348 Scaling An Accounting Firm to $1M in 2025

Today we're talking about those firms that have. That have outgrown the itty bitty team. They decided they don't want to be solo, but they still got one kind of big boss, one person running the show. Usually these firms range from about a quarter million to a million in revenue a year. You ultimately get to sort of a ceiling around a million in revenue. Lots of ways you can try to weasel your way around that. But today we're talking about the pains and the blockers for firms at this stage, whether you're trying to refine, run, like the most efficient firm you can within that framework of kind of being the one boss, the one accountant to rule them all, or whether you ultimately want to grow past this. Today we're digging into the plateaus and what keeps these firms from being as profitable as they can be. Let's do it. Come on in. Let's run a better firm. Hey, if you're new here, welcome to the Jason on Firms podcast. We talk about running more profitable, calm accounting firms. Oh, boy, what have I done with my life? Okay, so I started my career in a firm just like this, spent the first three or four years in a firm that did about 800 a year and had, like, bounced back and forth between that at 3 or 400 grand a year and about a million. And so I'm intimately familiar with this. Also, the traditional partnership model is kind of just a bunch of this. This sort of single partner fiefdom that's subject to the limitations of that owner. And everybody kind of works for that boss. Everybody reports directly to that boss. There isn't really any, like, middle managers yet. And the boss, the boss. Oh, does the boss have to do all the things? So the pains that you get stuck with at this stage, how am I going to improve the firm if I'm also doing the work? I'm doing the client work. I'm managing the relationships. What am I supposed to manage? The people. And actually think about the business itself. Another big issue, overestimating capacity. That old chestnut always being like, boy, how many years in a row have we said it would go better next year? Let's not dwell on that. That's too sad. Struggling to follow through on leads. Oftentimes. This is a problem here. You got, like, some warm folks that may want to come work for your firm, but you're like, bro, I can't possibly do any more than I'm doing right now, so I'm going to stay on the same hamster wheel, neglecting the fact that, oh, those May actually be better clients than the clients I have today, but we don't really have time to like dig into that. So you kind of just hold station and keep running into the same wall over and over again. This has been too personal so far. Finding the right people to come and work for you. You just can't get good help anymore. You know that old adage, please don't be the, please don't be the guy that says that. But being perpetually hiring blocked. If you run a tax firm, you know that perpetual open position you've had for a senior tax accountant? That's what I'm talking about. Being able to find uninterrupted blocks of time to actually get stuff done, delegating work out to your team, but then the client keeps coming back to you. That old chestnut. And they don't like being delegated to that person to begin with. Response times getting longer, delivery times getting longer. You get into renewal season, this one may, may hit a little too close to home. You get into renewal season and realize, oh, oh, this client I'm about to renew. We actually didn't do a whole, whole bunch of the stuff that we said we would do last year in the renewal. So what do I do? I probably can't increase the price. I'm probably just going to remind them of all the stuff we didn't just do. That is a version of being over capacity. And then last, ultimately not being able to like work on the business and work on, I guess, I guess the people within the business to build a culture that you're proud of, Pour yourself into the people that come to work for you. This can be a really hard thing to do when you're over capacity. And oftentimes the people who work for you pay the price for you. Being client centric. Try this one on for size. Your staff pay the price for you being the hero for your client. You want to know a worse one? Your family, the people in your personal life pay the price for you putting on the cape for the people at work. Priorities are totally upside down, right? I'm allowed to say that because I'm really good at having that problem. Now there are tricks for every single one of these problems, like little, little quick hacks, do this and that and it'll make it marginally better. But if you hear one thing from this, whether, whether you are watching me or listening to this, however you are consuming this thing that I'm making right now, if you take one thing away from this, it is that the only solution to Every single one of these problems. The only global solution where if you find fix this, it solves everything. Better clients, you don't get stuck on, well, I'm at capacity. There is no such thing. There isn't. The moment you say you're at capacity and you stop taking in new clients, your firm stagnates. Because every firm, whether you just started a side hustle out of your mom's kitchen table or whether you're big four, you all need better clients. The better client values you more, feels more acutely. The pains that you solve will pay you more to do the same work. Not the same as it being a bigger client who will pay you more to do more work. That's not always a good trade off. It is a client who feels the pains more acutely. Thusly, they will give you more money for doing the same work. And that is, it is the pill that is hardest to swallow for most of us. So my model for how I think about firms is I like to dig into to three things that a firm has. The firm's tools, the firm's systems, and the firm's offers. The things that they hold out and say, this is what I will do for you, prospective client. We're going to dig into all three of these things and we're going to do it in the order that feels good. The stuff we like talking and thinking about and end with the thing that we run away from but is probably not, probably is the most important. So let's start with the most fun thing, tools. Because it's way more fun to talk about tools and new tech and that new thing than it is firing a client that's been with you for 15 years. Or it may be being your fault that you're over capacity, because when it comes to tools, I mean, anything is possible. Maybe we can. Maybe we can workflow our way out of this capacity issue. Sidebar A surefire way to make those systems look really, really good. Being under capacity, I haven't worked for a huge number of firms, but there's a lot of firms out there who are just fundamentally over capacity. And at the end of the day, like who, who's. Who's to blame for that? It's the person bringing in the clients and the person in charge of letting clients go. You end up under capacity. And then that's really common to blame the workflows when it's like, like what are we doing taking incapacity in excess of the bandwidth that we have right now to begin with. And sometimes some of that is unknowable and things come up that'll put you in a bind. And that for sure happens, especially like when there's tax stuff going on. And Covid obviously was just a massive mess. But this is part of the appeal of tools, is we can look at the promise of tools to say, boy, a cool new, fully automated this or that makes me feel like we're doing really cool, novel things and beats the heck out of having to go have uncomfortable conversations with clients about repricing their engagement or having to let them go or something like that. Now, at this stage in your firm, it is extremely important. Like you've got your core tools at this stage, your tax software, your accounting software, whatever, you kind of got your core tools and you can for sure make incremental improvements by pulling in, you know, something for like rolling a bill, pay service or receipt processing. Like there's for sure incremental improvements that can be made. But the biggest thing you need at a firm in this stage is a rock solid practice management system that is doing the air traffic controlling of all of the projects going through the office, the digital lead sheet, as it were. Because when it was just you, like another pain you're feeling at this stage was it's not going to feel like very long ago where you just kind of knew where everything was and you could just look and you could say either physically, oh, it's the files right here, or you had a spreadsheet, or you just there was a small enough volume of things going on that you just always knew what was happening. And going past that is scary. But this is honestly like one of the biggest things software can do really well for you. The right practice management system answers the question of where it's at, ensures that your team is working on the right things, and maybe most importantly, enforces systems. When you craft a system, when you communicate to a client, here's the process for how we're going to do xyz prepare a tax return, do a tax projection, do a month end close, do a tech stack advisory call. When your firm builds the policy for how you do these things and you communicate those expectations to clients. A fantastic implementation of tech is the one that enforces those expectations, that plugs people on your team into all of the jobs that need to be done to deliver on what you've promised. And that is like the most powerful use of tech in what we do. I know that the sexy tech is the stuff that's like, oh, we used to do this manually and now we do this in a more automated way. And every day, like we're, we're kind of tiptoeing into new applications of that, and that's great. But the bigger picture thing that we need to be more plugged into is does everybody know what they're supposed to be working on? Are we prioritizing things the correct way? Are we wasting a ton of time having to figure out what to work on? That's a massive issue these days. If you have all of these different channels where work is being managed, if you have an email inbox that's full of things that need to be done, if you have a team chat like Microsoft Teams or Slack or Discord, where there's like messages that require things to be done, if you've got notes jotted down of things you need to do, if you've got the actual system where those TO dos are supposed to live telling you what to do, it's a whole bunch of different channels, all with their own stack of TO dos that require prioritization. And to go through any one of those channels and figure out, okay, here's what to do first, second, third, that's work. But then to pull all those together and unify all of those different like, sources of priorities from like, oh, somebody just called me, texted me all these different things, just the work of figuring out what to work on is a massive project. The solution has to be your practice management system. Everything has to be funneled back there. You have to really aggressively reduce channels because if you're not intentional about this, you will always have more channels and you'll have people reaching out to you different ways and you'll have team members tracking things in inconsistent ways because it's easier for them to do it over here. But unless you make a policy, then the rest of your team is going to do it over there. And so all that information is increasingly fragmented across different systems. And then the decision of what do I even work on next to? Just becomes that much more painful. There's a huge number of practice management systems, ridiculous number. I've got some other tools to give you, like extremely up to date recommendations of specifically for your firm. What practice management system should I be using? Take this very seriously. There's still a huge percentage, the majority of small firms are still on legacy systems because they haven't tasted the rainbow and seen how good modern great systems are. So take this very seriously. It is no small task changing practice management systems, but stop waiting for the legacy system to become something that's better. It won't make the switch to a platform that is great today because that will continue to get better. And I'll let you in on a secret. The ones who are great today, they're the ones who are still innovating at the greatest rate. It's not like they've stopped and the platform you're on is now going to catch up with them. That's not how this works. Like they're ahead of the game and we'll continue getting ahead of the game. So take this, take this super seriously. Practice management system, very important. Okay? That's all we're going to dig into on tools on this one because like I said, it's the thing I think we like to talk about the most because it's a fun distraction and shiny object and this and that. But it's probably the last thing of these three that we should be digging into. So up next, systems, you know, the things that are supposed to create like reproducible outcomes for your clients. Tell me if this one, if this one lands for you, you give a project to a member of the team to, you know, go get that thing done. Ultimately they come back and you're like, this, this stinks because it's not the way I would have done it. Or they come back and they find some completely off the wall way to screw it up that you never could have imagined. And maybe this person's a new hire and you're like, well, crap, I thought that they were better than this. When the real issue is these days small firms get the same work done in wildly different ways. So even if you go out and you hire somebody that's spent a decade at a small firm, the likelihood that they're going to come back and do that job just the way that you would have expected them to do is very low. And in this space, like, because much of the work that we do is pretty abstract, we are chronically over reliant on expertise to get something done. So when we have, when we encounter a situation like that where they come back and they don't do the work the way you think they will the way you want them to, oftentimes our first reaction is we gotta go get a higher level person. And this is how you end up being expertise blocked. You can never find the unicorn that can get this work done the way that we need it done. You just can't find these people anymore. And there's absolutely cases where you have to have those, those senior folks, they are, they are very important. But every single thing in your firm the degree to which it can be standardized is, is a, a big spectrum. And on a whole I think we are two on the expertise reliant end of the spectrum rather than the pushing the boundaries of what can be standardized end of the spectrum. I'll give you a very practical example. If you run a tax firm, you probably work with a bunch of S Corps. Every year you got to revisit owner compensation. We have tools to do this in a standardized way. RC reports it does reasonable compensation studies. You plug in all the variables, it gives you the like the best, most defensible answer for reasonable compensation. Which is great. A lot better than like shooting from the hip or whatever like collection of random wisdom the partner has in their head from some 20 year old CPE. And the big value to me is it makes it turnkey. Like that is the big thing is that anybody in my firm now can do a reasonable comp study because we have a process and a tool to do it. And I can sell that to my clients for top dollar. It can be part of like the annual advisory package, but it can be systematized because we have a consistent approach for how we're going to do that for every single one of our clients. Now bunch of examples of this for bookkeeping as well. Like when the client asks what do you want me to do with my receipts? Do you have a, a crystal clear answer for them? By default, accounting firms, you, you wade into these engagements kind of one at a time. But then over time, each of these engagements also take on a life of their own. Every single entrepreneur is different. Businesses are generally going to have different needs. And before you know it, you look back and in five years like you're doing all these engagements in completely different ways. They're all totally one off things. And if you have tried to build SOP standard operating procedures so that one person can build those that documentation and then if they're out or something like that, another person can come in and do the work. If you've ever struggled to do this, the biggest problem with SOPs is that such a large volume of SOPs is required when all of the work that you do is unique. So if you have to go through every single client engagement from end to end, and this is a big issue for bookkeeping firms, if you have to go through every engagement, beginning to end, and build an SOP for the whole thing, forget about it. It's just not going to happen. Like it takes so much time and then it is so much work to update every single One of those SOPs, whenever something changes that you just will not create that volume of SOPs. If you have to do it for every single engagement and if what you're doing for each client is unique, this is what's required. Like, that's the only way to document it. But the value of systems and when you're getting to this stage of, of firm growth is where this becomes really like essential for the first time. When we're talking about systems, it is flipping on its head the natural order of things. That is engagements get more different over time. We have to begin enforcing systems so that the opposite happens, so that they get more similar over time. There is no, like snap a finger and fix this overnight situation. Every accounting firm that gets to this stage, you got to this stage by picking up a collection of a whole bunch of random work, different sort of opportunities because you just don't know what's going to land yet. Like you don't know what you're going to double down on. Maybe you have plans to specialize, maybe you already have specialized, but for almost everyone, that's going to be a meandering journey because you're not going to get it right on the first guest. So your engagements are going to be a, just like a big hot mess. This is the case to a degree for tax firms. It's even more the case for bookkeeping practices. So how do we begin to build a process here? Uh, I've put a bunch of content out on, on the concept of, of developing your service library. And this is not the services that we present to clients and say that we offer these services. This is your internal vernacular for the things that you will do for clients. We may present this like externally in a whole bunch of different contexts, more around like solving problems for clients and enabling profitability for the business and that sort of thing where, where it's, it's framed in the value a little more than I sell bookkeeping for X dollars an hour. Because if you do that, that's a losing battle. You're up against everybody else that sells bookkeeping. But inside, behind the scenes, we have to have a vernacular for the things that we do for clients. And so that could be what, what is bookkeeping? Service level one, Bookkeeping service level two, Service level three. Maybe that's the basic level is, you know, quarterly bookkeeping. Maybe the, the second level is monthly bookkeeping. Maybe the third level is monthly bookkeeping and a call after the delivery. You have to do this for everything you're doing for your clients from bookkeeping to Bill pay to payroll to tax prep, tax advisory, whatever that is. You look at all of the work that you're doing for clients right now, like a really valuable exercise is just throw a whole bunch of post it notes on the wall and say, well, for Steve we do this and for Tina we do that. And some of those things are the same and some of those things are different. But the goal is for it to never be worse than it is today, the day that you decide to start systematizing that, that stuff. And so we're looking for commonalities there. What are the common threads of what we do for people? What can we bucket into bookkeeping? One that says this covers like, you know, 80% of what we do for this type of person. Great. That's a starting point. And it's not going to be perfect, especially in the beginning. It's still going to feel messy. But the valuable thing about this is as soon as you have a system, as soon as you have a vernacular, the opposite of like, the natural order of things begins to happen. Those engagements start getting more similar over time just because that system exists, instead of the opposite getting more different. This is the only solution to this problem. And clients will still fight you and try to come up with like, different things that you can do for them. And you can still do that stuff. Like, there's still value in having flexibility, but like, let the last 5% be unique rather than all 100% be unique. Right? But this is like one of the most profound realizations I had in running my, my practice. We had a team of about 40 was as soon as we had an internal vernacular where everybody understood what it meant to do this for someone. And we knew what Receipt Management 2 was. When a client brought up an issue, in all likelihood, we had a service and a service level that would solve for that problem that they were bringing up. And you could be like, oh yeah, no problem, we can take care of that for you. And it's the 50th client that we just added to receipt management too. It's not, we're now going to do XYZ for this client and it's totally unique. It's one more client being done the same way that we do that bit for everybody else. This episode is sponsored in part by Live Flow. Hey, cool new thing. Live Flow just shipped in their platform dashboards. So Live Flow, if you remember, awesome way to connect your QuickBooks and your 0 ledgers with Excel or Google Sheets, you now have just a button in your Google Sheets or Excel that can connect you to like any accounting ledger you have access to. But they're building on that to now offer dashboards where via the same ledger connections you can now pull like widgets into a dashboard for your client. Because it's live flow, they've templatized a whole bunch of it so you can swipe KPIs, build out this super nice visual for your client, and all you gotta do to share it with them, just copy the little link, send it to them, bada bing, bada boom. Cool dashboard, bro. As I told you recently, Liflo just raised a big old series A. So they're putting all sorts of cool new investment into the product we're checking out. Link down in the show notes, bud. Okay. This episode is sponsored in part by Ignition. Come, come, come, come, come. Here's the thing. Here's the thing about client billing. You can't bill for the time you spend billing. You can't. You can't. It is pure waste. And we're bad at billing because it's, it's icky. You let things slide. You don't get paid. You waste time. Waste time chasing people for money. That's not what I did. I would just. I didn't want to waste time chasing them and so I would just. I just eat it. Don't do that. This is where Ignition comes in. The leading revenue generation platform for accounts and professional services. When I was running my firm, Ignition wiped out our ar, it's true. And significantly reduced the time spent billing clients. Saving our partners over a thousand hours in the first year because they didn't have to bill all that stuff manually. Man. With the condition. We won more business with impressive online proposals. No more hustle and hustle and PDFs and Word docs. We automatically pulled payment up front or at the end of a job when it was done. No more dialing for dollars. We transitioned our firm to more recurring revenue and better managed scope creep. No more leaving money on the table. Ignition is making thousands of firms more money and genuinely made us more profitable. Check out my over 7,000 of the smartest businesses run on ignition@ignitionapp.com I'll put a link in the show notes. This episode is sponsored in part by financial sense because WorkflowCon is back, baby. With the theme Freedom to scale. Unlock your firm's potential for operational freedom and profitable growth. It's happening October 22nd and 23rd. Virtual conference, totally free. Not just for Financial Sense users. This year, their help of firm owners remove themselves from the day to day routine so they can stop being the bottleneck in their firm. Systematize it so it can run without you, giving you the freedom to focus on scaling, standardize your processes to empower your employees and improve client satisfaction. Scale your firm, whatever that means for you. Hiring new staff, getting acquired by PE. Get that out of my ad. Read, work 10 hours a week and travel or hit a million in revenue. Bunch of smart people are going to be there. Speaking Don Brolin, Sabrina Paris, Kelly roars, Nancy McClellan, Erica Goode, Chadwick Davis, Blake Olives, Brandon Hall, Keela Hill Trawick, Kelly Parker. A lot of people we've had on this pod. Logan McGrathman, Ryan Lazanis and others. Fun virtual conference, really. I'll put a link to register down in the show notes. Check that one out. Now, balancing like the uniqueness with making it super turnkey, this is more a positioning decision for your firm of how white glove you're willing to be. My practice was very white glove, so this system required a lot of flexibility. And, and if that's a blocker for you, if you're thinking, well, we're like we're too premium for that to work for us, that's, that's totally a trap. There's all sorts of ways behind the scenes that you can standardize what you're already doing and still outwardly make this feel totally customized, totally premium and unique to the client. In fact, that's just the better way to do it, especially as productized solutions are coming up market with like more automated ways of doing things right. Like the solution for us isn't to look like them and it's to still feel personal and like we're building those solutions just for their needs. That service library, probably the single most important thing you can do in order to start standardizing how work comes together. I would argue in an accounting firm where it kind of boils down to like client relationships are the only asset that you really have. I would argue that the exception to the rule there is actually your quality assurance process. And most of us again rely entirely on someone's expertise to handle quality assurance rather than trying to systematize as much of this as possible. And this is just like the service library discussion where it may not be realistic to think that we can templatize a hundred percent of quality assurance. But 10% is better than no. Percent, 30% is better than no%. In fact, we have AI tools now like the new models from OpenAI that are excellent at following your directions to check specific things like the More systematized we can be, the more we can not only get humans to do what we expect them to do, but we can get lower skill humans to do that same work and increasingly get software to do that as well. And so if you want to like, like what is ultimately what makes Toyota manufacturing great? Like it is like can you produce a big volume of cars at an incredibly accurate rate? Like the fulfillment side of an accounting firm kind of boils down to this, like how efficiently can we get work out the door? And is it correct? And at this stage in running a firm, you don't know anything besides being the one to sign everything that goes out the door. Right? Like that's, that's just kind of all you've ever known and to step back. And I would argue that actually the best application of that wisdom and the things that you're uniquely capable and gifted to do, the best way to help the most people with that is by building systems with that expertise. Not you who holding the hand of every person through that, but you creating the systems that enables your expertise to be made turnkey as much as possible and leveraged by the rest of your team. Again, you're not going to get 100% there. That's not the goal. The goal is to make it 1% more every single year to get closer. That's ultimately how you build systems that let you plug team members in and get outputs that are more in line with your expectation. What you want to see like loads of, of examples of two very similar accounting firms using vastly different skill level people to do the same job. Maybe the most obvious example is in like intake and fetching and gathering documents. Whether it be for month end closes, whether it be for tax return prep. I know a lot of firms where that process is completely admin. I can tell you in my firm, when I stepped out two years ago, it was still something. This changed the last year or two, maybe four or five years ago. That was a process that was completely overseen by our senior technical people because they were the ones managing the relationships. So they would do the outreach to clients to say we need X, Y, Z. And they would follow up when we didn't get anything back. And then they would follow up when we only got three, five and seven back. And then it was their job to figure out who am I even supposed to follow up with today? Which is a huge task. And this is my most senior, my most scarce folks. And this is consuming a huge percentage of their time just getting the information in the door so that they can then start working on it. This does not require expertise. The last 10% of that probably does. Because the blocker here is you say, well, if they're not a, they're not a tax professional or if they're not this or that, a senior people, senior person, if they're, they don't think just like me, then they're not going to know what to ask for. The reality is 80% of it is the same as last time. And if I get an admin to sort out that 80% and be super on top of it in a way that you and your senior tax folks won't be, that's just better. If that senior doesn't have to touch the work. If you don't even have to see the project until you should have just about everything that you need or you at least have 90% of it ready to go. If some stuff changed this year or this month, that's just a fundamentally place, that's just a fundamentally better place to be. That is your admins being much more helpful than, than they otherwise would have been. And it's actually a great investment too. Like our admins became super admins and then like before long they're actually doing very technical things. And one of the most rewarding things for me running a firm was like taking folks clear through from sitting at a front desk to like going on and getting certified and being like these incredibly capable technical people. I have a, I'm a real sucker for a good like operations nerd. I had great success taking non accountants and making them into amazing accountants. Going the other way sometimes can be really hard. Okay, last thing I want to dig into on systems, that is something that happens naturally and you have to like intentionally fight back against it. And if you struggle with being a people pleaser and always being on standby for your clients, this is probably a hard one for you. And if you've built your own thing from scratch, this is just one of the hardest transitions to make. Because there was a time where man, you were hustling for absolutely anything and everything. Like you were. These clients were what was putting food on the table and they had your number and they could ask you to do just about anything and you would do it because running a firm in the early days, like, it's scary. And even when you're over the threshold of I think we've got enough now, you, you don't lose that fear. Like you still have that scarcity mindset of yeah, but it could all change, right? It could all change. Like I'm going to get found out. Like, with this client and that client left, like, we. We could be in trouble. And it's in this survival stage where you're like, here's my. Here's my personal cell phone number. Here's my pager. Here's my fax machine, my street address where my children go to school. Feel free to pop by anytime, okay? And, like, no shame. Like, honestly, you got to do what you got to do to get things going. But when clients come in with this kind of expectation and when you begin hiring a team and when you get past that stage, the best thing for you, the best thing for your clients, the best thing for your firm, it has changed. It's no longer unlimited, unfettered access to you. And so the issue of, can I just get a day of like, or even an hour of uninterrupted work? The issue of, why do my clients keep coming to me instead of just going to my staff? I keep trying to send them back to my staff. Usually this happens because we've unintentionally designed a system that rewards them for going straight to you. So I'll give you an example. If a client can call you at the drop of a hat and you'll answer the phone, why would they instead call a member of your staff who will also answer the phone? Right. So the friction there is equal. They can either call you or they can call the staff member. They like you more. They started with you. They're going to call you. Another example, if you're tired of being interrupted by the phone. If they can call you and you'll answer the phone immediately, why will they ever email you? They get an immediate answer. They're not going to send you an email and then have to wait. Same thing with text messaging. If they will send you a text and you'll respond right away, they're never going to send you an email. Same thing with team chat. If you're. If your team chat organizations are touching, if they can DM you on team chat and you're going to respond right away, you set that expectation. That's how they're going to get in touch with you. And you've just created one more channel that you have to manage. We got to think of our clients, and I say this in the most loving way possible, and as mice in a maze, and you're the cheese. I got to design a system that ensures that their behavior is going to align with. With what I actually want. And that usually starts with, for the first time Setting really explicit turnaround time expectations. And in my firm, basically I was totally out of client work, so this didn't really apply to me in the end. But generally our most senior people that would, there would usually be like a 72 hour turnaround time there. There would be a step in the middle and then there would be another level of admin support which were more kind of like hybrid relationship managers where you could get immediate help, like where you could call them anytime. And that system was designed so that if they wanted a quick answer, they're not going to go to the slowest person, right? But boy, were there a whole bunch of traps there. What if they text me? Well, means you can't respond. What if they call me? Well, it means they have to like go through the administration to schedule a meeting on your calendar that's going to at least be 72 hours out. And to enforce that on the people you've had from day one who had unfettered access to you. Like, I don't, I mean, I'm not going to lie to you. Like, that's not an easy thing to do. That's, that is a hard thing to come to terms with. And it may feel like you're getting big for your britches, you know, like, why can't it just be like it used to be when I was helping them off the, the tailgate of the truck, delivering tax returns at the kids soccer practice. I'm going to, I'm going to put the tough love coach hat on here. You know, you can't have both. You can go back to how it was and you can run a small firm or you can run a solo firm and it can just be you. But you know the constraints of that. You can go back to those constraints or you can move into this new reality and accept the limitations of this new reality. Now, for myself, this was appealing to me because I ultimately came around to the notion that the way that I can help people most, the biggest impact I can have is by pouring what I know into other people, by building systems I can plug them into. By doing that, I can help more clients and I can enable success for these people who will come and work for me too. Like, I can enable career transformations for them by them using my systems. It's what ultimately led me to leave my firm and create content like this so I can help even more people. That is a really important calling. And if you are too attached to doing all that stuff yourself, then you're blocking all of those people. You're blocking all those higher leverage applications of your expertise because you can't, because you can't give it up, because you can't stop yourself like trying to do it all yourself. I know this one, like, I feel this one deeply. It's hard thing to get over and ultimately it's a, it's a decision for you to make when, whether you're willing to do that or not or whether you want to be the one that texts with your clients all day. You just, you can't have it both ways, right? So you got to recognize the limitations of, of one side or the other there. Ultimately, if you are infinitely available to the team, it's gotta come, sorry, infinitely available to the clients, it's gotta come with a bunch of trade offs. You're not doing the client work at that point then. And there's a version of this where maybe that works fine, but you can't manage the team, do the work like sign the returns when they go out the door, review the financials when they go out the door, have all the advisory calls. You just can't do all of that stuff. And if you're trying to get clients to go to your team directly, you have to have a clear framework for how are clients supposed to get in touch with you, what's the expected turnaround time side benefit here, like there's no question then for them of like how quickly should I expect to get a response? Because all that stuff is locked down. And that ultimately is what is going to free your time and focus. Now I did, I did a version of this in a 1600 client firm where I had, oh, I don't know, like a, almost a $2 million book of business. And it was a big hard transition. And there's good ways to do it and there's bad ways to do it and ways it'll take clients off. And there are clients who ultimately you will find are great for you but not great for your team. That's a tricky one. And especially if you want to grow over a million in revenue, if you want to keep growing your practice, that's one of the biggest unlocks. We're not going to dig into that in this one. And actually the next size firm will talk about this quite a bit. But the notion that it means taking in work that's great for your team rather than you. So not all of your clients are going to like the notion of like having to talk to squirt over here. But this is kind of what you got to wrestle with when you are setting up Your firm for you to be kind of the one, the one big boss. Okay, last we're going to talk about offers. This is quote unquote marketing, though I don't really like the framing of marketing. And it is the pill that is hardest to swallow but is the most important one to choke down, because it is what leads to better clients. And like we said up at the top, every one of these problems, capacity working too much. Like every single one of these problems is solved by having better clients as defined by a client that will pay you more to do the same work. Now, there's a whole bunch of other qualifiers on what makes a good client from like, are they a total turd to work with and stuff like that. I'm just assuming these people aren't being jerks, they're not cussing at your team. Like, those are all things that you absolutely need to be on top of. I'm purely looking at the value of the business relationship here. There is nothing more important to your firm than the quality of the clients. I give this analogy aloud, but if you think of it as like the roster of a sports team, the players you put on the field, on the pitch, on the court, whatever it is, they're ultimately what are going to drive the outcomes. And you can have an internal staff that's in charge of helping them to get better and improve and not get injured and all these things. But if you got a whole bunch of stinkers going out there every night, they're just. They're a bunch of stinkers. And what most firms do is they play that. They play the role of that, that internal staff, and that's all they ever do. Well, I can fix them. It'll be better next year. Meanwhile, think of, think of like the tiny spec your firm is in the broader ecosystem of entrepreneurs that need help. Just think about that like, we are like the earth in the universe. Like, your client list is such a tiny, like, infinitesimally small speck in the universe of entrepreneurs that you could potentially serve. But we're so fixated on who we have today, who we've just stumbled into through connections and kind of happenstance, when ultimately I would say the most important job for you at this stage in your firm and beyond is to be the curator of your client list. Who do you let in? How do you find somebody better to come on the list and in exchange cut a couple of the legacy folks in the process, Trade a great client for a few legacy projects. There is no more important job. But what is the right amount of time to spend on this when you're doing all of these other things and you're not managing your team very well and you're already over capacity. So what is the right amount of time to spend on, quote, unquote marketing or building better offers? I can tell you that the answer isn't no time, and that's how much time that most of us spend on this. Virtually no time. Finding better clients is a, a, a compounding opportunity where better clients lead to them referring even better clients and you gain even more flexibility. And what can be an unbelievably great gig, like running your own small firm, like finding some clients that will pay you top dollar and having total flexibility over your schedule, not having to work so much, like there's not a whole lot of gigs out there that can be as sweet as this. Now, the way that most of us sort of walk into this, myself included, is you're coming from an early stage where you were scrapping for every client, but you've crossed this tipping point where you have like this critical mass of referrals that now come in every year. And that's really flattering and it feels really good and it feels like this reciprocal thing with your clients that's like, man, thanks so much for like, helping me out. But what you'll find over time, especially as you're pushing up against that, that capacity, what you'll find is those referrals at best are like more of the same. And at no stage in me running my accounting firm do I want more of the same. I want better. But referrals are by definition like a lateral extension of the same thing. But I would argue actually oftentimes they're even worse than that. In my case, in my experience. Curious if you've seen the same thing. Referrals will actually skew towards the smaller clients that I don't want more of or the C and D clients that I don't want more of because many of them are getting like a sweetheart deal they can't get anywhere else, and they know that. And so they'll tell your friends to come, and then their friends expect to get the same deal. But also just purely from a numbers standpoint, the profile of that A client. There probably aren't as many of them in the world as there are those C and D clients that you picked up early days in your firm running and just haven't had the guts to let go yet. And so referrals, by definition, by default, are just going to be more of the Same, if not something that actually pulls you down a little bit over time. But what most firm owners do is they have, they have pride in the fact that everything is word of, word of mouth. And that's. That's great, honestly. Like, that is something worth being proud of. But it can also be a real trap because if you are stuck on. On something right now, if you have capacity issues, if you're trying to do too much, more, buddy, more is not going to fix that. More is just going to make it worse. And at this stage in firm running, you can actually bury a lot of issues through hiring. If you, if you compare this type of firm to, say, a solo, solo firm runner, where they're like, I only ever want to do this stuff myself, that solo firm runner has to be absolutely ruthless about the work that they'll take in and the projects that they can commit to because they got nobody to blame but themselves. They got to put all of that on their back. Once you grow beyond being a solo firm and you're like, I'm going to start hiring people to do this stuff, hiring can actually be a band aid covering up hard decisions that we probably should have made. Should you hire another person so that you can keep on those very first clients that you. That you, like, had in the early days that are no longer profitable clients? Probably not. And I want to get too sidetracked here, but people love to frame this. This is going to be. People are going to walk out of the theater with this one because this is a gut punch. It can feel good to continue serv. Serving those people. And oftentimes we can frame it as serving the community, helping somebody out. What we're doing is we're charging those people the rates that we would have charged them back in the day, and we're keeping them on the client list because we want to help them out. The reality of why those clients are still with you, though, we like to think it's because they like us because they've been with us from the beginning. And there's a degree of that, that's true. But the bigger factor here is that they're getting a deal from you that they're not gonna get anywhere else. You know, that if you let them go, they're probably not getting that deal elsewhere, and that is reason enough for them to stay. Now the reality is, as our firms grow and the profile of what an AI, what an A client is, shifts, and all of our attention and our love and the development of our systems goes more towards what those a Clients need. We're no longer very good for those legacy clients. And there's this kind of growing animosity there. And the longer you cling to them, the longer zooming out, the longer you're keeping them from being another firm's a client. Like those clients that you're begrudgingly hanging on to. They could change another accountant's life. But we're blocked by like getting too big for our britches, losing track of our roots, the people who were with us from the beginning. And the most common story I see firm runners tell themselves as I'm doing this to help out my community, bro, hear me when I say this. The people in your community that need help don't have any money to give you. The people in your community that need help are not the ones who can afford a $400 tax return, but not an $800 tax return. That guy drives Alexis. The people who need help don't have money to give. And if you're trying to build the ultimate flywheel to truly help people, the way that you do that is by charging people top dollar and using that money to go out and do pro bono work for people that really, really need it. Not this low bono crap where they can like pay you some, but it's really just like your own blockers where you can't imagine cutting them loose. If we really want to help people, the barbell approach in my mind is the only way where you're investing in a clients, they're paying you top dollar, your firm is profitable and yes, you should give back. And that's, that's actually a great reason for driving for better paying clients and all that is then you have more flexibility to give back. But giving back is not doing half pay work. Those people would be great clients for somebody else. Giving back is giving back. It's money, it's time. It's helping the people who don't have money to pay for that stuff. It is the best thing you can do for your firm because it gives you the freedom to go after the better paying clients and you're going to do somebody else a solid in the process. Like actually building a network of other firms where you can refer that stuff over in good faith and know that they're going to be taken care of. That's actually that makes letting these clients go way easier and absolutely worth trying to build a relationship with some other firms to facilitate that. This episode is sponsored in part by Safe Send 1, who helps you automate the entire tax workflow from taking information Actually before that from engaging the client, doing intake, clear through delivery, engagement letters, file transfers, organizers, E cigs, tax return assembly and delivery. Now with a new and innovative AI driven gather capability. We actually did a demo video on this that's coming out soon. It is really good. Safe Sense supports CCH Access Pro System FX Ultra Tax Go System Tax Lacert don't take my word for it. How's this sound? The average user takes them three to four minutes to deliver a return and 94% of E signatures and file forms come back within 15 days. You know those 8879 sitting in the file cabinet? You know those tinkers. Safe Sense can make that whole lot easier for you. Explore how SafeSense AI powered tools can make your whole firm more productive. Check out the link down in the show notes to learn more. This episode is sponsored in part by TeamUp, who helps you find talented accountants in the Philippines this week and team up Literal stuff that happened this last week. TMUP placed their first marketing placement actually into a firm, while a VA and a tax accountant both got offers last week. They have 18 active recruiting projects and in the last week and a half they've had one firm start looking for a bookkeeper. Three firms start looking for senior accountants and have had three signed job offers. Accountant, senior accountant and management accountant. Gang, it's. It's happening. People are doing this stuff because. Because it works. Same thing I did. Hired a bunch of accountants in the Philippines. Hired a bunch of accountants onshore too. But man, like it is, as I've shared it, is how I would build my firm tomorrow. About two offshore hires for every onshore hire. And that gives me the flexibility to grow to where I wanna grow to. When the reality is like it's very challenging to find onshore accountants. Think about it. I know there's a lot of blockers associated with this, but give it some thought. Team Up's gonna make it as easy as possible for you to hire people directly in the Philippines. Learn more at the link down in the show notes. This episode is sponsored in part by Carbon. Hey, quick call out. Do you run a big, a big firm? You push them past like I don't know, 50 people? Or do you aspire to be a big firm? Common problem with cloud practice management systems is they have never historically been particularly suited for bigger firms. Carbon. They're solving for it though. Commonly. Talk with Chad Davis on this podcast. He's got a big firm they're running on Carbon. It's one of the best scaling platforms out there for a number of reasons. They've got one of the better sort of reporting systems in the game. They've got their own sort of practice intelligence tool set for like planet capacity, stuff like that. But my favorite thing is they've got email built in triage. So email can lead to like task assignments and all that. It's all happening in one place rather than going and spending half of your day in email in a completely different system. That's all happening inside of Carbon. It's my single favorite thing about them and they always get annoyed because I bring it up and they're like no, but we do other stuff. And I'm like, no, but I like this. No shortage of PM options out there. But if you are are a high growth firm, wanna do big firm things, Carbon might be for you. Check out the link down the show notes. I want to run you through a basic basic math exercise. And this will seem really trivial and obvious and dumb, but I still don't think people like consider this enough. I want to convince you of just how like consistently going after a slightly better client has compounding benefits to your firm. But because we don't invest enough time and attention, and again, I don't want to call it marketing, but because we don't invest any time in this, we're perpetually like stuck like slogging through the status quo. So some, some real basic math here. Let's say you're running your firm at about a 50% margin. And if you've hired like you know, five to seven people and you're in this, this sort of phase of your firm journey, 50% margin, that's, that's reasonable. If you have fewer people, your margin is probably higher because you're doing more of the work. If you're pushing closer to a million in revenue, oftentimes margins will dip below 50%. But let's just say 50% hypothetical firm here, you're doing 600 grand in revenue a year at 50% margin. So you're making 300 grand a year. Nice work. You have 300 clients paying you $2,000 a year. So for every client engagement they're paying you two grand, you're making a grand on each one. Now my North Star is how do I find the next client who will pay me 1.5x what my clients pay me now for doing the same work, not for doing 1.5x as much work. That's important because oftentimes we wade into big engagements with bigger companies doing more work. But it's not actually any more profitable. Those oftentimes are not good engagements to wade into. What I'm talking about is the next client who will pay 150% of what most of my current clients pay for doing the same work. And the reason that they will do this is because we're solving a more painful pain for their specific application. This is where serving a more specific type of client avatar comes in handy. Starting to think about niching down all that, however you get there, whether it's the demographics of the people themselves, whether it's they appreciate the way you deliver the service, whether it's industry specialization, whatever you get there, that needs to be the North Star of how do I get that one next client to reinvent my firm? A client at a time. So let's say just thought experiment is this is wild. Let's say you committed all of your time. Let's say you just stopped doing client work. Let's say that you commit a huge chunk of your time to quote, unquote, marketing. Now, marketing. Most accountants will say, I despise marketing. I have no interest in marketing. I don't know anything about it. But the exact same accountants will say, what I most enjoy is advising my clients and sitting down and having helpful conversations with them. Gangster. That is the best form of marketing is providing value to people. And so don't think of this as like, you know, this funnel hacking, like all these super nerdy marketing things. Think of this as you going out into the world and helping people who are not yet on your client list. This could be a podcast where you're just talking with people and helping them work through their problems. Could be turning up on social media every day and just having conversations, hanging out in communities and forums where the type of people that you want to work with hang out and, and just being helpful every single day. That for me was the thing that I most enjoyed about doing client work. And I know is the case for most of us, but what we do instead is we end up mired in the like grunt work of doing the work. And that takes us away from the advisory conversations. And so if you're feeling allergic to marketing, know that marketing is being helpful. Like that is the very best marketing in this day and age. Not like dancing in front of your phone making TikTok videos. It's helping people. So let's say you just like committed a bunch of time to this. Just hypothetical. And so the goal is we're going after these 1.5x clients, right? So in this case, if our clients are paying us two grand a year and we make a grand on it. What we're going after is $3,000 per year clients, but our costs are still $1,000. So we're making two grand instead of one grand. So this 1.5x client, we're not making 1.5x on them, we're making 2x on them. The old adage of double your prices and go home at noon is incorrect. If you have expenses, you actually go home well before noon. So in this case, a client that will pay 50% again as much of our current as our current clients, that client is two times as profitable. 3,000 in revenue, over a thousand in expenses, compared to 2,000 in revenue, over a thousand in expenses. So let's say you're going to going to go out and do a bunch of quote unquote marketing, whatever that looks like for you, hanging out at industry events, just trolling people on the Internet. If you can find two 1.5x clients per month, Per month, that's it. Make that your goal. Then every single month you add two of those new clients. And for every one of them you add, you dump two old clients. Not sure I said that right. So if you add two each month, we're going to dump four legacy projects each month. So top line revenue remains the same. Right. But we're doing less work as a result. Well, here's what that looks like. After 6 months. After 6 months, then we would have added 12 new 1.5x clients and dumped 24 legacy clients. Right. We now have 288 clients in total instead of 300 clients. Our profit remains the same. I think I said our revenue remains the same before. That's not right. Our profit remains the same because we're adding a project that's twice as profitable and dumping two old projects. So profitability remains the same. So after six months, total profit of the firm is the same. Still 300 grand, but we're doing 4% less work. That's just after six months. That's just adding two of those clients per month. Now what if you did that for three years? Imagine how unthinkable that is. Your job is just to go out and be helpful in the world for the next three years. I'll be honest, that actually sounds really fun. The reality is you're still gonna be wiping butts and all that stuff, like in the firm and putting out fires. You're still gonna have some of those responsibilities. But just on a flyer, imagine you did this for the next three years. The same scenario after three years. At this point, you've added 72 new clients. That's only two per month. That's all we're asking of you. Go out and find two 1.5x clients per month. And this is if you find a specific pain. This is not hard to do. You've added 72 clients after three years and cut 144 old clients. We're now down to 228 clients from 300. We're making the same 300 grand and we've reduced our workload by 24%. I'm still assuming we're carrying all the same staff. Honestly, you probably don't even need like as much staff as you had before. If you just reduce the workload a quarter, they're probably actually making more money. But if you just go out and find two 1.5x clients a month for the next three years, your workload goes down 24%. You know what starts looking really nice at that point? Your schedule, your capacity. Things start looking pretty chill. And that's obviously not factoring in price increases. Having to pay staff more, which is a much smaller percentage than like your top line revenue percentage increases should be from price increases. It's also not taking into account the fact that going after 1.5x clients is a compounding opportunity because that 1.5x client, the norm for them, is establishing a new norm for your firm. And then they will refer clients who are even more premium than they are. And this game like doesn't stop. There are massive firms out there, wealthy people, like all sorts of like, like a massive spectrum that we have never even been exposed to of folks who are willing to pay wildly different things for your services because there's wildly different levels of upside for different people. This, you know, what you do may unlock crazy profit potential inside of their business or your tax abilities may save them huge amounts of tax. But it's just because you don't have access to somebody that has that level of problem yet that you can't imagine charging that much for that work yet. But if you're going after those 1.5x clients, they just lead to more 1.5x clients and then 2x clients and then 2.5x clients. So how much time do you commit to this? Hard to say. I don't know what the right answer is. But I can tell you what it isn't. It's not no time. And that's how much time most of us are committing to it because we're too busy because we're at capacity. And step one, unfortunately, is usually cut and bait with a bunch of folks that we shouldn't still be serving. Again, best way to do this, build a relationship with another firm that you trust. Figure out what that interface looks like, where they can understand. Here's how we've been serving these people to date. Tell me how your systems work, like, so that I can communicate that confidently to my clients. And then I have a conversation with them that says, I'm really sorry. Just the direction that our firm is growing, going, we're not gonna be able to serve you very well anymore. But I've got a firm here that I absolutely love, that I believe will take great care of you, and I wanna get you connected with them to make sure you're taken care of. Doing that gives you the freedom, gives you the capacity to go after that better stuff. This is absolutely the hardest pill to swallow. The notion that you have to continue reinventing that firm to get to something better. If you want to get to something better, maybe you're at a point where you're like, this is cool. I just wanna do this. This is sustainable. That's also fine. But that's not where most people at this stage are. They're like, I'm kind of burning out. I'm working pretty hard. I. Almost all of us want better. And while all of your systems changes and the tool talk and all that stuff is really fun, it's ultimately a distraction from the uncomfortable thing that is we need to let go of some old clients. We need to put a little more effort into having probably a lot of the same conversations with folks that are not on our client list, being helpful to them and all that to build interest in what your firm does so that then your client roster gets better. They're willing to pay you more for the same work. I told you, we were starting with the fun stuff and then ending with the hardest pill to swallow. But everything else is honestly just beating around the bush. Like, it all boils down to how do I make that arithmetic work out? Where it's like, I trade that one client and I can cut two clients. It's honestly. It is as simple as that. Those little, like, if you're thinking about, oh, we're going to. We're going to roll out a new practice management system. It's going to boost our productivity by 10% and that's going to solve all of our problems. It absolutely won't. If anything, you'll add more clients to fill up that 10% and the underlying issue remains the same, is that you're doing more of the same rather than doing better. And doing better requires a different strategy. Getting in front of people willing to pay more for the same work, finding really painful pains that you can build offers around. We're not really digging into offers much here. The Hormozi book, a hundred million dollar offers, as cheesy as I know that sounds like that is the ultimate crash course on how to create something compelling where someone sees it and they're like, I have to go work with that person. It's a really good framing of how to present what we do in a more compelling way. Rather than saying we sell tax prep or we sell bookkeeping, and then you're going to be compared to every other service provider out there right now. You can build a great lifestyle without optimizing, you know, a lot of this stuff. And it doesn't mean that you have to do every single thing. I will say oftentimes what blocks us here is we find a level of success and we think, what do you mean? Like, I've already, like, if you'd asked me three years ago, I'd say, oh, that guy's got to figure it out now. There's always more to figure out. There's always better, there's always a bigger fish, there's always a better client. You got to balance this with like not creating a hamster wheel that just runs you ragged because if you get too sweaty about this, then it's no fun. But honestly, for as frayed, as afraid as accountants are of marketing, marketing framed the right way, it's actually a blast. It is going out and meeting people. And if, if the vertical you're going after or if the specificity in clients is something that you enjoy, which it should be like, what's an industry where you could go hang out at a conference and be like a kid at a candy store? That's what we got to look for. Because there is, there is in any space, there's enough room for a boutique accounting firm to come in and serve folks like, whether that's golf caddies or beekeepers, like, whatever that is. That's the great thing the Internet enables is we can go more micro niche than ever before because we have access to all those folks online. But if your job is simply going out and hanging with the people that you love, hanging with and being helpful and that ultimately leading to folks coming to your, to your firm, man, that's not a bad gig. Like, that seems like arguably the very best use of the agency that running your own firm gives you the best use, I would argue is probably not spending all of your time in front of the battle station, but putting the numbers in. And a lot of us, like, that's what we love and that's what we enjoy and that's why we wanted to do this, is we really, we really like doing the work. But even most of those people will say, I would love to rise above that work more to do more advising. And that's kind of what marketing is. It's being helpful. Like at scale. There are loads of firms at this stage. And oftentimes the goal, as soon as you push beyond solo firm running, is to reach a million bucks. Like at this arbitrary threshold. Right? Like that can kind of be glorified. I will tell you that you got to decide before you get there whether or not you want to go past a million bucks. Because the next trap is, okay, I've maxed out what I can do for me my one person firm. But to grow beyond me requires building a completely different type of firm that's not built around me, that's actually built around my team. Now, what we just talked about, where you spend your time marketing, that still works. You can take that well beyond a million bucks in revenue. But it means bringing in clients that are great for your team, that your team can serve. It means having much better systems so that your team can deliver consistent outcomes. It cannot mean you being the one sitting there responding to every text and email and taking client calls every time something comes up like that. That while you can get by with that at this stage of firm, between, you know, 300 grand in revenue and a million in revenue, while you can get by doing that. And it'll, it'll be a lot of work if you do. But you can do that at this phase, if you want to grow beyond this phase, which not everybody needs to by any means. If you want to grow beyond this phase, like, you absolutely have to divorce yourself of that because it's just going to be too much volume now. Don't feel the need to keep pushing. I think this is a big trap. Growth for growth's sake, just continue to grow to, I don't know, impress somebody or something like that. Be sure that if you continue building your thing bigger, you can tie your perceived outcome of like, your rationale for doing that. Be sure that you can tie that back to a real life goal that is meaningful. Because simply doing more oftentimes can make your life worse. And if you look back at the person you were three years ago and they could see you now in most cases they would be like wow like you're absolutely killing it. You have more than I could ever imagine having had like three years ago. Right. And so really push back on that what is sometimes the human nature to continue growing and this is where like thinking about better instead of more plays in. Hopefully got some helpful tidbits from that. I've struggled with this myself big time. All these blockers, these gut punches these are really hard realizations that I made like my own personal blockers that I think many of us struggle with. So much of it is up here up in your head. A framing I've heard from from Tim Ferriss Easy decisions, hard life, hard decisions, easy life. There's probably some hard decisions right now standing between you and and something easier, something better. Don't be afraid to make those hard decisions. Thanks for coming to Hanging today.