176 7 Inconvenient Truths for Accounting Firms

Going to run through some inconvenient truths about running an accounting firm. Some mental traps that I think hang us up. Stuff that I was stuck on for over a decade and still struggle with some blockers for entrepreneurship in general, but also some blockers specifically for accounting firm stuff. So come on in, let's talk about it. Maybe my favorite social media post of all time from Dicky Bush on Twitter from 202219 Inconvenient Truths I Don't Want to forget Maybe you've noticed this trend on this podcast. I don't mind getting punched in the grief bone because oftentimes I feel like that's what you need to like wake yourself up from the things that you're hiding from or blinding yourself to. So buckle up because this is just gonna be an all out assault on the oof bone. So I'm gonna run through this original post from Dickie, tell you why I like it, and then I've got seven kind of of my own things that I think are particularly relevant to accounting firm running. So this is from Dickie Bush. I'll put a link to this thread down in the show. Notes 19 inconvenient truths I don't want to forget. No one cares about what you do. They care about what you can do for them. Ain't that the truth? I talked about this a lot when I was sort of reasoning through or sharing my rationale for how I ultimately decided to leave my firm and how that was a really hard thing and how I let down a lot of people in the process in order to pursue something that I thought could ultimately help more people. And going through the process of that, it was a really good reminder that I've probably been hit with now three times in my life that for most of your professional relationships, you are ultimately a means to an end for that person. Which is a bummer and which we kind of hide from because I think we don't want that to be the truth. And it won't be the case in 100% of situations. But for most people, you're the person who will sign the paycheck. Maybe you are that person's manager who is in charge of their performance reviews. Maybe you get their tax return done, maybe you get their accounting done. And in our head, I think we like to maybe overinflate these relationships to be more than what they are, to try to convince ourselves that there is more meaning there, or to oftentimes justify the investment you're putting into that and maybe the sacrifices that you're making elsewhere, when the reality is, if you disappeared tomorrow, those people would go find another job, would go find another accountant, and you probably wouldn't talk to them after that. And that's admittedly a tricky thing to balance because I enjoy building relationships with the people that I work with, my professional relationships. There's obviously a ton of value in doing that and fulfillment to be had there. But you also have to temper that with the reality of, like, keeping perspective of exactly what it is that you're doing for these people, not getting this overinflated perspective of the importance of that relationship. When ultimately, if they don't need a tax return anymore, or if they don't need accounting anymore, or if they retire or something like that, is there really still going to be a relationship there? For me, when I left my firm, really thinking about that, that's what ultimately chose me to make a decision that was selfish is probably too extreme of a word, but a decision that fundamentally put myself and my family first rather than trying to be the hero for somebody else. Next one here from Dicky Bush. No one on earth thinks about you as much as you think they do. That's particularly relevant when it comes to putting ourselves out in more visible ways and just optimizing for visibility in the Internet age and how increasing that surface area of where people can find you creates opportunity. You think you fixate on what are people going to say about this and that. And the reality is these days, and this is the case for me too, 90% of the things that you put out, nobody's ever going to see. You're the only one that has 100% perspective on all of the things that you've done. They call that the spotlight effect, that you think everybody's fixating on what you're doing when everybody else is going to going about their days fixating on what they do. And for most of them, the touch points they have with you are through the lens of, how can this person be helpful to me? What do they have to offer me? Am I going to follow this person or not? Right. But nobody's sitting down there just thinking about you all day long. Successful people are neither smarter nor more creative than you. They're simply executing better. How many of those knucklehead clients do you have that make a stupid amount of money? And you're like, how did I end up where I am right now for that guy or that gal to be making 10 times the money as me in a 10th of the time? And I think the first thing we do is probably blame the profession and the mechanics of what we do instead of looking at what they're doing and being like, okay, I'm frustrated by this person and I'm not particularly impressed by this person, but there must be something they're doing fundamentally better than I am. So at some point there was an opportunity that they captured or in some way they're executing in a better way than I am. If I were in their shoes, would I have done the same thing? And oftentimes for accountants, that is maybe not opening yourself up to entrepreneurial opportunities because we identify as people who do accounting or run accounting firms, but in our roles, we're actually privy to a bunch of really rad entrepreneurial opportunities that most people aren't privy to. We did an episode on this a while back, opening yourself up to entrepreneurial opportunities that make sense adjacent to an accounting firm and how we can give ourselves permission to explore those things. Building a business that is not subject to some of the limitations of scale and all of that that come with a service business, building that alongside an accounting firm in a way that can actually make your accounting firm even better because it's a solution that the clients you're attracting may benefit from that's really exciting. And for me, it kind of scratched a different creative, like entrepreneurial itch. It also puts running an accounting firm in perspective because there's a lot of limitations that are just inherent in how accounting firms work and how you run a service business and how you find people and all those things that are not the case for many other types of businesses. And so it kind of, I think for me made me a better entrepreneur when I started thinking about stuff outside of just exclusively my accounting firm. And so I think what we may not be, what we may not have our eyes open to, that these other clients of ours are capitalizing on is just finding the opportunity and being willing to take make low stakes bets and. And these other potential opportunities to see where they go.

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Absolutely not the case.

There are tens of thousands of people working for big four accounting firms. You know, offshore outside the US you can get folks that can do anything from tax to junior level stuff to super senior level stuff. But try to do that yourself. Figure it all out yourself. That's going to be hard. It's going to be scary. Really good place to start climbing Cloud accountant staffing. They will hold your hand through that process.

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Success comes from doing somewhat monotonous things every day for years, but nobody wants to hear that, man. Every interview I do now, the first question is like, whoa, look at you. And look at all this impressive stuff that you're doing. How did you do it? You're just such a natural and this and that. And it's like, I think we want to find the overnight success stories. I think those, for whatever reason, those are fun and attractive. The reality is that's just not how it goes. That's not my story. My story is working really hard on this stuff for a long time and nobody watching. And that's why now the output is good. It's not because I'm a natural or this or that. It's just because I've spent more time on this stuff than. Than anybody else and more time talking with accounting firm owners to, like, kind of refine my mental model on what works and what doesn't work and kind of widening my perspective of different things that folks have tried. The more I've widened that, the less convinced I've been that there is a single formula that's going to always be the right solution. But it's honestly just from spending more time and effort on things than most folks would spend or think is reasonable to spend. So if you think about the pie chart of how you spend your time, you know, I am a. I'm a big. And I was, even when I was running a firm, a big outlier in the split of how I spend my time. So is there. Is there a way that you can organize what you do and spend your time to set you up to have an advantage that is like, kind of this outlier advantage and then execute on that consistently if that's looking like a journey that you're ultimately gonna enjoy. I learned that I super enjoyed doing video and creative and comedy stuff that looked like a journey that I could enjoy. So I started allocating more of my time to that. And over time, as you keep doing it consistently, it's not always gonna be fun. But when you're ultimately an outlier in that domain, like that is then how people find you and how you stand out. You know exactly what you should be doing. So stop chasing shiny objects. Instead, figure out why you aren't doing what you know you should do. Yeah, that whole exercise of if you sat down right now and made a list of all the things that you know that you need to do that you haven't done yet, and then in the other column next to those things, write how long you've known that you need to do those things. The best advice for most people is just sit down and do the stuff that you need to do so that you can start thinking about what's next. You can solve almost every modern day problem with writing, exercise, clean eating, smart sunshine and meditation. I don't know about you, 80% of the time, if I'm overwhelmed, if I'm struggling to overcome something, it's because I'm hungry, it's because I didn't sleep the night before. And so we talk about how to make this stuff easier and more sustainable and all of that, and that we probably don't talk about those core fundamentals enough. Because without that foundation, kind of nothing else matters, right? That's the driver of everything else. I hope you can hear my wife blowing her nose right now. Is it still coming out? Is it still coming out? She said it's so sticky and terrible. If you spent half as many hours taking action as you did thinking about taking action, you would be in a better spot. Yeah, the whole one way doors versus two way doors thing. A one way door you go through and you can't go back from it. And if we actually think about the technical work that we do in accounting firms, those things are generally one way doors. We make a lot of decisions in the course of doing technical work and you don't ultimately then want to have to change that decision down the road. And that's kind of oftentimes problematic if you do. Right. And so those technical things, they are like itty bitty one way doors that we're going through a hundred times a day. But the reality is when it comes to running a business, most of the decisions that we actually make are two way doors. They're not really that high stakes where if you did go through them, you could go back having learned something. And I actually think that because what we do is so technical in nature, we see a lot of two way doors as one way doors. When you think about stuff like pulling somebody in to help with your email or something like that, that is a really low stakes test that you could try and then roll back if it didn't work out. And at that point you've learned something about why that did or did not work for you, maybe you don't do it long term, but then if you went and did it down the road, you're in a fundamentally better place to know what a better version of that for you could be. And so the enemy here is inaction. Like that's how you always lose, is not trying it and not testing accounting firms due to their cyclical nature. I think oftentimes we can be really slow to evolve because there's many things that happen on an annual cycle and you're like, well, here are the things that we're going to do this year and then we're going to wait an entire year to consider doing anything differently. When the much better thing to do is be thinking of it in terms of tests. What are some small, low stakes tests that we can run ideally on a cycle much faster than a year long cycle. Because the reality is like being afraid of change, I think usually leads to making too big of changes and your changes ultimately then being too high stakes. Like you talk about stuff like adopting a portal where clients can come in and self service and stuff like that. And maybe you sit on it for five years because you're afraid to do that. And then you're like, okay, we're gonna do it and, and we're going to enforce it across our entire client base. That's really, really high stakes. And to me that's the worst way to do that. That's where I push back on the folks that say you need to do the exact same thing for every single one of your clients. Because I'm an advocate of, let me test that with, you know, 5% of my client base. That is a representative spectrum of kind of all the different avatars in my client base and how I think they'll receive that. I'm an advocate of testing that stuff because if I roll it out and it's bad, I don't want to do that. So I think we are, we can be too slow to take action and to try things oftentimes. Because what are actually two way doors are looking like one way doors to us. 95% of reading, planning and brainstorming is procrastination disguised as productivity. Yeah, like looking for that next great idea when you've already got that long list of things that you know that you need to do. Right. You can't deposit the number of books you've read or followers you have in a bank account. You said you would start months ago. You have three finite resources, time, energy and attention. Every time you waste them, they're gone forever. One of the things that stuck with me Most about that 13 questions exercise we did on the main channel and then the podcast a week ago was if you had. If you have a problem and money can solve it, is it really a problem still? In the beginning, in the early days, we trade our time for money. We give that time away and then people give you money back with the hope of someday being able to be on the opposite end of that equation where you then are able to buy time back with money once you have money. But oftentimes we are really slow to, or we never get to the point of unlearning where we started and being willing to invest in things that will ultimately get your time back. If you never get there, if you never get that time back, what is the point of all of that? Right? And I don't know that it's ever worthwhile to be in the situation where you're making that sacrifice for this future potential payoff thing. I think that's usually a trap. But I know a lot of us that are stuck on hard problems but unwilling to spend money to solve the problems, to get time back. And at that point it's like, well, what's the point? What is the point of that money then? If you can't get that time back, you can't. You can complain about the game or you can learn the rules. The market rewards not the best product, but the product who best positions themselves as the obvious solution when it comes to accounting firm running. As much as we take pride in technical prowess and doing the best technical work, that's not generally what's going to get you home in time for dinner. Honestly, I have as much pride in that and a sign of as much importance to that, I think, as the next person and don't want to do bad work. But running a successful firm comes down to a whole lot of things besides technical expertise. And sometimes we can hide from that because the thing that comes more easily is that next continuing education on a technical course or something like that. Rather than digging into stuff like, you know, emotional intelligence and business strategy and some of the things that are going to lead to actually making this a more sustainable business.

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The people you look up to are not that special and are no more talented than you are. Most of the people we look up to, we look up to them because they've developed an adjacent skill set that highlights that core capability. So maybe they're really good public speakers, but maybe they're really persuasive. Maybe they're good on video. They have this other thing and that is the only reason that you know that they exist. And because they have that adjacent skill, they've increased their surface area for opportunity and finding new things and all that. And most of us, I don't think are investing in an adjacent skillset right now that will enable that. You have that core capability and you're like just pushing more and more and more and more and more on that core capability until the end of time rather than developing other complimentary skills around things that you enjoy. Maybe that's building community with people. Maybe that is doing silly stuff like I do on video or making memes on the Internet or something like that. What is that adjacent thing that will be like a megaphone for your core capability? That is what actually leads people to finding you and enables visibility. Being busy is a sign that you lack leverage and are delegating poorly. And 99% of people would rather be uncomfortable and unhappy than uncertain. I do think we will sooner sit there and like white knuckle it through an uncomfortable or hard situation than take actions that are more like long term investments of yourself that maybe don't have a clear roi. Like because you can't see, you know, say, say you make the decision to post a YouTube video every week. What is the ROI of that what is your life going to look like on the other side of that? Like what's over that next hill? What opportunities will that expose you to? Building the skills of having done that for a year. Once you have that, what are the next skills you will build as a result of that? Because you can't really see that it's easier for us to sometimes sit and remain in a not fun hard situation because we can't trust what's on the other side of that. Okay, seven more Inconvenient truths for me Specific to accounting firm Running overwork tricks you into thinking that you did your best. Sometimes working more hours is the easiest route. The whole notion that running into the same wall face first for the hundredth time is easier than stopping and reassessing the how and why and whether you should be what you're doing, doing what you're doing in the first place and working our fingers to the bone Honestly in most cases, like as much as we like to pain signal and think that we gave it our all because of that, that's usually the easiest way out. Like that is the not like the way that does not require critical thinking. But we can fool ourselves into thinking that we did our best. As a result, we look to workflow efficiency for profits when the answer is uncomfortable client pricing conversation. So if you run a 50% margin firm and I can't tell you how many people will say we don't need to increase prices or we don't need to fire these clients because we're doing this or that system change or hiring this person to solve for this capacity constraint. But if you run a say affirmative 50% margin and you've got a new tool or something like that, that's going to enable a 10% productivity boost, you know, that's huge. That is massive. Best case scenario, that's a 5% impact on your bottom line. Reality is probably isn't cause you're probably not going to let people go. You're probably not going to have folks work less. But you know what else is a 5% increase to the bottom line? A 5% pricing change. So like ultimately it is price that dictates profitability of your firm and it is the profitability of your firm that dictates freedom and flexibility. How much you got to work those little fingies to the bone? Number three, the idiot clients who make tons of money in most cases have unlocked something that you haven't. Finding the thing that'll make them money, doing the heck out of it and cutting out everything else with the asterisk, money is not the be all and end all. So even though they already have clients and it's frustrating and they're like, there's almost a degree of resentment sometimes that they've found the success that they have in spite of themselves, they have still figured out something that you haven't. And rather than blaming accounting or blaming your circumstances or something like that, really stop and consider. What have they figured out? If I can figure out what they've figured out, then I can probably do it better than them, right? Not the same thing necessarily, but like, what is it that they're doing differently that you can learn from to find similar opportunities for yourself? Number four, it's easier to spend all day solving other people's problems than stop and consider your own. It can be really hard to untrain yourself from that in public accounting. If you came of age in public accounting like I did, that's just what you do every day. You sit down, you look at everybody else's stuff, you help them solve their problems, and your stuff gets put on the back burner. There's two types of tax accountants. The ones who do their tax return first and the ones who do their tax returns last. And I'm not convinced that there's that many that are in the middle. I was one that did my tax return last. Highly recommend hiring an actual tax bureau to do your tax stuff who will give it more love and care than you will if you're one of those types of people. But oftentimes it's easier to solve other folks's problems than your own next one. You may enjoy working with that client, but they aren't with you because you're a great person. They're with you because you're the best option. And this affinity can oftentimes be manipulated, causing you to extend discounts, go the extra mile. This one makes a lot of people mad when I say it. And you do have real relationships over the course of running business, but. But not as many as you think you do. Because I think we inflate the importance of those relationships to justify maybe some of the trade offs that we're making along the way. But then the worst version of it is when a client will build that relationship with you or make you feel like you have that relationship in a manipulative way in order to get more out of you. And that's. That is real. That's happening in every single accounting firm. Something to be aware of doesn't feel good, but it's happening. Two more if you disappear tomorrow. 99% of the people you talk to every day won't notice or will move on with their lives. The ones who will. For many of us are sitting at home wanting to spend more time with you, but we are too busy pouring ourselves into that 99%. It's another one of those situations where we, I think we, we inflate the importance of those relationships and all that because it helps us. It makes it easier for us to justify the amount of time we spend on work and the amount of attention that it gets. And there are real relationships there. It's not to say that they are meaningless, but we gotta be careful not to put too much into those last. It's easier to listen to someone telling you what to do than to go do it. So go do it. Do you have that list yet of things that you know that you need to do? If you're on a team, I would super encourage you to make that list of things that you know that you need to do. You don't have to do the second column of how long you've known you need to do it. You don't need to like punch yourself in the grief bone, but make that list at least as a starting point and pull other people in or at least make them aware of it. Oftentimes, I think we, we put too much pressure on ourselves to solve all of those problems. I know I always did that. When you get a big old team of people and you're like, you, like, use these people and enable them. Every single idea and every single solution doesn't have to come from, from your little noggin. Like when you've got a big team of people, lean into letting them support you. I wasn't very good, and I'm still not very good at letting people in to that stuff, but it feels a whole lot better than having to put that whole thing on your back. So best thing you can do is have that list of things that you know that you need to do, work through it. It's gonna be hard, it's gonna be uncomfortable, get help. There's gonna be people that you have probably that can help you. Even if it's like just your partner, your spouse, being able to talk through with someone, those things that you need to do. That's step one for all the big brain, ambitious ideas that you have. First step is like the little brain things that you need, you know, that you need to do. Because some of those little things, man, and usually the uncomfortable ones you've been putting off, can have such a massive impact on quality of life and on how much you enjoy turning up to work every day and how you manage your energy as you go through doing those things. And when you start ripping those band aids off, like, you feel so. It feels so good. And you're like, oh my gosh, why didn't I do this a year ago? It probably starts with making a list, so if you don't have that list yet, go out and build it. Feel free to copy and paste it into the comments. And when other people see it, they're probably going to be like, oh shoot, I probably need to do that too. Thanks for coming and hanging today, and I'll see you in the next one.