In the end, did our firms really need the Paycheck Protection Program federal grant/loan that we all received? For the majority of firms, most likely not! Of course, at the time PPP was made available, we were all scared, concerned and clueless as to what would lie ahead. If you were the managing partner and elected not to receive PPP, I am not sure you would have a leadership job today, or maybe any job today. At Winding River Consulting, we work with over 100 top firms on an annual basis, and we don’t know one that didn’t receive PPP dollars.
We all know what happened. Most firms had a small decrease in revenues — say, 4-5% — and some firms actually grew nicely. Some firms established PPP and Employee Retention Credit practices and did amazing. On top of this, we pretty much all reduced or eliminated our travel costs, which dropped a few percentage points to the bottom line. The PPP money to most firms was around 9% of gross receipts. The math is easy: Many firms had record years!! Some lemonade from a ton of lemons.
So most firms we work with are sitting on more available cash then ever. There are two options — big bonuses to your partners and maybe some of your team, or an amazing opportunity to reinvest into your practice. I strongly urge you reinvest — this could be the gift that keeps giving. I ran a firm for 27 years, so I understand the pressure of increasing partner compensation and I know the squeaky-wheel partners who want more money. This is a once-in-a-lifetime opportunity. Most firms skimp on reinvestment and favor higher partner compensation. This is the time to focus and invest into your future.
Every firm will need to evaluate how best to use their PPP stash — but some good places to consider include:
- Updating your technology;
- Investing in new service lines;
- Developing and executing a digital growth strategy;
- Investing in innovation and automation of your processes;
- Hiring a consultant to get you to the next level;
- Investigating M&A;
- Finding your weak spots and strong areas; and,
- Developing a strategic plan.
Improve, get better and build!
This is the once-in-a-lifetime opportunity to build a better practice for the future. Don’t squander this opportunity on a few greedy partners.