086 Handing Your Accounting Firm Over to your Staff

Welcome in to Jason. Daily Q and A time. We're going to talk about how you actually set up a firm to hand off to a team. What does that look like in 2023 as the environment has changed so much? Soft skills for accountants, how to write a book that somebody would actually want to read. And for the bookkeepers who are working with accounting firms. What do the accounting firms want to see out of those bookkeepers? Come on in. Let's ha. Okay, I have a soft skills question for a future Q and A. I've been in internal corporate leadership roles in industry for a long time, so my communication skills over the years have focused more on being prepared, putting together presentations, and less off the cuff. I'd like to hone my communication skills, especially for working with clients. Thought you mentioned in a past video you take an improv classes. If so, do you mind sharing your experience? Did it help with speaking extemporaneously? Man, I did improv this year and it was a ton of fun. I started doing it in January. I fell off the wagon a bit around May, and then I've been traveling a bunch since then. I'll tell you what improv teaches you. And I've actually, since sharing that, I've. I've run into a few folks who swear by improv. Also, we all know have experienced this. When you're like, in the context of meeting with somebody, you are constantly thinking about what you're going to say next. And it can sometimes be hard to be in the moment because you're calculating so hard and planning so hard. And there's situations where that's necessary where you're like, okay, I have to be sure that I get this specific piece of information. But that also, like, takes you out of the moment and, like, the best things in life. I'll get the custom printed potholder ready here. The best things in life happen in the moment. Like, in that conversation. The little things that you pick up on that you then go, I don't know, kind of explore deeper. But if all you're doing is, like, working off a list of questions, which, let's be honest, a lot of our client conversations, they happen when we're like, in a rush and we just want the information, then we wanna move on to the next project. But what improv teaches you is that every day there's kind of a million, like, fleeting thoughts and you have to, like, let them go. Like, with improv, you're in the moment perpetually and you are doing this thing as part of a team. And One person will say something and you think they're going in a direction and you're like, aha, this could be funny. And then they somewhere totally different. And what we do in this situation in the business context is you sit in bed all night thinking, oh, boy, if only this or that could have gone differently, or if only I would have said this. And I super regret that. But in improv, that's happening, like, every single moment where you're having to change directions, you're just having to let that go the moment that you go on to the next thing. And for me, as someone who lays down in bed and thinks about all of the stupid things that I did that day that the other person probably didn't even notice from hesitating too long, like holding a door open for somebody and then thinking, well, that was probably weird. On the other, like, all of these things that you did through your whole day, right, that probably nobody but yourself thought about. Improv is really good at training you off of that mindset and making you more okay with just things coming and going, but also being much more present and on your feet in the moment. And so on the subject of, like, will it help you to kind of go with the flow and speak extemporaneously? It absolutely will. So I've got this fun thing going in my account community right now where now Carter Gray is running this role playing series where she will give you, like, a sticky client situation, and you kind of have to navigate through it. And we're like, we're in a group, so there's a bunch of people watching as we're doing this. I'm realizing so much of client communications is about, like, fill in time while you're trying to figure out, like, exactly where this is going and how you're gonna kind of bring it back around to the point. And I think that's just how human interact. You're talking about the weather, you're talking about all these other things that are beating around the bush. And there is a certain art form to that where you can do that and make the person feel comfortable and make them feel like you're really, you know, enjoying this conversation and you enjoy their company and all that. And there's a tremendous amount of value to being able to do that stuff on your feet. And for me, improv, like, was totally a great help. I. Less than ever before, I'm not like, in my own head as I'm talking with someone. I'm trying to be in the conversation. And that's an incredibly Useful skill because there's a degree of almost like relinquishing control of the conversation to, I don't know, something that's like better and more organic and an actual conversation rather than coming to a person with an agenda. But so much of what we do is just relational. Like, I've worked with people who were phenomenal accountants, phenomenal technical people, but awful at the relational stuff and couldn't keep a client. And I've worked with people who are the opposite, who are unbelievably good with people and could totally brainwash them, but then behind the scenes took awful care of them and were not good technically. So, like in a relationship business, I totally think it's worth doing improv. You know, I don't live in a huge town, so I'm from Salem, but they've got local improv classes and they're out there more than you think if you go out and you look for them. What I'm hot on right now is actually sketch writing. That's kind of how I'm scratching the comedy itch. And it's particularly relevant to, like, the stuff that I produce on YouTube. Okay. 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. Because 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. Hmm. You know, I sidebar. If you go to the conferences, Canopy'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 don't know, give away a 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 kanopy. Check out the link in the show Notes Notes to learn more this week's episode, it is sponsored in part by Co Pilot, the Uber flexible client portal. Co Pilot 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. One Stop Shop with a client portal that streamlines messaging, payments, file sharing, help centers, custom app access and more. Copilot Automations is a set of pre built workflows available on Zapier and our API that helps you save time, reduce human error and run more streamlined business. You can set up Automations that streamline sign up like new client sign up, onboarding, intake forms and more. Check out some of the automations you can set up with our API or with zapier. Assign forms to newly activated Copilot clients. Okay. Update clients from new Copilot form submissions. Change of address maybe you know the holy grail? Upload files to Google Drive when new files are uploaded to Copilot like that. Check out copilot.com to learn more and start a 14 day free trial. What have you got to lose from Nathan Sosa on the subject of handing off or positioning a firm to hand off to your team? You know, the way they always did it back in the past, at least at small firms. How in the current day and age do you create a plan for the cool thing you've built to be passed to your employees that are interested in ownership? Quite a few firms as of late that had a succession plan had an old kind of deal structure that didn't make sense anymore. The successor group didn't want to do that and just left to go do their own thing. Yeah, there's definitely the kind of old timey mentality was that was the destination that was success, right? Was that you were part of that succession plan and you were just going to work until the person above you was done working. And that was definitely the age that I kind of came to firm running in. And I was actually one of those people where when it finally came time to actually talk turkey and I saw what that deal was, I was like I see why this is how the deal was the last 50 years. But I can also tell you I'm not about to sign this deal because it is ridiculous. I've seen deals with things like there were stipulations in there that you couldn't leave before, like the age of 65 and if you did there were like penalties and stuff like that. Like the way these deals were written in the past were wild. And these days, honestly somebody who is of the ability and of the confidence level where they will happily go into ownership tomorrow. Those people are usually the ones with plenty of confidence to go out and do their own thing too. And it is not particularly hard. I would argue it's never been easier to go out and do your own thing than it is right now. It doesn't mean that's gonna be a good reason for everybody to do it. But to the point that you made here, Nathan, how do you create a plan for the cool thing you've built to be passed to your employees? Well, first and foremost, the employees have to want that, you know, and I think that's a kind of a big point that a lot of people miss right now is I've made this cool thing. And because I think it is cool, everyone else should also think it is cool and want it. When in reality, oftentimes, if you've worked with, like, especially in my experience, generationally different ownership, the clients that they work with are not necessarily the clients that you enjoy and that you want to work with. So regardless of, like, how impressive the business is when they're out of the picture, are these people that, like, you're actually going to be able to help and that you're actually going to enjoy working with. So to zoom out, I would say, like, beyond the technical nuts and bolts of how a deal is written, first and foremost is are these people who will actually be able to pick up what you're doing, like, where you leave it. And for the traditional firm structure where the partner controlled the entire relationship, that wasn't always going to be practical. If you're a firm owner that is more kind of managing the business and your team is managing all the relationships, that's going to be a much more organic transition, because oftentimes that transition can happen without the client even realizing that it's happening, because their point of contact hasn't changed. You were kind of the wizard of Oz that they maybe weren't even, like, aware was there in the first place. And that's why towards the end of my firm running journey, like, that was how I had positioned myself was being the systems guy, the ops guy, the one behind the scenes so that I wasn't bringing the people in and then, you know, like, kind of disappointing them by moving them to someone else or making them feel like they got delegated. They never saw me. And what that meant was changing the positioning of the firm so that the clients, when they came in from day one, that was a client that the team that we had could service really well, which was a different firm than the type of client that I could personally service really well when they came in. And this is why, if you listen to like Patrick Dieter on Twitter and the folks that talk about firm acquisition, the 1 in 100 firms that are really good acquisition targets right now that are running on a cloud practice management system and have their clients working out of the portal and stuff like that, there are the firms that have the team doing the work so that if a new ownership team came in, you could kind of continue business as usual. You don't have the owner doing all of the work, so that if you take the owner out of the picture, you've got this huge void of like, well then does the new owner have to step into all that? How does all that stuff get done? So if you're thinking about building something that you ultimately want to transition to your team, my first recommendation would be how do you think of it less transactionally and, and more kind of organically, where it's really easy for them to imagine, like you almost like work yourself out of a job, I think is the best version of that happening. Practically, I've seen the opposite version of that where the person's doing everything and then when they leave, it's really hard and it's this really abrupt transition and all the clients are like, yeah, I'm not sure, but I guess I'll give this next person a chance. Like, that's the worst way that you can do it. You're kind of spinning the wheel of chance on that one. So first and foremost, work yourself out of a job so that the role that they're being pulled into is one that they're kind of already doing. But then financially, I'll be totally honest, it has always been really hard for me to visualize a timeline where the people who worked for me could also be the ones that would pay me out from the money that I have paid them, if that makes sense. So I've had kind of different situations where I had, you know, mid career switchers, where you had people who had money from other businesses and that sort of thing. And that's more probably an external acquisition where they have now made that money and they're now going to kick that in to buy you out. But for someone who's just like come up in your firm, for them to then turn right back around and give you the money that you're paying them to do that job, that's hard. And the way that I think people have made this work in the past is by bringing in a larger number of new owners than there were previously. So if two owners are going out, maybe four owners are coming in at varying levels of equity. But being able to pay out that bigger number works because you have more people paying it. Ultimately, I don't know that that works long term unless you have this firm that is just always growing to be able to cover that like nut of paying them out. I'll be totally honest with you. Like, my thought on it, and I've shared this before, is I'm not particularly interested in building a firm that's optimized for sale. I would personally rather build a firm that's optimized for my own longevity and what I can do sustainably, not staking my retirement and some hypothetical future possibility where, where maybe the right person's going to come along and I can get out of this thing what I think it's worth. I think that's a terrible way to like build your life up to this big thing that's totally, I don't know, outside of your control. If it's me, my approach is doing that in a way that's going to be sustainable for me for longer so that I can be okay turning that over to my team in a steeply discounted way. My team is like not going to be able to pay me a 1 1/2 x multiple unless I have a ton of of people who are capable of coming into ownership. And to be honest, I always had the opposite problem. Like we never had enough people in the pipeline who would want to come in and do that. If you have that, awesome, maybe that works for you. That was just never my experience. And it was also really hard for me to ever think of like an external buyout being a successful outcome for my team and for my clients. Like, I've just seen way too many of those where in 24 months time, almost all of the team members have left, a huge percentage of the clients have left. And so as long as I was running a firm, like, I never really felt like I could in good faith, like go really hard trying to build this thing to scale just to like then pull the rug out from under it. Now there are really good ways that that could happen and with the right partner that will take care of everybody. Like, I'm sure there are positive examples of that. But like selling to a regional, I've just never seen that end in a way that everybody was happy with. So ultimately, build for you, Build for what's going to be sustainable for you. So that it is something that you can do longer rather than running yourself into the ground with the expectation of them being able to do some sort of buyout. So do it in a sustainable way for you where you can maybe even work yourself out of a job. So if you did leave, it wouldn't be a big deal. And then by working yourself out of a job, hopefully you have clients that your staff are aligned with because they're already managing those projects themselves. Then it's just the small task of working out all the financial bits. But you'll figure that out. This episode is sponsored in part by the fine folks at Cloud Accountant Staffing. Do you hire accountants? Bless your little heart. Not the best part of the job in my opinion. Not something I ever enjoyed. Well listen, you can build your accounting dream team with talented offshore accountants in the Philippines that work 100% full time for your firm. Their accountants aren't freelancing or contracting for multiple firms. They're all yours. They work exclusively for you and are incentivized to stay with you and your team long term. They're not gonna get swiped. Cloud account staffing is 100% dedicated to the accounting industry and founded by a former accounting firm owner that understands your business, knows your pain points. They had to hire some accountants and they said you know what? We're gonna build our own pipeline in the Philippines. Going to pull in some super talented people and then open that up to other firms. Basically that's the story I've been talking about a lot about staffing, building more resilient staffing pipelines for your firms. 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 the show description cloud accountantstaffing.com gang this episode is sponsored in part by Firm 3 360. 360 degrees Let me tell you about Joy. Joy's been using Firm 360 since September in 2020 because she was looking for a project management solution that would help her gain better visibility into her projects. We all know how important that is. Specifically she wanted something that would handle recurring projects. So that stuff just automagically populated. Unlike that stinky old spreadsheet you're using. Am I right? She liked the ability to automatically pull her clients bank statements into the system. What? No, really. Quote My productivity has greatly increased with firm 360. I have better overall visibility to what tasks my team is working on. Hey, be more like Joy do you have a 360 degree view of everything that's going on in your firm right now? Be honest with yourself. Look in the mirror. If you don't check out firm360, put a link in the show notes below from Megan in a YouTube comment. I own a bookkeeping firm and just found your content and find it so valuable you stop it. Could you talk on what accountants need from bookkeepers? Some communicate with me really well, others not so much. But overall, whether the books are done in house or not, what do accountants need for the books to be ready or done for them? So I assume the most common scenario here is probably bookkeepers working with tax firms. And it's funny, yeah, I mean, to your point, you're going to get tax firms that are very different about this. You'll have a lot of tax firms that just think you need to prepare the books exactly as they want them. And oftentimes that looks like posting the tax adjustments to the books, which oftentimes isn't a great idea because management kind of has its own view of what it wants those books to look like. So it's a little bit of a tricky question because I think different tax firms will have different expectations of you. Biggest thing is probably just to ask and to try to make as clear as possible the communication about, like, I understand what you want as the tax firm, but here's what the owner wants and what the owner is asking me to do. If that's an expectation that you want to change, that's probably like a hill that you're gonna have to go die on. Like go talk to the owner about that. So the biggest source of friction I see there is oftentimes you have a bookkeeper that wants to produce books for management, because that's how the owner wants them, is to look a specific way. On the other hand, you'll have a tax accountant that wants you to produce books according to how they have to be for tax rules. And those can be two separate sets of books, in my opinion. But where I've seen tax firms get most frustrated with bookkeepers is when they insist on the books being prepared this certain way that they need to be for tax. And you can absolutely end up stuck in the middle there. Now, if we kind of turn this on its head a little bit, accounting firms, tax firms can also be phenomenal sources for referrals. So the other thing to be thinking about is there a way that you can be a resource for them because that can grow your business really quickly. Are they getting into A specific industry specialization where maybe there are certain challenges around how bookkeeping is done for these types of people, where if you could step in and get a deep understanding of exactly what they want, what their expectation is, they will absolutely adore you and send all of that work to you because nobody gets it quite like you. So being asked to turn up to all these different accounting firms and produce books kind of with different sets of expectations, that is a challenge. But if there's one group you see that you like, don't be afraid to ask that firm, is there a way that I can be a resource for you? Because if there is a more specialized type of work that you can do to their liking, they will probably love you and send you a whole bunch of work. Last one here. So Alison Rife Martin had commented on the book writing episode. How do I actually write a book that, like, anybody will be interested in reading, though? And I totally get it. Here's kind of where I'm at with that, is if I went out and wrote a book tomorrow that was like time management or productivity or, you know, high level stuff like that, I'm like, why is anybody going to read something that I write over, you know, James Clear or whoever else you like? And so ultimately, to be useful, it has to be hyper, hyper, hyper specific. And so if I was writing something about accounting firm running, and I'm thinking, me personally, maybe that's helpful, but maybe that's also not specific enough. Still, if I was writing something about like accounting firm running for millennials and like, kind of how they see the world differently and what they've seen from the generations before us and how what we appreciate about work is different than that, like through that lens, maybe it's actually more helpful because it's more specific. I would say right now, if you're still serving a very general client base, doing a lot of different type of work, it could be hard to write a book that will resonate. But also, don't let your client base necessarily get in the way of the person that you want to work with. So if there's a specific type of person where if you put this book on a shelf, it will feel so specific to them and they will stop and they will read it and be like, just totally pumped about it. The fact that that person isn't on your client list right now shouldn't keep you from writing that book. So if you're looking at that book cover, that hypothetical book cover, and thinking, why would anybody actually stop and read this? It probably just means it isn't specific enough yet. Hopefully that's helpful. That was one thing that I kind of always got stuck on, too. That's it for Q and A. Got more questions? Drop them in the comments. We do one of these each week and I'll see you tomorrow, Sam.