188 The Skills Needed To Develop An Accounting Firm

Oftentimes when an accounting firm fails or when somebody comes into accounting firm ownership and they're like, man, this is not what I expected. Also, when you're spinning up, like a new initiative within an accounting firm, like a sub team, where those things usually fails when you have the wrong types of skills for the wrong stages of growth of that project. Different stages of firm running require different skill sets, and they don't always align with maybe what you identify as or what you even want to do at that point. So for those different stages of building a firm or building a. A team within a firm, what are the skills that are required? If you don't have those skills or you don't want to do that, how do you augment your own abilities to get you over that hump? Let's talk about it. Come on in. Have you ever had the E Myth? The E Myth, the book by Michael Gerber has maybe the most simple framing of this that I've seen. And you can really see it in people. When you start thinking of folks falling into one of three buckets, you've got your technicians, the people who do the work in the context of the book, they are the pie makers. The person that loves making pies so much that they say, I'm going to go into business making pies. And before they know it, they're actually like, oh, what I actually enjoyed was just making the pies, not running a business. A lot of those people in the accounting profession. But the thing is, we all went through a stage where this was us. Like, when you're early in your career doing technical stuff like this, be it accounting or tax, there was a stage where we were all technicians. And I think oftentimes this framing of what people are is like, held kind of similar to how you would hold, like a Myers Briggs assessment or something like that, where it's like, this is just the person that you are and this is your personality. Where I could tell you, in my experience, I actually ebbed and flowed between these different roles sometimes as needed. If I didn't really want, like, even though I didn't want to, other times I was naturally being pulled towards one. And that's the value of being aware of this stuff, I think, is this is not like for most people, it's not like in your genetics. It is at this stage in my career. Here's what I'm energized by. And if you're aware of that, I think you can better set, set yourself up for success by getting plugged into the right Projects that will make the most of that. Cause there's pros and cons to being, you know, a technician, for example. So a technician while, especially in small firm running these days, people almost like look down their noses at technicians as if everybody should be aspiring to get out of the work. When it's like, you know what, it's not a bad gig. If you run a solo firm and you've got like five clients that pay you really well and you've got a bunch of flexibility. That's not a bad gig. Like everybody doesn't have to set up their firm and, and run it the same way. Right. And if you're a technician, that sort of setup, like you can build an awesome livelihood around it. So that's one of three types of people. I'll cruise through this because I suspect you've heard it before. Second type is a manager. The job is basically overseeing the technicians and building systems and standardizing and all that. And. And the third type is the entrepreneur, the visionary, the person that sucks at details, the one with the risk appetite. So three different types of folks. Technicians, managers, entrepreneurs. But we're gonna talk about three different stages of firms. But it could also be like initiatives within a firm. So for example, I had a tax practice with about 30 people in it at the time. And we started a cast practice to do accounting for clients. And that started from scratch. And I would think, I even think like within that team many these hurdles that you hit at X number of people. I hit those hurdles within a team the same way that you had hit it like growing a firm from scratch. So first that zero to one stage like that, getting that thing off of the ground. It's funny, this is, this one's kind of tricky because. And I actually think this prevents us from having two times as many people out there starting their own accounting firms. But that one person firm, like in most cases you're fundamentally going to be the technician because you're the only person there. Right. But it requires a degree of entrepreneur to get over the hump to start to like have the confidence and take the risk of starting. Yesterday's main channel video was about things to consider if, if like you're thinking about starting your own firm. And I, when most people talk about starting small businesses, there's like those stats thrown around of like the number of small businesses that fail and stuff like that. And I know for me that was always a rationale to not then start my own business was. That was just too risky for me. But we don't Talk enough about how in the accounting space, if you went out and you actually had just enough of that entrepreneurial mindset to be okay with going out and doing your own thing and starting your own thing, what really is the worst case scenario? Like, we talk about that as if it's like going to be a hindrance to your career when even if that thing goes belly up, like you're getting fantastic experience being an entrepreneur. And if you're working with clients after that, like, you have an entirely different perspective of what it takes to build something from scratch, even in a situation where you fail. And then it is not as if accounting will not take you back, right? So I think oftentimes people who are at a crossroads thinking about starting their own firm, it may be coming from a place of I'm in a public firm right now and I'm not enjoying it. Like, not a great work life balance. This is probably the most common scenario. So do I go to private and like find balance or do I go build my own thing? All of those options, all of those different things you can hop around between those things are still going to be there. If you try something and it doesn't work, there's a lot of value in just trying things and learning about yourself. Is this something that I enjoy or not? Because I think oftentimes the worst thing you can do is not do that thing and always wonder, hmm, I wonder what have happened had I tried that thing. Like, that's what I kind of optimize my decision making for, is I don't want to get 10 years down the road and be like, would I be in a fundamentally better place, you know, if I did this or that thing differently? I want to try it responsibly. Like, there can be risks, but you need to like get real explicit about what those risks are and how you could mitigate them. Because you can fail and have a plan, right? If something doesn't work out, like, you can still have a plan B anyways. That stage of firm running or building a new thing from scratch within a firm going from 0 to 1. The biggest issue people run into is they don't have a plan for how to get past one until they're at one. And it's the age old like capacity problem of if you have reached capacity and you don't yet have a plan to increase your capacity, you're in trouble because the act of increasing capacity is work. And now you don't have time to do the work that it takes to increase capacity. And a really hard spot where people run into this is building from zero to one. You have this scarcity mindset as you're building where you just, you have to get stuff going and you're probably pretty fast and loose with the type of work that you'll take just to kind of fill your plate. But then you get to one and you're like, well, how do I do any more than this? Now I have to go out and figure out how to hire people for the first time and figure out how to manage people for the first time and like delegate aspects of work but still be responsible for the quality of that. And all that stuff takes time. And when you hit the wall at one and you're at your limit, making the time to then increase capacity and have a plan to go beyond one, that can be really, really hard. So if you are building something from scratch, it is smart to always have a plan for like what's next. And this is another argument I think for fractional hiring for maybe using some element of like outsourced services where they can like take on work in an incremental way. Because if you go from zero to one and then you make a full time hire, like you're going to burn 50% of your time like just holding the hand of this full time hire and then can you keep them busy and like that's just a really big step to take. And then if you're a two person practice and one person gets sick or something like that, like you're, you're in deep doo doo at that point. And like that's to me the value of having like fractional means of getting the fulfillment done either through offshore groups, through part time hiring, that sort of thing to give you a little more flexibility. You never want to be one person a away from being in trouble. This episode is sponsored in part by Cloud Cloud Accountant Staffing. Y' all know I'm a big advocate of hiring offshore. One of the biggest changes I made in my firm, we transitioned a Legacy firm from 100% onshore local hiring to 100% distributed US and then 100% distributed globally hiring and honestly is the best thing we did. It virtually alleviated all of our hiring pains, completely changed how we thought about staffing projects and the type of work that we wanted to bring on. Because you know what, the folks we hired offshore, really freaking good a lot of misconceptions around the type of people that you hire offshore because your enterprises will oftentimes use offshore folks for like menial work. Absolutely not the case There are tens of thousands of people working for big four accounting firms, you know, offshore outside the U.S. 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 cloud accountant staffing. They will hold your hand through that process. Their story is super simple at accounting firm in the US Hired a bunch of people in the Philippines, fell in love with them, but didn't fall in love with the fees they were having to pay to the staffing companies that were managing these employees. So they built their own solution and now they're starting to pull other accountants in. I'd encourage you. A big tipping point for me was when I was like, I'm going to stop being opinionated on this and just try to learn. And so I talked with other practitioners, I talked with some of the vendors that would like help you get into offshoring. That really opened things up for me. So if you've been on the fence, I'd encourage you to at least learn about it and you start heading down that path. Consider cloud accountant staffing. Today's episode. It's sponsored in part by liflow. Okay, so thought experiment. Close your eyes with me. Lean back in that chair. Oh yeah. Now imagine. Imagine if you had a single spreadsheet with a whole bunch of your clients, balance sheets and P. Ls all viewable in one place. They kept auto updating from QuickBooks so you could pull up a single spreadsheet and see all the clients that you want in a single place gang. This could be helpful for monitoring what shenanigans your clients getting up to for ensuring that they're keeping within like the profitability boundaries that maybe you had from a recent tax planning sesh. How's it possible? Through the magic of liflow, they got a new consolidations product that makes it super easy to roll up a whole bunch of different sets of books in one place. And this is obviously helpful for like when you've got a client with a bunch of companies and you need to report that all at once. But it can also be helpful just for informational reporting to see all that stuff in a single spot. Otherwise you're doing the hokey pokey, hopping around, jumping into all these different QuickBooks files. And the really nice thing about this to me is because it's in Google sheets, you've got the entire ecosystem of other stuff that's built in Google Sheets that you can like put on top of this. So like monitoring specific cells, all that in a single view across a whole bunch of different clients. How cool is that? Pretty nice. Same tech or I guess the same use case where folks are now using Live Flow to like review month end books for their clients. Tying out balances, pulling in ledger detail directly from Live Flow. That stuff keeps syncing and keeps updating without you having to like pull in the numbers, print a PDF to like put in a workpaper, that sort of thing. Be pretty nice, right? All those books in one place, you're thinking about it. Learn more about that one. Check out the link below to Life Flow in the show notes. Now there are killer upsides to being in this one to zero stage and this one is zero stage. I mean you pretty much exclusively have to be the technician, the person that is geeking on how you get that stuff done. But the, the upsides to being a technician here is this is like the peak of your expertise. You are in the weeds, you are doing that stuff, you to a level that nobody else has, have a deep understanding of, of what it takes to get the work done and what the clients want. Like the very real day to day interactions with clients. And as you become a manager or you're overseeing a larger group, like the reality is you get removed from that stuff and some of the nuance is lost. And there are upsides and downsides to that nuance being lost. Sometimes there's actually value in having somebody with a bit of separation from those client relationships because a little easier for them to see the 10,000 foot view and what the entire business needs. But the upside of being the technician is like this is your peak technical time. Like this is probably the best and the most efficient that you will ever be at getting this stuff done. Because it's just what you do. Like it's what you're totally focused on. You have a level of hands on involvement that you won't have at any other stage. Now the downsides here are pretty obvious. When you are a technician, oftentimes it can be hard to learn the skill of delegation and delegation is a learned skill. You look at accountants talking on social media and you just see such a mass of spectrum of comfort levels with delegation and for some people this comes really naturally. Other people it's a lesson learned the hard way. But when you're a technician as opposed to say a manager, a manager's job and like what they identify as a manager's job and like what they identify as is Someone who builds repeatable systems and like oversees that stuff from a higher level view to ensure that it is all getting done at the level of quality that it needs to get done at. And so kind of ingrained to that person's nature. And I do think there's a big aspect here of like, what do I identify as? Ingrained in that person's nature is the fact that they are overseeing the work, they're not doing the work. And oftentimes the trap where you get sucked back in when it feels like you're making progress, then you get sucked back into something is when you have to swoop in and be the hero. So very simple thought experiment. If you have five people working for you, something goes sideways and a project isn't going to get done by a deadline. Do you step in and get it done or do you let it not get done? That's a thought experiment that is like a really helpful thing to think about. Because I reached a stage in my career, there was a big chunk of time there where I would be like, no, like everybody's gonna do everything it takes to get that thing done, myself included for the client. Like that's what we do. Like we are in service of the client. There came a day when I was no longer that way. And it was ultimately because we had a 40 person team. And if I stepped in to be the hero in every situation where I could have been the hero, that was all I would ever do. It would run me into the ground and it would teach my team some really bad habits. Like there's some swooping in to be the hero can come back to bite you. Particularly if you're pushing to like make your team feel like they have more ownership over process and accountability for getting things done. So when you're at that zero to one stage, I mean everything starts and stops with you. But from that one to ten stage, you're, you're kind of making that transition to more of a managerial mindset. And when we are early days in this stuff, like we are all technicians and then usually somebody tells you you're a manager, when you're a good enough technician, they say you're a manager. Now sometimes that goes well, sometimes that, that doesn't go well. Like some people do not particularly enjoy overseeing other, other humans building the systems. I had great luck with developing non technical managers because I could find folks with people skills who weren't accountants that could help to develop those folks and who were really good at building systems. That was what I looked for when I was hiring non accountants was folks that could hustle systems that were like high emotional iq. And so for some people you can develop into that and you can learn systems. And that's like a fun way to keep growing as a person. For other folks, they just want to be the technicians. And so if you're thinking about yourself starting a firm or deciding what to do next in a firm, if you're running a small firm and you especially enjoy being a technician, like growth probably isn't the thing for you. Like overall, like doing more volume. There's lots of different kinds of growth. The best kind of growth I think is more iterative, like pulling in better clients while letting the subpar clients go. Like that is a good kind of growth. But if you are of the technician mindset and you don't want to lose the involvement in the work, then you got to find a way to mute all the folks that are telling you scale, scale, scale, and this is how you make more money and do more of this and that. Because most of that is going to be at odds with enjoying being a technician. In the software development world, they've long had the same issues that we have in our industry where you have somebody that's really good at technical stuff and then they get promoted up out of doing the technical stuff. On the engineering side, increasingly software companies are creating growth tracks that keep them in the technical stuff. And this is something that we probably don't do enough of in accounting because we need really good technical people. A big percentage of our technical people are not going to be capable managers. But if the only way up is through being a manager, then you kind of put them in a tough spot. And so I, I think firms can probably do a better job job of letting technical people have a higher ceiling where they can just do the technical things. So in that one to ten stage, if you launch that firm from scratch, you're kind of, I think in that stage kind of finding your way and learning what it is you enjoy and like what you're going to slot into. Oftentimes that stage is a really rude awakening where you're like, oh, it turns out I just wanted to do the work and now I'm, I'm in over my head with a little more than I actually want to do because I'm not ready to be a manager or an entrepreneur or something like that. And that's totally fine. But for other people, that can be a real liberating period where maybe they are entrepreneurially minded, they want to get more to the vision type of stuff. And now they finally got the infrastructure that can enable them to spend more time focusing on the bigger picture opportunities for the business. And people very often ask like everybody gets hung up on these different thresholds for accounting firms. We're like, at what threshold can you do this and what threshold can you do that? That may be like at what threshold can you absorb, you know, people leaving? At what threshold can you get yourself out of the business? I want to go on record as saying you can get yourself out of the business at like literally any size of accounting firm. If you're running a one person accounting firm, you could pull in contract like service groups to do the bulk of the work and you're reviewing the output and like managing client interactions. You're not totally out of the out of the work at that point because you're still managing clients. But with your very first hire you could effectively remove yourself from the client facing aspects of the work. This episode is brought to you in part by Team up, helping you recruit top Filipino accountants without any ongoing monthly fees. The difference between Team up and all the other offshoring options. The Team up helps you hire staff directly. No middleman. You work directly with your new hire in the Philippines. Hire the person, not the company. Guys, Gals, gang. Here's just a few reasons to hire directly. You have access to higher level talent. Makes sense. You have complete control over team culture and training. They keep 100% of what you pay them and it's a lot more affordable for you. So you can retain your team for the long term. Team up can source accountants with experience working at US or Australian firms familiar with tools like Xero, QBO and Dex. Also recruit specialist roles. Team leaders, tax specialists, administrative assistants. Thought Experiment what if you had an executive assistant for the first time this tax season? Just just throwing it out there. What would they do? Start at that email video I did on the main channel recently. Get help with that stanky ol inbox. I digress. Team up recruits these talented folks for a flat one time fee of 4,000 US American dollars. That's it. 4K one time. Somebody at Robert Half just did a spit. Take Robert Half reference. We ever gonna get Robert Half to sponsor this pod? Not anymore. And they can connect you with an affordable employer of record if you need help with payroll and compliance once you hire that person. Big fan of hiring in the Philippines. You know I did a bunch of that. Check out the link in the description to learn more about Team Up. This episode is sponsored in part by Relay did you know that Relay saves advisors three to five hours of work per client per month? Because collaboration between clients and advisors on Relay is easy and secure, every client you invite to Relay gets added to your firm's partner portal. You may have seen we recently did a demo day on Relay on the main channel. Relay does a bunch of cool stuff. What gets me most excited is Access not having to hack together like using your client's access or your team using your access. So every client gets added to your partner portal. This means a portal where firm staff can safely access and switch between client accounts from a single login, their own login, role based permission levels, direct bank feeds to QBO and Xero, and statement syncs with Hubdoc and Dext. Ultra detailed transaction data that speeds up reconciliation, built in receipt management, accounts payable automation. Plus Relay's new partner program introduces meaningful cash rewards for advisors, more partner perks, and an advisor directory to help clients find you. The clients are already banking with Relay. Head over to relayfi.com adjacentstats to learn more and book a demo or check out the link in the show notes. Disclaimer Voice Relay is a financial technology company, not an FDIC insured bank. Banking services and FDIC insurance are provided through threadbank Member fdic. The Relay Visa debit card is issued by Thread bank pursuant to a license from Visa USA Incorporated and may be used everywhere Visa debit cards are accepted. I've seen a lot of number numbers thrown around from a million dollars to $5 million to headcount of 10, headcount of a hundred. There's, there's trade offs. Obviously it's gonna be harder to make money if you're running a lower volume shop and you're not doing any of the work yourself. But there is no, like there's a, there's no absolutes here. I think the bigger thing is actually what sort of person does that firm runner identify as? Do they identify as a technician, a manager, an entrepreneur? You look at somebody like Chad Davis who told us on a podcast in the past, pretty much from the day he launched their accounting firm with his partner, he was being removed from the work like pretty much immediately. And I think he said by the time they were at 10 employees or something like that, he was, he was totally out of it. And that from day one was the plan. And I have to imagine that's because at that stage in his life he identified more as like a visionary entrepreneur than a, than a technician or a manager. I in my career almost skipped that manager step I think I was a technician. I was doing tax. But then I went back and got my mba and it gave me just kind of this different, more entrepreneurial mindset. And I came back and said, within this firm, I want to start an accounting practice. And I built that from zero to one. And that grew pretty fast to where I had to pretty much from the beginning be focused on how do we hire people to get the volume of work done that we can take on if we want to. And we did take on too much too fast. But I kind of then just jumped from technician to entrepreneur. And I learned as I leaned more into that entrepreneur functionality because it was not natural for me in the beginning at all, I learned I actually loved that stuff. So I, I started going out to conferences for the first time and talking with other people who run accounting firms. And I actually learned that I love that stuff way better than doing the technical work. And I don't know that somebody is going to know until they do it, like, which aspects of those things they like the best. And that's why I always tell people, if you're going to start an accounting firm, start it as a side hustle first. Like, get some experience managing your own clients. There's going to be certain people who do that and they're like, I can't hire fast enough. Like, I got to go make my first Iron Philippines or find somebody to come on part time or something like that so I can get out of this work. And it's just like they're just dying to get to more of that entrepreneurial like mindset. And for those people, like growth and building something larger, like, that's probably the path, that's probably the thing that you're going to enjoy longer term. It also impacts the type of folks that you need to hire. If you're entrepreneurially minded, man, you got to find a bunch of managers. You got to be the visionary that will attract people to come and work for you and be technicians. When you get to that stage of, you know, 10 people or beyond, and that's, you could set that threshold a bunch of different places. At that point, you need several managers. I don't know if you still need a visionary at that, at that low of a threshold, but at that point you've got several managers that really need to be overseeing the rest of your technicians. Things that I bumped into in practice where we had like a misallocation of those different types of people. When I originally bought the practice I was at, it was a traditional partnership model where you historically had four to six partners in this firm that oversaw a bunch of technical people. And it was basically a bunch of technicians and four to six partners kind of serving as managers. And so when I came in with an entrepreneurial mindset, I was missing exactly what you would expect. Those partners had left. We had way too many technical people and not enough managers to be hands on support for those technical people. Because for me as the entrepreneur, I'm, I am scatterbrained. I am bringing stuff back that I'm excited about and just overwhelming everybody. I'm not following through on details. And if you've ever experienced that without proper managerial support, you're like, you might think like, man, I suck at this stuff. Like this is maybe this isn't the thing for me. When it's like, no, like you just have to be more self aware of what you're going to be great at and the things that you will struggle at as a result and how to build a team that ultimately complements you. The team I had complemented the past like org chart structure. The team I had when I came in did not compliment me and what I did well. And so we went out making higher level hires than we had ever made before because historically the firm had just hired a bunch of technicians that didn't want to do client facing stuff, didn't want to oversee other people or worry about systems. And so we went out and we had to make some, some expensive hires for folks that could kind of be the middle there. So whether you are, are building your own thing from scratch or whether you're like starting a new initiative within, within your firm, maybe that's a new niche practice, maybe that's rolling out a different service line. It is worth being aware not, not just in yourself, but in your people. Like where are those, where do you find those folks right now? What stage are they at? And the stage can change and maybe a stage isn't the right word because it's not like you're always going to progress from 1 to 3. There's people that are going to be technicians until the end of time and you need those people. Like if everybody was squirrel brained entrepreneurs or that sort of thing, like you cannot run a firm that way. Early in my career I worked with a guy who was a technician doing, doing write up. But he was so entrepreneurially minded, he was always frustrated with how this, how the small firm owner in that case would manage clients and all these different things. And you could just see it was always just a matter of Time for that guy went and did his own thing. Eventually he left and he runs his own firm now. But when you look at the folks that you have on your team, oftentimes folks will slot fairly nicely into one of those three categories. But then even as you're having conversations about what's next for them and what they'd like to do more of, oftentimes that develops from one thing to another. And as much as the E. Myth book is like kind of long in the teeth now and some of that stuff doesn't quite hold up, this really simplified like archetypes of these three different types of people, well, it's not going to be perfect. It is a really helpful construct to think through. Where am I at right now and how do I then build around myself knowing where I'm at right now, what the business is going to need? I don't think there's a huge need for entrepreneurship in running small accounting firms. The reality is like most firms are not doing like wildly innovative things. The biggest, the biggest things firms get wrong, I think is probably having a whole bunch of technicians and struggling to find folks who can do that, that manager role. Well now in a perfect world, you would have those managers that come from technical backgrounds and have a deep understanding of the work. But there's a lot of examples in other domains where that's not the case, where the managers are not also the technical people or they don't have that technical background. You will see out there in, you know, different types of, of advice for firm owners. Advice that's very clearly coming through the lens of a person with a particular mindset and thought leader type folks are usually entrepreneurial and they, they almost kind of look down their noses at folks who are not also entrepreneurs. If you want to be, if you want to run a firm with that mindset, great, like be the entrepreneur delegate and all that. That was me. I didn't start there, but I got there. But you'll also see thought leadership from folks who are technicians. So like if you go to tax, continuing education is very, very technical. You got a whole bunch of technicians in the room. Many of those folks with decades of experience. The advice that person needs to how to. For how do I build a firm around myself if I just want to be a technician? It's very different advice. And that's okay. The like, the biggest issue is just when you are not aware of, okay, this is what's giving me energy right now. This is where I'm at. Knowing this, how do that I then build around myself, the team that supports where I'm at. Like, that's the bigger thing. It's just an awareness of where you're at and what you need and where your team members are at. If you are, you know, kicking off a new initiative or if you're thinking about what that org chart looks like and ensure that you've got all the people in the right seats. I don't think we need to try to get to, like, an absolute right answer, or you need to be this or this or that way. We just need to be very aware of what's the right answer for that season of life and that season of building a business. And that was part of building a business that I really enjoyed. Kind of like the puzzle pieces, how you put that stuff all together, and also the development of people, like, that's really fulfilling when you see folks transform from one thing to another, and you can sort of shuffle the makeup of your firm to accommodate that, to support them and grow to that next thing. A lot of satisfaction to be had in that as well. If you've never read E. Myth, recommend checking it out. Still, even though it is a little dated, it's pretty quick read or audiobook. Listen, that's all we got for today. Don't let people go out and tell you you gotta be an entrepreneur. You don't have to be. Can be if you want to. I like being an entrepreneur, but we gotta have technicians, too. Pie makers are gonna make pies.