012 When’s The Right Time To Launch A Firm?

We got some great questions from future firm runners and people who are on the fence about whether it's the right time to make the jump. Let's share some advice with these young Padawans. Avoid the same mistakes that you've made and maybe are still making. Let's do it today on Jason Daly. Quick programming Note. Tomorrow at 4:30am Pacific, I'll be doing a one hour AI talk for a group in the UK called AVN. I'll put a link in the show notes. Hey, if you're looking for a reason to get out of bed nice and nice and real early, or if you're on the east coast, maybe come hang out. It's gonna be real early. Really? Okay. Shower thought. Want to know what you think here? This like seed of an idea not totally fleshed out. Nobody tells you how much time to spend on your work versus how much time to spend on your family versus how much time to spend on yourself. And when you work for someone else, one of those three things is outside your control, which in some ways makes life easier. Because I can always point my blame on my point, like point the blame on my employer. Well, I couldn't do this or that because I had to work or I had to work overtime, so I couldn't do this or that thing with my family or I didn't have the time to invest in myself. But as soon as you go out on your own and you don't have that really largely arbitrary framework within which to frame the things you do in your life, you just, you start doing a whole, whole lot of thinking. Should you be working eight hours a day? Like, I don't know, what's the right answer? Is it seasonal? Does it depend on whether you have family? Does it depend on whether you're 20 something with absolutely nothing better to do and if you're not working, you'll just get in trouble. I have found that when, even, like, even when I transition into owning the firm I used to work at, I feel like I was still in that framework of, well, there's a clear expectation of just how much people work because of the amount of momentum. That is just we have this inertia in the way that we've always worked and that works out to, you know, X number of hours a week throughout different seasons of the year. And that was like, although it was arbitrary, it was a framework and I found myself not thinking about it as much as opposed to going out and doing your own thing where you're like, I'm working eight hours, but I'm also doing just fine. And I don't need to work eight hours. So should I be working four hours a day or six hours a day and spending that time with my kids or my spouse or on learning to play the accordion or something else? I tell you what, that, like, having that level of freedom is one is one of many existential crises I think you have when you're not subject to the man, you know, somebody else that's telling you, here's the right answer. I've been thinking about it as kind of three things. What's the right amount of time to spend on work, on family, and on yourself? If there's some sort of golden ratio there or a book or something you've gotten to, that feels like an answer, let me know, I'd love to hear it. And that's my, that's my shower thought for the day I made. There may be more shower thoughts in the future. Okay, couple of questions that I've gotten in about, you know, somebody who feels like they're on the path to running their own firm one way or another, and what are the steps that you take before making that jump to ensure that you're in the best position that you can be to do that thing in the future? And honestly, I love these questions. These are just such, like, planner, like, this was so me, like, what can I do today to make sure I'm. I am fully as prepared for this thing in the future as I possibly could be. Bless you. That's absolutely how I was wired. And honestly, I'm a little bit jealous because I never had that level of foresight to even know what I wanted, like what I wanted to do down the road. But we got some whizzing hands in the audience here. We've probably got some advice we can share. So first question I've got here. Hey, Jason, I'm a sophomore in college right now planning on pursuing a cpa. I intern remotely for X type of private company doing fixed assets and will be interning for a mid sized public firm next year. My plan is to work for this midsize firm while working on getting my cpa, learning the ins and outs and slowly building my own remote firm. I guess my question for you is, what do you think of this idea and what can I do to set myself up for that future? Right now I try to get people to comment before I. Before your thoughts pass through my filter of what my thoughts are. What would you say to this person or even if this was you, a sophomore in college and you're like, I think I'm gonna go work for a firm for a bit and then start my own firm. Like, what would your advice have been back then? Whether that was last year or 1983, here was my advice is, you know, thinking back to me being a sophomore in college. When you're at that age, I can tell you what, and there's many things, like many domains in my head that still work this way. When I was a sophomore in college, I was still blown away that grown ups could go close themselves in an office and sit in front of a computer and, and do something that people would pay absurd amounts for. And like, that was just a way of, of going through life. And these machines existed. Like just that. The whole premise of white collar work blew my mind. And frankly, because I don't understand what 99% of the people in the world do, I still feel that way about pretty much everything but accounting. And so the answer for me was until you do that stuff, you just ultimately don't know what you enjoy and what you don't enjoy. What are the pros of running your own firm versus the pros of working for somebody else? So my advice was pretty much just start working, whether that's the internship, both through the lens of the internship, working for somebody else, seeing the pros and cons of that, getting good experience, but also for yourself. Like, find somebody who will just let you do their bookkeeping even if it's for free. Like, don't get. I, I think in college I had thought about doing this, but got too hung up on like the spookies of pricing conversations and oh, why? Like, how am I gonna price what I do? And would anybody actually go for that when the most viable thing for you at that stage in life is just getting that experience under your belt? Experience is ultimately the prerequisite to being able to do anything for money. So even if you're not getting paid for it, that experience will ultimately aid you well. So go out and just see if there's people that you can help. Like, even if it's through the lens of like maybe a service opportunity where it's a group that maybe probably couldn't afford professional help, that's a great way to learn on the job and get that experience under your belt. Get some like, kind of entry, like beginning client management skills too. Most of my early experience came in tax. I did tax almost exclusively for about a decade and it was with, it was with a small firm. So inevitably there's quite a bit of accounting Work and cleanup that comes with that. So I got exposed to some accounting also. But in my mind, before going out and doing that work, accounting in my head was never tax. It was never doing income tax prep for small businesses because I was going through a program that tried to pipe everybody into one of the big four firms in Portland. And so what they were talking about was more a test type work. Usually audit is where you would get plugged in initially and at the stage of being a sophomore in college, it is worthing worth thinking about. If you're going to go to a regional firm, how are you going to get plugged into that regional firm? I don't know that many folks that are going to go out and like hang their own shingle and do audits from day one. There's obviously exceptions to that. But is that it's worth thinking about whether that regional firm experience is going to be relevant to ultimately what you want to do. Maybe that's an accounting practice, maybe that's a tax practice. You will definitely pick up some things being at a regional firm, whether you're doing the same work or not. But the most relevant experience is ultimately doing the stuff that you want to do when you're out on your own. In a perfect world when you're in college too, is you can find some fellow nerds that are into that stuff as well. Like the type of people who will go out and just like start their own little bookkeeping practices just doing books for people on the side. That stuff is way more fun if you can like go through that journey with other people. Kind of like having a study group. Like it's way more fun to study as a group than it is to study by yourself. And you're gonna learn a lot by going through that journey kind of in parallel with other people. So for me, the way my brain works, the way I'm motivated, is I'm most likely going to follow through that if I can find a little group of other people that are kind of at a similar spot to me in that journey. And, and we'll go through it with me. And in the process, you'll learn what you like and what you don't like about it. Because ultimately there's no replacement for just doing the thing. You got to learn the stuff that you got to learn in school. But doing the thing is going to teach you just as much, if not more about what a sustainable future of, you know, doing this work in the profession could look like to you. Okay, other question I got this is through the lens of somebody that's currently working for someone else. If you're in a firm, how do you know when to stay and grow versus do your own thing as a toughie? I think it depends a lot on the quality of your employer. And I think many of us, the right answer is framed by maybe what our own personal firm experience was and the people that we worked for in the past, which is not gonna be the same for everybody else. Maybe you've got a phenomenal employer where as long as you're going to be there, you're going to learn, you're going to have more opportunities and maybe there's never a reason to leave. That is not the case for most people. I think most of the people that go out and start their own firm did so from a place of having a philosophically different approach to running a firm that they were only going to enable by doing it themselves. So a lot of moving pieces there. It probably depends on what is your vision of a fun, sustainable firm look like. If it aligns with more the traditional model of running a firm, you may be just fine working for other people, just fine acquiring practices for people who are retiring or. Or folks that are just getting out of the game. If you have a very specific vision for how you want to run a firm and you think that's different and unique and not something that's out there that's probably ultimately going to take you to doing your own thing faster, there ultimately is no right answer. And to the question of how long do I stay and grow versus how long do I wait to go do my own thing? The moment you go out and do your own thing, you learn a whole bunch of other stuff outside of client management and just the administrative aspects, some of which you may enjoy, some of which which you may not enjoy. I think the right answer for just about anybody is at least to dabble at it. Dabble in it in the form of a side hustle. You're going to learn more about yourself and what's good about that and what's not good about that as opposed to just quitting cold turkey one day and going out and hanging your shingle. I think that's just generally not what most people do. One other thing I think people don't talk about enough when it comes to starting your own firm is the upside of starting with a small acquisition. So like Logan Graff did this. He bought some clients off of. I think it was off of the place that he was leaving. He bought some of those clients. And I think what People get stuck on sometimes is those ultimately are probably not going to be your forever clients. Maybe they, maybe they align very well with the, with where you want to take things and if so, that's great. But even if they don't, oftentimes buying that initial set of clients can serve as your Runway for like that first 24 months. It doesn't mean that you have to keep them forever. It's definitely like sunk cost fallacy, the idea that you bought this client so, you know, have to keep them until the end of time. But if you get into the frame of mind of somebody who's just starting out in the beginning, man, you're just thinking of how am I going to pay the bills? And it's usually not that hard to cover the cost of an acquisition by servicing those clients in a really hands on way. In fact, most in most of the acquisitions I've been involved in, there's usually some sort of clawback if we lose some of those clients so that we don't necessarily have to pay for them. But there isn't a cap on upside. So for example, if your goal is to build this hybrid firm where you do both tax and accounting support, oftentimes you can buy a set of tax clients who are suited for accounting support as well and then upsell them on accounting support. And all you're paying to the previous provider was the tax fees. And so if you can, you know, 3x the fees by doing accounting as well, that can be a really cash efficient way of getting yourself started. So when you're at that kind of tipping point of like, what does the very first version of this look like? For me, I think oftentimes people overlook acquisitions that can be done like through just seller financing and a really sort of cash friendly way just to get you started in the U.S. that answer is a little bit nuanced with tax work because it is so cyclical. So be mindful of that. There probably is a better answer than some others for the time of the year to make that happen. But another big variable there is, is would your employer let you take some of those clients, let you buy some of those clients out and take them with you, because the people you already have a relationship with, who maybe you're already sort of managing yourself, those would be great clients to start with. Not necessarily through the lens that they need to be your forever clients, but because the clients that already know you and trust you and honestly would like probably be happy to go see you do your own thing. I think a lot of Us, when we work for other people, had those clients. Because this business is largely like personal relationships. It's not, it's rarely firm relationships. And yes, to a degree, they engage the firm to get the job done. But ultimately the people that they draw close to are the specific people that do the work, and those are generally the people who they want to follow. So you've probably got a good group of clients there who would even be happy to see you do your own thing. I will say that seems like a really, really spooky thing to talk about with your employer. The more you can try to normalize that conversation, the better. Even if it's through the lens of, like, here's the thing, sometime in the next five years, I'm going to go out and do my own thing. I, I don't see people necessarily punishing you for that. If anything, hopefully it leads to a more constructive version of that conversation that's collaborative, where you can find like some mutual success for everybody. Nobody likes staff leaving, you know, in a surprising way. And so hopefully they'll appreciate that transparency and that honesty from you that you're trying to make a plan and you want to make a plan that's going to work for everybody. If that's inevitable, then it is what it is. It's not your fault. And hopefully that's a more constructive way to sort of work through that journey with them. I do think it's like, in some ways the easier thing to do is just the cold turkey, overnight surprise thing. But honestly, I think that's ends up being like, worse for both parties. Like, it's a big old kick in the gut for the employer and it doesn't necessarily lean into, like, any ways that your employer could potentially facilitate that transition for you. Like, I think most, most firm owners right now, like, would happily sell off some clients if they knew those clients were going to be successful in their next move. Like, nobody is, nobody is hurting for clients right now. And obviously you've got like, people that are real a holes that'll just try to make your life difficult. But I like to think in most cases there's something there that could be mutually beneficial. But for both of these people, like, the big question here is, is launching your own firm the right thing for you? And like, you know, I, I think I probably talk through the lens of how it's right for me and how I value the independence and all that stuff, but that absolutely isn't going to be the right answer for everybody. There's a lot of that that you're just gonna not learn until you do it. And you're kind of flapping in the breeze and you have and grapple with these kind of existential crises that I talk about quite a bit. So as much as possible, like, it's worth thinking through that, like, if you have a partner, like, like, what does that look like for the family? Like, what are the boundaries for, like, working for yourself in this stage of life where you can ensure that this is a healthy thing for you. A couple videos that I put out on this, I put out a video that was like, I think it was called 16 Reasons to Never start an Accounting Firm. I'll put links to these in the show notes. And then there was another that was like 16 reasons to start an Accounting firm. And the one that's like, to start an accounting firm has way more views because that's just always the more fun spin. Right. Is the positive one. But just to cruise through, like, some of my thoughts on what are good reasons to do run a firm on batteries and to run a firm, for me, ultimately it was the freedom that was. And I, in the video, I organized these into like an S tier thing. I said that was freedom is S tier, but it's also F tier. It's like the very best and the very worst thing of running the firm. Like, you know, for the old hamster wheel thing of nothing feels worse than running on somebody else's hamster wheel, except running on a hamster wheel of your own design. And that's maybe not true. I would, I would rather run on my own hamster wheel than someone else's because then at least it's my fault. And there's a different, different level of agency there, right? The idea that you're in control of your own destiny as opposed to just building assets for someone else. And I do think that notion of building value for someone else versus building value for yourself is something that once, once you have been. Is it red pilled? I think red is the right colored pill. Once you have been red pilled to that idea, you never really go back. Like, at a certain point, you're just unemployable because you're never going to go out and do that stuff for people. And like, for me, I used to make videos for other people and I used to make content for other people until I got to this point where I'm like, I'm investing time and energy and making this rad stuff that becomes an asset for someone else and they're paying me fine to do it and all that. But ultimately why would I not invest that same time and effort into building valuable assets for myself? And like, there's just a different part of your brain that engages. I think when you go into business for yourself for the first time, that becomes beneficial. Not just as it being a. I'm gonna put better in quotations, better way to apply your accounting expertise, but also like a better framework for how to approach entrepreneurship in life in general. Because if all you ever do is run an accounting firm, in my opinion, you're probably not making the most of like the stuff you enjoy and the stuff that could make the most of your expertise. And for me, until I was running my own firm, that part of my brain hadn't really switched on. It takes, in many ways, it kind of takes the spookies and the scaries out of entrepreneurship. And if you don't have those spookies around entrepreneurship, like, man, you're ahead of like 99% of people who will never do that. And so for me, that just became a really, really fun playground. Like the idea that I can create and make a bunch of relationships out there that may someday down the road turn into like cool business partnerships. And that for me has probably been the most rewarding aspect of going out and running my own firm versus just doing it for someone else is like that whole universe was opened up to me and became a lot less scary once I waded into it myself. Now there's a ton of really hard aspects of doing that yourself. Things that like, you may really struggle with, like the notion of all of your boundaries now rather than someone else enforcing them. They're really self enforced. And that's gonna work for some people, and maybe for some people it won't. The whole notion that running your own business is like just this buffet of stuff that like it's an all you can eat that could never end. You have to say, no, this isn't worthwhile for me. Rather than getting to like the end of the workday and you did what you did. I guess you can create that arbitrary framework, say I'm only going to work from, you know, 8 to 4 or something like that. But when you run your own business, like there is always something to do, which for some people is the most exhausting aspect of running your own business. The fact that there's always something more. You could be posting content on social media, you could be redoing the website, you could be rebuilding this process or that, or going out and recruit, recruiting. There's always more. And that's really hard. Not every industry is the same. Not every type of business is the same. I would say, specifically when it comes to launching accounting firms, and I assume this is the same around the world. It's absolutely the case in the US People are frequently shocked at how quickly they can grow. And there's usually like a three to six months, maybe 12 months of scaries there where it's like, oh, we're, we're running pretty tight, like, we gotta grow. But in almost all the cases where I've Talked to people 24 to 36 months down the road, they're like, holy smokes. I'm charging five times as much as I was on day one. I'm making several times as much as I was when I worked for somebody else. And they're committed to never going back. But it's not as if there is not a new set of challenges that have to be managed. And honestly, like, that's why this show exists is, is how to, like, manage those challenges in a mindful way, how to build a community, like kind of your own support network of people that will leave you feeling energized and, and not feeling isolated. Because the worst version of doing your own thing is the one where you don't have anybody to talk to, don't have anybody in your life that understands what is really challenging about doing what you do. But there's absolutely solutions to that. And that's like part of why I enjoy doing just this is having that space to talk about what we do. What do you think? Any advice you'd give these folks, Drop it in the comments. Brogan McGrathman. He's done two annual videos each year where he recaps how much money he made or didn't make each year. It is the single greatest advertisement for starting your own firm, in my opinion, especially if you're based in the US he's made a shocking amount of money last year in spite of himself and just seen the progression and how he thinks and tackles things from year one to year two. I think it's an amazing story. We'll link that in the show. Notes. That is a, I think, an awesome source of motivation if you're thinking about it. Because ultimately, if you know Logan as well as I know Logan, if Logan can do it, you can do it. You can absolutely do it. No problem. All right, that's it for today. Questions. Anything else like that, you know how to get a hold of me and I'll see you tomorrow.