Listen to this episode here: Counting numbers to leading change
In this very first episode of TALKING NUMBERS, we are lucky to have Warwick Cavell, Managing Director of Profitable Conversations, sharing his knowledge & experience on how to start having profitable conversations with clients.
Warwick is a Chartered Accountant, and now a Coach to the accounting industry, sharing his knowledge and experience with a number of accounting firm that wish to transition from compliance to consulting, with a simple successful framework.
Share a little bit about you and your story in the accounting industry?
I guess I look at my career in three phases. The first is what I call the numbers phase, which is where I started out a chartered accountant with the big four (like many of us). I started off with a firm called Ernst and Young, I started off in audit and then moved into specialist tax consulting after three years, which was a fantastic experience.
Then I operated for the next seven or eight years in suburban Melbourne and that grew to a three-partner practice. I really moved away a little bit more from the specialist tax areas, and more into the SME, and I just got enamored by that space and thought there’s so many opportunities in that space to service that market, but at the same time, I also felt that I wasn’t doing it very well.
I sold my group of fees to a mid-tier firm and became partner with that particular fund manager in Melbourne for a short while, and then realised that it wasn’t really the size of the firm that was the issue – it was the way the accounting professional were thinking and probably is still thinking to some degree today.
And as a result of that, I sort of really wanted to move out of accounting and move more into the strategy field. I asked the Small Business Development Corporation, “who are the best consultants in Australia”, and they gave me a few names. I chased them down and that got me into an alliance with a firm, and I then started to move into the strategy area doing a lot of strategic work. So that was the second phase moving out of the numbers into the strategy. What was actually creating the numbers was my passion and so in that sphere, I did a lot of all the professions, accounting, legal, and engineering in particular, did a lot of work in strategy work in those professions: small and large education, not-for-profits, local government, manufacturing.
The next phase, I guess was the implementation of the strategy. You know, we had a lovely document, we had a lot of good intention, but it was really not implemented particularly well.
So that, and that’s a number of key things where a lot of people fall down. They bring in consultants, write white papers, write strategic plans, all these sorts of things. It’s a 20 page, 50 page document, and then it’s about the size of the document.
It works really well for the consultant, but it doesn’t work very well for the business. The business doesn’t get the value out of it, but it really should.
Do you remember Paul Dunn? Paul used to talk about FTI, failure to implement, it was an interesting acronym that went around, but it’s so true.
What encourages that is that what often happens even today, people say, I’ll go do a business plan. The first place I go is I look up, what does a Business plan template look like? So they focused on the template and the document, it’s not focused on, or not even designing it for implementation.
So that then lead into the third phase, which I call implementation. It is really about change management, how to lead, change, move people. And that’s the human aspect of the business and so I studied in NLP. Now I have a graduate certificate in Neuro-linguistic Programming, and that’s the backbone of the work that I’m doing now, particularly in the profitable conversations area and the power of influence. How to work with people differently without being the expert, with the facilitator mindset. And that was really powerful. So, you know, I’ve been able to, I’ve been really fortunate in the sense of, and I’ll put those three elements together, the numbers are important. The accounting background has really helped me understand business enormously.
Then the strategy bit that’s been added to that, as in saying, okay, now I know strategically how we need to think about businesses and how to create the numbers, and then the implementation – what are the people aspects? How do we get people on board? How do we actually drive change through an organization effectively?
Now, you said a couple of key things, I’m looking at my books in front of me here – it’s called NLP at work, so it’s quite funny, my first exposure, that was through Tony Robbins. Maybe give us a quick summary. What is NLP?
It’s really about patterns of thinking and realising how we get into a pattern of thinking, and how those patterns of thinking can either be advantageous to us or disadvantageous to us. NLP started with Grinder and Bandler, and I was fortunate to have John Grinder come to Australia for one of these sessions, absolutely phenomenal facilitator, absolutely unbelievable. I learned a hell of a lot from him, but the whole idea is studying people who are successful studying models who were successful.
For example, if you go to a business, let’s say a franchise, you might find that, 20% of the franchisees generate 80% of the business. So, we would ask you, what are that 20% doing that the 80% aren’t doing? NLP is looking for the differences that make a difference. So, you would study and analyse what those 20% are doing. That’s just one example but it’s also patterns of language, patterns of thinking. It’s about how we get stuck in patterns and models, and how can we change those patterns?
And that’s really what Profitable Conversations is, essentially about understanding the patterns, how to become more influential, how to move people and assist them. How to get them to move rather than dictate movement to them.
Let’s talk about that a little bit more, delve a little bit deeper into how you’re assisting other accounting firms to have conversation. Tell us a little bit a bit the profitable conversations with business clients.
I think that the accounting profession with its values and its integrity is an outstanding profession in many ways. Not everybody’s perfect, but certainly, most accountants would give their support to their clients. They probably service their clients in many respects: the integrity, the ethics… in many respects, I think is a very high level.
In short, we have a conversation that’s built around, expertise. That’s a particular type of conversation, which I call the diagnosis. You go to a doctor, the doctor asks you questions, diagnosis’ the problem, and tells you what you should do, right?
So that’s very simple model, and that’s what most professions do, right? That’s what we’re doing as a profession. Now, that’s the only way it works if you’re the expert. What happens if the client is the expert in their business? How do you help them then? And that conversational style simply won’t work.
So many accountants are stuck in that conversation, there’s nothing wrong with that conversational style if you are the expert. But yeah, if that’s the only conversational style you’re familiar with, then it’s going to be very difficult to really harness the potential of your relationship with that particular client.
And I’m saying, no, that is not the way to do it, that’s starting where you feel comfortable starting, not with a client. You already have enough information about the numbers. You don’t play tennis while watching the scoreboard. You know, you play tennis by looking at the ground strikes, and if you get those right, then the school board will look after itself.
The score board is important, but that’s not the way. The numbers are vital, but what’s even more vital is what creates the numbers. I think that’s where we’re missing opportunities in the profession: we’re not looking enough at what creates the numbers, and how do we facilitate change in our client’s businesses.
That’s exactly what our show is called, the numbers. Let’s bring that into a real life situation, where you’ve done this with a number of accounting firms – you don’t have to give me details, but share with us the sort of mindset. Let’s say, 12 months ago and probably some of the numbers and the impact to the business, the business growth, revenue, profit, and more importantly the clients.
There’s a couple of quick examples I can give you. One is a sole practitioner from western suburbs of Sydney and approached me with a concern. It was a new problem I spent about six months working through and sorting that out.
Once we’d done that, I asked him, “where you want to go from here?” And we started talking about his SME client base and stuff like that. He had a good number of underdeveloped clients, and he didn’t know really how to capitalise on it. He tried several methods. He’d been down financial ratio, analysis bars and other models and stuff like that.
I said, let’s take a look at it. We started down the profitable conversations path. After about nine months, he’d been around the million dollar mark. So we started some workshops, and he did a unique thing – something I’ve never done before or since . He invited a couple of clients in. I sat in on the meetings with the client’s permission and we did a complete debrief afterwards and from that very first meeting, he started to kick goals.
Within nine months, he’d grown his fee base to $1.2M. That’s a breakthrough of the $1M barrier, and he is now going from strength to strength. And he’s actually doing a video, on leveraging a crisis already. He’s working through that and doing that. It’s what has deepen his client relationships, more profitable, enjoyable work, less fee resistance, far more staff engagement… All those sorts of things have been real payoffs.
Now’s a really interesting time in our lives, coming out of the pandemic, fingers crossed. Last week we started talking about the conversations to start having with clients in a crisis, and you went through a brilliant framework and we’ve touched on that. Could you quickly touch on that for our audience? What conversations can we have with our clients? How can we start to move them forward?
The first thing that you focus on is Survival, stage one is to survive. What do we need to do to survive? And that’s really essentially about protecting the core of the business. What is the core of our business and what is it that we need to protect? There’s nothing like a crisis to focus you on what’s important
Let’s now look at, now one of the things might get thrown overboard, but let’s make sure that the important things are not. The things we talk about there is employee welfare, using the crisis to bring people together, you know, against a common enemy. We’re in this together, we heard the federal government making those sorts of comments.
You know, cash flow, cash is critical in a crisis, let’s protect that in the first stage, access any available stimulus package. Obviously. Right? Think about pricing strategy. A lot of accountants were sort of saying, Oh, what do I do? My clients are sort of half expecting these services for nothing, or not much.
What’s the pricing strategy in this space? One of the most important things is to protect your value chain. What is your value chain? Stay connected to clients, stay connected to your partners, your suppliers. Ensure the robustness of the appropriateness of the current business systems and process.
They’re the things I’d be doing in a survival stage. Once you’ve been through that and the storm is starting to subside, you then can lift your gaze a little bit more, and then you move into the Revive stage.
And think about it perhaps a little bit differently, the revive stage is asking you the question: do I pivot or persevere? Do I keep going in the path? What have I learned out of this crisis that really would stand me in good stead? This is the exploratory stage where we start assembling what we’ve got. We start collecting what we’ve learned, and then we start to think about the future. Bet your value proposition, what’s important in your business.
Do an 80-20 across the whole business. What’s really important in your business? What did we learn about different ways of operating and your different processes, systems, waste and all those sorts of things.
After that we’re now starting to think more about profits, whereas in the survival stage where we’re thinking more about cashflow and then the final stage is insight.
Okay. Let’s now Thrive. So that’s about how do we move forward? How do we stimulate progress? Think about improved client focus. Who are your real targeted markets? What have you learned?
Who do you want to really focus on and target? What’s your enhanced value proposition? What’s your new adaptive business model going to look like? How do you lead change? How do you empower your people and work with them differently? How do you embed the new team culture and what’s your growth strategy going to be from here? So that’s a very quick revive and thrive, but it’s about the conversation.
You’ll be listening and thinking, okay, I’m going to meet a client right now. I’m on the way to their office. Apart from the tech side of stuff, which is important to the individual and the business, we all want to pay the least amount of tax legally. But you can offer more. You could ask, what I’d like to talk to you about is three key areas, which is around surviving, reviving, and thriving, as we move into the new financial year. Would it be okay if I set aside another hour and talk to you about that? That’s exactly that.
Yeah. How simple is that? How many businesses would say no to that? Well, you could do it even easier, you just start the conversation. I don’t have to set up a special meeting. You’re meeting with me about your tax and your compliance work. And as a part of that conversation, I just asked the question, how are you managing with the pandemic? How is it impacting your business? Start to talk about the survive stage.
Have you got through the survival stage? Okay, I’ll take a look at it. There’re three stages, right? I’ve introduced it. I’m not asking for permission. It’s a natural flow and I don’t need to set it up.