How to Manage (and Anticipate) Firm Growth
Source: CPA Trendlines
The following includes excerpts, reproduced with permission, from an article by Gale Crosley.
An Internet search for the term “predictable growth” yields millions of links to websites, videos, books, and consultants. But for accounting professionals who are trying to grow their firms, it may seem that there's nothing predictable about sources of opportunity and how to manage them. If that's your situation, it may be because you haven't yet unlocked the power of the product lifecycle.
In the 1970s, Bruce Henderson of the Boston Consulting Group introduced the concept that products and services have a predictable, consistent cycle. Some four decades later, the BCG Matrix that he developed remains a popular growth tool.
According to the model, products, services, and industries exist in one of four stages, determined primarily by the degree to which they are contributing to firm revenue.
I've renamed these stages:
- Stage one: Early;
- Stage two: Diamond in the Rough;
- Stage three: Cash Cow; and
- Stage four: Fat Cat.
The first step in determining product lifecycles is to gather your partners and break out a whiteboard or create a spreadsheet, placing each of your offerings into one of the four stages. Then repeat the same exercise for your industries (or other buyer groups).
The graph you plot with the data should show climbing revenue as the stages progress. Margin, on the other hand, will climb through stage two, then starkly decline and level off over time.
Rather than placing all service lines and industries on the table in a heap and arbitrarily deciding which are the best candidates for growth, assess the lifecycle stage in order to sharpen your approach.
For the complete article, read “How Firms Unleash the Power of Diamonds, Cash Cows and Fat Cats.”
From CPA Trendlines, http://cpatrendlines.com, May 10, 2012.