085 Should Accountants Ask Clients For Referrals?

Okay, this is a sticky one. Where do we stand on asking for referrals and on paying commissions? I've seen people do it and it absolutely like explode their growth. But I think the reality is most of us are limited by kind of the skeeviness of how that feels. Is that justified or not? Can we maybe brainstorm some non skeevy versions of that to make that a little less scary? Let's talk about it. Come on in. So we've been talking a lot lately about getting better clients. Many of us have enough clients and we are overwhelmed. And so the idea of marketing is like, why would I ever do that? But everybody can get behind the idea of better clients, right? And so one of the ways to do that, as we've been discussing, is a compelling offer around a pain point that is more painful than the problems you solve for your clients now. So you're going after a more painful problem. So that, that and we'll pay you more. And oftentimes that stems from something you stumble into with a client where you're like, oh man, we just realized we can do this really valuable thing for a client. They love it. Let's do more of it. And so that client is kind of your foot in the door to this new exciting thing that is better than most of the stuff that you're doing. Cause on your client list, like, it's a portfolio of all sorts of different things. So in a perfect world, at any given point in time, you could clone your very best client 100 times and build a really cool business around that. Right now, we don't have the technology for that yet. But I would also say that we don't really do enough to kind of, I don't know, grab kind of our reality by the steering wheel and try to create and seek out more of that type of client. And it's because asking for referrals is weird and uncomfortable. And like, I'm running an accounting firm, not a pyramid scheme. So it's just kind of, I don't know, it's kind of uncomfortable for us. But those very best clients, clients sending you more clients like that is referrals at its very best. And one of my coldest takes that people generally just don't like is that referrals can be a real trap. Most of us, I think, would say that we get most of our business from referrals. That was definitely the case for me. But I also know there's a lot of firms out there who are in a spot where they're like, man, this just ain't working. And we are feels like we are working really hard, not making as much money as maybe we think we should, and it doesn't feel sustainable. And when you're in that situation, the solution isn't more. The solution isn't adding in more of what you already have. The solution has to be some degree of doubling down on the best stuff or finding something new that's even better and letting the worst of the stuff go away. Right? But I think referrals, like just general referrals with no intentionality, no going after a certain type of referrals, referrals will naturally just be a kind of lateral progression of what you're already doing, because everybody on the list is going to, you know, refer somebody. And so it's kind of an extension of what you already do. And oftentimes that's not what you want because you don't actually want more of who you have. What percentage of your business is legacy projects where you're not necessarily happy with the pricing of those legacy projects. Oftentimes those people are tickled to work with you because they're working with you at rates that they can't get anywhere else. And you know what that makes them likely to do? Refer more people. I worked in some firms where these were referred to as niches. You would do work for like, half the price. And there was some, like, element of, you know, kind of this slightly altruistic angle to it. And before you knew it, man, they were bringing all their friends in because the clients, they think they're doing you a favor by pulling more work in. And they don't realize, no, we're actually doing this work at half the rate. And now we are like, like, taking up all of our fulfillment capacity with this work that will just hardly pay the bills. And the firm referred to this as a specialization or a niche. I did a video about low bono work kind of around this, how this can be a real trap and how oftentimes our best intentions of wanting to help people can actually end up getting in our own way, as opposed to developing a niche where folks will pay you top dollar, and then you have the flexibility, you have the money, you have the bandwidth to actually meaningfully help the people who most need help. But this was something that I struggled with in firm running was when any old client could refer stuff to you, and you felt a degree of obligation to say yes because you were flattered that they would make that referral. But many of my projects were not projects that I would Let in the door in the form of a new client, maybe because we had increased rates and this project was kind of going along at a rate that I wasn't happy with. And I know that they just told that new person the price and so we kind of would begrudgingly take them in and be like, yeah, no, thank you for this referral. But what we didn't do was proactively go after more of the folks we loved, the best of the best engagements. And we didn't do it because it was uncomfortable, because it was weird. How do we make that ask in a way that doesn't feel untoward of, you know, a professional service firm? Because I can tell you what I always really struggled with was commissions and kind of the quid pro quo. That was always really hard for me. And I know a lot of people that do it well and make a lot of money on it and don't have any problems with it. And I think I probably needed to be more okay with this. And people I think are quick to put their finger on rules around commissions. I'm not aware of any situation where you straight up just can't do a commission. There's a lot of situations where it needs to be disclosed. I think that's fine. I'm not talking like contingent based fees and stuff like that, but generally when somebody's referring you work, oftentimes you're required to disclose it. But I'm not aware of any situations where you just fundamentally can't pay a commission, at least in the work that we do. But I can tell you one situation where I was on the other side of this and I felt like I got really smoked. There was a time when we were trying to move into a new, new sort of specialization around these kind of group organizations. And the organizations would come together and nobody would want to be the one to figure out, like, how do we manage the back office for this collection of companies? Like they would form this new holding company and everybody's like, yeah, we understand that that stuff has to get done, but we just don't want to be the ones to do it. And at the time I was building our cast practice and this seemed like killer work. Like, okay, you just, you're going to pay us x percent of revenue. We're going to come in, we're going to manage the back office for this collection of holding companies. And there were a whole bunch of holding companies out there just like it. And we were like, this seems like a killer gig if we can get in and start Doing a bunch of these, they would average, I mean what we were looking at, they were probably going to be 250k to a million dollar a year engagements. And so we could pull in kind of our best of breed tech stack and we could wow them with like how great and streamlined this was. And we genuinely did a good job at the work. At the time we were also really leaning into offshore hiring. So we're able to get a lot of this stuff done cost effectively. And in this process when we were starting to wade into this new type of work, we ran up into a consultancy group who were the ones driving a lot of these roll ups, a lot of these, like the development of these holding companies. Oftentimes they would launch with the support of this advisor group. And so we went through a couple of these with them and you know, you'd have the dinners and they'd be like, oh yeah, we could, we could send you all so, so much work, there's so much out there to be done and like this is a service that so many people need. We totally send you this work and we're like cool, great, you got my number. But what was really happening there was they were opening the door to like some sort of commission arrangement or wanting some sort of kickback and come to find out basically having gone through several of these things with this group, they basically had an entire network of all of the people that they would pull in to get involved in these things. Every single one of them they were getting a kickback from. They had the attorney, they had like, they had everybody lined up so that it was kind of a one stop shop. You could come and get all this stuff set up, which for the people creating these companies that was probably handy like that they had a person for everything. But they were also getting a commission for every dollar of work that they sent to all these other people. And when you hear that story, I think there's probably a massive spectrum of reactions to it. I think the most pearl clutching old timey accountant in me is like that's wrong. If only the client knew. Because in this situation I don't think they had to disclose any of it. Are they really getting the best work that they could get? Just because there's like this kind of quid pro quo going on, like surely not on the other end of the spectrum I was kind of annoyed because I'm like if that's the game, play the game. Like if we would have played that game, there was nobody else doing that who would provide this kind of Outsourced back office for these groups. And I'm like, just do it. Like you got to pay them. You're going to get a ton of work from this. Why would you not do it? You can either sit on the sideline and complain that that's the way that it is, or you can find a tactful way to play the game. And it doesn't mean you're not transparent about it. Like you can disclose that stuff to your clients. There's probably a non slimy way to do it. But if that's what the game is and that's how you're going to get into it, like should you really be that bent out of shape about it? And so that was kind of the spectrum that I would be on from one day to the other. On the one hand I'm like, nah, that's just, I don't like that. I'm not going to touch it. Feels weird. On the other hand I'm like, that's the game, just play the game. You know, if you did, you would grow a whole ton. And the people listening to this, I think you're going to have people on every level of that spectrum. Because I know a lot of firms that do tons of commission based stuff on the main channel. We recently did a roast, a firm where this firm grew like what was it, some huge amount within 12 months, half million or something like that. And they were doing kind of like back office stuff for religious organizations. And one of the things they're doing is they're paying commissions to pastors for referring other churches. And it wasn't like a sneaky thing by any means, but like those pastors are very tightly networked. There's a lot of social proof there and trust and to know that oh, this guy's using this or this organization is using this group, that is a huge sign off on the validity of your services. And they grew a whole ton as a result. I know a bunch of firms who have commission arrangements with financial advisors and they've got kind of a few different financial advisors that they will cycle through referring stuff out to and they get paid for every single one of those referrals. And probably 95% of people who just heard that said, what the heck, why am I doing that for free? There's a bunch of firms out there that refer client leads to other firms. This stuff happens, I think more than we realize. Cause we just don't see it or maybe we're not the ones doing it. But it happens a lot. And I don't know, I still kind of straddle like, what's the right thing there? This episode is sponsored in part by the fine folks at Cloud Accountant Staffing. Do you hire accountants? Bless your little heart. 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I had staff in the Philippines totally red pilled me to like oh geez, like we need to globalize the way that we get our work done. Check these folks out. Link in the show description cloudaccountantstaffing.com hey. This episode is sponsored in part by Canopy, the practice management system. Canopy unlocks the firm that you always wanted. Think about it. Close your eyes, lean back in that chair. What is the firm that you always wanted? Oh wait. Canopy unlocks it. And they do this by unclunking accounting firms with an end to end solution that makes your tech stack feel a little less stacky. Cause it's end to end. Putting our customers first with world class user experience, support, education and innovation rooted in customer feedback. Working and working well anywhere and for any size or type of firm, wherever you are now and wherever you're going, multiplying your efforts so your practice requires less proverbial midnight oil. You know. Sidebar if you go to the conferences Kanopy's got like they always do some like really good little like sorta, you know the stuff that they use to like trick you into coming to the booth. Well this year they've had like Legos out there, maybe, maybe a double down on the midnight oil thing, you know, maybe like I know give away a little, little, you know, little actual midnight oil. I guess it would need to burn too, but that one's free. I think it's A good idea. Delighting your clients with a modern, easy to use portal that helps you get the info you need when you need it, that is Canopy. Check out the link in the show notes to learn more. Let's do a little bit of brainstorming of like, what are kind of the really helpful ways to build a better practice that you can do this that aren't gonna feel scummy. So if we look at how like traditional affiliate marketing works, usually a company's gonna have kind of two customers that they are serving. They're gonna have their end user customer, but they're also gonna have kind of affiliate customers. That is, who are the people who can grow our user base or our client base the quickest and how can we serve those individuals? Cause ultimately they're gonna unlock a bunch of growth. And so in the analogy earlier, if it was this consulting group and that consulting group in many ways was one of my customers who I'm actually getting a bu and how they feel about me and my services and how we're taking care of people is very important. Then I kind of have this like volume model side of my firm where we're managing not just the end clients. So we've got this other team that's managing sort of the facilitators, the people who are bringing in work to the firm. And I think there are non skeevy ways to do this. One of the big opportunities that I don't think we lean into enough and kind of to zoom out. Like the best people for this are like, where are the hubs of the type of person you want to work with? So if we think about what our firm is doing, our firm is solving a really painful thing for someone that they will pay well for. Where do the people who most feel that pain collect? And there's probably a bunch of different versions of that. There are sort of consulting groups who work with these types of clients. Chris Wittich shared his story a couple times. He talks about it on Twitter. Coming into Covid relief, he got super deep into ERCs for salon owners and his big foot in the door there was. He got kind of partnered up with this consulting group where he could get out in front of them and they were all shut down. And this was a time of like these people massively being in need. And he could tell them about the ERC and he could tell them about what was inbounds and what was out of bounds. And he, he added a bunch of value to these people, but he added a tremendous amount of value to what this consulting group could get in front of people. So if you think of this consulting group kind of as this secondary customer, he was able to add a bunch of value for them. And this actually took career in a completely different direction where he's like, I will never not do like non niche stuff again. And he's been able to super double down on salons in this really exciting way. But a big unlock there was finding the hub of where those people were already hanging out and figuring out how can I add value to the people who run that group so that they will open those doors for me, I can make their group better. And it leads to me being able to build some killer client relationships. Another example is kind of interesting is I know a good number of tax firms who do 10, 40 work with people who have options, incentive stock options. And obviously those people collect around certain companies. And I think there's interesting deals to be made there. Almost framing it as like this employee benefit. Like obviously it's a taxable employee benefit, but those companies that are doing incentive stock options, all of those employees have the same problem of how do I manage this for tax purposes? Maybe you're pulling in new people who have never had this before. And it's kind of a scary thing that they don't quite understand. But if the employer can extend either this preferred solution or even a subsidized in part or subsidized in full solution where they will actually pay the tax preparer man, that seems like a way to get a ton of that type of work ultimately for you becomes about, how can I add value to the group and make it worthwhile for them. I think there's probably a lot of situations where we can add value. You know, financial advisors, like, that's the most obvious one and to be honest, like that's one of the less exciting ones to me. I'm sure you could add value to their clients and you know, offer to run a webinar or guest write their monthly newsletter or something like that around. You know, you're on tax implications and that sort of thing. And the, the importance of the tax advisor being in lockstep with the financial advisor. Maybe that one's boring to me just because it's so played out and it doesn't feel particularly novel. But one that I don't think we pay enough heed to is influencers. And of course I would say that. But you know what, everybody's scrolling their algorithms these days. Like influencer content is really like kind of the new fastest growing source of media and the percentage of what people consume is definitely trending toward more influencer, creator type content rather than, you know, mainstream tv, that sort of thing. And when there's people out there who spend a whole bunch of time with an individual consuming their content and have built sort of that, you know, parasocial relationship where right or wrong, they feel a high degree of trust in that individual, then man, when they make a recommendation or when they speak highly of something. I still don't think like brands out there assign high enough value to this. And obviously this is very self serving in the nature of the work that I do, right? But like, just to give you a very real example, if I go out there and I say this practice management system is best for this type of firm, you should be using this system. For this other type of firm, you should be using this other system that is unbelievably like, I know the value of that. And how many firms will make their software decision, you know, based on that decision, not solely based on that decision, but if you compare that to like having a sales call or seeing an ad in your Twitter feed or your Facebook feed or something for that company, like that really influences people. And you as a firm, you ought to think about. For the folks I want to get in front of who is influencing them, that may be a podcast host, it might be a YouTube channel. Like, I mean, the interesting thing now is there are people like me in pretty much every little nook and cranny of, you know, the Internet. And I'm honestly, I'm shocked there still aren't more people that do what I do for the accounting profession. But there's folks out there for pretty much every type of business owner. And when those business owners tune in and they find that person that speaks very specifically to what they do, they're like, yeah, like this is me. Finally. It's, it's something that I can kind of identify with that's a reflection of the struggles that I have every single day. And that just becomes such an intimate place for sharing social proof and like just a tremendous amount of trust. So if you look at those people out there and like the not interesting versions of this to me is like, you know, a mega Instagram influencer just doing a brand deal with Dove Soap or something like that. And it's like you're going to pay them X amount for X number of posts per month for the next quarter or something like that. That's lame. Like that's not interesting to me. Or buying a sponsorship on a YouTube video, like sure, maybe that's valuable. But I think the better version of that is is there a way for you to provide value directly to their audience? And so if they produce, you know, YouTube videos, is there a way, if you're a tax pro, that you could help them develop an episode around tax stuff? Can you guess, write, you know, a weekly newsletter for them. Like how can you provide value to them now? Providing value to them directly could look like I'm gonna do their tax work for no cost or you know, solve some sort of very personal problem for them. But I think we probably like put on ourselves like we kind of put it on our own back to go out and fight, find all of those people's ourselves a little too much rather than trying to like hijack the place where those things and those conversations are already happening. And so like to use the influencer example, what's going to be required of you then maybe it's enough for you to help them develop content and they will refer people your way. Maybe there has to be some sort of commission. This week's episode, it is sponsored in part by Copilot, the uber flexible client portal. Copilot lets you provide clients a one stop shop experience. Not a strip mall. This ain't no strip mall. You go straight in everything you need. 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Learn more about Client Hub at Client Hub app or the link in the show Notes. I think as long as the commission is happening in a transparent way, I think that's kind of my, my main thing and oftentimes it doesn't even need to be transparent. But like I'm going to go, I'm probably going to take that extra step just to be super clear about what the deal is there because if I'm on the other side of that transaction, like I'm going to think that's kind of weird. And we've all seen really bad, really scummy versions of this. But in the influencer example, like if they you use you for their tax work or for their accounting work and they can speak to exactly how you solved pains for them, great, like that's, that should be an easy recommendation, right? Like they are literally using you. What's the problem there? And if you do a really, really good job, it's actually a way to like share some mutual goodwill. When they send people to you and those people have a positive experience, those people actually attribute that goodwill back to the referrer. Like they will attribute that goodwill back to the influencer. Even though they're not the ones doing the work, they're the reason that they found them. And so they will always like kind of forever be grateful for that fact, even though they're not the one doing the work on an ongoing basis. Now some hard aspects of this, you have to take care of those people. Like you have to follow through anybody that is going to refer to you, they're going to like expect you to take just triple a care of these clients. Because we've, most of us have been on the other side of this where you refer somebody to another person or to a piece of software and then the client has a negative experience. You know just how bad that looks for you. So you're still gonna have to follow through. Like, you're still gonna have to execute well and take care of these people that get referred to you. But as much as my kind of pearl clutching, old timey accountant nougat core struggles with. Is that weird? Like, does that feel scummy? I think there's almost always going to be a way to do that that's a whole lot better than having to build that client list like yourself. These people are already kind of collecting in specific places. How with a bit of like social engineering, can I weasel my way into that? Who are the people who I can provide value to, who will happily let me have the mic for a moment or put my name on something or get them to like, you know, drop the name of your firm in a video or something like that? I think with a little bit of creativity there, there's probably a way to find more of the people who are like the very best clients that you have today. Not just like taking any and every referral from your entire client list. So you're just doing more of kind of the generic same. But how to get more of the very, very best people that you're working with today? Have you done this well? And like, what is your kind of feeling on this? Cause I think there's gonna be people who are like, dude, get over yourself. Like, this is just how business works. There's also gonna be people who are like, I would never pay a commission. Like, it just feels wrong. Curious where you are on that spectrum. And if you've ever seen any really good, non scummy versions of this that are kind of inspiring to say, like, here's sort of a model of how this could be done really well. We'd love to see that in the comments if you got it. Thanks for coming and hanging today. I'll see you tomorrow.