277 This Accounting Student Just Took Over Their Mom’s Firm

I mean, it was right in the title. This accounting student, they're still in university, just took over their mom's accounting firm and is running it themselves. What were you doing in college? I mean, we got, we got people listening to this pod that are long past their college years that are still blocked on. Could I ever actually run a firm who. This is an amazing story. Talk about multitasking, going through school and running their mom's firm. So some very like real life things that they're stuck on too, and trying to balance with while building a business that they think that they want to run. Got a whole bunch of details, even financial statements from this firm. I'll share those with you and then we'll share some wisdom with them. And I think when you hear this, there's a couple things that you may even pull out for yourself here. So come on in, let's roast a firm. So these details were submitted to me anonymously by this accountant. Link down in the show notes. You can share info with me anonymously as well. And you just might be roasted in a future podcast on social media on the YouTube channel. Super fun to put our advisor hats on and look at other people's firms and be like, you should totally do that because we don't have all the blockers of what we see in our own firms and things maybe we should do that we're unwilling to do. But putting that coaching hat on, I actually think it makes us a little better at running our own firms. Okay, the story here, this is a quote, legacy family firm run by an accounting student. This firm does 70% write up work, including in house payroll and 30% tax work. When they say write up work, I think they mean bookkeeping. They say they're working to venture into more advisory services. Boy, I can tell you what, it took me about a decade in the profession to be like, how am I ever going to advise anybody when all these clients are 20 or 30 years my senior? I digress. Tax work is comprised of both individual and corporate returns. About a 50, 50 split. This person's role, they are the owner, they say. But Minion feels more apt based on client demand. Their first year in business took over the mother, their mother's legacy firm that they worked at for three years with an established client list they're currently growing, projected to do just over 80k this year in revenue. Boy, $80,000 in college money is like a million dollars. You know how many late night trips to Denny's I would cover? Locales, suburbs of a small city in The Midwest Currently operating in a hybrid model but would like to be fully remote. General client vibes are anti remote services. Their clients are all local small business owners. Less than 2 million in revenue. Most less than a half million in revenue. No specialization. Currently a generalist only serving local clients. They have one employee that works a day a week. They're bilingual. They also work as an office assistant, provide assistance with native Spanish speaking clients and do some general office tasks. Now check this out. They share an office with an 80 year old CPA who has his own practice and outsources his write up and tax work to this person's firm. So in an office they get this office space for free with this other 80 year old CPA. And the CPA outsources their work to this person's firm. So they have their own clients but they also do work for this other firm. The annual cadence More or less what you would expect from a tax firm. January, they're doing manual annual payroll wrecks. Disgusting. Q4 reporting, filing and processing W2s and 1099s and the same type of subcontract work for this other cpa. Very little tax planning. Okay, the big thing there was manual. Ouch. Woo. Manual. That must be an awful January if you're doing all that stuff manually. February through March they're going ham on tax prep for their firm as well as 400 plus returns for this other firm. Yuck. April, all the way through the 15th they're doing subcontract tax work. The other firm refuses to file extensions for individuals until the 14th. Oh, and they're also doing first quarter manual payroll reporting, filing and processing. So many of you skinny jeans wearing none. New age accountants, they didn't grow up on the mean streets like me and this person did. Inheriting all this legacy work. You're just choking on your avocado toast right now. This is. I mean this is the way most of the accounting profession in the US still is small for small firms. I truly believe that. May through June doing catch up on write up. Does write up mean bookkeeping? Am I missing something there? I've heard write up used for tax work. Also I've heard write up used for just about anything. The doing doing of the work, like staff level stuff. Then the pattern continues for the rest of the year with each quarter and month respectively pricing lowest monthly write up with accounting, bookkeeping and payroll is. Drumroll please. $150. That is for bookkeeping, accounting and payroll. Let's just say bookkeeping and payroll. 150 bucks a month bless highest ooh is 350. Watch out. With some variation in between depending on payroll frequency and and monthly sales tax filings. Oh, gross sales tax too. Dude, I'm from Oregon. What a gift it is to not have sales tax in Oregon. Blech. All right, so clients are coming in between 150 and 350 bucks a month. Very small town local clients. You're not going to charge massive rates in a market like that in general, but even that, that's pretty small for a small market. Billing all clients are now on quote budget billing with a set monthly fee based on scope of services included in engagements. Anything outside of scope is billed at 75 bucks an hour and 150 bucks an hour for last minute work. All invoiced through their accounting software, sales and marketing. Currently no paid ads, mostly word of mouth and found on Google. Most call to inquire about services A virtual or in person consultation scheduled if the client likes to propose services and cost engagement is drafted and signed same day. Client is billed on the first of each month and have started requiring autopay technology primarily using QuickBooks Desktop. Parentheses I know Jason. I'm working on it. Close parenthesis hey, you just. You changed in the world one changing the world one QBO subscription at a time with a handful of clients using qbo. Oh, see, there you go. Just migrated my payroll clients to gusto. Get out. Get out of those manual filings, bro. Or brah. Can't get legacy CPA away from ATX for tax. OneHub for client portal slash document management. I don't even know what one Hub is. Google Sheets. Google Sheets for practice management. Okay. Oof Workflow. Monthly and quarterly accounting docs are either uploaded to OneHub or delivered to the office or pulled from client logins. Work is completed by the 20th monthly reviews scheduled post. 20th monthly reviews like with the client? Like get on a call and review legacy CPAs. This is the other firm they're doing work for tax Clients are sent postcards Parentheses I know Jason. I don't have anything against postcards. Am I anti postcard and I email organizers to my clients in January. Legacy CPA then calls everyone who has outstanding March 1st and I push messages to my clients via client portal. I mean that's pretty progressive. They're pushing messages via the portal. Legacy CPA prints and either mails or provides in person paper copies of return. I provide paper copies of return in person or upload client portal. Today's episode it is sponsored in part by by liveflow liveflow is an extension for your spreadsheet app, Excel, Google Sheets, whatever you use that lets you pull live QuickBooks data from client files into your spreadsheet. So your spreadsheet had a baby with QuickBooks. Now how can you use that? How about to get the client to quit sniffing around in QuickBooks where they don't belong? Okay, stop touching stuff. The moment they start fumbling around in there, you get concerned they're gonna break something. But also they're absolutely hopeless when it comes to getting to the information that they actually need. Which is why using Live Flow to build, like customer reporting, the stuff that your clients actually want to see in a concise view, super, super valuable. And as I've shared before, can actually take the pressure off of the month end close as well. Because when I send those financials to my client, they're like, this is cool. I guess it means the work's done, but I've got no idea how to use this information. So instead I'm going to give them like a real time set of reports that live inside of this spreadsheet. I give them access to the spreadsheet. I'm keeping them out of QuickBooks. They're not asking about the monthly financials. Everybody wins, right? Sounds like a home run to me. Learn more about LifeLoad and link in the show notes Today's episode sponsored in part by the folks at Team up who help you find talented accountants in the Philippines. Today we're learning more. What's an employer of record? Do I have to hire people in the Philippines through an employer of record? Basically you got two options. You can hire them as a contractor, just pay them directly on contract or. Or hire them as an employee via an employer of record. Now, employer of records, usually you're running like 4 to 500 bucks per month per employee. If you do want to hire that individual as an employee. Got some other stuff there around, like benefit requirements from the Philippines, but the employer record, they'll help you handle most of that. The majority of firms I talk to who hire folks directly hire them on contract. But it could make sense to go either way. We mentioned BPOs. Talked about BPOs recently. A BPO is like a company that not only employs them, serves as the employer of record, but is usually giving those people a place to work, like managing it, managing more of the infrastructure. An employer of record, all they do is the person that works for you is an employee of the employer of record and you pay the employer of record for them to work for you. So it's a bit more direct than a bpo, but maybe not quite as direct as bringing them on board as contractors. So there you go. Good stuff to know that you're probably too embarrassed to ask. Actually wasn't super clear on that until I went through this ad read right now. And if you want somebody to help you through the process that's done this with a bunch of other firms, team up. We'll go out and and find you some awesome hires. You pay a one time recruiting fee, but because they're neither a BPO or an employer of record, you don't pay them anything. Ongoing after that. Learn more about Team Up. Check out a link in the show Notes Pains Legacy CPA needs to retire but won't doesn't do any entry work of any kind, but gives me free office space but won't let me change anything except my office room. Well, at least you get to pick your furniture and your plants and stuff, right? Can't have name on exterior door. Oops. Have offered to buy practice but he won't sell. Have offered to pay rent but he won't charge. Going fully remote and severing ties would mean leaving him in the lurch unless he goes back to his six column pads. But also doesn't know does he know he doesn't know how to use stack software. To all of you right now, saying who? What do you why are you concerned about leaving this guy in a lurch? Shame on you. Okay, shame on you for not being as good as this person. But also I agree clients are mostly unresponsive to document requests and unwilling to provide information timely. Handful complain about second half price increases. I know that means very time demanding for general questions and assistance, mostly revolving around payroll. Manual payroll reporting will be alleviated with new gusto migration, manually entering bank transactions for reconciliations and QBD is for the birds. Oh, managing outstanding client tasks on spreadsheet for controls is difficult. Yeah cause it's a spreadsheet enjoyment okay man, this is a college student. I love this. This is so great enjoyment. Enjoy the day to day management researching new ways to automate and streamline services to to slow roll to clients, researching my ideal niche client base and marketing to said base. Don't mind the accounting and working for myself. I mean as should be the first thing we say on all these things cause it's easy to jump to the mean stuff and all the things you're doing wrong and all that. What was I doing in college? I was super proud of myself for standing up a counter strike Server when I was that my whole freshman dorm floor could play on. And honestly that was freshman year in the first couple few months. I don't know that I had a bigger achievement in college than that. I survived two tax seasons working for a firm. The office with the bathroom right next to the client waiting area, that one. But I was not doing anything like this in college. Good for them. Before I taint your perspective, why don't you in the comments just give them one piece of advice. What's one thing? Because there's all these maxims and things that we know are the right thing to do, but at the end of the day, when somebody's at a all that matters is what's then the most important thing to get them to be. And that's kind of what I try to focus on here is like, if you could do one thing, what would it be? Because every firm's in different places, what's the next best thing that they could do? So before I share my thoughts, maybe just pop one thing in the comments. Obviously there's a million things you could tell them, but you got to start somewhere. For me, I'm going to share three because this is my podcast and I'm the captain now. First, if you do one systems thing, one automation thing, pick up a practice management system. They are not expensive. They will beat the footer off your stanky old Google sheet that you're using for managing projects. Practice management system is one of those things where you don't understand the value of it until you use it. There's a huge spectrum and cost. You could start simple. It'll also handle the client portal side of what you're doing. Although that is admittedly maybe a blocker. If you already have people trained on one hub to get people to change to a different portal is a real headache. But again, you don't even necessarily have to use the portal in this new system. In fact, I probably wouldn't from day one so that you could first get all your work in there and decide that you actually love it. And if you're like, okay, I think I'm gonna use this for the next decade, then maybe start the hard work of migrating people over. But a practice management system will save you so much time and headache. It'll help you get a better understanding of your capacity of how much work you do throughout the year. So as you're thinking about other things, like maybe moving away from this other kind of contract relationship or attracting a new, more specific type of client, that visibility you have into Your work in a much more clear format will help you, like, make more informed decisions in that regard. And then also just from a workflow standpoint, the greatest upside of a practice management system is staging requests and recurring requests. So you're doing monthly accounting for somebody. What are the three things you need from that client every single month? Stage requests in the PM to automatically go out on the first of every single month. You're getting into tax season. You do a huge volume in tax season right now. So making this business manageable is pretty much all about how can I take work out of the busiest season, doesn't matter how many hours it takes me in the slower seasons. Your bottleneck is busy season. Setting up requests before tax season that are explicit lists of all of the things that you need from a tax client. Takes a ton of work out of your busy season. Set that up in the fall, set that up in the winter. Then when you get into busy season, February 1st, whatever it is, you cut those requests loose and they're automatically following up with your clients, saving you the work of having to track them down. You don't have to go whole hog on this. You can test it. You can start with 10 clients. Start with 100 clients. Start simple. Start with the ones that will actually engage with it and respond to to it. They said they have a lot of problems with clients kind of ghosting them and not being responsive enough. Build around the people who are responsive. One thing we learned a month or two back when we did that week on scheduled work is when you make changes to your firm that make things more organized and more clear and oftentimes mean enforcing some deadlines. The people who are capable of following deadlines actually appreciate that. They're like, oh, great order. I like order. I would love to know when you're gonna do my stuff. And they'll actually respond positively to that. The reason we don't make those changes is we are afraid of all the people who will complain who are not the deadline followers, who are not the great clients. But they're the ones taking up all of our headspace, making the changes that we know that we need to make for the good clients. So anytime you're considering a change like this, don't allow too much headspace to the folks who are not the great clients. If this change is going to make the good ones happy, it's worth considering when you feel that resistance to. I get the idea of that. I like the idea of it. But the imagine. But the notion of pushing it through my clients that Feels hard in your head, you're thinking of a client or you're thinking of a group of clients. What clients are those? They may be paying you money right now, but that doesn't mean that they are your A clients. If they're not, you kind of gotta like flush that out of your head and think, what are the A clients gonna say? Because what you want is to three years down the road only have your A and B clients, but then to have found even better clients or more A and B clients. And so if you're optimizing for the better version of your firm that has three years down the road, don't make the decisions today that are best for the people who will no longer even be with you. So that's my first like systems tech thing. If you do anything, pick up a practice management system. Second, something's got to give with the this whole other firm that you're doing contract work for. It doesn't sound like maybe you have much leverage in this relationship. Like, I don't know, maybe they think that you need them more than they need you because you come and you make these asks and they're just like, no. So at a certain point there's going to be, there's going to be a fork in the road. And maybe that's not today, maybe that's a few years down the road. But, but start thinking about what a tactful way of navigating that could look like. If people have ideas here, it'd be great to see em in the comments or if you had to navigate something similar. Where my mind goes to first is at a certain point you're gonna have to put a timeline on this relationship and define the boundaries of kind of what you're willing to do, what you're not willing to do, and in several ways. One, in the clients that you're still willing to serve or that you're willing to take on yourself. So some version of this, there has to be some sort of transaction here at some point if you're going to keep serving these clients. Otherwise you're going to go out and get your own clients that are better and will pay you more. And you don't have this other guy skimming money off the top, right? So the only scenario where you're still doing work for this person long term is if you take on some of their clients, but you do not want all of their clients. This is a great opportunity to cherry pick the ones that you actually want, the ones that are responsive, the ones that may align Better with the type of work that you want to do going forward. And so you have to, you have to be willing to, to say, of all of your clients, here are the ones that I want. And I don't know, maybe they'll, maybe, maybe he'll only sell them all of them and sell you all of them. And at that point, then you just have to be happy with paying a price only for, you know, the 50% that you want or something like that. And then you can resell the rest or let them go, something like that. But then the other maybe slightly stickier issue is you have to put a, a time horizon on when this has to happen. So you have to come in and say something like, I will start paying you now. But you have to be completely out of the picture and say 24 months. It can't be ambiguous. You can't cut a check without a really hard drop dead date. I don't want to be, I don't want to be crass here, but this person is, is of the age where something could literally happen any day. This could be, you know, depending on, on who they could be leaving behind, part of this deal could be, hey, if you drop dead tomorrow, like, here is the, the price to take that stuff over. And that goes to your state, that goes to your spouse, whatever, whatever there is is left there. But I would come into something like this saying, I will no longer serve your clients 24 months from now unless you're completely out of the picture. It may not feel this way because they're 80 years old and you're in college, but you have all of the power here. They're completely hosed with that. They can't make any money if you leave. I could probably go out and find somebody else, but that's also a lot of work that they may not be willing to do. And if they close shop and if they just let all those clients go, where are they going to go? They're going to circle right back to you and you're not going to pay a nickel for them. Especially in a small market like this where there's not going to be a ton of providers. Now, in my opinion, the fair thing to do here, if it's me, I would still pay for it. There's a version of this where you could literally run them out of business and still get all the clients, but that's probably not the right thing to do. But at a certain point, you got to draw a line there. If you do still want to support any of these clients, uh, you may start growing fast enough or may get plugged into a niche where you realize, like, no, I'm actually totally fine to build my own stuff. I can charge 2x the rates. This person's not taking their 40% off the top. And so I'm not even, I'm not even going to touch this market. That is kind of the beauty of, of leaning more into a distributed team finding clients online. Particularly if you're in a small market, you can run a firm on, on kind of small market cost structure while getting access to, to larger market prices. This episode of the podcast is sponsored in part by Maker's Hub. Hey, the age of AI, just like the cloud accounting transition is going to create lean in arbitrage opportunities. Arbitrage, it's the word of the day. Opportunities where tech gives us a wildly better way to do something overnight. We stumble into these things still with our clients that have awful back office procedures and we just get them on a better tech stack and it like cuts the necessary headcount to do all that work in half. That's why I loved doing our managed accounting service where we just come in, find super unoptimized back offices and be like, hey, we'll come in and do this for more or less what it was costing them to hire a team to do it and then we just automate the heck out of it. As we're in this very transitional period with AI, I think the first example of a AI driven arbitrage opportunity is frankly going to be accounts payable makers. Hub is one of the providers now using AI vision models to take extraction, like automated extraction to a wildly different level than has ever been possible before. You know that old chestnut, the whole notion that your tool is going to do bill extraction so well that it'll completely eliminate make annual entry, which people have been saying for over 10 years. But I don't know if you're like me, you do an AP for a client, all it takes is an extra digit somewhere and you just, you just burned a whole lot of the client's cash and that's gonna be an uncomfortable phone call. So that's a little easier said than done to like blindly trust invoice extraction when it comes to bill pay. But we've done some, some demo days on my channel now with Maker's Hub showing off like just the level of detail that it will pull off of invoices, especially complex accounts payable use cases where you're doing like inventory and receiving and matching numbers of widgets to products in your system and all that. I had clients that had multiple staff doing like detailed receiving and all that matching with purchase orders. An insane amount of like manual work in these systems. That maker's hub is now like automating to a level that it's never been automated before. If you're looking for tech enabled opportunities where you can, where you can use AI to deliver super like high leverage, more profitable work to your bookkeeping clients, Maker Sub is a really interesting example to look at. I'm actually excited for, for more of this stuff. I feel like it's, it's kind of like the cloud accounting transition, but with even like even more promise, potentially even higher leverage. You want to explore that for ap, check out Makersub. Put a link in the show notes. This episode is sponsor in part by Takeru. Gang, we live in confusing times. We've got artificial intelligence, all sorts of technological marvels happening all around us that we're very excited about. But how do we weighed into this stuff responsibly? How do I know that I'm not giving up my lucky charms to just whatever new hot AI thing just cropped up? Gang, you need a team of smart, attractive, well educated IT professionals that are on your side because you got better things to do. Then fix Tina's laptop when it doesn't boot up on Thursday. You're better than that. Okay. Tech Guru's got everything you need to help your firm navigate what is, what is a tricky time. You know, boy, managing tech with the like even in an office. But across a remote team too. Not fun. It's a lot of work. Tech guru, they just work with accounting firms so they know all the stinky old tools you got to use. If you're a tax firm, they know the weird cycles of your business and they're learning from every other firm that they work with. And you know, who's gonna, who's gonna benefit from that? You? You? Okay, so go swipe the link in the show notes, schedule a call with them. You got nothing to lose. K, that's Tech Guru. Third thing I had here. And there's so many small things that as you're reading it, you're like, oh gosh, don't do that, don't do that. And you figure all those things out over time. And even in my firm when I bought it, and it was a very legacy firm when I bought it, I mean there are a million things I would look at and I'd be like, that sucks, that sucks, that sucks, that sucks. But at the end of the Day, you just got to prioritize. And so like it's not going to be perfect. If the notion of going out and starting your own thing from scratch sounds attractive right now, you know what those people don't have that you have today? Cash flow. You're paying the bills. You're running an $80,000 business while you're still in college. If you go out and you start your own thing from scratch and you can kind of throw out the playbook and set it up the way that you want to set it up, that may be great, but you're not making any money in the beginning. So there are for sure pros and cons to what you're doing, but the big pro is it's your cash flow and that's great. And you also have like total agency over what you're doing. There's not very many people in your role, your stage of life that can say this. You have like pulled forward that entrepreneurial journey in a way that will pay. Like compounding dividends sooner than other people that may not start that journey until, you know, like I, I became a business owner when I think I was 30 or something like that. You got more time on me. I don't know if this person is, is like a 19 year old accounting student or if they're, they're more mid career, but either way you're getting killer entrepreneurial experiences. Really cool. Third thing I wanted to share is just start building awareness of who on your client list right now. You are great for flexibility, profitability, all that stuff. It all comes back to pricing. It's always just frankly as simple as that. So if you look at your entire client list right now, who are the people that absolutely adore you and absolutely love what you do, who never complain about the bill and are super, super appreciative? Not everyone on our client list feels the pains we solve to the same degree. That's why the people at the bottom of your client list, where you discount the work, they still complain about price. Like in most cases it's not because they're bad people, it's just because they don't feel the pains you solve very acutely. So if you look at your client list today, who are the people that most acutely feel the pains you solve? And they will be the ones that are super appreciative, happily pay every single bill, no questions asked, absent some other force or motivation or inspiration. That can be a good rabbit to chase, dragon to chase. That can be a good avenue to explore. How do I find 10 more of that type of person. And what about what I do for them is so valuable? Is it because we do this specific payroll thing for contractors? Is it, Is it something very specific? Because if one person has that problem that leads to them appreciating you, a bunch a whole ton more people do. And rather than just sitting there and saying, I do accounting and tax in this market and I just wait for people to call me, if you can find more people that have that pain by going to that construction conference that, you know, a whole bunch of small business owners go to and doing a little talk or having a booth or something like that, like we said to, to in three years have a whole bunch of A's and B's and maybe S tiers and even better clients that, that you couldn't imagine having right now while having dropped the season Ds. That's what we're, what we're trying to get to. And if there's a big mistake that I made in my firm, it was allowing way too much headspace for the C and D clients that we weren't a great fit for because they were the ones complaining and the ones bringing up issues. And as kind of the, the person that the buck stopped with in my firm, those were the conversations that I was having. And just like that is how they work, they will dwell on the people that are unhappy, the stinkers, unfortunately. And it took too much of my attention away from the great clients that I wanted to find more of. So as you're in this stage of how do I start bringing in my own type of clients that I vibe with, that I really enjoy working with. Consider who's super, super happy right now, why they're happy. If that's a person you're gonna like, be really happy serving more of and then just start making very basic investments in that space, learning more about them, what they do, who their friends are selectively asking for referrals. We did an episode on the podcast about that a while back. It can be a really uncomfortable thing if done wrong. But if you don't proactively ask clients for referrals, you get referrals from kind of anyone and everyone. And that generally like pulls the client base down a little bit. Cause you'll get more cheap referrals than you will get great referrals on average. Because there are, are more cheap folks than there are premium businesses. But you gotta start like walking that path towards building your own client base and something that you'll be excited about rather than just stuff you inherit from other people. And the great news is when you're serving those more specific pains, that work pays better too. And honestly, right now where you're at, this is, this is probably the worst that it will ever be. That's kind of what you got to look forward to, which is pretty darn cool. We can get fixated on certain goals and destinations, milestones, all that stuff. The biggest thing is how do you make the journey something that's enjoyable, so something that you will be excited to turn up and do every single day. If you haven't yet, see if you can find a peer group. I don't know that I know many like super, super young people that are running their own firm. But if you're not yet, start talking about what you're doing on social media a little more. Find a few other folks like yourselves that are doing this. That for me was super energizing. When I could find other folks like myself doing this stuff that was really fun. And then I go to conferences and we'd hang out, we go on trips together. Like that was just super, super invigorating. But man, good for you. This is super cool. Kind of puts in perspective our self limiting beliefs about what we're capable of. If you think about your frame of mind when you were in college also, I didn't, I didn't have parents that were self employed and I'm a little bit envious of those, those who did have like that. Nobody in my family still is self employed and so the whole notion of doing your own thing is literally just unthinkable. You don't realize how different your brain is wired when you don't work for somebody else and you're exposed to the wide world of like, oh, I can just go do anything, I can make something, I don't have to work for somebody else. Man, I would have killed to have that context in my early 20s or when I was in college. That's really cool. Thanks for, for the submission. You're helping people just by sharing your journey. If you want to participate in this as well, like I said, there's a link down in the show notes for you to anonymously submit info to me. You got any wisdom to share, drop it in the comments. I'll see you in the next one. Sa.