349 Scaling An Accounting Firm from $1M to $3M

So you want to push past that like one partner, sort of single person accounting firm sort of magic boundary of about a million bucks. Where things start getting especially hairy, I'm going to tell you right now, requires reinventing that entire accounting firm. It means reconsidering who the stakeholders are that are going to get you there. Because if you don't want to go the traditional partnership model path, it requires a different level of alignment. There's a reason, a good reason, that big firms for the last several millennia have been traditional partner model hourly billing firms is because that's easier than what we're talking about today. If you're at a million bucks, if you're closing in on that and you think you want to keep going, come on in, scooch up a chair, let's talk about. It's worth acknowledging with, with like every threshold of firm growth that that next threshold and, and pushing through to it can actually be a band aid that's covering up a bigger problem that can't go unaddressed. So if you're a solo firm runner and you're like, ah, I'm at capacity, I can't do any more stuff. I got all just, just a hot mess of anything and everything that I let in the door. I, I'm going to hire people to keep doing that work for me. That's probably not the move. The move is probably cutting the stuff you shouldn't be working on to get more lean, maybe making some hires. But at each like plateau that you naturally hit. And a million bucks in revenue is a big one. If you are like a single firm runner, the one big boss, you can absolutely push past that. Don't know that I recommend it, but for every one of those plateaus, it's worth like giving a real big think to. If we continue growing, is it just to bring along stuff with us that maybe we no longer have any business bringing along? I would say that sort of growth is the wrong growth. The good growth is we've found something that we can do for people that's really powerful, that we can crank on, we can make really good money on it. I have accepted that I have to walk by those hundred dollar bills you see on the sidewalk. You know, that quick little project, that one that maybe used to be your bread and butter, that these days isn't as profitable as like the work you get from your A clients. Can you commit to being willing to walk by those hundred dollar bills or thousand dollars bills, whatever it is, on the sidewalk because they're ultimately a distraction from being better for your A clients and then finding like what's the next version of an A client that seemed better than this. That is the right way to grow beyond a million bucks. Not just doing more while while like rolling forward everything that you've ever done. Now two big, two big uncomfortable switcheroos that are sort of cornerstone things to figure out before you venture into this. And a lot of firms don't. And it's what creates a lot of sort of structural issues in the firm. Two big issues. And then we're going to dig into tools for these types of firms systems and crafting better offers to attract better clients. But the two big traps, number one, the switch roo, you have to be willing to make. I'm going to stop saying switch roo. I'm really sorry about that. You, you have to change from bringing in work that is good for you to bringing in work that is good for the team. When you venture beyond a million bucks, you are into a new paradigm of what you probably already knew, which is, I can't keep growing if I'm the face, if I'm the one ultimately like managing the client relationship. And I don't want to die of a heart attack by the age of 45. Even if you're, you're doing your best, you, you're bringing the juniors along and you're, you're delegating the client work to them and all that. Like as long as you're the big boss and you're in the loop there on the client relationship, a lot of that stuff just comes back to you. And the old problem of my clients don't like it when I, when I slough them off to the junior. Are there like right and wrong ways to slough a client off to a junior? Maybe. But you know, the only complete solution to that is they start with the junior on day one. They may not even know who you are at this stage. You're. One of the things we're gonna get into is you're, you're starting to look at salespeople. And so ultimately they're like the only way long term to avoid just getting pulled into more and more and more. Even if you are pushing that stuff off to the rest of your team, the only way to ultimately escape that is when they come in and are served by somebody else on day one. And that may be unimaginable to you right now because you look at the people on your team and you're like, please, nobody's got the, what's the word Is a French phrase. Joie de vivre, joie de viv. Maybe that's not the right phrase. Nobody's got the riz that you do. The confidence to walk into a room and just crush it. I remember, I remember working with, with partners who staked their pride in. You want to know how good I am at this stuff? I've never walked into a meeting like that and not closed it. I'm like, wait a minute, hang on. There's never been a client that was like, you're weird. I don't want to work with you. Or you're not ready to pass what we're worth. I don't want to work with. You mean a. To tell me that you. Every single one of. Yep, yep. That's how good I am. If you're like me, you came up in like this, this, like alpha. This is how you assert your dominance. Closing deals, driving revenue sort of era where that was impressive. That was how you settled the food chain. And it might still be a big part of your identity. And, and that may be like the biggest blocker to the notion of removing yourself from that is, well, shoot, if I can't do that, then, then what ultimately is my value to the practice? I was the breadwinner, I was the rainmaker. But you know that like pushing the firm to 2 million, 3 million, 4 million, 5 million, it is not going to happen with you being the relationship manager of every relationship. Like every client that comes in the door, that just doesn't work. And I can't, I can't emphasize enough how much reinvention has to happen at every phase, like every plateau of firm running. We've talked about building a side hustle firm, maxing out a solo, like a one person firm, maxing out a one liter firm, around a million in revenue. Now we're talking about how you push through that. Every single one of those thresholds requires a reinvention of the client list, likely of the people on your team, of the assumptions you hold and the responsibilities that you have within the firm. There isn't a version of this that you start out at on day one that just scales to, you know, a hundred employees. I wish there was. I wish there was an org chart that was just this linear thing and you just keep plugging more stuff into it and everybody works the same way that they always did. Doesn't work that way, unfortunately. And it's oftentimes when we're unwilling to break the business we have because it won't work for where we're trying to take it. It's oftentimes the resistance to that that you end up paying the price for because the old model just doesn't work in the place that you've now set up camp and are trying to go. So the first big switch is being willing to take in work that is good for your firm rather than just what is good for you. To be clear, it's still okay for you to be the face of your firm. In fact, these days, the way social media works and the way that people are buying around influence now, there's actually a cool model where you are sort of the influencer in residence and you're the reason that people find the firm, but you're not the one ultimately doing the work. Like, you're not sticking your nose in on the sales calls, on the delivery of the work. Maybe there's some, you know, really high on the value ladder product where you're doing like mastermind groups or something like that for your most premium clients, but you're not sitting in on client onboarding and you're not, you're not getting involved in that like you used to. And this is. If you've never done it before, it, it is hard because if you're like me, you spent all your years in practice doing the work and it's what your identity's wrapped up in. And then all of a sudden you have to learn all these new skills like how to actually build an org chart and these things that you may not feel necessarily equipped or qualified to do, but it's what's going to get you firm to the next stage. And like, if, if that's not appealing to you, that's also completely fine. Like, we shouldn't, by no means should folks just arbitrarily push to continue beyond a million bucks if they have hit that. But they, like, if you, if you still love doing the work and you want to be in the thick of it, just optimize around like that. You know, a deal that you make with yourself of I'm not going to get any bigger than this. In fact, I ultimately made one of these deals with my partner where I'm like, I don't really want to get any bigger. So what we actually did was we, we agreed on here is the level of profit that we want from the firm each year. And that was a really helpful exercise to give ourselves permission to cut work and to eliminate when we brought in new stuff rather than just trying to arbitrarily do more. So whether that profit level is, I want to make 50,000 bucks a year, whether it's a half a million bucks a year, whatever it is, if you feel that treadmill, that hamster wheel of just like this unknown force pushing you to do more, make a deal with yourself on the bottom line, on the profit. And then it's much easier to justify when you bring in that 2x client. You're like, okay, if I'm, if I'm really sticking to this, it means I've got to get rid of some work that that profit just replaced. And that's a, for some reason, that's a really hard thing to do. Like, we've got this sort of scarcity mindset about that. But if you struggle with putting those boundaries around your business, that's, that's the best way I ever managed it. Okay, first switch is bringing in work that's good for your team instead of for you. Second big switch is ensuring that all of the stakeholders in the firm are actually on board with this non traditional partnership model approach. In my experience, it can be really hard for people to remove themselves from that client stuff, especially because they probably have a bunch of existing relationships within the firm that they're trying to push to another team member. And old habits die hard. Like if somebody gives them a call, are they willing to not answer it? And maybe that's actually a really good litmus test to see, like, are they actually willing to commit to this approach? A version of this that I've seen that can be a trap is you have a couple of partners and the partners wear different hats, and one partner wears more of like the strategy firm operations hat, and the other partner wears the hat of client services. This can work. If you're gonna put a ceiling on your firm, let's say you don't wanna do more than 2 million or a quarter million. Could, like, could you make this work? Potentially. But oftentimes what happens really commonly there and what that's actually code for is you have one partner who is willing to commit to a traditional org chart and the, the, not the traditional partnership model, but then you've got another partner that maybe doesn't know how to not operate in that environment like they are. They're so committed to the traditional approach of managing their own clients that the band aid you put on that is they're going to be the client person when the reality is they're just not willing to pull themselves out of that stuff in the same way that you are. And I had a, I had a situation that was somewhat similar to this where Ultimately it leads to friction with your partner because the strategy person is perpetually growing and getting themselves out of the jobs that they have and hiring people to do this and that. And the client relationship person inevitably becomes mired in the work that goes into those relationships. And as the firm grows and as the number of clients grow, that person takes on more work. While your ops person, the strategy person, hires folks in to support new roles. And the relationship manager, like they can't do that the same way. Like, yes, you can hire client relationship managers and all that, but if they're unwilling to remove themselves from the client work, as you're crossing over this threshold, if you continue to grow, that will I think, almost inevitably create some friction between the two of you. Now there are so many internal roles that can be done. There are plenty of hats that can be worn that, that are not client facing. And one blocker here I think for accountants is they just think, well, I've never seen inside a firm somebody who wasn't client facing, so I'm not sure what I would even do. But if you're the person whose mind is maybe a little more wired around strategy and all the possibilities that are there, I mean, just start making a list of the important stuff that you're blocked by. Marketing strategy, hiring, mentorship within your firm. We talk with Chad Davis a lot, the Canadian firm owner, his partner, a huge percentage of his time just goes into mentoring team members. They got 50 or 60 people, that's basically a full time job. And it's, it is the level of management that we often don't give to our team because we are so over capacity and because we are trying to serve clients at the same time as building the business and doing all the things right. So sticky decision that you, you need to kind of sort out. Oftentimes business relationships fall apart as you are coming over this threshold because one person, they may say they want to go to the traditional org chart and do kind of what is the cool new thing. But if they're unwilling or unable to remove themselves from that work, then they're not really building the machine, they're just operating their own little solo siloed version of the machine. And again, that's actually fine. And it's worth knowing this about them now. And there's probably a good way to like spin that part of the business out if that's ultimately what they want to do. But if you don't address that head on, like it is going to create friction inevitably. Okay. When I look at the makeup of A firm. I think about the tools they use, I think about the systems they've built and I think about the offers they hold out to prospective clients. So let's start here with tools and what require requirements change as a firm grows beyond $1 million in their tech stack. Now in the last five years the technology to support this type of firm, I would say firms from this size to about 100 to 200 employees, the tech to support firms up to that size have has changed massively in the last five years. We have, I would say, I would say there's three practice management systems right now that I can confidently recommend to firms a hundred employees and up. And we are talking about million dollar firms. And so these are not a hundred employee firms. But if you want to grow to say 50 employees right now there's probably only three platforms. I recommend either carbon canopy or count. Now if you think in three years you may be at 50 employees, we're probably gonna have three to five other providers that by then will have come up market enough to support you. But just five years ago you really didn't have any options here. It was bad like you were stuck with the legacy tool set from like tax vendors tools like xcm, which is probably the least bad of all of that legacy crop that were just built for like big like national firms. But that's changed. So most important tool in your stack is getting that practice management system right. If you're still on a platform that was built by your tax vendor, that's not the right system to be on. That's not me. I don't know like shading anybody in particular. It's like, I mean show me one accountant that swears by Thompson, Reuters Practice or Envio and I'll show you literally a hundred that have bailed on those tools and will never look back because like the cloud ecosystem has gotten so much better for, for practice management systems. So get your practice management system right. Also in some cases it may make sense to have separate environments, like separate instances of your practice management system. At a million in revenue, you're not there yet probably. But these tools, like the three tools I mentioned, they can support you in doing that. That's something that may make sense to do logically if any one part of the business in the platform gets, gets too unwieldy down the road, a big untapped opportunities here. I think for firms this size and up. One, if you do tax work, intake automation, there's not a practice management system on the market today that has an organizer or an intake approach that I think is adequate. It's all boilerplate, it's not dynamic enough. The, the leading tax intake tools right now, the automated ones that are leaning into AI tools like Sorban, Safe, Send, Gather, Stanford Tax, I think we'll see a growing number of AI enabled tools come into specifically how we do tax intake. It is a massive time saver. In my experience in my practice, we could lose up to a third of our professional staff's time chasing down documents, figuring out who to follow up with and all that. Let the machines do the requesting, let the humans do all the other stuff, handling the exceptions. Don't be afraid of software sending your clients reminders. It is a hugely valuable thing for your firm. If the software can be the one to do the following up. It pulls your entire workload forward because you're not waiting on your own team to follow up with those clients. And let's be real, those, those clients that maybe we shouldn't have on the client list to begin with that require multiple follow ups. Things get weird after a certain number of follow ups and you stop. And we've all had that, had that situation where like they get bent out of shape because they miss a deadline or something like that. And they're like, why? Where were you? And you're like, well, I reminded you three times, that was last four months ago. And they're like, and he didn't send me anything for four months. And you're like, no, you turd, I didn't. We probably shouldn't be serving those people to begin with. But if you're afraid of software tools being too annoying or too persistent, what's the alternative? Like, they give you controls over like, how frequently will they send reminders. And oftentimes it doesn't need to be every single day. So you can kind of optimize that. But if your clients are bent out of shape that a platform is reminding them of to do something every single week, there might be a bigger issue there. So if you have those blockers, if you have those fears, you gotta get over them and tell clients to look out for those reminders. Pull them out of their spam if they come through. Because those reminders are very important to keeping all of the projects on track. 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 got to do to share it with them, just copy a 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 Kay this episode is sponsored in part by Teamup, who helps you find talented accountants in the Philippines. This week in Teamup, literal stuff that happened this last week, Team up 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 accounts 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 to grow to where I want to grow to. When the reality is like it, 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 is going to 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. Similarly, for month end for accounting practices, bookkeeping firms just like centralizing how you request things every single month. It's a really big unlock when those requests automatically go out on the 1st of every month or as soon as they can to get, you know, the credit card statement that closes on the 25th. They need to be getting the request on the 26th to get that over to you as soon as you can to pull all of the information gathering forward to get that off the plates of, of of your humans interestingly. And and these million dollar firms like they're not quite there yet. But the bigger you get on firm sizes and especially folks who came from bigger firms. And oftentimes if you're growing past a million bucks, it's because you've seen into bigger firms and that's not as intimidating to you, the notion of building your own firm a little larger. Big firms have chronically been less turnkey as a byproduct of having very weak tools to make work turnkey. If you think about the practice management systems big firms have had to use for years, they are just very high level. They have statuses and that's it. These days we have tools to build all sorts of automations around. Every single status, every single step kicks off all these different automated workflows which completely changes, like how we serve our clients and how we communicate with our clients and set expectations with them of like, hey, you're going to be getting a message from this system that you need to engage with and need to respond to. You don't want to be paying me to just remind you and follow up with you. That's a waste of both of our time. And so big firms oftentimes, or if you have a background in big firms, can oftentimes be a little slower to lean into this stuff just because historically these newer tools that handle automated intake and that sort of thing just haven't played all that well with big firms. So if you're still, if you're coming out of that environment, like it probably requires doing some digging into tools like, like if you run a bookkeeping practice, keeper is like kind of a totally new approach to managing month end closes. The tax intake tools that we talked about can save you a pile of time. Okay, let's dig into systems because you cross kind of an important threshold around this million dollar mark that is necessitated by, you know, if you have 10 direct, 10 or more direct reports, you're ultimately not going to be serving those people very well and not managing them as much as they need to be managed. And where that was once like a single jumbo pod, that this is the point at which most firms will begin to sort of organize themselves into clusters focused around certain types of work. And this is the beginnings of a greater level of specialization of the people within your firm. Rather than throwing payroll, bookkeeping and tax at, you know, one person, this is where we're going to start carving up those responsibilities. And it's absolutely worthwhile to do because somebody that can, that can focus on a specific thing and specialize on that, honestly, they can, they can easily be 2x the output of somebody that is kind of asked to do everything. A really solid example of this is if you do any tax work at all, even if you don't the job of tax resolution, even if you're a bookkeeping practice, you do a bunch of compliance and all sorts of forms from sales tax reporting to just whatever like the local jurisdiction sends the client that they then forward to you. Could be payroll, whatever it is. Centralizing the function of resolution is incredibly valuable if you think about, I'll use my firm as an example. We had 40 people and about 30 of those folks were associated with the tax side of the business. A client gets a notice and this was an 80 year old firm for 80 years. The person that handled that notice was whoever the client gave it to. And handling tax resolution was less than 5% of the people on our team's time. It wouldn't make sense for them to have like dedicated tech that they had access to for handling tax resolution. And so every single time they were working through this stuff, they were grabbing like, like looking for past similar letters that we've written and just working with what they know, which is not very much. Cause they don't do it that frequently. As opposed to centralizing all of the tax resolution in the practice to a single person, giving them tax resolution technology for the first time that gives you best practices on how to respond to different notices and, and gives you more of the background of why they're even getting that notice to begin with. And because that person is so much more focused on that task, they can do that stuff honestly in like a quarter of the time while doing it much better than the, the professional that's just handling it like a one off tax resolution case. And so this applies in all aspects of your firm. Whether you got people doing payroll, bill pay, whatever it is. When you have this small of a number of people, it can be scary to specialize too much because you're like a person or two from kind of being hosed. If we put all the payroll on Tina and then Tina's got to go on vacation, then what? And, and that is a balancing act here. And this is where pods start to make sense. And to me the most natural way to wade into pods is the notion that all of your senior people need some form of assistance. So yourself included, if you are at a firm of this size, you absolutely need somebody to help you manage your email inbox, get over whatever blockers you have around. Like I'm not that kind of person. Like your Hoity toity, like need a personal assistant or something like that. The reality is your email inbox is like the receiving bay of your company. And if we treat it as like this propriety, like if we treat it with this propriety of oh no, you have to be the one to handle all of those things, it creates issues for the entire rest of the business. Now, occasionally you do have sensitive things that come through there and we just have to find a different place for them or they have to be like, you know, saved behind a login where only you have the credentials or something like that. So work through those issues. But, but the reality is email inboxes, if you have a team, you absolutely want access to your team members. Email inboxes, right? Like clients are sending important things through there. You need help too. And this can actually be a tremendous perk for your senior folks. And if you haven't done this in your firm at all, like the way to roll it out is start by normalizing this for yourself, getting help. Our minds, like one of the blockers we have here is we jump straight to the most hard, most technical, most challenging things where you're like, well, nobody's going to handle this quite like I am. But you know what? Like, the majority of the things are that are coming through your email inbox. Can I get a copy of that tax return? Are we still meeting on Tuesday? The Cabela's ad. A super basic question that literally anyone in your firm can answer. That's the vast majority of that stuff. And there's right and wrong ways to do this. Don't have people impersonating you out of your own inbox. But at this stage in your firm running journey, you need to start thinking about how everything in the firm can have a home that isn't you. That means every single client has an account manager that isn't you. It means every piece of software in the firm has a subject matter expert that isn't you. Every technical thing that you have to deal with in the firm, like broad brush strokes. We're not going to be able to get too granular here with such a small firm, but partnerships s corps, like whatever that is, integrating a specific, specific tool. You need to have a dedicated subject matter expert within your firm. And this may seem overwhelming if you haven't done this at all because you're kind of in charge of the boss of everything. But start small, start with a thing at a time. And then ultimately what you do is you sit back and you say what stuff is still coming to Me, why is it coming to me? Is, is there a subject matter expert that can handle this? Does this client have an account manager? If so, that inquiry needs to go to them and they'll respond to the client. And as you sit back and those things still come to you, your job is to either redirect it to the person it needs to go to or to realize, okay, so we, we actually have this thing. It's, it's hiring, say for example, where this stuff still has to come to me. And I, I haven't delegated that out yet. That was where I got to in my practice, getting out of client work. And a lot of those things that come to you, they come to you via muscle memory because that's how it always worked. And, and they've always asked you that question in that scenario. And, and until you like disavow them of that expectation, they're not quite going to know what to do until a few repetitions of you like sending it somewhere else. Another thing that comes back to bite us here is if you're the type of person that loves to swoop in and come to the rescue on things, they will invite you to come in to the, in for the rescue, but they will also just jump out of the way because it's easier for them. Like if they're coming to a hard decision. Oftentimes if you've made a habit in the past of offering an opinion and coming in and providing the boss approved approach, they will immediately jump out of the way and be like, I'm just going to let Tim tell me what to do here. And so the next time that happens. And like, I've absolutely been there. We've, we've all done this. The next time that happens, you just like sit them down and talk, like reason through it and get them to come to their own answer. This is also going to mean sitting in staff meetings and have to having to sit on your hands sometimes. Like, you more than ever before have to pick your own battles because there's certain things that people just won't learn until they go through that themselves. And on the flip side, there's other things that are, you're probably like a little too set in your ways on because of your own experience. And maybe some of that has changed too. And if you get out of the way, that's helpful. But if you have a habit of swooping in to be the hero on everything, like, you're just asking for everybody to send that stuff to you. So everything in your firm needs to Have a home. Now normalize the notion of getting help by you getting an assistant first. That could be an admin on the team. It could be pulling in somebody external, but then to baby step into pods. I'm a huge advocate of giving your most senior people as much help as you can, because the reality is, especially in small firms like this, your most senior people waste so much time on admin, on taking documents from A to B, on getting that thing that the client emailed them, on following up with clients that haven't got them the stuff that they need to. Your senior people waste time on things that are in no way senior. And you want these people to continue growing, to continue doing more, obviously, to. To spend their time wisely on the things that actually require their expertise. But the blocker for them, as is the blocker for all of us before we learn how to do this, is they don't know how to delegate. Or they may not even think they have permission to delegate because they've never had a member on the team that they could just dump stuff on. And this is the natural beginnings of forming pods. You either pull an admin to support those seniors, you either pull a junior person and pair a junior person with those seniors. A side benefit here is I think it actually massively accelerates the growth of a junior person if you buddy them up. It could be a combination of the three, but basically everybody needs to have someone that they can delegate down to, even your juniors, because there's tasks that, like, I mean this. So much of what a junior does is the tedious, like, menial stuff to just sort of keep them busy. But if you want your team to be able to learn delegation and to be more mindful of, like, is this a waste of my time or not embedding someone with them who can kind of be their own assistant, I find it actually makes folks approach work in a more collaborative way rather than the way it may be perceived. If you haven't done it, which is like, you're going to have a whole bunch of, like, prima donnas who are too good for certain tasks. It's like, no, like, your task that you can get off your plate that is below you, is going to help somebody, like, grow. Like, that's a great task that will challenge them and make them better. And the less friction there is and how these tasks move through your firm, the faster everybody grows. Where do you want those senior people to go next? Do you want them to manage people? Do you want them to be. To be higher leverage and not Waste time on things that they shouldn't do. They're not gonna be able to do that until they learn to delegate. And they're not gonna learn to delegate until you give them permission and you give them specific people or a team that they can work with to send those tasks to. Much of the your team members evolution simply boils down to the evolution of the tasks that they do year over year. If you sit down and you have a planning meeting with that person and you're like, here's what I see you being capable of and the steps that I want you to take. Ultimately the evolution of the tasks have to align with the journey that you want them to take. And so oftentimes done wrong, this can just look like you want them to do more. It means not giving them any sort of support structure to, to be like, if I'm going to get into all these things, then, you know, 50% of my tasks over the next 12 months need to evolve into something else. Like that's what real growth looks like. And it only happens when you pull somebody else in who will be enriched by the opportunity to take on those tasks. Oftentimes we project our own disinterest with some tasks because maybe they're your least favorite thing you like, you do that stuff because you don't want anybody else to have to do it when it is like literally an opportunity for somebody else that's just clogging up your schedule. A couple other thoughts on Systems Service Library. The things that you are willing to do for your clients, Baby, this is where you got to have that thing nailed. And the stakeholders in the firm have to be in agreement on what you will do for clients. If you have a partner or several partners and you're all like, yeah, we're going to go do this thing, we're going to keep growing and all that. The biggest trap here is partners inevitably kind of wander their own different ways and what they tell clients that they will do for them. Cause their clients have different needs. But everybody's trying to support the business in their own way and bring in clients. But absent an agreed upon framework of here are the things that we will do for our clients, you're just kind of walking into a mess. And this is where you start having more siloed groups within a firm. And not in a good way, like not around specific functions, but more siloed around specific partners because the partner has their own way of delivering tax returns and meeting with clients and serving clients. All these different things. And in order to be Helpful to that partner. You have to understand exactly the way that they want to work. I had this problem big time in a past firm where we roll somebody into our practice, don't have enough conversations in the beginning, and they want to serve people in a completely different way. That's what their clients are used to at this point. And so that partner then begins picking their people, quote, unquote, their people within the firm. And those people learn how that partner wants their clients to be served. And now that partner can't make use of the other people in the firm, and those people can't be of use to the other partners. And this is one of, one of the traps that folks will fall into when they give lip service to, like, no, we want to do the traditional org chart thing, not the, not the partner model. But then when it comes, like when push comes to shove, they're not willing to, to systematize and agree on, like, here are the things that we want to do. I, I, turns out I actually still just kind of want to do my own thing, and I don't want somebody else to be able to tell me, like, no, we don't offer this service to clients. So that service library, it is your internal vernacular for all the things that you're willing to do for your clients. It's what is bookkeeping service level one? What is tax advisory service level two? What are all the inputs and outputs of that? What meetings are required? What software is used? What's the deliverable? What's the expertise required of the people involved in each of the steps in the process of delivering that service? Now, in the beginning, you know, bookkeeping service level two, it's probably done by maybe the junior person in each team. As you push beyond 3 million in revenue, these service lines begin getting spun out to their own functional groups. And your pods begin playing the role more of relationship management than fulfillment. The folks in your pod may review the work, so especially in the beginning, but their job is more client management. At that phase. You're doing such a volume of those specific things that now you just have dedicated teams on the back end that are just cranking on that stuff. And that is how you, like, go wild on production and get that stuff out the door as efficiently as possible. You have a dedicated team that just cranks on bill pay, just cranks on bookkeeping, on tax prep. But the prerequisite is having a finite set of things that you will do for a firm. And if you haven't done this yet, it is a really hard thing to Do. Because most firms, they just grow and they kind of take things in and not a particularly standardized way. And the natural course of engagements is for them to get more dissimilar, more different over time, because clients have different needs. And if the client asks for something, and I myself, the person at the firm, can't anchor that ask back to something that we do in the firm for a bunch of other people, then I'm just going to say yes. And we're going to, like, default into doing it how the client asked for it to be done. And as you know, well, we default into so many stupid things that you end up doing for years. And then somebody digs in there. Like, why are we. Was there a reason that this. No. Somebody just started doing it that way, and then 18 months later, we were like, no, let's. How about this other way? Like, that's just how things happen. Wild thing happens. As soon as you have a service library, though, and like, the beginnings of a service library is throwing everything that you do up on a wall, trying to find the common threads and giving, like, a basic vernacular to them. I spent an entire week on this on the podcast. We won't get too deep on it here, but once you have that service library, that internal vernacular, this isn't how we hold out our services externally to clients. It's just our internal vernacular for what we do for our clients. Then that natural way of how things get more dissimilar over time, more different. The opposite starts happening the next time the client asks. Man, it's a pain in the neck for me to, like, track hours for my team and then send those to you for each pay run. What should we do? And you're like, oh, on payroll, service level two, we roll in this time tracking system that we really like. You want me to get that set up for you? Awesome. Had you not done that, the client would have gone out, found something that they liked or worked for them, and it probably would have sucked. And you. That would have been the one client that you would be tracking hours that way with when you have a service library. The difference is they're now the 25th client that tracks hours this way. Right. But absent some sort of standardization and system there, that service library, all those engagements kind of go their own direction with it, by and large, at least more than they would otherwise. They trend back to standard. And it's not to say that, like, you're going to be running a mill and everything's going to be exactly the same. That certainly was not the Case in my firm, we had 1800 clients and we successfully got back to this. It doesn't mean that a hundred percent of the engagements are the same. It just means that, like, can we, can we nail this down for, like, the first 40% of the engagement and then 60 and then 80%, like, that's the goal. And then when a new client comes in, you're a little more opinionated. You're like, no, actually, like, this is the best way that we can do this work for you on the back end for your team. It's a collection of service items. And the nice thing about those new clients is you don't have the whole unlearning of, like, the way we set the system up before. Like, and it can be much more nailed down from day one. And then if you get a new client in and you're doing bookkeeping service level three on it, everybody knows what that means, right? Like, that's. That's the idea. That's what you're trying to get to. 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. Hours in the first year because they didn't have to bill all that stuff manually. Man with the condition. We want more business with impressive online proposals. No more hustling, 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 why 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 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 a high growth firm, wanna do big firm things, Carbon might be for you. Check out the link on the show notes. Last thing on systems. At this stage you will start thinking about fractionally, probably hiring folks for things that you have never hired someone for before before. So you're starting to think about hr, potentially somebody to help with hiring. You're probably starting to think about like a contract operations manager, somebody that's got some experience in another firm that could come in either permanently or temporarily and be like, here's what I see, here are some opportunities that's such a worthwhile investment if this person has experience in other accounting firms. Like I think that's an important qualifier here. There is, I, I shouldn't say that there is value in like an external brain coming in and seeing what you do. But if they don't have any context about how accounting firms work, you end up doing a lot of training of them to get useful things out of them. This is also where you start looking potentially at salespeople. And whether or not this will work is a product of how nailed down that service library is. When you have a service library externally, like you present this stuff as solutions or offers for a specific type of client that is, you know, blocked by a certain thing or kind of at a certain stage in their entrepreneurship journey where what you can provide will unlock something for their business. This is ultimately how we escape selling quote unquote bookkeeping or quote unquote tax services and being compared to everyone else in town. And by the way, your personality, I would argue it wasn't enough before, but it's definitely not enough now. When you're growing beyond a million bucks, you're selling outcomes. You're not selling the fact that they enjoy you or like you more than the next accountant. So as we think about pulling salespeople in, the prerequisite to that being done effectively is having that nailed down service library so that ultimately they're only committing your team to the things that you already agree to do. And that's actually like a really cool unlock. I know some firms that have gotten into that this early and absolutely actually crushed it. Like they're paying these people really good commissions. A lot of firms sales are actually the last things that they will delegate. But if it's something you don't like, this is probably where you can start exploring that. But the biggest thing you need to think about beginning to hire that is a big, big shift is another boss, somebody to be the boss. You're starting to transition to be the boss of the bosses rather than being the boss of everyone. And that's a toughie. Man. This was probably the biggest blocker in my firm. We. I basically bought out several partners and we ended up with about a $5 million practice and just myself and the partner and my partner, that is. So there were just two of us and this firm, historically, it was the traditional partnership structure. And so what we were lacking was this whole level of like middle management. And everybody in the team was used to just coming directly to us. We didn't have anybody in the team that was like ready to really step up to that role because they had operated in this firm for the longest time. That just didn't work that way. You had kind of these siloed partner pools where everybody just answered to a partner. And so the notion of them having to answer to somebody else was a little bit uncomfortable. The notion of the partners letting somebody else manage the team. Oh, buddy. Was that real uncomfortable? And honestly was something that they just didn't know how to do because we had never done it before. Like, everyone had just operated their own little fiefdoms. And all of a sudden we got to pull in people to like manage the team members. It was absolutely what was needed. Because when you're managing, like when everybody's the direct report to you, you're just not managing at that point. You're Handling things when they break. But you are not like conscientiously like meeting with the teammates on, on a team members on a recurring basis and like actually helping them develop and mentor them. Because you got like 10 plus people reporting to you. And it's at this stage that you're at your limit. If you're, if you're doing a million in revenue, like, that's, that's a lot of work. It's a whole lot of work and you probably aren't doing much managing of your people. And best case scenario is you've got somebody in the team that can organically step up into this. You all know this very, very well. If you came of age in accounting, not everybody that's a good accountant is going to be a good manager. Also. Not everybody that's a good accountant's even going to want to be a manager, which is totally fine. Sometimes it means pulling someone in externally and this is hard and can almost feel like a bit of a betrayal. When your whole team's used to coming to you and you're like, no, I'm actually going to bring in this stranger and you're going to go to them instead. Like that. That can be hard. But it is one of those things that like, truly does require reinventing your firm and how it works and how you bring in clients and how you build systems to push past that plateau. Okay, last thing we're going to talk about offers the things that we hold our firm out to do for potential clients. I don't care about the people that you got on the bus already. Like it matters, but it doesn't. Like your job is the big boss in the firm or what's ultimately gonna steer the direction of the firm is how you bring in new clients. Like, that is what pulls the firm in a trajectory. So more important, like, there's, there's the system side and we need to optimize the machine and make sure it's gonna run as efficiently as, as it can and all that. But what ultimately drives the direction of the firm is what you're willing to do next. Like, you reinvent your firm one client at a time. Big trap here. We touched on it earlier. Growth is not an excuse to, to bring along dead weight. And I mean that through the lens of like, old clients, maybe some of your early clients that you might just be afraid to get rid of. And you're like, well, let's just keep hiring people and they can serve them, then we don't have to get rid of them. Meanwhile, your new Clients are like, you know, 3x is profitable. Is that work you took in in the past. And if you could cut that work, you would have more capacity to go after more a client. So growth is not a band aid. It's not a. Ultimately a solution for some of those hard decisions that you just have to make in the transition of getting your clients to. In the transition of getting your team to serve clients from day one, rather than you having to get out of the way for the first time. Maybe you're the smooth talker, the one that could always close the deal or go to a conference and come back with 10 business cards and some. Some new clients in the transition to your firm, taking those clients from day one. In some cases, that means a step backwards in, in maybe the profile of that client or how premium that client is. I've talked with firms who ultimately made this trade off. The team couldn't do the dance quite like they could. And so the profile of that client kind of had to change and they had to rethink what that looked like. But this is where firms who are super leaning into the notion of having a compelling offer for a painful pain for a specific type of client, this is where these firms pull ahead. Because you can ultimately sell people and relationships and the magic that a person has, or you can sell a system. And when you sell a system, you know, that can be largely automated. For example, that's super turnkey. You can do that till the end of time, right? When you can sell a system that is so turnkey that you don't even need technical expertise, you can have an admin run through it. That's super easy to scale, right? Because it doesn't require expertise. If you have a system that a junior can hustle, that's a little more risky, but better than it just being you sitting in a room. And that's the secret sauce that you're selling, right? So there's a big spectrum there. And are you selling a system, a solution to a specific pain, or are you selling Tom? And Tom's really good, and people really like Tom, but Tom has, like, big ambitions and may not be here forever. And that could leave you in a pretty big lurch. In fact, Tom may just take a bunch of those clients because everybody loves them so much. Sidebar. That's not the worst thing if that happens. But recognize that there is a really big spectrum and how systematized your firm is, and there's pains out there that you can absolutely crank on, and that's where your firm becomes One of one. Because you're the only one with a meaningful solution to that pain. Or at least the market perceives that you're the ultimate option for solving that pain. Super. Maybe the most common blocker here is we just still think the world is too small and, and that those people aren't out there and that the total addressable market for some very specific thing isn't enough. But it's like the world is just, it's so, so much bigger than we can get our heads around by and large. We spend so little time like marketing, going out and meeting new people, going to events, usually because we're doing the work. If you're crossing this threshold, it depends on how you're wired and ultimately how you want to spend your time. But there's a really big opportunity here to just go out in the world and be helpful in a way that for me is like so rewarding. Like I enjoy it so much. Think about the stuff that I do. Like, think about the thought leadership content that, that I put out. There's a version of you being that for a vertical where that's just what you do. Like you go out, you be helpful. Some of those folks convert into clients. Maybe it becomes a media business where you do sponsorships and partnerships and all this, all this different stuff. But I can tell you, you know, most, most accountants will say that their favorite thing to do is advise clients. But what you actually end up spending most of your time do is like hustle and software and all that stuff, not actually sitting in advisory meetings. Marketing done right is advisory. So you have a unique opportunity here where the business is large enough that it can, there's a self sustaining version of it. It might look different than the one with you at the helm where you are pushing all the buttons yourself, but that's ultimately how you draw people into your bubble. It is easier than ever before to go niche, to go micro niche, to find folks with very, very specific pains that you can plug into these systematized solutions. But you gotta go out there and you gotta find them. You gotta find the consultants in the space, you gotta find the influencers in the space, you gotta find the offline people in the space and where they're hanging out. I mean, and don't be afraid to go like lo fi here. Like I'm, I'm literally looking at direct mail into accounting firms. Because when I was coming up in accounting firms, that was what I looked at. That was my only window into the world was the stuff that would randomly show up in my mail slot. And I love that stuff and I would read it, but I wasn't going home. And like my Twitter algorithm was not accounting firm stuff. So wherever those people are, you need to show up and you need to be visible. You need to be perceived as the guru for that type of person. So that when they do have a need, they're like, oh, Steve, not Steve. Oh Tom. He's the expert in this space. I'm going to take my stuff to Tom. Or even better, you capture them like at a, at a sort of tipping point in their professional journey, like opening a second office for the first time or, or they hit this certain plateau. Like this content that I'm making right now is, is to find accounting firms at certain plateaus. And if you have a deep understanding of the plateaus of the, of whatever type of business you're serving, then what you're offering, the opportunity that you're putting out into the world is what that next like era of their business can bring them. It's not I'm selling tax and bookkeeping, you might do all that stuff for them. But the value of your opportunity is what you're going to unlock for the business as a whole. This is ultimately how we sell profitable engagements rather than just trading on the billable hour. Okay, one, one parting thought. I want to leave you with that. I think is is very important to look within yourself, to assess. Anytime you are, you are facing one of those plateaus and thinking about going over that threshold. You got to keep reassessing that. Why? What makes you want to go beyond a million? You got a firm of this size, you're going to be able to make pretty good money. It probably doesn't need to be a financial thing. You're probably doing just fine. There's a lot of really bad reasons to do this. The most common ones, to prove something to someone. Maybe it's a past colleague, maybe it's somebody in your personal life. Maybe it's, maybe it's dad, maybe it's I know yourself. People put waste decades killing themselves to prove something to someone who doesn't, doesn't give a hoot about you. Usually those people in your life, like they could care less. Like what do you, what, what point are you going to make? It's ultimately you that that's paying the price for that. Another bad reason getting to that ebitda, that EBITDA threshold where the multiple go go from from 2 to 12. I'm so over that crap. It happens in every single industry. You just need to Be aware that it's a thing that there are people that make a lot of money on transactions. Firm brokers will give you wild numbers. I know so many people who have gone through sales, explored sales like at all sorts of different sizes. The only scenarios where people are getting crazy multiples is where there's a personal relationship there. And that firm actually has something very unique and very special. Otherwise no, like there isn't a level where people are getting 6-12x multiples where PE is going to swoop in and like give you some absurd deal. I've seen PE deals and I'll be honest, the few that I've seen look no different than traditional small firm deals, except they've got way more strings attached. Like the partners having to hang around forever, team members not being able to leave these super tricky like sort of cliffs where if it goes over this threshold, a huge part of the deal just gets like washed out. There's a lot of people, brokers, a lot of people incentivize to get people to explore this stuff that love to promote it. But I mean, we worked with dental, so like dentists dealed with us all the time and we even got involved in like DSO roll ups and almost everyone got hoes in those situations. Nobody was getting the multiples that they thought that they were going to get, especially not in this like market right now. But that stuff is, is, is 90% fiction. It honestly, honestly is. And it's even worth zooming out to consider how happy you would be in an exit situation. Ultimately, like to me, happiness and fulfillment, like it's, it's absolutely the journey and the day in and the day out, it's not reaching this milestone. Because anytime you build these milestones up to be really big, honestly on the other side of it is usually disappointment. You're like, what the heck do I do next? Now I realize I actually kind of enjoyed what I was doing before, but really wrongly, the, the narrative and professional services firms is like, you build up to some exit someday and that's like, that's a successful life cycle for a partner for it to end in an exit. But you want to know what happens in 95% of exits? Your firm goes to somebody else's firm who ultimately don't give the same care and attention to your clients and to your team. And so all the people who just climbed into your boat over the last couple of decades and committed themselves to your vision and the way that you wanted to do things, the people that you owe everything to are the ones that pay the price for the sale. In most situations, there's exceptions to the rule, but honestly, that's 90% of acquisitions. Is that a successful outcome? You've been the bread, the biggest breadwinner in the firm for how long you have made money. I don't wanna sound too dramatic on the backs of all these people because they've stuck with you, because they believed in you. And the last page of the story is you cashing out. I always had a hard time with that. The more interesting version of that to me, and I just like, unless you got a whole bunch of people that are ownership material, the notion of an internal buyout just for most firms isn't realistic because it's just very hard to pay someone the money that they then have to pay you. I can tell you the version of this that's interesting to me is I have a group of people in the firm that I want to take over. I optimize the firm for longevity, for sustainability for me, not for an exit. I don't try to build it into something that we'll get another multiple or something like that. That's just a total risk that I ultimately don't have a ton of control over. I would rather optimize for sustainability, do it another two or three years and enjoy it and leave something to the people who most believed in me. Not that I'm going to give it to them for free, but it's not going to be the market price. It's going to be something that will actually work. I would much rather do that. Like if I'm. If I'm optimizing for. For deathbed thoughts, for funeral eulogies. That's a much better way of paying it forward than like this, like pump and dump. I want private equity to roll up my firm. Like, that just sucks. Don't be that person. There's situations where you may have to sell. You don't have a choice. There's also situations where, like, they go to a good home. But I do think that we like to tell ourselves that story because that check is. Is attractive. So reassess that. Why? You have to be able to tie your rationale for going further back to what in my life am I not able to do now that this will let me do? And there's a short list of things that pushing that hard will ultimately let you get to think about it. Hopefully I didn't just ruin your day, but you don't want to learn that on the other side of, you know, a whole bunch of pain and the family paying the price for it and all that stuff. So one to $3 million firms one of the biggest plateaus you will ever hit because it, it requires pre programming your brain. What do you mean I don't do everything anymore? What do you mean? I have to trust these other people to manage my clients. It's, it's biggie, it's tough. In my case, I got greater fulfill fulfillment out of building the systems and out of building the people who could ensure great outcomes for clients and how I could take their career from A to B and leave them in a totally different place. Like I got more fulfillment out of that than I did serving yet another client. And that was actually what I learned that I loved about running small accounting firms. What brought me back to the professional when I thought I was leaving. And there is like, like that is a really powerful thing that you can enable for people if you can get out of your own way. Right. That's the struggle at this stage. Hey, thanks for coming and hanging today. You got this. Don't let anybody make that decision for you. It's got to be something that like you believe in and is right for you.