This content is part three of a four-part series called Leveraging Market Trends to Reach New Clients from a conversation between Joe Woodard and Mike Michalowicz on the Scaling New Heights Podcast. To read the other parts in this series, see the links below the article.
Joe: It sounds like a “surge” and a “trend” are kind of the same thing. And how long can a business ride one?
Mike: Surges and trends are similar. The only difference is that a surge is imminent and rising quickly. With a surge, you want to catch it earlier before it turns into a trend.
Trends can last sometimes for years, sometimes for decades and some only for months. Look at the ice bucket challenge. Not that there was necessarily a marketable opportunity there, but that surge raced through in about a year. You don't hear anything about the ice bucket challenge now, but it had a huge impact. Another example going back to shoes is penny loafers. They surged and continued on, died out a little bit, and then the wave started growing again for decades and decades. The thing is no one knows how long a surge will run.
Here's the thing, when you're up on the wave, literally milk it for all it's worth. Get everything you can out of it. The markets are moving faster and faster.
Once you identify your niche, you want to get as much out of it as you can for as long as you can. Two things are going to happen. At a certain point, other surfers will try to catch that wave and the competition will set in, but the surge will die out. Once you're up on it, I can't promise you how long it will last, but do everything you can to extract everything out of it to deliver as much value as you can as quickly as possible.
Joe: To create a practical point for accountants to relate to here, a current trend is automation. That is a wave. You can automate up to 80% of the accounting process and in some cases more, through a suite of solutions that extract data off of printed pages or scrape emails that come into your inbox and extract that data. There are solutions that don’t even wait until it hits your inbox or get a piece of paper. Solutions will go out and grab the documents, pull them in, and place them into your document management system, right into the client’s folders where you need to work. Then other technologies will scrape them and automate the accounting process. We have had bank feeds in ever increasing quality come into it over the last ten years or more. I could go on and on. Click with your phone and phone image parsed and gets automated. The automation category is really large and that, I would say, is a surge.
I can ride the wave of that to create an entirely new approach to bookkeeping. It might be at higher margins, but it isn’t just about efficiency. It is the branding around that, and then using that energy like you talked about like tricks on a wave. Some of the tricks I would do on the wave once I had the energy is use the accurate, real-time financial information to interpret the financials on behalf of my client. In other words, I would insert some pro-action in there, and that would make my service unique.
This really aligns with your examples. In time others are going to adopt the same technologies, and I will lose the competitive advantage. I don't think that will be a short window before accountants and bookkeepers lose the competitive advantage of extreme automation. The point is that this wave, like all of these waves, give a long enough ride that it's worth the investment in the branding and the messaging.
The waves may last a year or maybe five or ten years. The point is, I will ride that wave while it lasts, but I don’t necessarily consider it to be a pervasive and enduring business model. I am always waiting until I paddle out to the next wave and I'm always thinking about that paddling.
Mike: Exactly. You can really ride away for ten years and then catch the next wave after it.
I had an interesting call with one of our members who targets the Amazon seller niche. She called me and said, "I have fascinating news." I said, "What is it?" She said, "I found a way to automate every single element of what I do. There's software out there that does it and I can replace bookkeeping services for all Amazon sellers." I said, "Well, that sounds horrible. You'll no longer be a bookkeeper." She says, "No, no. I don't want to be a bookkeeper anymore. I'm transitioning into being consultative. Over the next few years, as I bring on clients in this space, I'll actually remove the transactional component of bookkeeping by using this new software. I have already started transitioning to a consultative model around a very specific need that Amazon sellers have which is inventory management."
She's becoming so specialized now that she can provide significant consulting work. And when I say significant, I mean very impactful, which means she can dictate, and deserves, a very significant premium. She hasn’t lost the bookkeeping, she's actually plugging in a system for that. That is how you ride the wave.
Joe: There are two things in that story that are significant - technological innovation and niche. When you combine those two elements, they will free you up. That bookkeeper is not trading keystrokes for dollars. She isn’t burning her time and her team’s time on that process. Instead, she has the bandwidth to be innovative and to go into these new areas. And that just creates more energy. She is doing new services that she can tell a story around. She can build brand better than ever. And that, in a nutshell, is what riding the wave means.