Mark: Welcome to Unsuitable on Rea Radio, the unique financial services and business advisory show that challenges your old-school business practices and the traditional business suit culture. You'll hear from industry professionals who think beyond the suit and tie to offer meaningful modern solutions to help you enhance your company's growth. I'm your host Mark Van Benschoten. Today, we're talking to Rea & Associates CEO, Lee Beall, about the importance of your organization's strategic plan, which is a topic that really gets to the heart of what business leaders can do to really take control of their organization's growth. We'll also give you some tips to also formulate your own strategic plan. Welcome to Unsuitable, Lee. Glad to have you with us.
Lee: Mark, it's wonderful to be here.
Mark: I know we have a lot to cover today, but real quick, I have to ask you one question that I'm a little sad that I have to ask. How happy were you that the Indians beat the Yankees last night in 16 innings?
Lee: I went to bed after the end of the 12th when we tied it up so I wouldn't have to see the inevitable conclusion, but thank you for asking since you're a Yankees fan.
Mark: I was a little disappointed when I got up this morning. I was like, "Oh my goodness, we've lost 4 in a row. We're only a half game up on Toronto." I'm a little concerned, and I don't want to hear what happens if the Yankees don't make it. You could take baseball and you could look at strategic planning to see what Toronto did. They brought in the trade deadline. They brought some people in from a strategic planning standpoint. I think, obviously, they have a plan. In businesses you always hear that phrase, if you fail to plan then you really plan to fail. I don't know if you have any comments just to get started about why you think strategic planning is important.
Lee: The most important thing I learned, and the reason that we undertook updating a plan that we had done pre-recession, was that our younger people kept asking me questions. What do we stand for? What do we do? Who are we? Why do we do it? That really started to resonate with me, because I'm thinking if they don't understand what we're doing, because all the old guys seem to, then where are we going?
Mark: And ladies.
Lee: And ladies.
Mark: You bring up a good point right out of the shoot there about it's not just ... Okay, we're going to get this new business or we're going to grow our revenue. It's about who we are, what do we stand for, some values and some mission type stuff as part of a strategic plan. That's a good point. I hadn't thought of that.
Lee: I hadn't really thought of that either, and I think that's really important to younger people when they're starting out their careers and trying to determine what organization do I want to be with and what is it that they stand for that would cause me to want to be part of that organization.
Mark: You hear on the news about young people coming into employment. They're going to work for 7 different employers, and that's obviously costly to an employer. If you can get a hold of them, and keep them, and make it more than just a paycheck, I think obviously businesses would be better off.
Lee: Well, you know, that's interesting. Why do they think, or why do they end up working for 7 different employers? Why can't you find a way to reinvent yourself within the organization you're in to do those different things, to allow your career to grow over time. Why do you think you have to change? It's our job in leadership to make sure that we provide that growth opportunity.
Mark: Good point. Is strategic planning just for large companies? Big businesses?
Lee: It's obviously for everybody. Our sweet spot in our firm is closely held businesses, and I think it's even more important for them. They're fighting tooth and nail trying to survive. If they don't have some sort of vision as to what it is their core mission is, when they get into the trenches, do they loose sight of what they're trying to accomplish?
Mark: It's probably easy to take your eye off the ball and get distracted and maybe do something that's easier than the more difficult item.
Lee: Easier, or you always revert to the more comfortable. The more comfortable isn't moving your organization forward.
Mark: True. Within the ... Thinking and preparing for our session today. You have a strategic plan for a business or a firm, but I think you could probably drop it down to a division, an office, a particular work group within the business. They could also have a strategic plan, couldn't they?
Lee: The plan that we've just ... We're putting the final touches on, does just that. It says to each location, define your market and define the niches within that market that you want to work in. We've introduced the concept of dominance in this plan, and said, "Define for us what it is you can or want to be dominant in, in your market."
Mark: Going a little negative, people say, "Well shoot, I can save that $10,000, $50,000, $100,000, I don't need to spend that money. It's just not worth it." How would you counteract that?
Lee: First of all, I think the cost gets overblown. You can find a facilitator, and we've helped clients find facilitators that are very reasonable cost. The wonderful thing about finding a facilitator is that if it's somebody that you can work with over time, they hold you accountable for that plan. If you achieve the growth goals you put in that plan, that makes that facilitation cost pretty minimal.
Mark: That's a good point.
Lee: The real cost is not the facilitator. It's the time of your people and getting them engaged. That's the real investment.
Mark: Three key things you mentioned there. Facilitator, accountable, and engaged. We'll start with facilitator. Would you suggest that if you're going to go through strategic plan, you have an outside facilitator? Could it be somebody internal?
Lee: I think if you've never had a plan done before, I think an outside facilitator is important. A good one, and we interviewed 3 different facilitators before we decided the one that we wanted, a good one will ask a lot of difficult questions and will look at you differently than you look at yourselves. The facilitator that we chose asked us some very simple questions about the revenue that we have and our sources. We responded very quickly, but it totally opened our eyes when he pushed that back to us and said, "Look at this. Did you realize that 3.5% of your total clients account for 71% of your total revenue?"
Mark: Wow. Well, you see that information all the time but you just never stop and look at it. The benefit of an outside facilitator. You also mentioned accountable. Very easy to go through a strategic planning session, answer the questions. How do you make people accountable?
Lee: One of the reasons we picked the facilitator that we did is this individual knows our industry, is very experienced. We have agreed that he will continue on to coach. His point on strategic planning is, the more important part is the execution. The plan can be very basic. In fact, the plan that we ended up with was far simpler than I expected. It's the execution of the plan. He's going to continue to work with us, and my successor CEO on the execution.
Mark: It's not just the facilitator, it's somebody who's going to work through and make sure the implementation. Make sure we're doing the things that we said we were going to do during our strategic planning session.
Lee: Absolutely. The accountable part, Mark, and you know this because you were part of the committee. We picked 12 people that we thought were visible leaders in our firm, so that they were a part of it. They're vested in it, but we've also told them you are responsible to spread the word and hold us all accountable to achieve this plan.
Mark: Previously we were talking about holding people accountable, doing what's comfortable. I know in my career, I get up, I come to work. I like taking care of clients. To have a strategic plan be really successful, I think we need to alter people's daily activities, so I don't come in and say, "Well, I'm going to go through my emails, listen to my voice mails." Still need to do those things, but probably the first thing is what am I going to do today to impact the strategic plan. We need to take strategic plan and get it down into our daily activities. I think we have a huge challenge. I don't think we're unique in that.
Lee: We're meeting this Friday. Our Operations Committee is meeting to establish the metrics by which we're going to measure the plan. There's 2 levels of indicators that we're going to analyze. One is called leading indicators, and one is lagging indicators. Too often, organizations tag the lagging indicator as the important one, which is, we're going to acquire 25 new clients in the next 3 months. That's a lagging indicator. Unless you take those little steps that are the leading indicators, that say, "I'm going to go have lunch every day for the next month with a prospect." That's a leading indicator that will help you realize the lagging indicator. We never really understood that. We're now going to go define those.
Mark: That's a great concept, in that you hear it, it sounds so simple. I guess that's why we're accountants, right? We're simple.
Lee: Right. A facilitator brought that to us, Mark. Absent that, you and I would be sitting here doing what we always do, which is, "Well, we'll just go find new clients." We need to break it down for a lot of our people to say, "How do we go find those clients? What are the little steps that we need to take to do that?"
Mark: Taking strategic planning out of the CPA firm, I would think a manufacturing client should have a strategic plan, a construction client. They would be able to go through what's important to them. What revenue goals. This wouldn't just be for service industry, correct?
Lee: I think it's more essential for a manufacturer, because the lead time for a product is much longer than say a lead time ... For example, Nike. The lead time for a new pair of shoes at Nike, and I know this because I have children that work there, is 2 1/2 years.
Mark: My goodness.
Lee: You've got to coordinate that whole manufacturing stream and that whole distribution stream, and then couple that with your marketing effort and so on. I think with manufacturing, you can't survive without doing that.
Mark: You do a strategic plan. You always heard, you do it, you put it in a binder, you put it on a shelf. Hopefully, that's not going to be our experience. Do they need to be updated?
Lee: We adopted a Board of Directors a few years ago, Mark, and their job is to hold me accountable. The number one item that they listed that is my responsibility is to drive the strategic plan and hold the organization accountable to achieve it. When I'm evaluated by my board, that is what they're looking at. If I want to keep my job, and I do, then I've got to pay attention to that.
Mark: I deal with some not-for-profit work, and I always hear them talk about strategic planning. What about governmental entities? Do they do any strategic planning?
Lee: I don't work in that space. You and I work in the not-for-profit space. I've not worked in the governmental, but it seems to me they have to. You know, it's interesting during one part of our session, someone raised their hand and said, "Is this all about profit?" Well, in a not-for-profit organization, it's not all about profit. However, you've got to generate revenue to survive and serve your clientele. It seems to me a strategic plan for a not-for-profit or a governmental entity needs to define how we're going to take care of our customer, and then can you fit that within your financial constraints?
Mark: Sorry to ask you a question. I just thought about that, about the government. Didn't mean to put you on the spot. You handled it well, though.
Lee: Thank you.
Mark: This concept of, is it all about profit? It's not about survival. If you're not making profit you're not surviving. We talked about turnover before. If you're not developing your staff, not giving them growth, they're going to turn over. The strategic plan is really all encompassing. I wonder if bankers take a look at, when they're going to extend credit, if it's part of their evaluation process? How serious are you?
Lee: You know, in the old days when a client wanted to go get a loan, they came to a CPA firm to put together the loan package. The loan package had in there the business plan for the business and it had the financial modeling. Now bankers, because the landscape has changed, and they're more aggressive, they have their own people that put the loan packages together. I don't think the clients understand that the banker wants to see that business plan and wants to see the budget and the projections that are behind it. I think as a result, some businesses have lost sight of that and our profession hasn't done a good job getting with our clients and talking and saying, "Mark, where's your business plan? Where's your projections? How often are you updating this stuff? Does your banker understand what your plans really are?"
Mark: That's a great point. I'm wondering if, as we're evaluating prospects, if we should get their strategic plan, or ask if they have one. How serious are these companies? We talk about working ... Hedgehog clients is a term we use internally. How serious are these people about their business? Are they doing the necessary steps for them to grow and for them to succeed?
Lee: You know, the difficult part with many of those clients is they don't know where to start. They maybe don't have the internal resources. Mark, how often have you asked a client about their budget? What's the response?
Mark: Ah, we'll get that next week.
Lee: Yeah. Then when I press them, and I pressed a client last week and I said, "You have to have a budget." The response was, "There's too many uncertainties for me to start with this." I said, "Okay, let's start with the certainties." The expenses are pretty certain. Let's start with that. That'll tell you what kind of revenue you need. Then we can start to drive up into the revenue segment and start to define. Did you know that 3.5% of your clients are providing 79% of your revenue?
Mark: Sure. That's a great point. Interesting. Anything else on strategic planning before we wrap up that we didn't touch on?
Lee: What we learned, and the facilitator in this case brought a process to us that he had used successfully. We didn't redefine a process. We're adopting a process that's already been proven to work. The first thing was, you don't have to reinvent the wheel. If you find somebody who's successful at this, and you can check on their track record, they can bring a lot of the structure for you. The question is whether you accept it.
The other part that we found was, in the process of doing this, that we identified a certain vocabulary unique to our firm that we didn't recognize we had. He built on that and he brought us new pieces of vocabulary. For example, the term famous people. The idea of dominance. The 4 cornerstones of our plan, which are people, clients, firm, and growth. I think when you develop a plan, I think you can also develop a vocabulary that helps your people communicate internally about that plan and keep it front of mind.
Mark: That's a good point. All the people, it's just not the strategic planning committee that gets to see it, the board gets to see it. Everybody needs to get to see it. They need to live it, breath it, and do it. Right?
Lee: Without question. You asked about driving it. Once we nail these metrics down, and the committee that you serve on approves them, then we're going to try to roll these metrics into every individual's goal setting process for our upcoming fiscal year. Break it down into little pieces and say, "In your role, what is it that you can do on a daily basis that helps drive this plan forward?" When you take all those pieces and put them together, does that then result in getting that lagging indicator that you're looking for?
Mark: Good point. Before we wrap up, I've got one question to ask you. If you could have one super power, what would it be?
Lee: Well, besides taking the Indians to a World Series, which would be high on my priority list. Acuity. Visual acuity, and mental acuity. Perfect visual and mental acuity.
Mark: Interesting. Thanks for joining us today, Lee, and thank you to our listeners for tuning in. If you want to learn more about strategic planning and other tools to help you take control of your businesses growth and overall success, check out our podcast page at www.reacpa/podcast. You can also subscribe to Unsuitable on iTunes and you'll never miss an episode. Until next time, I'm Mark Van Benschoten for Unsuitable on Rea Radio, encouraging you to loosen your tie and think outside the box. Thank you.
