135 Working ON THE BUSINESS in an Accounting Firm

Okay, this is gonna be a fun one. You know how online people are like, oh, man, accounting firms are just ripe for disruption. Why doesn't somebody just go and solve this easy problem?

You know those people?

Well, I found one of them. I got one of them in here today. Patrick, say hello.

Hello.

Okay, we're talking with Patrick Dixer.

You may have seen him on Twitter and all of that. He's acquired several firms as a non.

Accountant, but specifically relevant to this crowd is how. How do you build an accounting firm when you don't have the expertise? Right, because, like, we all came from.

It, from being like the biggest brain expert on this stuff. How do we work backwards on that?

Let's talk about it.

Come on in. It's Jason Daly. Okay. We're here with Patrick.

Patrick, you want to give like a 30 second.

If folks haven't seen you online before the quick intro?

Sure. Jason, it's good to see you. Thanks for having me. I am a little over a year and a half into my journey as owning an accounting firm. I have a background in small business marketing and small business consulting and acquired one firm and then did a couple more acquisitions as well after that. So, yeah, I own Apple Tree Business Services. We do bookkeeping, tax and payroll, and I am not trained accountant or cpa.

Yeah, let's start there. I mean, the crux of my first question is what gives? With a little bit of who do you think you are? What, like, of all of the things to do, like, how did you land there? But also have the stones to come into it and say, like, man, I ultimately, I'm not an expert in this stuff, but I'm still going to own a business that does it.

Yeah, I. It's been a winding journey and gotten punched in the face a few times owning a firm, but how I ended up here. I love working with small business and have done so in other capacities before. But really how it. The genesis came, I was doing small business consulting and coaching, and all these new clients would come in and they have terrible bookkeeping. And we were trying to do like pricing analysis, forecasting, growth planning, help them improve their business and go to market strategies. And we couldn't really do that because we didn't have data or visibility on their financials. And then we're always referring them out to bookkeeping. And when they had solid bookkeeping, it was like transformational, you know, And I kept referring it out and then hearing about people that buy businesses. And I started to explore buying an accounting firm. And the more I looked at it, the more excited I got. I thought it matched my background and skill set. Well, it's much needed and I think it can be a solid business to own. So that's what led me down the path. And then at the end of 2021, I closed on the first firm.

Why do it yourself as opposed to, like, build that referral network? What, I guess what ultimately made you. I don't know what was alluring enough about it to actually get into the business of doing it.

You want to get personal?

Please.

I. I'd been employee and like, held stock at 2 at a startup, and then I had a partner path at the consulting firm, and there just didn't seem like that much upside or what I wanted. So I really wanted to own and control the next thing that I did. Yeah, I could have, I don't know, worked, kept working in consulting or sales or something, but I had this really big chip on my shoulder, like having not grown up with money, wanting to make money, having three kids, wanting to take care of my family, and I was like, I'm going to go bet on myself. And there's some people that think this might not work, but, like, I'm gonna go prove them wrong.

So, yeah, the. The destination on the pass that you were on weren't. Weren't that appealing.

Yeah, I, I mean, I had a good run, but it just didn't seem like I had that much to show for it after I had, like, worked my tail off for that long, you know?

Yeah. For context, for listeners, I know you've acquired a few practices. How big is. How big is the team now? Just kind of in general. I know you're doing both accounting and tax. Like, what does the business look like today?

Yeah, the first one I acquired was doing about 1.2 million in revenue and like 12 team members. This year we're going to do like 3.3 million. Maybe we're 25ish team members, maybe 26.

Did that 3.3 come from the original 1.2 or was there other. Were there other ones that you folded in in the process?

Did a couple other smaller acquisitions, I'd say of that revenue this year. Like, sorry, doing some quick math. Maybe like 1.8 of that was from the acquisitions. The rest has been organic growth.

Cool. Super cool. What got them from A to B? Like, what is the growth drivers? Is it legacy fees that you're updating? Is it like doing more? Is it a different service line?

Retaining in most of the acquisitions, like retaining. Well, raising fees a bit. One of the acquisitions had poor retention and then leaning into sales, marketing and hiring. You know, like we, we probably pick up like 5 to 7, 5 to 6k in your current revenue each month. So not really like cross selling that much more new stuff, but picking up new clients and just being focused with what type of new clients we want to work with. You know, it's like you're going to come in, it's a bookkeeping and tax monthly subscription. You know, here's how we work. And you know, usually that's anywhere from like 700 to 2000 per month. Average is probably 900 per month. Okay.

There's a whole other discussion to be had around acquisitions and just like what, what works and what doesn't. And if you're not following Patrick, I don't. I think you're probably sharing the most helpful stuff online right now about just the nuance of that. But what I really want to talk about is something I think applicable to most small firms that we alluded to off the top. Most firms, you know, most professionals journeys is their subject matter expert. And then they decide to go out and do it on their own. They start out doing it all themselves and they build a team. But for a very long time and maybe always ultimately they're the one putting the stamp on it when it goes out the door.

Yep.

You didn't even have that option really from the beginning. So what does it look like to kind of have the opposite approach and to delegate that final sign off and like what works about that and maybe what if anything's been hard about that?

Yeah, I'll give you a long answer. I think originally I was looking for pure bookkeeping firms and they just, they're usually not big enough to like acquire. So then I started to like explore what if it also had tax and then credit to the first guy I bought the firm from. He had really built his firm in a way where like his other accounting managers on the client relationship and sign off on the tax return. So like that has kind of been the DNA that we've built from of like accounting manager leads the client relationship, signs off on the tax return and then there's staff accountants under them. So for, for anyone who's built it from scratch, I have like immense respect because I, I can imagine how hard it is to like scrap for those first few clients and the first few hires and you're trying to, they then let go. And it's totally opposite like that letting go that's going to get you from like 400k to a million. Right. But I think once a firm gets to like 700k, from there to 5 million, it's all about, like, sales, recruiting and systems. So I try to focus on those strong suits. I think I'm not always perfect about this. Like, I've maybe sold some tax stuff that was like, overly complex or like I didn't scope it properly. I'm learning those things. But I think it would have been much different if the first firm I bought, you know, it was like the owner signed off on every return and nobody else did. So it's worked out that that was the structure that he had. Yeah.

And that's one thing you talk about. And when you're assessing acquisition targets, I mean, I got to think 90% you're throwing out right away because it is just an operator that manages all the client relationships and the notion of changing that out probably isn't realistic.

Yeah.

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Yeah, the. What is your. I'm curious and this is getting real inside baseball. So you do. You do cast and tax and we did that org chart episode recently. I think something a lot of folks struggle with is ultimately what is the ultimate org chart, if that's a thing that even exists. But also, how do you. Is, is it realistic to expect a single human being to be the point of contact for accounting, for tax, for managing the relationship? So some folks go the. The path of having your accounting manager and that's separate from your tax manager. And. And for a while there, it seemed like it was popular to have a relationship manager because adding yet another person was, you know, somehow going to be the solution to that. How have you, how have you navigated that relationship management across all those things?

Your, your episode on the org chart I think was timely. Cause I was thinking about this discussion and I think if you were building a firm from scratch somewhere between like, I don't know, 20 to 40 employees, you're probably thinking about like an operations director or like a head of people or recruiting manager or a salesperson, right? Like I Feel like I, I pivot between those things, you know. So like, I know it seems like this really weird foreign thing for like the owner to be not a cpa. But I think if you were to just keep going down that path like you had talked about, and the other guy, I'm blanking on his first name, you talked about like we had this rockstar office manager that like elevated herself or like he ended up having sales team from the start. So I just kind of short circuited that org chart. But I've decided to like really leave that workflow in place. Where we call them an accounting manager. You know, I think that term might mean different things in other firms, but they review the bookkeeping, they sign off on the tax return and they interact with the client. And really you're, you're thinking about like these, these pods that, you know, accounting manager, staff, account, blow them and really trying to find good people, fill them up, train them, like, find the next one. So. And now we have somebody who's like a senior tax person that can help support those other accounting managers for complex tax situations. But yeah, I'm sure it's like totally foreign and different. Where I interviewed somebody recently and she was just like, I really wanted her. She was just so baffled that she'd have to sign the return. And I said like, there's plenty of help, there's somebody that will review it. And she just was, she was just so used to, you know, for the last eight years, somebody else putting their name on it, you know.

Yeah, yeah, that's so. And, and those, obviously those people are unicorns. The ones who you can trust through the accounting well and the tax well and manage a relationship and all that stuff. How do you support those people? Because obviously they don't grow on trees. You talked about a tax manager that's like a, to me almost like a, like a roving. Like you have a technical thing that will help you with that. And so from that standpoint, how do you support them but also what does their underlying team look like? I have to imagine they've got like, you know, bookkeepers and tax prep type folks supporting them as well.

Yeah, we were talking about this before the call a little bit, but that accounting manager usually has to be three things and sometimes they don't come in with all three. Like they need to understand bookkeeping and be able to review it. They need to be good at tax and you know, business tax returns. And then they need to build a relationship with the client, be client facing. So normally if somebody comes in strong. On the tax side, we're trying to like skill them up with some of like the bookkeeping review and you know, vice versa. I'd say one thing that helps a lot is we have an onboarding team that really helps, like wrestle the client and clean it up before it gets to them. So they'll do the bookkeeping back work, you know, like all the get bank access, like comb through the QBO so that by the time it gets to the county manager, it's just much less of a lift, you know. And then there's some small operational things that we do with like, you know, our chart of accounts that we use that most people know and the way we train our staff accountants to really be really good, full charge bookkeepers that sit under those accounting managers. And then part of it is like, what do you let in the front door? Making sure that they're clients who appreciate what you do, they're responsive and they, you know, their tax situations or industries that we're familiar with. But it's not perfect, you know, like transparently, like we've churned like four of those accounting managers in the last year where you know, they decided it wasn't for them or we let them go because, you know, they weren't able to get up to speed. So it's a hard thing. But this, this model that I'm following, there's, you know, there's like a peer group that I'm in and a lot of people follow that same model. So I'm like, I don't want to reinvent the wheel here if it's working for all these other firms.

But yeah, and it's not too dissimilar to even just the traditional approach. I think the only difference is you'd have a partner over a pod like that and ultimately the partner's signing that stuff. I know you shared. You had the one person you chatted with where that just felt too foreign for them. Has there been any other complication around that or did these people not know anything different? That's just kind of how they developed within your team or any other, I guess complications around asking that person to kind of be the one to sign off on that stuff.

I think for everyone else it's a little bit of a leap. So what we're trying to explain is that there's plenty of help to help review it and we're controlling the bookkeeping so you can be confident that it's done well. And then when a new manager comes in, we're trying to give Them some existing clients, you know, so we have like prior year returns that we did. Yeah. Otherwise. Yeah, it's still just like, it's still something that's new to a lot of people that we're hiring for that role. Yeah.

So most accountants are not engaging on social media still. And it's something that obviously that you do. You talk about firm running and bookkeeping and all that with non accountants and are generally pretty transparent about your journey. What, like, I'm curious, what value is there to you and kind of that transparency, you know, like that sort of build in public mantra of being willing to share that stuff when the vast majority of people just don't.

I didn't have a grand plan. You know, it's like I kind of got more active on Twitter a few years ago as I was looking for businesses to buy and then just sharing the journey. And then I'd get inbound leads and people would say like, hey, can you help me with my accounting? And it really surprised me just how much business was coming from that. So part of it is like to generate a new business and then just to be transparent with what, how hard this is and like try to teach other people. So I think, you know, for somebody running a firm, like it can be a great tool to like connect with clients, have new potential clients, find you, help with recruiting. I also just think it helps sharpen your brain if you have to like distill down what you're, what you're working on. And I love the community of like other people that I've connected with and you know, share pointers with. It's funny because like I feel like when I first saw tax orders, like everyone in there like needs a therapist. Like most attacks are just like complains about their clients. And I've like slipped into that from time to time of like, you know, like, I can't believe this client did that. Yeah. And then one of these clients was like, is that me? Are you referring to me? And so I feel like I'm kind of walking this fine line of like sharing in public. And then, you know, there's some potential clients or clients that see it, you know.

Does that cause you to filter at all you think when you post recently? It did.

Yeah. So you were talking about pricing and somebody was like, I was like, we do a QuickBooks desktop to migration for free. And these other people were like, we charge five grand. And this client saw it and he's like, that just felt weird. He's like, it just felt like you all were competing with how much you can charge. You're like, how would you apply it for? And I was like, yeah, I don't know what else to tell you. It's just discussion. There's so many different ways to price accounting. I do think we provide a fair value, but this guy was an engineer, you know, that'll do it. Engineers are always, you know.

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Interesting in that you're talking about. You're talking to normies, but also talking with accountants at the same time as oppo as opposed to like Mitchell Baldrige, who I is generally just engaging with, you know, sweaty Twitter. Not. Not the, not the accounting side so much.

Yeah.

So I imagine you've probably got more crossover there than, than most folks do.

And then the community I feel like I'm trying to speak to most of the time is like SMB, Twitter, you know who people that are running small businesses are trying to buy? Small businesses, whether it's plumbing, marketing, ages, like they're trying to buy other industries. So like I be like more often than not, that's who I'm trying to talk to. And then there's occasionally like crossover with.

Dax, Twitter and then me just hammering, hammering your DMS about helping people acquire accounting firms. Yeah, yeah, okay. So it's just me and you here and just a bunch of accountants listening. What is your. Your best inside baseball thing that you've just gotten spectacularly wrong? Or like, what is just the horror story that only fellow accountants will understand? Or maybe even the thing that, you.

Know, change management is just so. Yeah, it's so hard. It's. Yeah, like, that just drives me nuts, but I know it has to happen. That'd be probably the biggest thing that's, like, been a surprise is just how hard it is to like, you know, some of these migrations that we needed to make with like our practice management software or our payroll software were probably overdue, you know, and as much as I try to get by in and share why we're doing it, I still, you know, I still get a lot of resistance sometimes. And even if they understand that it needs to happen, it's one more thing that they have to help with, which I can empathize with. You know, they're like, I got to. I got to do all my normal job and answer all these questions from the client who went from desktop to QBO and wants to complain about how they invoice every single time that we talk to them, you know?

Yeah.

So that I think is, I don't know, the inside baseball and just, I think how hard this can be with some of the acquisitions that you make. I think the bar is so low in marketing. Like, that's one thing I've been surprised by. Like, if you don't have 10 Google reviews, like, go get 10 Google reviews and like, most people in your town probably don't. Or just like, reply back to leads and you're ahead of, like, you know, two thirds of the competition.

Yeah.

So those are the things that jump out of me is like, inside baseball that hopefully, you know.

Yeah, no, I. I mean, the bulk of. The bulk of the people that listen to this are pretty progressive, and I have to imagine are like, crashing into that on a daily basis too. I don't know any nuggets of wisdom there or, you know, balancing how fast you move and the risk of leaving people on your team in the dust and whether that's okay or whether that's even just a cost of change management.

I'm sure I move faster than our team wants to on most of these things, you know, but I feel like part of it was just, like, really risky if we didn't do it, you know, because they were like some of these legacy tools that only one or two people knew how to use. And you Know, for better or worse, because I'm not as in the day to day, like I'm willing to like go push these things forward. So. But usually after the fact, they're like, oh, that was a good change. You know, I'm glad we did that. Now that it's behind them, you know.

Yeah.

So I think the other thing that I still see even some of these modern firms do is just they, they feel like understaffed to me, you know, Like, I hear about some of these people where it's like them and one other tax pro and like two or three staff and they're debating the next hire. It's like hire two, hire three. I'm sure you have the cash and the demand is there if you hire. So I don't know. That's one thing that I frankly challenge most of tax Twitter on is don't hesitate to go hire more people because it takes time to ramp them up and get them used to your systems and you don't know if they're going to work. And being understaffed is really dangerous, you know?

Yeah. I mean, I think you've got that entrepreneurial bug for sure. And like the whiplash of the team, like, that's kind of all the hallmarks of that personality type. Do you, do you have like that integrator type person in your business or do you have to straddle both of those roles?

I do have a person and I straddle it. So I feel like I'm not the most like hard charging visionary. Like I, you know, I know a lot of other people that might have hit the gas even harder. So I have. One of the best moves I made was bringing somebody in that just handles onboarding. She's like my right hand person because that's such a bottleneck in the firm. And then she helps train the other staff accountants and our new managers that come in, like, they learn a lot from her as they're working with new clients. So she's kind of like my integrator then the previous owner of the first firm, he's kind of like the backup on tech and like tax review. So without those two, like none of this, none of this like fast growth could ever be possible. But those, those are the people that really kind of help me be a backstop on some of these changes that we're making.

What are you most excited about? Like, anything, anything you stumbled into that you're excited to double down on, either from an operational standpoint or sales or staffing or anything.

I mean, this doesn't sound sexy, but just seeing how far we've come of trying to get a little bit better every quarter and every month. Now I look at it and it's like, okay, we've got all these workflows built out. We've made some really good tweaks for this coming tax season. A lot of our new clients are just more tech savvy, more responsive. So when I look back at all the stuff that we've done, I feel like we've got some really good momentum, and I'm proud of what we've done.

There's also been some dark days, though. Like, I feel like. And you've shared, like, that person leaves and you're like, oh, my gosh. Like, I just. I feel so hosed right now. Like, it's probably easier to see, like, in hindsight, like, that larger kind of arc. Right. But, like, it's for. There's for sure. You have those days.

Yes. Yeah, I have those, like, once a week.

You know, that's Tuesday.

Like, we're. You know, our practice management tool was like, hey, we're changing, like, our payment processor. So we're, like, going through that. And I was like, what if this doesn't work? And, like, all this, like, we normally build most of our clients on the 10th. Like, we pull an ACH. I was like, what if there's a hiccup and we don't get all that cash? Like, you know, or we've. The past few tax seasons, we've had people quit, you know, mid February.

Yeah.

And that's always just like. Yeah. Or we had, like, a string of people that didn't work. And so this client's, like, getting past to their third accounting manager. Just like, what are we doing here? Or one of the acquisitions, like, has not gone great on the retention side, you know, so I've definitely had, like, those dark days, really stressful times.

I don't know.

I knew I was signing up for that.

Yeah. Part of the game.

Well, cool.

Thanks for doing this. Where do people find you online?

On the Internet? Yeah. Fairly active on Twitter. You can find me on LinkedIn, whatever. Go to our website. So, Patrick, last name is Dichter. D I C H, D E R. We'd love to chat, connect with people. I'm also in realize, so if you're a realize member, happy to connect there as well.

Cool. Thank you very much for doing this, Patrick.

Thanks for having me.

All right, see you. Bye. Sa.