The E-Myth Accountant Series – The Pursuit Of Money
This is the first in a series sharing highlights from the book “The E-Myth Accountant: Why Most Accounting Practices Don’t Work And What To Do About It” by Michael Gerber and M. Darren Root, CPA. As the popularity of “E-Myth” and “E-Myth Revisited” grew, author Michael Gerber chose to apply the E-Myth philosophy to various industries – one of which was accounting.
In “The E-Myth Accountant”, Michael Gerber and his co-author, a seasoned CPA, explain that although business owners know everything about their trade, very few know how to effectively run a business. Throughout this series, we will be sharing the highlights of their philosophy in order to help the new and seasoned accountant entrepreneur.
The first topic discussed in the book is the pursuit of money. With money consuming so much energy, why do so few accountants handle it well? Why is money scarce for most accountants? What is it about money that is so elusive, so complicated, and so difficult to control?
Michael Gerber explains that you must teach the people who work for you to treat the money of the business personally. From the admin to the junior accountant, they should all understand the financial impact of what they do every day, in relation to the practice’s profit and loss.
You must teach your people to think like owners, not like technicians, or office managers, or receptionists. You must teach them to operate like personal profit centers, with a sense of how their work fits in with the practice as a whole.
You must involve everyone in the practice with the topic of money—how it works, where it goes, how much is left, and how much everybody gets at the end of the day. You also must teach them about the four kinds of money created by the practice:
As accountants, it’s a given that we all understand the concepts of income, profit, flow, and equity—but what most don’t consider is how the relationships among these concepts create value in your practice.
He shares that the secret to more money for your practice is in the battle between you as the employee and you as the owner. It’s a battle between the part of you working in the practice and the part of you working on the practice. Between the part of you working for income and the part of you working for equity.
Here’s how to resolve this conflict:
- Be honest with yourself about whether you’re filling employee shoes or owner shoes.
- As your practice’s key employee, determine the most effective way to do the job you’re doing, and then document that job.
- Once you’ve documented the job, create a strategy for replacing yourself with someone else (another accountant), who will then use your documented system exactly as you do.
- Have your new employees manage the newly delegated system. Improve the system by quantifying its effectiveness over time.
- Repeat this process throughout your practice wherever you catch yourself acting as employee rather than owner.
- Learn to distinguish between ownership work and employeeship work every step of the way.
By mastering these methods, understanding the difference between the four kinds of money, and developing an interest in how money works in your practice, you have a much better chance of building the successful practice most accountants dream of.
Co-author, M. Darren Root, CPA, explains that the real art of making money in an accounting firm is not in the quantity of clients, but in the quality of clients. It’s about changing the mind-set of how you grow your business and make an attractive profit. The biggest challenge is moving from technician to entrepreneur.
He explains that your efforts must be to transition to an entrepreneurial way of thinking – you must see your accounting firm as the product. Once you see your practice in this new way, you can then move into building your product—and the strategies and processes that will support a leading, next-generation firm.
Source – “The E-Myth Accountant”