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T2 Consult
We Help Businesses Grow Strong
We Help Businesses Grow Strong

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Outsource or Inhouse?

Everything is online now

Websites like Upwork (used to be Odesk) and Fivver are revolutionising the way we can get things done. It's really easy to find good people, and find them quickly.

This is especially powerful for smaller businesses as they grow. But can be just as useful for a manager of a bigger company. All you Marketing Managers know this.

Go back 10 or 20 years and you used to have to look up a business in the yellow pages. You had to ring them up, maybe meet with them, etc. It took days just to get started. It was also hard to know if they were any good. It was easier to employ someone.

These days the people selling their skills on outsourcing websites have user reviews that make the whole process safer. You would be amazed what you can get done, and what it costs. If you have a repetitive task that annoys you, check out Upwork. Give it a try and let me know how you get on.

So, the thing is... what should you outsource?

There are 3 parts to anything we do:
1) planning
2) the doing 
3) review

The planning is the what, why, how, when, who, how much, etc. Reviewing is the all-important feedback loop that allows us to get good at number 1. That's where the magic happens.

I know I call myself an Outsourced CFO but I spend most of my time with clients helping with 1 and 3, the planning and the reviewing. Finding the best ways to get things done.

The better you get at 1 and 3 the easier, faster and cheaper number 2 becomes. We need to own, understand and manage all three but we don't have to do the leg work.

Cheap and Fast or Good and Fast?

As automation starts killing off more of the "doing" jobs services business will have to shift towards 1 and 3 to provide value.  Firms will also probably polarise with "fast and cheep" (automation) on one end, "fast and good" (bespoke services) on the other. As an aside a lot of tax accounting firms are turning to bookkeeping to bolster their falling margins as tax is further automated but I wonder how long before bookkeeping margins are squeezed too. There is obviously margin at present if they are chasing it. Anyway, back to the point...

This polarization between bulk and bespoke is happening in so many areas. Mercedes sold more cars than GM sold Commodores in Australia last year, small sensible cars are incredible value because of economies of scale. If you want a cheep website to use as a company brochure it would cost maybe $300 on Upwork, if your business is your webpage or you have to have a high-end profile then you want to drop the coin on a specialist.  But they could be located anywhere. My proofreader lives in rural Victoria, my graphic designer lives in rural New Zealand and my web guy is in India. I have clients in New Zealand, Asia and the UK. The old rules of geographic barriers are being broken down for all of us.

What's in it for you?

Like all rapid change there are opportunities as well as threats. A lot of us can also sell in new markets. Maybe it's time to break out the trusty SWOT template for your business? 

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Setting a target for business growth this year? Some encouragement 

We all know that we need goals and unless you measure something it won’t improve, but don’t get too stressed out about picking the right number. Remember, you’re not forecasting for the stock exchange, and there’s no punishment for getting it wrong.  

Be ambitious. Write down a percentage number on a piece of paper, stick it on a drawer and get moving. If you can’t decide, pick 20%. It doesn’t matter if you haven’t grown an inch in years, just write it down. You don’t have to commit resources to supporting that number until you’ve got a better feel for the possible growth. Committing resources should be part of your Quarterly Operational Work Plan (QOWP) - that comes later.  Ok? Cool.

Once you pick a number we can see how to get there by calculating the productive capacity of the firm. In my experience, most firms can usually hit an ambitious growth target with the resources they already have. The rest of the numbers for your firm should fall from that top line number.

The high level numbers of a professional services firm are pretty simple once you get your head around them.  

To calculate the productive capacity of your business, multiply the number of people in your business by the hours they are available for work (usually 220 days a year times eight hours), at the average rate they’re billed at, by 80%. I’ve included a link to a template at the end of this chapter which you can download to work it out. There is a good chance that the answer is higher than your current sales.  

This is an excerpt of my eBook Overcoming The Most Common Obstacles to Business Growth

You can calculate the firm’s productive capacity by downloading my excel template from the members section of

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Stuck With A Legacy Headache?

We've all been there, chasing it down. When do you know it's time to give up and let it go?

If something in your business is unreliable it can be like keeping an old car on the road. "$4k for a gearbox! Outrageous. That's all the car is worth. But maybe it will be cheap from now on..." maybe not. More like probably not. And it's the disruption that causes the most grief. Not just being left on the side of the road but weeks of hassle getting it fixed again (and again).

That's the thing about risk, sometimes we can be wildly optimistic if we've sunk a lot of time and money into things that, in hindsight, had lots of warning signs of being rubbish. Maybe it's optimism bias, perhaps with a bit of pride thrown in.

It might be your old laptop, but it it might be a whole division of your business.

Tim Ferriss of the Four Hour Work Week says that you should never try to make back money where you lose it. Just move on to something that does make you money.  

A lot of successful people will tell you they ignored everyone who told them they were wrong and went on to do great, and a lot of people say they wish they'd headed advice. I guess that's the challenge. When to hang tough and when to let go? None of us get it right all of the time and hopefully we all learn a lot of the from mistakes. One of the advantages of getting older I guess.

One thing I do know... is don't sweat the small stuff. If it's a process or system, just do it. Do it one step at a time but do it.

If it's a big thing then I guess you have a bunch of choices to think about. Check out this TED Talk about how to make hard choices.  

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Want business to go for in 2016? Numbers Wise...

You usually get to choose what sort of work you seek. Hopefully fulfilling work you enjoy. But numbers what about the numbers? You can choose to pursue more work with existing clients (client depth), similar clients (industry depth) or different industry sectors. You can choose similar work (practice area depth) or different types of work, or you could try a new geographic location.

The way to measure the success of any of these choices is gross profit.

The gross profit of a business is the sum of the gross profit on individual projects; it is also the sum of gross profit of individual staff members, individual clients, market segments, service types and geographical locations. It sounds like a lot of work but in the process of discovering one of these, the results of the others - the ones that suit your business - are easy to see.

You just use the same utilisation/WIP/direct costs report but change the filters. So the columns stay the same but the rows change.

If you’re not doing this sort of reporting you might be surprised by the results. Certainly as you get bigger you will need this tool to help you grow safely.

That’s it; it’s a simple concept but will be a fair amount of work and very important. It will depend somewhat on the quality of your time and billing system and probably setting up a companion reporting system in Excel using pivot tables, or in Access.

Can you sort your clients by gross profit? Maybe have a stab at it in an Excel pivot table if you can get the data from the billing system. 

You can download an example from the members section at

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Should You Join With A Bigger Fish

Is running your own show is the best way for you to grow? One option might be to join with a bigger fish. 

There are some advantages that come with size:

 - access to their bigger clients
 - hopefully a well know brand that will also get you access to new clients
 - work referred by other parts of the bigger organisation  
 - more sophisticated resources for sales and inbound marketing
 - better technology, administrative and HR support
 - project and client management methodologies
 - it might be easier to recruit good staff with a bigger brand 
 - working capital to fund growth (someone else to worry about the cashflow)

Plus some cash in your pocket or some shares in a much bigger company. 

There are three main reasons that a company will pay money for another company:

1) Clients - If you've built a successful company you and your staff will have built great relationships with your clients. Clients of professional service firms build buying relationships with individual advisors. To get access to those clients a savvy bigger firm will pay to get you and your key staff.     

2) Employees - Recruitment is getting harder and harder for larger companies and costs them quite a bit money. If you have a good culture and good people it's often cheeper for a bigger firm to bolt on a group of people than to do it one by one. Be careful here though, make sure the bigger culture is compatible, people issues are the main cause of merger failures.     

3) Core Processes and Technology - For example an add agency might want video production capability. If there is something you do really well there is probably someone that wants to pay money for it.

Obviously there are risks; most of them around not being the only boss and working with other people but if you like working with people, and you make sure they are compatible, it could be a good move in the long run.

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How to grow past 30 employees

Most businesses don't get to be bigger than 30 people, or stay bigger for very long, unless they solve the fundamental problems that come with growth.

30 people is a dangerous time. It's around that time that the early systems, that worked pretty well for you, start to break down, a thousand things seem to be happening at once, and you can't keep on top of what everyone is doing. It's hard to step back and plan for the next stage because you're so busy but you have to. It's probably the most critical stage of all for your business.

The first thing you need to do is get the foundations right. The biggest foundation of all is obviously delivery systems, whatever that is for your industry. If you rely on excel to do client project management (or whatever your core business process is) it will break once you get bigger and you can't follow what all your people are doing.  Your beloved spreadsheet might have been easy to use and cheep and it will probably stop you from getting any bigger but the main reason is that it will take far more valuable staff time to administer it. The solution is usually simple - get a good system that's been built for your industry, hopefully cloud based. It might not do all the things you want it to do but it should be robust and scalable. 

People often get stuck trying to make systems fit the way you've always done things but it's usually better to change how you do things to suit a system. Think of it as an opportunity to streamline processes. Try to keep things as simple and robust as you can. If you want to make toast, just buy a toaster and move on, don't try to make it do everything anyone can think of. Billing is usually the next big headache, get it wrong and watch out. It's usually integrated with the delivery system but if it's not make sure that whatever you use is solid. 

Make sure that the books provide for liabilities like taxes and employee entitlements. If your tax agent has to make big adjustments at the end of each year your books aren't giving you a true and fair view during the year when you need it. Your project costing needs to transparent and reliable, costs can build up on jobs if they aren't tracked properly.

You've probably worked out a method of projecting cashflow but it's critical that it's robust once you get bigger.  Those taxes and employee entitlements start to swing big numbers, on top of growth putting pressure on working capital (WIP and debtors). Your sales pipeline needs to feed into the cashflow, not budget.

Once you get bigger and you hit a quiet period it can be hard to make adjustments as quickly as you might have when you where smaller. Costs have substantial momentum for bigger companies, particularly staff costs. You going without your salary for a month isn't going to help the way it used to. If you can build some flexibility into your rem structures and keep a close eye on cost ratios. 

Have solid HR policies, again aim for simplicity and robustness. Consider using an outsourced HR specialist.  

Sales and marketing costs are potential sink holes, set a budget based on industry standard ratios and try to get as much bang for your buck as you can but don't overspend.   

Resist calls for adding layers of management, big companies spend a lot of time trying to minimise non client-facing managers. The secret to growing safely is to remove unnecessary complexity, not add it. Use simplicity and automation where ever you can. Employee people to do the easiest administration tasks to safely delegate first, not the most complex.

Lastly, make sure you set time aside each month to step back, take a breath and think about things from a high level. An advisory board is an excellent way to do that.  

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Are tough times coming? 

There seems to be a lot of mixed messages about; a bump in confidence from the changes in Canberra but the RBA is downgrading earnings, the housing boom can't go on forever, a small renaissance in America making things other than corn and financial engineering, but maybe a tech bubble..... and a thousand other things. 

Greater minds than mine look at these things everyday. I don't pretend to know anymore than the next person, and aren't there usually mixed messages, but what can you do now in case bad times do arrive? 

I know that sailing analogies are lame but they work because sailboats are ecosystems just like a business, mixtures of people and machines responding to the environment. And good sailboats are always prepared for bad weather. 

That's it for the sailing, back to business.

Firstly don't be one of those businesses that swell with overheads when times are good and get mean spirited when times are bad.  Cutting back on something like fruit when the business needs people to perform is not cool. Symbolic things like this are not where the really big costs are.  

The biggest overhead for most organisations is administration people and it's sometimes hard to know what's really necessary. I'm privileged to work with some outstanding administrators and they know their role is to support the client facing teams, not creating busy work. They simplify and automate as much as possible, constantly improving things. Like a good golf swing the good ones don't appear busy.      

The way to tell if your overheads, and all of your other costs, are ok is to use benchmarking. 

Next, look at building some flexibility into your remuneration structures: profit share, and well designed commission structures, can act like shock absorbers when things turn down a bit.

Lastly, always know where you are, where the margins are, and plan ahead. In practice that means proper accrual-based monthly management accounts (not just a cash P&L), good operational reports (margins/utilisation/project costing), pipeline reports, proper P&L and cashflow forecasts.  

This might seem like more before-mentioned busy work but it's very different.  Don't think of the reporting side of accounts as an overhead, it's your business control room. The reason for the reporting is so you can respond to changes in conditions when they occur, not after it's too late.

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Make it 5 steps

If you want to get into a huge mess try to do everything at once. It will work every time. That's not to say that we can't do a few things concurrently but big changes take planning, good management and discipline. This is particularly true of system changes.  Maybe it's best to plan in steps of 5.

Build on the rock and not upon the sand 

A good way to think about it is from the bottom up, like you would with a house. Start with strong foundations. For most businesses that's Xero. Because it's an accounting system it's designed to have strong controls and structure. It also happens to be a particularly efficient and robust system. Start with this strong foundation and it will grow with you - but it's important to also understand what it is not. I've seen people try to use it for things it was never intended to do, particularly project management and billing. 

Fit for purpose

It's very unlikely that any of the problems you face have not been faced before, make sure that you search widely for possible solutions. Talk to people that have been through the same issues, talk to users. This is particularly true for operations systems and CRMs. It's easy with Xero because it's such a safe choice but maybe not so easy when it comes to things like CRMs that can vary from inflexible industry specific systems to a raw database.     

Keep it simple

Some of the great features you might see on some systems sound great but, before you start down that track, can it process an order and prepare an invoice? Does it have reports that show you exactly what's going on. These fundamentals have to be addressed first. Absolutely make sure that higher level features can be next steps but make sure the basics work in step one.

Joining it all together sounds sensible, but is it that important?   

A lot of people talk about joining systems together and it's easy to imagine an ideal world where all information comes together. You can imagine yourself playing big-data wizard but at what cost? I think the first steps should focused on transaction processing, billing etc, before you tackle the nice-to-have. Good systems export data to excel and often business intelligence needs change so quickly that it's not worth the time and money to hard code them. Thats a good rule of thumb - bed down transactions and key reports reports solidly first, then ask more complex questions in excel.   

What if you're stuck with a legacy headache?

If you pull out one part the others fall over? Not a nice place to be and more than often caused by not following the steps above but there is always time to change the road you're on. I'll blog about this in a couple of weeks time. 

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What To Look For In A Business Partner

Like marriage and just as destructive if it ends 

When you're thinking about a business partner it's good to think about how you might resolve tension because there definitely will be some, maybe you should travel with someone before you go into business with them? 

Ok, this is as far as I want to go talking about behaviour and values, most people get that bit. What I want to talk about is skills match. Should you look for someone that has similar or different skills to you?


Think about the four perspectives of business; finance, client, core processes and people. On top of those four is strategy. Note that a core process is defined as one that touches a client, processes like operations, marketing and sales, it is not administration. Profit is a return for entrepreneurship and capital, not just labour.  

Think about you and your partner and score yourselves on each of the elements. I think that if any of the five, but particularly strategy, are very imbalanced then there may be trouble ahead. 

We all develop over time and obviously we can't all be experts at all things but I think it's important that the thinking on all things are shared rather than divided up. In a domestic partnerships if one person is a chef the other partner's cooking skills get worse rather than better. 

Some things can be complementary but some definitely have to be equal 

One of the things that I think have to be equal is the amount of work done, the number of hours spent in the business. if this is unequal it will cause big problems. It will be hard for staff to work effectively if the bosses aren't present and available. 

If the hours are going to be different it's probably better to think of the relationship as a strategic alliance, a sort of profit share for services received.  

Top up skills with an advisory board

A key success factor for many businesses is access to specialised advice via an advisory board. If you are contemplating taking on a business partner because they have specialist skills ask yourself if they might be better suited to being an advisory board member.  

If you go it alone make sure have a good support network
A lot of successful businesses just have one boss but if that's the way you want to go make sure you have a strong base camp, ideally a mentor and an advisory board as well. And maybe a nice dog.

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