One of the biggest challenges a business faces is adopting change—especially when the status quo is comfortable and safe. But the status quo could also be what’s keeping you from achieving your firm’s long-term goals.
Stepping out of the day-to-day is critical in making the right decisions to move your firm forward. Ask yourself: What keeps you up at night? What makes you hesitate to take that next step to grow your business, expand your current offerings or take on new clients?
One major area of concern for many firms is that, although their staff is at or even over capacity, they’re not having much success with finding new talent to ease the workload. So it’s easier to maintain the status quo, for reasons we have no problem justifying to ourselves. “There isn’t any talent available.” “Budgets are tight.” “The economy is uncertain.” “I’m too busy with my current clients.”
But what’s the cost of inaction? Not addressing a problem can impact your business just as much as making a change.
In our staffing example, we would start by monetizing the cost of the status quo. A few items to consider:
- How much revenue would be lost from future clients due to capacity constraints?
- How much revenue would be lost from current clients due to overwhelmed staff?
- How would the loss of current staff due to pressure and stress affect your business? Would it mean more overtime for current staff? How long would it take to find a replacement, and how long would it take to bring him or her up to speed?
Monetizing the cost of inaction is just as critical to making decisions as understanding the cost of taking action. This allows you to consider the opportunity cost of one choice over another. What are some of the changes you might consider related to staff capacity issues?
- Investing in technology to address inefficiencies and bottlenecks
- Hiring additional staff for increased capacity
- Reviewing the work being done for your current clients to identify high workload with low profit margins
- Reviewing your client list and “firing” your less valuable clients—or those that cause your staff trouble
These choices all have explicit and implicit costs to consider. For example, the explicit cost of new technology may be high, but when you take into account the implicit benefit of increased staff capacity, the higher revenue may convince you that it’s worth the investment.
I once had a customer tell me how happy they were that, after they implemented their practice management software, they increased their billings by $30,000 a year. They also told me they regretted not making the change sooner. What held them back from taking that step? The perceived cost of change.
Does every decision need this much research? Of course not. But consistently using an established framework to make key decisions—large or small—can be extremely valuable and pay off in many different ways in the long run.
What are the big decisions facing your firm? Can you monetize the cost of sticking with the status quo?