161 Leaning into Entrepreneurship as an Accountant

You know those clients you have where you see just the stupid amount of money that they make and you're like, what the hey am I doing doing all this stuff? Cause that person is an absolute knucklehead. But they make 10 times the money that I do. They have 10 times the flexibility. How did I end up in these circumstances? Gang, I'm here to tell you that I think you are more capable than you may realize you are. We get super fixated. And I run an accounting firm now, and this is all that I'm ever gonna do. What? When you have a lot to offer outside the context of an accounting firm, it doesn't mean you don't need to run an accounting firm. It doesn't mean you drop that and go do something else. But oftentimes there are really compelling adjacent businesses we can build to our accounting firms that are not subject to the limits of traditional service businesses. They're fundamentally higher leverage stuff that can make you more money in less time. Let's talk about it. I know, Okay. This feels, this may feel like sacrilege. It may feel like a betrayal to your accounting firm. It's funny, a lot of entrepreneurs out there, they have more than one business, right? They have several investments going at a time. Maybe there's like one that's really driven the success of what they're doing and they take the earnings from that to try these other projects. But most entrepreneurs aren't always a hundred percent fixated on this one thing yet. If we run accounting firms, it usually consumes the entirety of us. It is the thing we lose sleepover. It is our full time gig. And maybe the worst thing about accounting firms is they're subject to these sort of constraints that apply to most like agencies and service businesses. And that there is only ever so much upside you can reach. That is because you're ultimately limited by, you know, human scale. And obviously there's firms that are in wildly different places. And you can make a stupid amount of money and have unbelievable flexibility running an accounting firm, frankly, more than like it was an amount that is more ought to be more than adequate for people to get by. Like, we're talking about much more than ramen money. More than switching from Walmart to Trader Joe's money, Maybe even more than Whole Foods money. So can you absolutely build a killer accounting practice that makes you loads of money? Yes. But I could tell you through my experience, I actually got a ton of enjoyment out of the diversity of working on different projects and would argue that that diversity made me better at Everything. Now, something that opened my eyes to this early days in accounting firm running is I met a few different folks who will take investments in their client businesses. And this was like, shocking to me. And at worst, I think what this ends up looking like is just having to do discounted work until the end of time. At best, this is like, holy smokes, these people are really smart. I see they're onto a super compelling opportunity, but because they super need what I do and I have a trusted relationship with them, I've actually got a way in that. Otherwise I wouldn't be exposed to. And like other folks aren't exposed to. And it's. I don't know. I don't know if that's a good idea or not. But I will say we are definitely privy to really cool opportunities oftentimes before traditional investors are. And so one approach here is actually like almost more of a family office approach where you end up working and supporting the businesses that you actually have some skin in the game in. And this is pretty high stakes. And so I, I will mention that, but that's not really gonna be the focus of this episode. I think the more traditional path to enabling entrepreneurship around your accounting firm is, is more of a, I got three steps here that's kind of a, a framework to get you to a place where what you're doing wouldn't necessarily just have to be running that accounting firm. So first up, as we talk about a lot, running a profitable accounting practice is about pain identification and being able to find those super specific pains that people feel super extremely where they're like, this is such a blocker for my business. I will pay any amount for somebody to take this thorn out of my side and stick it into theirs so I don't have to worry about it anymore. And once you got that nailed and you're attracting a specific type of person, what do you find when you, like, get to that level of, of depth? And, and we talked about this quite a bit on the episode that was like, what are counter arguments to niching down? When you start niching down and getting specialized, you actually find a whole bunch of other nuance around those businesses that you weren't already aware of. And so I talked about, you know, getting into dental and then discovering, oh, like dental labs have their own specific set of needs and you have all these different types of entrepreneurship cropping up around that space that you like, just discovered. So you go like, you walk through that door and you discover like, oh, there's actually a whole bunch more doors Here I could still go through. And you end up with this very intimate understanding of what's happening that is very unique to you. You end up having access to a bunch of people that you wouldn't otherwise have access to. And you honestly become like a respected guru within this little bubble of the world. And there's something like magic about finding those little bubbles where you can go, be a guru, whatever you want to call it, a micro influencer. Like, there's, I think there's pride to be taken and being really successful and simultaneously not being able to explain to anybody what you do. Like, in my experience, the best things and the things that people will pay you the most for are things that normies are like six degrees of understanding away from being able to get their heads around it. And we see this every day in, you know, what are more upmarket firms charging clients? And it's just astronomical. And I can't even get my head around it. But what keeps us from getting to that level of specificity is like, we all come into this at a very general level because you got to start somewhere and then we start thinking about, like, okay, like, what does it look like to specialize in this industry? And you're still, honestly not mega specialized if you're still. If you're just working with dentists or doctors or beekeepers or whatever it is. And so that is going to like, level one of specificity. And you can kind of explain at a party what it is you do there. But level two of specificity is going even deeper into that domain because you realize, like, oh, dental lab companies, I can be the foremost expert for them. These are pretty decent sized companies. I can work with them nationally and I'm like the guru for them. I. All I do is I go out and I talk about, like, how accounting and tax and, you know, other pains specific to these businesses, because I now know this space really well and how they fit into the ecosystem. You're level two now. And whereas before at a party, you could explain like, well, here's how I support dental clinics. You're now like, here's how I support dental labs. And most people are like, what the heck are dental labs? And that's a killer place to be because, like, you are more in demand, you are more scarce. There's not that many people talking about what you do specifically for that group. Beyond that, honestly, there's probably a third level who are like the equipment companies that they work with, who are these software platforms that, you know, support dental labs? But most of us never see the levels 2, 3, 4, 5, 6 because we're afraid to step into level 1. And with each like level you get into, stuff gets more scarce and in my experience gets more expensive. The equipment, the software. Like when you get to that level of specificity, like we're usually talking about super hairy and frankly something super unimpressive stuff. Like we've all seen these industry specific software platforms that some of our clients use and you're like holy geez. Like this is what interior designers use. Like this is what this very specific type of person uses and it looks like it's like 15, 20 years old, right? So the more like each, with each level you go deeper. Honestly, the worse the solutions that are there are because you're drawing from a much smaller pool of people that are developing solutions for them. Haha. Lightbulb moment. Enter you 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. 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, gonna 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 like totally red pilled me to like oh geez. Like we need to globalize the the way that we get our work done. Check these folks out link in the show description Cloud accountantstaffing.com gang this episode is sponsored in part by Live Flow. Live Flow is the easiest way to sync that QuickBooks data back and forth to your spreadsheets. You may have seen this actually had a big announcement lately. So this fall G2 gave them the top spot in their fall 2023 report as the leader in the financial analysis category. That's right, they won number one. Nice work. If you've been around my channels For a while you've seen Live Flow kindly. They have sponsored quite a bit of stuff. And I'm not, I mean, I'm not saying I'm taking credit for it, but that was probably why I'm not familiar with Live Flow. Super easy way to sync that stuff. Sync your QuickBooks data back and forth with Google sheets. They got a whole pile of templates too to make the process of building that stuff for the first time as easy as possible for you. Stuff for managing cash, AP, KPIs, like everything you can imagine. Sync that data into your existing sheets to make them smarter. Get it to auto sync or build your like custom new sheets that talk with QuickBooks totally from scratch. Pretty cool tool. Check that one out at LifeFlow IO. So the first step to developing a killer potential adjacent business to your accounting firm is getting the levels in, like getting in deep. And then you look around and you see the solutions that are there and you're like, okay, there's like two consultants here and they kind of suck. Cause they don't know anything about this or that. Okay, there's like one or two leading software platforms here and this looks like stuff that was developed like 15 years ago and hasn't changed. You start looking around, you see stuff like that, right? And the first step there is probably not to go out and raise a bunch of money and build some big complex other business. Honestly, step two is probably, can I build service lines within my accounting firm that solve these other problems? They might be tax or accounting related, they might not. They could be something totally different. And I actually love working when accounting firms have the confidence to offer something to clients that is completely off the wall. That has absolutely nothing to do with accounting and tax. Because gang, that is how you get the folks who are living at level one, level two, level three, that is how you get them excited when they can go to any old firm and get accounting or tax help. But you are the only one doing that very, very specific thing that beekeepers need that they can't find a good solution for. That makes you one of one. And as accounting and as tax continues to get commoditized, I would argue those other like very nuanced services are almost going the other direction. As people get more scarce and finding good help is harder than ever before, that other stuff is even more valuable. Maybe the best example I have of this in the wild from when I was in practice was when we did this, and I've talked about it before, this sort of cash reconciliation service for dental clinics. So all the patient payments go into this practice management system that they have that has all the patient data in there. I don't want any of that. And so that's where all the payments get posted. But then biggest source of theft is like cash deposits and mishandling around that and nobody's actually making sure that the payments that just got posted to the practice management system ever came through the bank. And there's still a lot of ways you can game that and where it still does match what comes through the bank. But like that is step one. If a patient just made a $500 cash payment and you don't have anybody checking whether the payment that got posted to the pract management system actually came in the bank, that's a pretty big hole, right? But if you think about a small dental dental practice, who does it? Are you going to give your admin team access to the bank? The reality is it's either the dentist says that they will do it and they never actually do, or it's like the lowest value thing they do or they will get like their partner to do it and that becomes that whole thing. But we could be like, hey, we're an independent third party. We've already got banking access. Send us the redacted payment reports and we're going to go through and we're going to tie out every single deposit, make sure everything came through the bank as it should. And we would find issues all the time that were not necessarily nefarious but like errors here and there and all that. And you know what, we could charge for this, like a lot, as much, if not more than literally like the cost of the full month end close because it was super painful for them. It had an element of, of found money where it was like, oh, this is real cash that's changing hands every single day. So it's worth investing in a service that solves this. Me and those became some of our most profitable client engagements. Not because we had nailed the accounting attacks, but because we had found this other adjacent service line that was super valuable for them. Now I've shared before how we did this with like some airtable scripting and we, we largely automated the process of matching this stuff up and people have reached out and been like, oh man, this would be a killer thing for a software solution. And I'm like probably. And I could have jumped straight there, I could have jumped out and been like, oh, we're going to stand up a business just for solving this problem. But place to start is probably that service line and if you do find that, like, there's a huge appetite for it in that service line and you can automate it or build software to do it, that's where you go to step three. That's where it's like, okay, I've now validated this problem. This may actually be a situation where you do stand up an adjacent business that just does this. And so what are some examples we've seen of this in the wild? We talked with Mitchell Baldrige a couple months back. He works with real estate syndicators or some asp, some, I don't know, some type of real estate people. And they have massive needs around Cost Seg. Because they're always buying big commercial properties. So he spins up a Cost Seg business with a partner. He's still running his accounting firm, but that very naturally fits alongside his accounting firm. And those two things actually work together in a way that either one couldn't necessarily independently, because you have folks coming in both channels. You got folks coming in the accounting firm that you can refer out to cost segs, but you also have people coming the other way. Folks just need cost segs. They find this group, and if you can actually tie it back to your accounting firm, they're going to be like, well, obviously you're going to know more about how to do this right, than my current accountant, because you're literally in the business of doing it. And, like, as I talk through this, I think most of us probably know all of this. We probably know that there are, like, cool opportunities. And maybe you're already thinking of a couple, few. And maybe more significant than the reasons why you should do it are what are the reasons why we don't do it? What are the blockers we have that prevent us from doing this stuff? And honestly, I think it's probably as simple as the fact that when you do a thing and when you run an accounting firm and when maybe accounting is the only thing that you've ever done, you simply don't identify as an entrepreneur through the traditional sense. Like the people who call themselves serial entrepreneurs. First of all, yuck. Second of all, they're hopping around doing all sorts of different stuff, right? They're just looking for business opportunities. And that's not really us. That's not our jam. A lot of us went through school doing accounting, and we're like, well, I'm either going to work for somebody else or I'm going to work for myself. And we build our accounting firm model based on what we see everybody else's accounting firm looking like that's just kind of what we do. And so many great things and great possibilities die because the person simply doesn't identify as the type of person who would do that. That's a big blocker when it comes to making videos or social media content, stuff like that, and is not founded in anything that is reality. Right? Like that, like that's such a self limiting thing, the notion that I'm not the type of person to do that. Well, nobody's the type of person to do anything until they actually do it. Last Monday we ran through those seven internal voices. You know the, the voice that is like what is that person like from your past going to say when they see you do that thing? Who knows the real you or when you go out and do that thing, what's that other person gonna think who's like prolific at that thing? And you could never do it as good as them. And we have all these kind of internal voices that are talking you down from what you are actually capable of. And I like the framing of those internal voices almost being like Internet commenters where what they're saying probably comes from a seed of reality. But if you lived your life based on what the most negative Internet trolls told you, you would know that would be ridiculous and not found it in reality. Right? But the internal voices, well, they're inside of me, so they must know what's going on, right? No, like they are oftentimes equally unhinged. And that sort of dissociation with disassociation with that voice and even giving it a name can be a helpful way to acknowledge that internal dialogue for what it is. Weigh any reality that say or like, should I take this seriously or not? But then make a decision for you. They'll make a decision based on what that voice is telling you. Right. This podcast is brought to you in part by Teamup who helps you find super talented Filipino accountants. Hire them yourself without any sort of ongoing monthly fees. They can source accountants with experience working at US or Australian accounting firms familiar with tools use like 0qbo indexed. They can also recruit specialist roles like bookkeeping team leads who have leadership experience or US tax specialists what team up recruits these people for you for a flat one time fee. They're headhunters, not the typical outsourcers. And they can connect you with an affordable employer of record if you need help with payroll and compliance. Right now you can save 1000 bucks on end to end recruiting. Current price is 3000 bucks to find you a great accountant. But it is going up to 4,000 in January. That's right, act now. Remember, other outsourcing companies often mark up salaries by 50% or more. What? So you'll save a ton by hiring directly to get to build your own team for the long term, just go to hireteamup.com to start building your Philippines to team and sign up before January to save a beta cheddar even if you won't be ready to hire for a few months. This episode is sponsored in part by Forwardly. Are you tired of waiting for payments that seem to operate on their schedule, not yours? What the heck. Say goodbye to slowed ACH transfers and rising credit card fees. Welcome to Forwardly, where you can receive payments instantly in 22 seconds. What? Okay, sidebar experiment. I just initiated a payment to you. Put a PIN in that. Receive payments instantly 22 seconds for 80% less and no monthly fees. I like that. With automatic payment options and automatic reconciliation with QBO and Xero, Forwardly streamlines the whole payment process. Same day Ach man, I don't know why this hasn't been normalized like everywhere. Why are we not doing more Same day Ach, by the way, your payment that I just started, it just arrived. Arrived. It's been 22 seconds. How fast was that? Legal has informed me. I need to say I have not in fact paid you just to just clear that up. Just a mental exercise. The future of business payments is here. It's here and waiting for you@forwardly.com check out the link in the show notes to learn more. So let's do a little thought experiment. Let's take a couple niches. Let's use ChatGPT to help us brainstorm. Like what are some very nuanced adjacent needs that this type of client could have? And is that a business that I want to build or not? So here's the prompt I'm given to ChatGPT. I run a tax and accounting firm that works exclusively with beekeepers. What are some adjacent businesses I could develop for services I wouldn't offer in my accounting firm that solve extremely nuanced pains for beekeeping business owners around people process regulation and software? Number one, beekeeping business consulting. If I roll that out, I'm probably going to do it within my accounting firm. That being said, if you end up like with a killer process for selling advisory within your accounting firm, could you spin that out to just be a consulting practice? I mean, totally good, right? Number two, regulatory compliance services. Since beekeeping is subject to various environmental and agriculture regulations, a service that helps beekeepers navigate and comply with these rules would be valuable. This can include assistance with permits, health and safety standards, environmental regulations. Maybe there's a business to be built there. If you think about stuff like CorpNet, where in the US it's just built around like helping you complete the setup, documentation anytime you go into a new state, something like that, maybe there's a business to be made just around compliance. Another like micro version of all of these businesses is also like a digital product. Like if you could make a 60, 60 minute course or a 90 minute course around this concept that people would happily buy and consume, that itself can be a killer business because it's like infinitely scalable, right? You make it once, you could sell it as many times as you want. And that may even be like a great way to test the waters of how. How excited would people actually get about this? Number three, workforce training and development. Develop a training program for beekeeping staff covering topics like best practices, safety procedures, effective beekeeping techniques. That feels hard. That feels like in person, hands on, not say you couldn't do it. But if I'm going to build an abyss, a business adjacent to my accounting firm, it has to be a fundamentally better business. And to me that is like something that is more scalable. Number four, Beekeeping software solutions. Create or collaborate on software tailored for bookkeeping businesses. This could include inventory management, hive monitoring systems, productivity tools, or financial management systems specifically designed for the nuances of beekeeping operations. How about like a. A beekeeping reporting package? Like maybe it starts with. Well, our advising framework for beekeepers follows this specific set of KPIs and you have, you know, a very tailored approach. But maybe there's a software platform that productizes that specifically for beekeepers. You connect it to QuickBooks or whatever system they use. It's like the reporting systems that we use, but like just for beekeeping, right? Could be cool. Number five, supply chain management services. Help beekeeping businesses optimize their supply chains from sourcing sustainable materials to efficient distribution of honey and other bee products. This could involve logistics support, supplier negotiations. Sustainability? That feels too abstract to me. Number six, Beekeeping legal services. Man, folks that are both attorneys and accountants, that that stuff blows my mind. Number seven, Eco Sustainability Consulting. Number eight, Marketing and branding agency. This one I'm actually a little surprised we don't see more often. It says specialize in helping beekeeping businesses develop their brand and marketing strategies with a focus on highlighting sustainable practices, quality products and unique stories behind each beekeeping business. Working with Dennis, I've Found there's a whole bunch of marketing agencies specific for dentists. And if you ever worked with a marketing agency before, I would argue it is not the highest bar. I'm sure there's awesome groups out there. There's. I would argue there's a lot that, that are not. But pairing marketing and branding with an accounting firm, I'm. I'm kind of surprised we don't see that more often, especially as more accounting firms are leaning into social media content and attracting a very specific type of person. A really valuable thing about firms that are serving a specific niche that we don't think about enough is what a unique hub we are of those specific people. There aren't very many groups that are collections of folks with those specific types of pains. And anytime you have that collection of people, you're uniquely positioned to do certain things other people can't, like launch a community, you know, where, where those folks can come together and the value that they ultimately glean from the community is gleaned from each other, not from you. Yet the value is attributed to you for bringing them together. But I think we're stuck on this whole like, you know, the, the nondisclosure and the fact that we're not going to tell clients that we work with other competitors or other people in their space. We get super fixated on that when there's probably opportunities that we're missing by not bringing more of that stuff together, like in a responsible way, of course. Number nine, research and development firm focused on innovation and beekeeping. And that doesn't feel like me. Number 10, community engagement and education programs. Develop programs that help beekeepers engage with their local communities, such as educational workshops, beekeeping experience days, and community supported agriculture programs. I like that. From the standpoint of not only the, the cold hard business of capitalism, but that adjacent business as a way of actually doing good, of maybe like supporting folks in a way that's adjacent to your firm. And that's probably getting you in front of a bunch of folks that are like early in developing those businesses or the businesses that are super focused on maybe scaling social impact. And if you are a player in like how that social impact is coming together, obviously it's raising your standing and your visibility in the business community, but it's also helping you be a more impactful company. I'm sorry, that was a B joke. I'm curious. If this is something you've done or if you've considered it before, why would you not go up and spin up an adjacent business? Obviously there's gotta be worries around overwhelm and can I actually manage two businesses when I'm struggling to even manage this one? Or if you've seen like really compelling examples of like we talked about Mitchell Baldrich with the Cost Seg Company, what are some cool examples of this stuff that we've seen in the wild? I love to see that. If you got it in the comments, we get really fixated on what we're doing today. I think we lose sight of just how much you can develop over a year, over five years, into a different person, into different opportunities that right now you couldn't even imagine. But most of us are so far from death's doorstep that to sit here right now and say I can only run an accounting firm feels really self limiting, right? Like where's the fun discovery in that? And even if you try something and you fall flat on your face, to me like that is still success. That's still learning about you learning lessons about entrepreneurship that all of your clients are learning at the same time. That's probably just making you a more like well rounded person, right? That's all we got for today. We got a super fun interview coming up tomorrow on why I think honestly, timekeeping and like that whole pricing dialogue just totally misses the point and really doesn't matter that much in accounting firms. So tune into that tomorrow if you want to get triggered and I'll see you there.