everyone’s delivering value to their clients and not digging themselves into a pit of unprofitable clients. So that control is really important for us. And so, yeah, we’ve got our franchise agreement and franchise disclosure document and there’s a O, yeah, there’s a whole lot of disclosure steps, in the process. But licenses do have a, some recourse if they’re not getting the value from us.

Greg Alexander: All right. So I get the definition and I think those that are listening to this probably are familiar with franchising maybe from the fast food space like jersey Mike or something like that. What’s unique about this is that to my knowledge anyways, it hasn’t really been applied to the white collar professional services, something like accounting. And in that context, I want to first ask you how you make revenue through that business model, then I want to ask you how your licensee makes business model makes revenue through that model. And then third, why would a CPA firm… buy a franchise from you when they can just be their own CPA firm? You mentioned, the app stack and things like this. So, that hints towards your system for lack of a better term, allows a CPA firm to be a better CPA firm. So I really want to dive into those three things. So let’s take those one at a time lease.

Matthew Peterson: Yeah. So the, what we, what we’ve created for our franchisees is just like, all the aspects, of a CPA firm business loosely based on like traction or eos and we’ve built in the dashboards and the data structure, having the database of all the points on your client list and how your team is doing. And so we can have the, those key metrics just at the fingertips that’s a big part of it, the marketing and lead generation that’s something we’ve really kind of over built for our own size. So we have a lot of, a lot of reach there. And it’s all inbound marketing. We’re getting a lot of organic leads… and we could just turn up the paid ads part of it if we want to get into a new territory. So we have that like helping these see grow is probably one of the biggest reasons that’ll come to us. The thing like if we’re looking for entrepreneurial CPA’s, they want to run their own business, they feel stuck at their conventional accounting firm or maybe they’ve started their own shop and it’s just there’s too much going on. It’s too overwhelming. So, we want to help them hit their goals, get to their like right size firm that however many people they want on their team, what kind of clients they want to deal with. And we will send them leads and we have pricing policies and structure and how you set your proposals and your terms and conditions, and the onboarding process. We’ve got like over the past 10 years basically over built all those processes. We have, a pretty good bench of tools and templates and all that, to lean on. But the world is changing super quickly to a so… from like the HQ or the license or franchise or perspective. I like this is the kind of stuff I’ve been working on for the last 10 years in my own firm. And now I think this us, I’m not going to change that. Still trying to keep on the cutting edge of as AI comes in or there’s open banking coming into canada, us has started down that path as well. But these are big like shifts that are gonna change the way CPA firms operate there’s. Also a big wave of demographics, demographic changes. I guess coming to the industry, 75 percent of CPA’s are ready for retirement in the next few years. Half like enrollment, in accounting programs at universities is down… by more than half. So it used to be two percent 10 years ago. Now it’s less than one. Percent. So there is some concerns winds kind of shifting but that’s why somebody would join us like, yeah, they’re gonna have to pay a royalty, eight percent royalty and the three percent brand fund. But they E, they get the advantage of like somebody evaluating all these apps that are coming out and like adjusting procedure manuals for open banking. And… yeah, so there’s a lot of reasons there, to join like accountants. Like many technical people aren’t super good at running a team or running a business like focusing on everything they have to wearing all the hats. Yeah. So we want people that can manage a team and deal with their clients and let us evaluate the apps and build, the systems around that. And then the marketing and sales. I think that’s the big piece.

Greg Alexander: So you mentioned lead generation. So it sounds like you have an advanced capability there. So if I become one of your licenses and I am paying you for the right to be one of your franchisees. I now no longer have to generate leads. You’re generating all the leads for me. Is that true?

Matthew Peterson: No, you can definitely generate your own leads and we would just take that 11 percent of the revenue as normal as with every client. But if you do want us to help you grow or you’re O, you’re not finding clients fast enough. We a, there’s basically like a status that they can put themselves on like accepting all new leads that fit within are like predefined parameters or ideal client profiles, I guess. So if he, if they’re accepting clients, then we can, I, there’s two options. There’s a referral fee. So we’ll send them a qualified lead. It’s a meeting with the client, spin their calendar. And at that point we’ve estimated their annual recurring revenue. So say that’s like a 5,000 dollar client, we would set up a meeting and then we Bill them 15 percent of that arr, if they want us to O, like close that prospect for them. So, we actually get to sign engagement letter. We get the payment and we onboard them that we’re gonna pay or we’re going to charge them 40 percent. And that’s really just on the first year’s proposal or that like arr number. So we’re not taking that on. Like if there’s catch up worker… yeah, anything like that. So we try to keep it simple enough, to quantify.

Greg Alexander: So you got your first three doing this summer. What’s the vision? How many of these do you think you could have stood up?

Matthew Peterson: Well, we’re taking it one step at a time but I think like the overall mission is just like helping entrepreneurs and, these folks have a tough time finding good capable CPA’s people that like have the, have their processes figured out and can move at the pace that their businesses are moving. So, it’s really imperative that, we get as many entrepreneurial CPAs out there as possible and as quick as we can. So we like I think 100, in canada, 100 branches 100 CPA firms. I think that’s, our big goal, for the foreseeable future. And yeah, I guess we’ll just see how it goes if it takes off… and there’s an opportunity, to go south of the border. We would definitely look at that. But yeah, I think it could be like the bigger we get that’s what’s so interesting. Like if there’s 100 CPA firms each with 100 clients, that’s 10,000 small businesses that we have a direct line of communication to. And so there’s a, at that point, it gets quite like, yeah, there’s a lot of opportunity there to sell directly to those clients.

Greg Alexander: My last question would be, I mean you had a choice. I mean, you were running your own CPA firm for 10 years, and that had its own scale attributes positives and negatives to it. And you’ve decided to stop doing that and then empower and enable other CPA firms and go the franchising route. And obviously, since you’ve made the change, you feel that had more scalability built into it. So explain that to our audience.

Matthew Peterson: Yeah. So we got to, we got to 25 people like 3,000,000. We opened our second office a few years ago and we just found it became the client experience wasn’t exactly what we intended it to be. Like there was too many new faces. Clients were getting passed around. There were never quite sure who is there like main contact. So those are a couple of the issues that we faced by getting to that like two to 5,000,000 dollar range, you got to start hiring middle managers and a like a O in 2022 that was our journey. Like I was having my third kid took a few months off and brought in two managers, to help stabilize the team and run the day to day. When I came back after that sebatical, a lot of, a lot of the cracks in the business model where we’re showing and we were all kind of longing for that like those days of an eight person team. So I do feel like if we’re going to set some guard rails for a CPA to run their own shop, size is a big part of it. Like if you can get your team or keep your team under 10 people and yeah, you can operate profitably within there. You’re just like you have better relationships with your clients. Your team is more accountable like it’s harder for one person to hide and like just drift on everybody else’s coattails. And so, the account the client expect… and I think just… entrepreners want somebody that’s lived what they’re living or at least has some sort of empathy for what the business owner is going through. And so that’s the one thing like I had a couple of business partners that… each of them are. So they’re so good at servicing clients. But neither of them had that entrepreneurial experience. And now they’ve gotten that over this whole transition. And now they’re running, their own firms. And I think that I, it just forces them to like be more customer centric. I think as they are, they’re living it themselves.

Greg Alexander: It’s it’s a really a fascinating way of doing it. And, and I’m gonna put my own spin on it here. Just speaking directly to our audience. You know, if you think about Matt, so, he is running a 25 person firm doing 3,000,000 bucks, 10 years in steps away because he has a baby comes back, and things are cracking, right? Which I’ve heard that story. I don’t know how many times, right? I mean, it’s just the nature of the beast. So you have two choices there, right? You either go from 25 people to 250 people and those problems become bigger and bigger. And there’s a whole path to go follow there with middle management et cetera, and there’s pros and cons associated with that that’s one path inside a collective 54. We call that a rabbit business, a rabbit businesses. You have lots and lots of clients, but each client spends a little with you. And that was the path that Matt was on the alternative to that traditionally. And today we’re learning about a third choice. But traditionally is you go up market. So you transition from a rabbit business to elephant business, you grow your revenue and your profits but not necessarily your client count. So instead of serving onto peers and matt’s case, maybe it serves mid sized businesses at large enterprises. So now you have 10 20 30,000,000, but you’re still at only 25 people because each client spends, you know, that much more that’s another way of doing it in it has its own pros and cons. There’s no silver bullet here. What Matt is introduced us to today is a third way which is to stay in the rabbit business but with a different mouse trap which is to go enable all of these 10 to 25 firms and expand horizontally by allowing all of those firms to run successful lifestyle businesses. And that’s a positive complement and do so profitably and stably. And and yet Matt can still reach his dream. So it’s a kind of a like a horizontal expansion play. It’s it’s a, very interesting approach. So, Matt, on behalf of the members, I want to thank you for coming on the episode and sharing what it is that you’re doing it’s. Particularly interesting since you’re in the early days of it, and I appreciate your transparency there. And the members are gonna love the Q and a session that we’ll have coming up following this shortly. So thanks for being here.

Matthew Peterson: Yeah, no, my pleasure. And I don’t know why nobody has done it before and, but I don’t know, it seems like a clear win for us and so we’ll try it out and yeah, maybe we’ll find out why nobody does it, but, it’ll, be a fun journey.

Greg Alexander: Exactly. Yeah. I think it’s gonna work. I think it’s gonna work because I think it’s a good idea. I think you’re a smart guy. I think the fact that you lived this yourself for 10 years is gonna be the difference maker. I think, you know your client better than most. We’ll be pulling for you. So best of luck to you on it. Okay?

Matthew Peterson: Appreciate it. Thank you, Greg.

Greg Alexander: Just a couple of concluding remarks here. So, members, if you’re listing, you want to attend the Q and a session and ask questions directly of Matt, look for that invite. It will be coming out shortly. You’re not a member. You want to become one, go to collective 54 dot com for out an application. So will get in contact with you. And if you just want to read more about topics like this, I’ll point you to my book. It’s called the boutique, how to start scale and sell a professional services firm. You can find that on amazon. But until next time, I wish you the best of luck as you try to grow scale and some day exit your boutique pro serve firm.