Agency Finance and Business Boosting Insights with Jason Blumer from Blumer CPAs

Foreign. Welcome to Inbound Agency Journey.

This is the show where inbound agency leaders share the strategies, shortcomings, and successes they've experienced in their journey toward building their dream agency.

Now, here are your hosts, Andrew and Gray.

All right, welcome to this week's episode of Inbound Agency Journey. This is Gray MacKenzie. This week, I have the pleasure of bringing on Jason Blummer from. Well, we're going to get into some of his background, but from Blummer, CPAs, and a couple of things that we're gonna get into here. Jason, welcome to the podcast, man.

All right, great. Thanks for having me, man. I love your podcast and you are on mine, so it's cool I get to be on your podcast now.

That's right. Yep. Well, awesome. Well, let's start off just so obviously you and I have talked before, but so that I can learn more and everyone else can learn just kind of about your background, I guess this could go a lot of different ways. There's a lot. A lot of questions I can ask, but what brought you into the accounting CPA space? And then. And then from there, maybe we'll dive into the different things that you have going on today.

Okay, very cool. So I've been working in the CPA public accounting space, you know, serving clients, doing accounting audits, payroll tax consulting for about 20 years now. And so about 15 of that has been in my own firm. So I lead my own firm with a partner. And so we're a virtual firm, a team of nine. And we've niched down to serving the creative marketing, design, and digital agency space. And so we do. Our team supports all the financial things that those agencies need. But I've been doing coaching and business consulting around things like, I don't know, books like Profit first and Traction or just helping people grow an agency. We've been doing that. I've been coaching eight, nine years agency owners. And then of course, you know that about seven years ago, I created a community for other CPAs around Canada and the U.S. where we coach and teach them how to lead firms and how to become consultants. And so we do a lot of work there and have conferences and a lot of online coaching and teaching through that organization, which is separate from the firm, you know, so that's my background.

Right.

Wow.

Well, that's a lot going on. I guess the first question that I had was kind of around the vertical that you guys have chosen. What led you into the creative agency space? Was that where connections were? Or was that background or how did that come out?

Yeah, I think A lot of niches find people, it seems, you know, especially in the accounting space. Most firms are very general practitioners. They'll just take anybody. And we were like that at some point. My dad started the firm back in 97 and I came in 2003 and have been running it since then. And my dad since retired. But it was just a general firm. We would take anybody. And then we started getting a couple of small designers and then, you know, that's designers. It's a kind of a big community. They really know each other, they stay focused and together online. So they, you know, started referring other people to us. And you know, and that just led us more and more into kind of doubling down on that niche and what it takes to focus on that vertical. And here we are, you know, fully focused on that niche, helping people become mature business owners, equipping them to actually grow a business.

Right. Jason, is there anything? I think not everything, but in a lot of cases niching is really valuable because you build relationships that kind of grow on each other and kind of multiply and then you also learn the lingo of that individual industry. But it's not necessarily that the businesses themselves are run that the business model or whatever service you're providing is actually that different from other industries. In some cases it is, in some it isn't. What is there? Are there some things that you see that make the agency space a lot different from other industries? Or at the end of the day, is a business, especially services business, kind of a services business?

Yeah, no, that's a good point. Yeah, I think you're right. Like if we were to niche in some kind of nonprofit or manufacturing or something like that, there might be specifics that we can do that other firms can't do. But yeah, certainly in a service based industry, it really just has to do. Niching in this kind of service based industry with agencies has a lot to do with just our experience. Just the fact that we've been exposed to a lot of agency business models. It's a service industry that's a lot like a CPA firm. So we're very familiar with it. So yeah, it's not that we can do magical things that other firms can't. It's that we've just been doing it for so long. And now that we niche, we train our team around understanding the lingo. So I think a lot of it is the experience around the lingo, how the business models work, you know, just, you know, the struggles with project based revenue and moving to recurring and moving out of hourly billing into value pricing. Those are the kind of things we coach and teach a lot about. But other things we coach and teach about are, you know, just business building things like what does a business model look like, how can you change it? You know, hiring, firing, taking risks, what are the rewards for those risks? So a lot of the things we coach around are just general strategy type things. But over time we have been able to build some service based tools. Like we have an agency financials metric spreadsheet and we have a certain philosophy of how we want to present financials and so how we present stuff. Some, you know, some basic financial tools we've created. These are the things that probably differentiate us and set us apart. But yeah, I think it is just the longevity of being in the profession and understanding it. When I coach agency owners, I've almost heard every kind of business model and can kind of highlight what some of those initial issues are. Sometimes just in the first 15 minutes of that initial coaching call just because we've just heard it all and seen it all. So does that give you any more questions? I mean that, I don't know if that helped, but.

No, yeah, that, that absolutely does. And that's exactly right. I mean you start to pattern match and understand you know, somebody because you've seen, so you've seen the insides of so many agencies, you start to understand, hey, with that, with this model, here's a reasonable profit margin that you should be shooting for. And here's numbers that are way out of line or in line or.

Yeah, or even if an owner starts explaining things to us, we can start to hear probably what the issue is. There's, there's some kind of growth related issue or something holding them back. And after the first 15, 20 minutes at least I'm the coach in the firm. The other four CPAs do the financial support of the tax payroll, accounting and technology. But I'm doing the coaching and consulting, sometimes consulting with my partner. And so just having that knowledge gives us the ability to pretty much identify what some of those growth problems are. And that doesn't mean we can fix them for anybody. We can just know what to go after and how to start really focusing on how to bring that business owner along into more of a mature way of growing and leading a company.

Right, that makes sense. Well, let's jump right into the part. Let's get into the meat here. This is the part that hopefully will possibly will convict some people listening, but also hopefully lead us into some solutions as well. And that's kind Of I guess my question is what are there doesn't need to be a number, but if this was the top three or the top couple mistakes that you see. And I think that when I'm asking these questions I always struggle a little bit because I kind of need to narrow the scope down. Can't just say agencies in general because there's probably a big difference between the problems that a 2 year old agency and a 10 year old agency are having. But let's say a relatively young agency a couple years into the business, a small, relatively small team. What are, what are the common mistakes that they're making that that's costing them money either in taxes or in lost revenue or in expenses kind of spiraling out of control. What do you see there commonly?

Oh yeah. So yeah, a lot of times when we start coaching with an agency that, I mean, it's cool. When you start coaching with somebody, it means they've already recognized they need help, so there's something there to dive into. Typically when you start coaching somebody and there are some real common two to three, I mean two to three common things that I typically know are always an issue is that they're serving the wrong clients probably. So that's probably true. They may or may not have the right team and they may not be being bold enough or recognize their value. So they're not pricing the right way. There's a lot of fear around pricing, which is why a lot of people do value based or do hourly billing, because there's no fear, it's neutral, it doesn't feel a certain way. But when you price, you actually try to figure out a value price for that client. And if you're a growing agency and you really are trying to claim some kind of expertise in your industry, which marketing agencies do, they say we can do this for you. Then if you're making claims and promises to a market, you kind of need to price in a way that that proves that you know what you're doing. And pricing is just really scary for a lot of people, you know. So those are some common things. There's a lot of things that come out of that. It could be the owner's fear, the owner's struggle, it could be that there. A lot of agencies give things away for free because they hide a lot of what they do or they just, you know, they do a website, but they're doing this strategy too. And so we'll say, hey, let's pull out the strategy and the planning and make that its own thing and price for that is an upfront discovery type price, and then do the website for that other price. And when you start figuring out what your business model is and what you sell and what's valuable and how not to hide your value, then you can start assigning prices to the value you're delivering more accurately. But to coach somebody through that process sometimes is scary because they may not have done it. They may have to practice the next time they have a lead, they may have to present a proposal that is a little bit of a fearful thing. A lot of times we shoot for doubling their price as just a coaching tactic. It doesn't mean their price is worth double. But a lot of times if we say, hey, can we build a proposal in a way that you double your price to your next potential lead, it makes. It forces them to start thinking about, okay, well, what is my value? What would my value have to be that I would present to justify a doubled price? And so those just lead us down the road of trying to unlock what's in that owner's head and what fears they're struggling with. But I would say probably not pricing the value appropriately. Probably a team that's not able to move forward and grow. And probably there's a client base a lot of times that will anchor a company back and hold you back from growth.

Right. All three of those. You said the word fear a lot. And there's definitely fear associated with all those. If I recognize I'm serving the wrong clients, but if I cut them, there goes a portion of my revenue, and that's a scary proposition. And if I double my pricing, that's scary when I'm already not. Probably in most cases where agencies, maybe not all cases, but in a lot of cases, when an agency realizes they have a problem, it's typically not a situation where they're winning 100% of their proposal. So there are exactly not winning everything. And now, now they want to double that, or moving people around the team, hiring new people, firing current people, making adjustments. There's obviously that's one of the scariest things to do as a business owner in a lot of cases. So all that, I think that recurring theme of. And I think that's. That's probably one of the areas where having a coach, having a mentor, whether it's a formal paid coach or somebody who's older, who's been through the business before, who's a friend, who's mentoring you in some way, I think can play a huge role, is just in kind of giving you the courage and being There to talk you through that process. You've probably gone through that a lot.

Oh, yeah. Well, you know, what my partner and I call it is playing chess. And that's what business is. It's really strategy and playing chess. And so what we're always trying to do is get as many chess pieces as we can, Like a larger savings account account is a piece of chess, this new person is a piece of chess. Or breaking into this new line of revenue. We got this one client now in the nonprofit space that's chess pieces. And I think what a lot of owners, especially creative people, they're technically built to be creative people a lot of times. So not necessarily business owners, but running a business requires the analysis of risk and reward. And that's what a lot of people can't do. And that's what a coach does. A lot of times you can't analyze your risk and reward. Just looking in the mirror, you can't often coach yourself. And so a lot of times what people say, what does a coach do for you? Well, it basically buys you back four or five years of having to learn it on your own. That's what a good coach can do. And you know, we're specifically focused on this agency space. And so we can help people not have to go through the next four or five years of experimentation and learning around their business because we can push them or we can help challenge them, or we can help them know how to play chess better, how to do that business strategy because it is scary. And a coach can help you go, okay, what are the rewards for this new team member that you need to hire? What do you think you're going to get even though you don't feel right now you have the money to pay that person or you can't justify it. What are you not getting by not hiring them? So those are some of the questions you want to ask. So a lot of business owners ask, if I spend money, what do I get in return? Well, a good coaching question and a good risk based question is what are you not getting by not spending that money? And so it's not that one question is good or the other, it's that you have to balance those because you got to say, my reward is potentially this. And if it's exponential, then we may push you to take the risk. Or maybe you shouldn't be taking the risk right now considering all the other factors. So a coach will just ask you tons of questions and just break through all of the assumptions that you're making that you don't know you're making. And sometimes coaching just helps people think more deeply, which is what they need to do. Few people think deep enough to actually run a business and craft some kind of justifiable business strategy. So coach just asks and asks and asks and leads them down rabbit trails and leads them in another place to really vet out all of these issues so that at the end we go, all right, what are you going to do now? What are the two takeaways and what are the dates you're going to do them by? Because there's always accountability that comes with good coaching and then a coach will follow up. So that's kind of what coaching is in a, in a nutshell. It's basically saying, where are you? Point A, where do you want to go? Point B. And then what are the steps between those? And there's accountability to help you walk those steps. So that's basically what a coach can do for somebody running a business.

Right. I think that's helpful and a good breakdown. A compelling argument for coaching. Just the realization. One of the things that you mentioned that kind of sticks out to me and I've started to realize in this space a lot of agency owners are the creative types. That's why they got into it. And sometimes what, what doesn't go along with that as much as with kind of more the analytical or data driven type is a tendency towards probabilistic thinking which really leans towards evaluating the risk reward relationship and kind of protecting yourself on the downside and optimizing for the upside at the same time. So I think that's where bringing in somebody who kind of complements your skill set and personality in a lot of cases makes a lot of sense.

Yeah, and it's, you know, it's also helpful because it's good to understand that in service based industries there are, there are plateaus and levels that companies reach at certain sizes and I don't know, it's weird, but typically when there's a one owner, five to six people, owners and agencies start bumping into some kind of glass ceiling. And a lot of times it takes some kind of risk based action to bust through that ceiling, but you're going to hit another one and you know, that first one is really where you're able to manhandle and keep your arms around everything as the owner. When you hit that next one, which could be nine to 12 people and maybe a partner or something like that, you're going to probably start running into another ceiling. And that's where you know, as the owners you have to let go. You have to start trusting in some kind of infrastructure with a team and processes. And if you haven't built processes that are really good to support you up to that point, you're going to really feel the push where you're bumping into the glass ceiling. And you may be experiencing that when you just can't grow, you just can't do it, you can't push through it. You know, if you're an $850,000 agency and you just can't break those seven figures to a million, you're hitting some kind of glass ceiling. A lot of times a coach can help you, you know, take some scary moves sometimes and break a ceiling by making a move that is not going to hurt you totally, but it is a risk based move to break that ceiling. So it's weird just to see service based agencies and really any kind of service based business just go through these plateaus and know they're coming and that you got to bust through them when you approach them and you start feeling the pressure of those.

Yep, that definitely happens. And there are those common stalling points for agencies. Jason, I kind of want to switch up topics a little bit here just because this one's come up a good amount in a lot of one to one conversations that I've had recently. And that's been the whole topic of like the exit, I guess, making an exit as an agency owner where agency owners have either realized we've hit this point where I'm at five to six people, I don't really want my career to be managing people. And so I'd like to either get acquired or merge or exit in some sense. So a lot of folks have asked, what does this look like to sell my agency? Is there anybody who'd really want to buy my agency? And there are a lot of. I've talked to agency owners who I think fall on both sides of this, who just have no confidence and I can't imagine that anybody would find value in what they've built. But on the flip side, people who think their agency is worth a seven time multiple on their top line revenue and probably don't understand how a lot of these deals happen and what it looks like. Yeah, is that something that you coach folks through a lot and are there any tips or kind of what advice would you have for the agency owner who's in that spot as they prepare to go down this route and think about the way out?

Yeah, no, that's a man. That's a good Question. We're actually hearing that a lot more. We're hearing, yeah, we have a client going through an acquisition right now. So I guess we can talk about, you know, there's a lot of different ways to do it, as maybe one of your listeners is thinking about acquiring an agent. So they want to acquire something and bring it into their own brand. Maybe they want to be acquired, so they want to be purchased or they want to sell. And so they don't want a company anymore. They want to be absorbed. What we hear is most common is merging. That's the most common. Where I think a lot of agency owners go, okay, I've reached a team of 10 and I'm by myself. I just can't do this by myself anymore. And so they, they want to still do it and they know they're valuable. They built, you know, to the 10 level and they're at a million dollars revenue and they, they want to merge because they need help. So they're really going into partnership. You know, at that point, there's just, I mean, and when you do that a lot, there's, there are no, there are no right ways to do it. There's not a book you can buy that say, here's how you sell or buy an agency. Maybe there is, but I'm just saying it's a negotiable thing. It can be anything you could possibly dream up that to humans that are not under duress, which is important for contract negotiations that any two humans can come up with. You can say, you get 49%, you know, I get 51. But also, we bring all of this in, but this line of revenue we leave out because it's product based. And I want to run that and spin it off as a separate company because the one acquiring may not want that product based revenue in their new firm, their merged firm. But whatever you do, I think you got to say, doing it the way I'm doing it now is not optimal. There is a better way. You got to believe that. And if you're wanting to bring on a partner or you want to be merged into another agency, you got to be able to say, we're better together than we are apart, or you don't want to do it. I mean, going into partnership is really, you should really do that very slowly. You know, the book Rocket Fuel is a great book about partnership. I think Partnership Charter, I think, is another one that really helps people lay out what does a partnership look like? What should it look like? So it could just go a million different Ways. Typically, you know, if you want to sell your agency, a lot of people start with one times revenue. You know, if your revenue is a million, you want to start at a million. But the only thing that would make a service based business valuable is really the internal people and processes internally. Because you're not really buying a thing. You're not typically buying trademarks, you're not buying, you know, tangible products. So what are you buying? You're kind of buying a brand. Well, that's tricky because why can't you just go take their clients, you know, well, maybe that brand or that firm that you want to buy or something like that has something so valuable that you would pay a higher multiple, maybe a 1.2 multiple of revenue or something like that. But I think it's rare that service based companies have a higher multiple than one. I mean, it could be, but that's really tricky. There's a lot that can go on between merging, buying and acquiring and things.

Like that makes a lot of sense. And that's, I think that's helpful and also kind of helped answer one of those specific questions which, which I had was kind of around what are some of the multiples that you see? And obviously there's a lot that goes into what that specific, specific multiple is in the deal.

Yeah.

For people who are either are thinking about it right now, even if it's a ways off, or maybe aren't thinking about it yet, what are some of the things that they can do to set themselves up? Well, is there anything in terms of, I mean, some of the obvious things that it seems like to me would be important would be keeping your books in order and making sure that those.

Things are done correctly.

Obviously trying to understand what is valuable. And typically that is either most acquisitions are either about acquiring your client base or acquiring the talent that you have internally. And usually some combination of both of those. So if you are thinking about what's going to create value, those are, those are two big things that can create value in your agency. But are there any things specifically that you've seen either hold up deals or make deals go smoothly that you would then tell agency owners based on that, make sure you do this or don't do this?

Yeah, you know, it's, I mean, coaching is about human relationships. That's really what it's about. Because all, you know, all presenting business problems are normally not the presenting problem is not the problem. So if somebody says my, you know, I just can't win proposals, it's typically not winning proposals. It's the problem, it's something else and it's typically human related problems. So when I would say things that hold up acquisitions, mergers, it's human based things. A lot of times there's two partners going through it and they just don't know what they're doing. They don't know how to negotiate, they don't know how to come to the table, they don't know how to talk about things, list things out, you know, things like that. But if you want to be a valuable company, you know, I mean bottom line, you got to be making a 10% profit. That's just a kind of a give me health signal, you know, after the owners pay. Even 10% profit is basically a bottom line health factor that we want to, we want our agencies making that. But if you're an agency that's making consistently 20% on all of your work, you've got something going on that's differentiated you. That's a pretty high profit multiple. 20, 25% is really, really high in a service based agency. And that means you're pricing in such a way that you're really getting high margins for the work you're doing. So you have some kind of strong brand or you have a really consistent deliverable model or something like that. So if you want to really be considered a valuable agency, 20% or higher in profit margins is good. And when I say profit margins, I don't want to assume everybody knows what I mean. It just means revenue minus all your expenses. That bottom line profit, after all of that divided by the total revenue is what you call your profit margin. So those are things you want to try to achieve. But a lot of times if there's a valuable agency, it's because they have some kind of recognizable process that produces some serious results. You've got some really solid people or the owner is really a solid and well known and branded owner. Those are things that make these service based agencies very attractive.

Well Jason, I appreciate you coming on today and just being willing to dive into that and share some of your background and a lot of resources here. We'll make sure that we'll link up in the show notes@doinbound.com podcast. We'll make sure we get your site. Bummer. CPAs thrival businessology, the businessology show, Linked Up. Is there any other thing, any place that you'd want to point people to learn more about you, what you guys do, what you offer?

Yeah, yeah, those are, those are great, you know, great places. Blumercpas.com and then Jason M. Blummer on Twitter, if you want to follow that. And then Blummercpas. You know, we're on Facebook and Twitter. You can find blumercpas, Facebook, Twitter, Instagram, and follow some of the things we do there. So, yeah, you'll find us. Jasonblummer.com is just my personal site, you know, that kind of shows all the things I'm into. And you can get a couple of ebooks there, too, if you want. So those are the best places to find Jason.

Appreciate your time. Thanks for coming on, man.

Cool. Thanks, Gray, for having me. I appreciate it, man.