350 How I Grew My Accounting Firm Past $5M

Oh you run a big boy firm, do you? Today we're talking about growing a firm past 3 million, pushing to 5 million. This is where I spent most of my time in like strategic firm Running was, was actually just that. Taking a firm from about 3 to about 5. Taking a firm from being a traditional like partner led firm to a more like org chart oriented firm. Transitioning my own book of business that I built about 1 1/2 million into that traditional org chart so it wasn't all dependent upon me. And then ultimately getting myself out of all the client work while having several kids and starting a YouTube channel and an accountant community and all the things this one's near and dear to me cause this was where I spent most of my days. And so if you are a firm, you got over the hump at a, at a million and you're thinking like what is, what does it look like to get to five? That's what we're digging into today. So come on in. Spoiler alert. This one's gonna be all about the stakeholders, bud. Ok, foreign. Welcome to Jason don't call me daily on firms podcast. This one does feel a little more personal for me because I bought, I bought a trad firm. My firm was so trad 80 years old tax firm. That was all they did traditional like partner silo. All the stuff that you would expect. We merged in another partner that did stuff completely differently even on a different tech stack. Just cause. Just cause you know we liked the cut of his jib. It was one of those actually. It was the. Some of the partners wanted to retire and it seemed like he had some money and the right approach for. For you. I think the reality of where most people tuning into this are going to be stuck is between, between that trad firm. Can we call traditional partner model firms trad firms? Is that a thing that we can pick up on? This is where I find out that means something wildly inappropriate. I think tradice means traditional, right? Sure hope so. Let me double check. No, that looks like it checks out. So where most people are going to be stuck here is on loving the idea of like the. The org chart firm. The more progressive like avocado toast, skinny jeans, like cool new way to build a firm versus falling back into the traditional partner model which is so much easier, so much easier in so many ways because you don't have to agree on the ways to do everything. You don't have to serve your clients the exact same way. You can pick your favorite people. You just have your own little siloed bubbles where you're just kind of running your own business. Resource sharing, by and large. So if you're serious about doing this either give up and just accept the traditional partnership model like real talk. I don't really have all that big of a problem with the traditional partnership model. There's things within it that kind of suck. Like hourly billing kind of sucks. Oftentimes not a lot of growth opportunity for the people within those. But that's more a product of like the bigger machine and the people within the machine, I think, than just blame the traditional partnership model. Because I'll tell you another trend that's really picked up the last few years is this notion of like sort of resource sharing across firms and these sort of like firm quasi roll up groups that aren't really roll up groups where they'll send you clients, but you're doing a degree of resource sharing within like something like who are the people that do it? Dark Horse, Breakaway, There's a number of groups that do a version of this and the idea is they'll handle a lot of the heavy lifting and the fulfillment and you're able to be more client facing in theory, like giving if, if that's just the stuff that you want to do, gives you the freedom to focus on the stuff you want to do. In some cases gets you over the hump if you're struggling to find new clients. In fact, let's, let's link Dark Horse and Breakaway advisors in the show notes if that's, if that's appealing to you. But you know what? That starts smelling a little bit like the, the traditional partnership model. It's not like all the way there. But ultimately then if you've got a $10 million firm, that's the traditional partnership model, you've got eight to 12 partners that are all doing a million ish bucks or so themselves because that's kind of the, the natural ballpark ceiling for most. And they're all resource sharing. And so it's funny how we've come full circle and now there's like a slightly dressed up version of that. I know the, I know at least the people at Dark Horse listen to this and they're absolutely appalled right now. In fact, drop a comment. Am I at least somewhat right? Like there is a, there is a slight whiff of that. You do have more independence because at the end of the day it's still your own firm. Right? So you can do whatever you want. But it is funny how that's like the balancing act is, hey, you get to run your own thing. But with resource sharing and traditional firms, you know, like if you look at legal, it's probably even more extreme this way where you have even more independence between kind of those attorneys practices. But they're all still operating under one roof. I bring all of this up because this is the big thing that firms at this stage are stuck on. Unless they were a traditional org chart from day one, which is not the case for most of them. It's usually they're either transitioning from a traditional partner model or they're, they're like a roll up, they've done some acquisitions, merger, something like that. And, and you still have the issue of what do I do with all of these stakeholders? So who are all the people on the bus if you have a bunch of quote unquote partners, Even if all of the partners are aligned in their vision to say yes, we want to go down the traditional org chart path. It's akin to running an organization with several CEOs and that's just not a thing that you do. Now there are exceptions to the rules, to the rule here where you have people who can be long term partners and they make that work. Chad Davis Life CA he's had a long term partner, Kenji and Matthew May at Acuity, which is hanging with the anomaly guys in Boston. Like you can find a partner potentially to do this with. I think that stuff's actually exceptionally rare and for every one of those that works out, there's I think a whole lot more that don't. Maybe that's, maybe that's just me reliving, reliving history with my partner. But it's very rare that I think you can just go marching straight into a setup like this with several alphas and that multi CEO thing just work. I think the better thing to do if you're serious about this like org chart approach is you just have a CEO is you look at what are all the roles that need to be filled. Do the folks here actually fit into those roles? Like do we have the right people to do all of this? And oftentimes the answer is no, because you came up in a similar way building your own practices and so your experience is largely the same and that doesn't offer a great deal of diversity to be able to do all the different things. And that's ultimately what makes that traditional partnership model easier. I'm not going to go as far as to say like you absolutely ought to do the org chart approach because there's, there's a world here where you've got other people that you enjoy working with and you wearing the CEO hat and them doing other roles that just. That just may not make sense. And there's probably a version of the traditional partner model where that's something you could even do with your buddies. It would probably be pretty fun. And sticking to the traditional approach bypasses a whole lot of the hard conversations around disagreeing on how you want to serve your clients, being able to pursue your own interests, rather than it being kind of this company first thing, which is kind of like the beauty of running your own practice is you can follow the things that you're most excited about. I think we dunk on traditional partnership models because that's what the mega firms do. But I mean, I would argue, like, timesheets. Don't blame timesheets. Don't blame the traditional partnership model. Blame all the bad people and the bad stuff that they project onto that. Like, timesheets are evil because, like, they are the. The yardstick of our own, like, kind of unfair inadequacies. That timesheet is like, perpetually cracking the whip on you in a way that. That oftentimes is unfair and just ensures that incentives are never properly aligned. The traditional partnership model and the wrong setup is just like this machine that just choose people, like, chews through people either up or out. You end up stuck in this. This bubble where the only, like, vision of success that you can see is just that really sweaty grind to get to partner. And the reason that it's awful is that everybody else around you is working themselves to the bone. Nobody worse than the partner. So the thing that you have to aspire to is even worse than the sweaty grind you're on right now. It's a version of the sweaty grind where you work even more and then you're stuck and there's no way of getting out. I would argue that's not the traditional partnership model's fault. That's the fault of, of the culture of the company and all the people in it. There's a version of that that you could do that would be just fine now for me, all that being said, buddy, you better believe I wanted to be the CEO. Nobody's gonna. Nobody's gonna tell me what to do. I'm. I'm. I'm too much of a no dollar. I really am. I will say, when you are at this stage, like, this is where the value and the power of a visionary leader is really, really important. Because what you end up blocked by is either getting stakeholders to get in line or be able to attract a higher level level person than you ever have been able to before to wear like those executive hats for the first time. And I'm jumping ahead of my outline here, but, but Quincy Jones quote, I've come back to a number of times recently, your ambitions, your ambitions for the firm have to be big enough for talented people's dreams to fit inside of them. People get really frustrated at this stage where they're like what these really smart people? Can't they see the amazing things that we're doing? Why are they not coming here? Why do they not want to be on the bus with us? Why can we not keep them? Like we just can't find good people. This is where being for somebody and for something and having ambition pays off. And this isn't like this isn't for everybody. Like if you want to go out and get these AAA like supercharged people and you want them to come work for you, you have to be that and more like you have to be the alpha. Doesn't mean that you have to be, you know, the best at everything. But you have to have like an ambition for what you're building that they can fit inside of. Otherwise why do these people not just go out and do their own thing? Right? That's what, what so many firms are up against right now. Why would this person ever come and work for little old me? I see how talented they are. They could just go do their own thing and, and having that self awareness at least is good, but it's ultimately a product of what is your ambition for the company? Is it big enough for them to fit within? And oftentimes the answer to that's gonna be no. Because we don't all have to make these humongous sweaty machines like we've been talking about in these different stages of running a firm. Keep coming back to your why, like do you really need a firm to go past a million in revenue? Is that boat still not big enough? So it's worth continuing to revisit this because not everybody needs to build a business business with just this obscene level of ambition. But if you are stuck between I need this type of person that I don't have and I can't seem to get them, I don't understand why that's usually it. If you don't have that visionary leader who can paint the picture of this is what we're trying to build and this is why it's different. That was my advantage in the firm. That was ultimately how, I mean at like 30 years old, was able to step into the shoes of, of several partners, take over that, that sort of leadership role despite having a partner who is my senior. It is that capacity to kind of be the visionary leader, to be able to like will things into existence when you really have to. I was making hires of folks online. Like we were building a distributed, distributed team for the first time and I was able to get people to buy into my vision for like this is how we're going to do this. And it led to some really, really good hires, which is then what made it all the harder to then leave. But shuffling out what's happening at the top, like that's going to be the really hard thing here. Whether you go the traditional path, whether you go the org chart path, and whether you or somebody, you know, whoever's going to fill that CEO seat truly has that visionary leader capability to attract the people that are going to get you to the next stage. And I think you know how influencers like to make things sound way easier than they are. I do think there's, there's degree that for sure where it's like you just like put a nice glossy coat of paint over everything and you aren't, it's kind of like Instagram thought leadership. You're not really seeing reality. There's definitely some of that. But if you look at somebody like take Brandon hall for example, and I think, I think when he last came on the pot, he said they were pushing like 12 a year or something, which is a wild rate of growth since COVID for his firm. And he's been real about like it hasn't all been daisies. Like there was like a, it's like a six month period there where he went totally dark and had to like really get stuck back into the firm. But I remember talking with Brandon at one point, it was when we were rolling out the whole job placement thing. So this thing that I'm, I'm kind of lukewarm on now that we, we've been doing for a while, placing accountants into firms, been harder than I expected this business to kind of get going and get accountants committed to going to work for firms. My, my thinking was I have all these talented accountants working for legacy firms in my audience. What if we just paired them with the progressive firms in my audience? Seems like a no brainer, right? Everybody wins, whatever. For whatever reason. It's been harder than usual to get like firms to commit. Mainly if you are a, an accountant after the deadline here looking for a new role, we'll Put a link to Jason Cruz down in the show. Notes. I can absolutely place you with a progressive firm. But I was thinking about doing this thing, and I had bounced it off Brandon at one point, and he's like, I don't see why anybody would have a need for this. And I'm like, you don't see why anybody would have a need for access to accounting, Accounting talent? Is that what you're saying? And he's like, no. Like, the solution is people, Firms need to be active in their thought leadership on social media, and that's not a problem. And then people want to come and work for you. And I'm like, I can see how that's your reality, Brandon, but that's not the reality for the vast majority of accounting firms out there. But you know what? Like, I think the reason that he's having success and getting through, I think when I first met him, he was 3 or 4 million, like, getting through these hard plateaus and figuring out the next version of that firm that requires more of an executive team, just a totally different makeup of person than you would have in a one to $3 million firm. The reason that I think somebody like that can probably make it look easy is, like, he is that visionary leader, and he's out there and he's visible, and people do want to come work for him, and they've bought into his brand of running an accounting firm, and he's doing what, frankly, is impossible for a lot of people. And you may look at that and be like, well, I'm. I'm not capable of that. There's Dale. Brandon wasn't capable of that either. And then he did years of a podcast and was hustling real estate stuff on. On LinkedIn for years before he ever came over to Twitter. And I. I learned about him. And so, as is the case with most things, like, you're seeing Brandon hall five years on the other. Other side of being visible and showing up on social media and building relationships and, like, being helpful there every single day. And a byproduct of that is people know who he is and he's very visible, and they want to go and work for him. And he's. He's an example of one of those big personalities that can resonate with a certain type of person to fill those seats in your firm that are extremely hard to fill. Okay, you got the idea. Stakeholders, the trickiest part of this phase of firm running. Let's get tactical. When I look at firms, I always look at your systems. I always look at your tools and I always look at your offers. What are the things that you hold out to people who are not yet clients and say, we do this thing for you. So let's start with systems. We've kind of inverted from where we first started talking about side hustle firms, the idiot bittiest of accounting firms, where systems are like, man, you're figuring this stuff out a day at a time. Every single engagement looks different. You're just trying to put food on the table. Systems were really an afterthought. Now we've, we've completely flipped where systems are extremely important. So if a firm's coming out of like you know, being 3 million in size or so, you are still grappling with what is this going to be? 20 person firm, 30 person firm at 3 million. This is where somebody always jumps in and goes, that should be seven people. Okay, there's no, there's no general like perfect answer here. It depends how much you're reinvesting to continue growing and all that stuff. But let's say 20 to 30 people at this stage, especially if you have several stakeholders and it wasn't just you that built it, you're still struggling with that middle manager, which is not the executive real high level person I'm talking about. It is the good technical person that doesn't know how to manage oftentimes. How do you find that person if you don't have them in your team? So that you go from partners with a bunch of direct reports to staff that report to that middle management layer and the middle management reports to you and a 30 person firm. What I'm probably going to do, I'm probably going to have five admins in a 30 person firm. That leaves 25 professional staff, maybe even five. I'm so pro admin, let's say 25 professional staff. I'm probably going to have five pods at that point and then a big boss of tax and a big boss of accounting services and the pod leaders will report up to those big bosses. And those are like sort of middle manager approach. Those are like kind of middle manager folks. And then to me I've got two direct reports now because most of these firms are product of mergers or of a traditional firm setup. In all likelihood, what you have is you may have two or three partners and the partners have their people and their people are used to going directly to that partner and breaking that relationship is a really hard, uncomfortable thing to do and can sometimes feel like a betrayal even to say I'm sorry, you can't come to me anymore. You have to come to this other person. And it's even worse if you have to bring that other person in externally if you weren't able to promote that, that person internally. A lot of firms here are still stuck with sort of that yucky middle layer. And you've got to get that sorted out. And the setup that I just described, I could probably do 2x that volume to where I've then got like 4 directors reporting to me. And that maybe gets you to 6 million, but it's really at that like 4 to 6 million threshold where I even start having to think about a level of leadership above that, you know, head of tax or head of cast type person. And I don't want to make this sound super trivial because there's also a world where that those like head of tax and head of cast type people end up sort of building their own fiefdoms and becoming this little quasi traditional partner structure. But depending on the number of stakeholders, you have common blocker here is that middle layer. I'm not going to beat this, this dead horse any more than I need to. But everything in the firm needs to have a subject matter expert. Every single app, every single technical matter at like broad brushstrokes, every system, every app, it has to have a subject matter expert that is not you and preferably isn't even those middle managers, because their job now is, is to manage to speak into some of those things. But the more you can delegate that subject matter expertise and give people something where they can really sink their teeth into it and feel like they can own it, like that's a really positive thing. And out of that, oftentimes you find something in people that you didn't realize or was there. And the firm that I bought, the traditional approach was the partners handled all the client communication. And so you'd had staff that had been there for decades and never been allowed to talk with clients. And when we switched to this traditional org, this org chart approach and we're like, no, everybody's like kind of handling client stuff directly now. You're a 20 year accountant, that's the thing that you can do. They were super like blown away and overwhelmed by that because it was something that they never experienced before. But in the process of putting new responsibilities on folks for the first time, a lot of people needed help. But you had a couple people that like rose to the challenge and were like, yeah, I'm ready for this. And I'm like, I'm actually feeling inspired for the first time in a long time. Because I have something that I feel like can be mine, and I can kind of run with this. And that is a awesome gift that you can give people. But everything needs a home. Because at this stage, when you're the big boss by default, you're the. You're the filter at the bottom of everything that's happening every single day. And there's a lot happening. And as much as possible, when something comes to you, you got to. You got to pause and say, how did this end up in my lap? Is it somebody else's job? And it was easier for them to just give it to me, or do I need to designate someone to be the head of this thing that has not yet been delegated? Don't let yourself be fooled into thinking that you can build a business with 30 people, but there still be a pile of things that only you can do. Usually when it ends up on your plate, it's because either you had swooped in in the past to be the hero on that and so they're deferring to you, or it was just easier to give it to you than to have. For them to have to figure it out themselves. Or maybe you're like, also the type of person that can come down really hard on the wrong decision, and maybe there's some fear there of making the wrong decision. They'd rather let you decide so that you don't ultimately come down on them. That is something worth working through for sure. This episode is sponsored in part by Team up, who helps you find talented accountants in the Philippines this week. And Team up, 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 I've had three signed job offers. Accountant, senior accountant, and management accountant. Gang is. 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 grow to where I want to 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 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 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, you wanna do big firm things. Carbon might be for you. Check out the link down the show. Notes Today's episode is sponsored in part by liveflow gang. Liflow launched a new dashboarding platform and I got to have a play with it the other day. It's actually pretty darn cool. They've got loads of templates like they've always had live flow for context. In the past there were utility that connected your qbo, your Xero with your Google sheets, your Excel so that pull any like client data into there. Now they're doing the same thing but for dashboards. Bunch of dashboard templates you can swipe with like full blown like a suite, like combinations of all these different reports, executive summaries and it all connects to that client data the same way their spreadsheet tool did. So you literally just pick a different company from a dropdown. So I could pick like make a cool custom reporting suite looks super impressive and then to like deliver it to another client. Literally as simple as changing the dropdown to a different company and pulling all that live data in a no brainer way. If you're tippy toeing into advisory to put better information in front of your clients. That's lifelong new dashboarding feature. Learn more the link down in the show notes nailing your service library very, very difficult when you have several stakeholders. As a firm gets bigger, it becomes generally more vanilla because you have more people doing more things different ways. Even if you start out with the best intentions of serving a specific type of client and doing very specific services, oftentimes the impatience of not finding people and not growing as quickly as you'd like leads to you widening what you're willing to do and leads to you carrying forward more old bad work than you should. The stuff that used to be great for you, the old B clients that are now C and D clients. Rather than cutting them loose as you probably should to keep lean and profitable, you hire more people to service that old stuff that you probably shouldn't even be dragging along. And before you know it, you got a whole floor of people, they're doing like this C and D work and it's just kind of like this no man's land of like, yeah, I guess go do that work. Even though we don't even really particularly care. Like if those people are super well taken care of and that's just not where you want to end up. That's why, like, as savage as it may seem to cut those people who were super important in the past, the reality is, is if they are no longer the apple of your eye, they're not going to get the best from you and they can be the apple of, of someone else's eye and get the best of them. And you could pay that forward to another accounting firm for whom they will be a clients. So as the firm grows and it kind of naturally goes in all sorts of different directions, particularly if you have the traditional partner setup where everybody's kind of going through life doing their own thing. The only way to corral this back in is with a service library and everybody agreeing to stick, to, adhere to. Like, here are the things that we do for our clients. There can, there can absolutely be exceptions. Like I rolled out this service library approach and you know, $5 million practice with, with 40 staff and almost 2,000 clients. And it was a collection of all this work from all these different partners. And this new guy that we had merged in, you better believe that we were doing things all sorts of different ways. So there are flexible ways to do this. Like the notion of having a quote unquote service library and being able to put your finger on this is tax prep one and this is tax prep two. It is as simple as well, Don used to always meet with his clients when they got their tax return delivered. So that's going to be, that's going to be tax Prep. Service Level 3 includes a meeting at the end. Like it's literally breaking down. Here's all the different things that we do for people trying to bucket them into the most like similar sort of buckets that we can so that your team has a vernacular of exactly what it is you're doing for everybody. If you've been listening to these different podcasts or different firm size podcasts all week, I sound like such a broken record now. But if you have an internal vernacular for the different things you're willing to do for people, it creates the ability for things to trend to be more similar now rather than the natural way of things where they trend to be more different. But that requires all the people being on the bus. If you have different stakeholders that are like quasi partners doing their own thing, managing their own book of business with their own people, inevitably those things take on a life of their own and do not track with sort of the direction of the company. And this is, this is a, a trap when it comes to pursuing the allure of growth for growth's sake. For no particular reason, almost always you end up making compromises, hiring the wrong people, letting in the wrong clients and stuff like that. Service library starts to be compromised and then efficiently, efficiency goes in the can. Like you're not serving clients in a consistent way. You're relying on people rather than systems. A big spectrum there of how much we are just reliant on unicorns and our most senior technical people and their abilities versus how much we're reliant upon systems. By and large, because accounting firms generally don't invest much time or effort in building systems. Like what is your quality assurance system? And most firms the quality assurance system is the person with the most experience. It isn't a system at all. There is no asset there that the company owns, no standardized way of doing things. And the blocker here is we're like, well, you can never standardize the entirety of the review of a super complex tax turn or something like that. But it's like, no, there's a whole lot of like a big swath of the work that we do that is the same across tax returns, across month end closes, that sort of thing. The goal isn't to get to 100%, the goal is to get 50%. And if you're a small firm person like me and you've ever looked at how big firms approach things and been super confused. I remember one example was when I first got a window into a regional firm and I'm like, they do three reviews. They did a detail review, they did a technical review, and then they did a partner review. I'm like, that is so wasteful. Because in my firm what we do is there's just one review and then it goes to the partner review. But that's just a signature, that's not an actual review. But the whole reason they did that detail and technical review is, is so much of the review is just like checking numbers, like very basic trivial stuff. And this is where it's possible to, to build systems to de skill that. And so you don't start with the biggest, hardest, gnarliest one you can think of. You start with 1099s. Do you need your senior, most technical person reviewing 1099s for correctness? You start with your most simple month end closes, the bookkeeping one clients very straightforward. Do you need your senior most technical people ensuring the correctness of a balance sheet with a checking account and a credit card? Probably not, right? But these people, they need to understand what's expected of the quote unquote review function. And until you create a system for this, you really can't. We did a whole podcast in the past around like difficulty scoring and how having an approach to score the complexity of month end closes of tax returns gives your team the ability to baby step into complexity, but also to democratize the notion of everyone as a reviewer. Because if you, if you put these technical folks up on a pedestal and somebody is on the other side of that for a decade and then one day they're told they're a reviewer for one, that's terrifying. But also like, what qualifications do they have? Like you haven't like baby stepped them into that in any way. So just a fundamentally better approach to handling something like technical review is to have a system for how are the level ones reviewed, how are the level twos reviewed, the level threes? And yes, the more complex it gets, the harder that is to do. But what a worthwhile effort. What is valuable in an accounting firm? Like what is the most valuable asset of an accounting firm if not its quality assurance system? That's ultimately what ensures the quality of the stuff that goes out the door. That's the best asset you could possibly build. And if you think about the fears around senior people leaving and stuff like that, like the ultimate way to Build a system is to take these really smart people and let them speak into that system to make it as good as they can, as it can be. And it will never be as good as them in many ways. In some ways it will be better because it can be a little more turnkey and you'd have a couple people cruise through it to make sure it's right that our lower skill. But if you have a super talented person come and spend five years with your firm and then move along, what do you have of them after they leave if you don't capture some of that expertise in the form of systems? I've actually been thinking a lot lately about the difference between selling people and selling systems because I think historically professional services, you sell people. It's the relationship. It's. Well, I like Tim and I believe that he can serve me. But increasingly folks just don't like stick around like people are not spending their careers in a role. You can't find a good company man like you used to, you know, like the youths like my generation and younger, they don't stick around that jobs for, I mean, certainly not more than five years usually. And we've all been in the situations, especially with our software vendors where you build a relationship with a rep and you're like, okay, I feel like you got my back. This is great. And then before you know it, like 18 months and they pull the rug on you and you're talking with somebody new and you don't like that and you got to build a relationship again. You probably don't like them as much as you like. The last person who either like left to go do something else or got promoted out of a role where they could still support you. Nobody likes that. And the more reliant we are on selling people instead of selling systems, the more exposed we are to the fact that those people aren't going to be around forever. Now this is in my opinion, an argument for separating the production, the fulfillment, the doing of the work from the relationship management. We heard from Chad Davis and how he built his, his org chart for their team of about 60. Right now they basically have client relationship managers who handle the technical review of work before it goes out the door. But then work gets done in centralized pods. So you have, you have a centralized group that does all the bookkeeping, the payroll, the bill pay, sort of all those different functions. And then you have a, a person whose job it is truly to keep that client happy and to advocate for the client within the firm. And I would argue in an Age where those folks are moving on quicker than ever before. This is a better approach because one, it doesn't disrupt the fulfillment, the doing of the work in the same way that it would if that person was also the one doing it all, not just managing the relationship. You could say the same thing applies for the team of folks doing the work and doing the fulfillment. But because that is a larger team, when somebody leaves, it's a little easier to flex that workaround. But then kind of the job of that functional team is to make that work as turnkey and systematized as possible. So. So in theory, it should be easier to pull somebody else in to do that work. So first argument for relationship managers is, is it, it protects you a bit from losing the person doing the work if that person is just managing the relationship. But then second, it actually creates a higher ceiling for your relationship managers. And a problem you have a lot of times with really talented folks on your team is you don't have anywhere for them to grow. Like, that was a real struggle for me. They're very good technically. You learn that, oh, they're actually really good at managing clients. And their clients love them. And they're the type of person, person willing to go the extra mile for them. How do I keep them excited long term? How do I continue to pay them more and like make this an exciting place for them to be? And the answer for me was removing them from the fulfillment and the doing of the work and instead focusing them on serving the client relationship like that being their main focus. It's at this stage, maybe a little past this stage. This is right about. It was at like maybe four and a half million when I really started leaning into functional teams. So rather than just having a collection of pods that largely did the same things, you had juniors and admins supporting seniors within a pod. It was right around 5 million when we began spinning out those functional teams. The pods then became ultimately responsible for managing client relationships. And then they. And they got smaller. And the functional teams were like, this is a squad of eight people that's responsible for all of the bookkeeping we do in our entire firm. And they just crank on that stuff. They're absolute wizards. They're total systems nerds. They try to make this stuff as turnkey as possible. And like that is the machine that is running. And then there's a machine for bill paying, there's a machine for payroll, and a machine for doing tax prep. This is where we started centralizing all of that work. And then the pods became more Just the client facing role. One other thought here on systems is more human system design. That is if you have very important stakeholders in your firm, what is your system for managing those relationships? For ensuring that you keep on the same page like that stuff is no joke. It is a marriage. Like how are you tending to that? Because it's not just going to manage itself and it's not realistic to think that it just will. That that just happens. I know Key man, Risk is a, is a huge concern for folks at this stage because you have people that are bearing a ton of responsibility. Obviously there's ways to, to mitigate for that for like to a degree in the org chart. But it goes without saying like that connectedness like being plugged in with everyone and, and that that actually being a system, like not just a seat of the pants thing but it's like what do we do every single quarter? This is one thing the acuity guys talk a lot about is like the leadership team, like they have standing like recurring things where they get away from the normal work environment and they go do these sort of strategic planning things and just have opportunities to connect in person in a different environment. I think that's, that's super important. Oftentimes you just assume that that stuff happens or you think you're not a fit for each other or that the right fit it would all just kind of happen on its own. And it's like man, the reality is it like it won't. Like humans are just not wired that way. That's not how any human relationship works. Like it is not always just going to be perfect. And so you have to systematize a lot of that work. Okay. Tools. I spend a ton of time on this because there's not a, not a huge number of platforms supporting firms of this size and larger. Super well today I would say for firms in the 3 to 5 million range you only really have three practice management options. Either carbon canopy or count. I work primarily with U.S. accounting firms. That's where my expertise is, accounting and tax firms. So firms outside of the US There are more options internationally. Boy. But I can tell you I think that they are behind the curve. I've been going deep on practice management systems lately and there's a ton more international options that don't market to the US that oftentimes will have like jurisdiction specific integrations that are important for your firm for filing taxes and stuff like that. The US practice management systems obviously don't offer that stuff. But I can tell you in the US we're in a really good place. We are ahead of any other market in the world in terms of the maturity of the practice management systems that we have. How good these tools are the blocker for adoption for most people outside of the US is just the local compliance needs that they have from their tool. Anyways, either carbon canopy or count is what you ought to be on here if you're looking for more tech opportunities. The opportunity here is the same as as it is for almost, almost any type of firm. If you're on a tax firm right now, there's big opportunities around intake. None of the practice management systems do a version of tax intake that is up to snuff compared to the leading tools that automate the intake process across your entire client base. So the leading tools right now are Sorben Stanford Tax I would say Safe Send gather Even really good PMs for tax firms like Taxdome. You know, their organizer, it's boilerplate. Like it does not at all go to the level of what these dedicated tools do to gather information en masse. If you have 2,000 clients, it is a unbelievably large undertaking for humans to follow up with clients and make sure that they gave you everything that they needed to do the tax return across 2,000 clients, 4,000 clients, please let the machines do that. Absolutely worth the investment in tech there. And I think oftentimes we are blocked by owning a platform that does a version of this. Like maybe your tax software has some sort of portal or, or your PM says they're going to get to it in a year or two. That is all wasted time. It's all wasted spend a half thought out feature that is not rising to a level that's good enough for you to actually put it to use. As far as I'm concerned. Like that is zombie tech that you're not even using. And it is never worthwhile to wait for a tool to do the thing that you need and then just use humans to do it instead as opposed to doing it this year, getting that immediate upside of using the tool. And then when year two comes around, in all likelihood the person that said that they were going to build it, they're going to be behind the person that you started using on year one because they've had a whole nother year to build a more mature version. But also in my experience, 80% of the time that company that said that they would build it, they didn't. Or it's pushed out a year or two years. And so now you're on the second year with that platform that you committed to the first year to say like, okay, we got to pull in this other tool because our PM or whatever it is isn't ready yet. Now you're on year two of that and you are, you are really humming and you're thinking even bigger. Like you're thinking about the next set of problems because you've already solved for the problem that you had the last year. And this is the trap of waiting too long and deferring decision making. So many people I see know that they're on the wrong practice management system. But like, the change feels too hard. It's like gang. Every single year, every single quarter that you wait to do this, you are deferring what that next thing would be like. These are compounding benefits. It's why I tell people, you know, if you're a U.S. tax firm, the best time to change big big Systems is after April 15, because you don't want to roll into the new year on new stuff. But if that has passed, say you're out past 10:15 like we are. As I've been recording this, you should still change then. Don't wait until next April because if you change now, yes, it's going to be a little more rocky, but you will be thinking bigger brain problems come next April. Like you will be in an entirely different place than you are now. And this is the value of, of not sitting on your hands too long. Making smart like calculated decisions here, knowing that I'm going to learn no matter what doesn't mean you want to be reckless. But too often I think we, we lean too far into inaction as a result of being over capacity, of, of of upsetting clients, stuff like that. Like we ultimately have to do what's best for the firm. And taking years to make hard decisions like you defer that next thing, that next opportunity years by doing so. This episode is sponsored in part by Safe Send one who helps you automate the entire tax workflow from taking information actually before that from engaging the client. Do an 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 a whole lot easier for you. Explore how safe Zen's 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 Fin Daily. Actually an app that I founded a few years ago and then sold Fin Daily. In short, it's almost like an email marketing platform, but for all of your financial data. So you build these email templates and then you plug in like banking balances, QuickBooks or zero data, like outstanding bills, outstanding invoices. You connect this email template to all these different variables and then you set that email to go out to your client on a recurring basis on a schedule. And then right before it sends, makes an API called all those sources, pulls the most updated information into the email and sends it out. Now, I was doing a cash reporting process for my clients. They were paying top dollar for it. But it was a pain in the neck to go out and like wrangle all the stuff I needed for those emails. So I actually founded this to automate that process. How's that sound? A fully automated cash reporting service that your clients will pay top dollar for you. It's a thing I can tell you because I've done it pretty nice. Fin Daily will even let you connect with like multiple accounting files so you could push out a single email digest pulling from like multiple sources, bank accounts, credit cards. Pretty cool stuff. Okay, check out the link down the show notes. The Learn more this episode is sponsored in part by Client Hub. It is tech change season. When you're, you gotta make those hard decisions and a practice management system decision. Oh, that's just about the most stressful tech call you can make. But let me simplify it for you. Comes down to the four C's capabilities, client experience, clarity and community. When it comes to capabilities, there's a lot of PMs with all sorts of capabilities. They do all the things. But Client Hub, it sets itself, itself apart with two things. Specifically, it's built to support cast slash bookkeeping work with QuickBooks and Xero Integrations. And they're investing in AI with Magic Email replies, magic workflow and magic answers. It's a lot of sorcery. I'll tell you what I appreciate about Client Hub. They're like, we're for bookkeeping firms. A lot of PMs are like, we're for everyone. We can do everything Great. And you're like really though tax audit firms go away, skip this ad. But if you're doing books, if you're doing advising stuff, client hub might be for you. Check out that, that linky link right down in the show notes. Something I'm big on is making meetings turnkey. You're at a, you're at a size of firm here where there's probably a growing number of internal meetings happening. For both internal meetings and external client meetings. I basically am a believer that you need to lock down the types of meetings that happen. So in the context of a client engagement, at what stages do you meet with the client? What's that meeting called? How long is the meeting? How do you prep for the meeting? Where does the meeting recording go? Where is the scheduling link for that meeting? Like those live meetings need to be part of the system. If it's a tax return delivery meeting, what is the script? What are the things that you go through every single time? I'm a huge fan of scripts and accounting firms do not use scripts generally for, for sales and kind of exploratory calls with, with potential clients. Even tax return deliveries, month end close deliveries, advisory calls. These live meetings are usually just left up to experience. Up to one's joie de vivre, your capacity to dazzle the client. And then you pull in a junior or somebody else and you're like, why didn't they do it the way that I did? It's like pour all that experience and expertise into a system, try to make those meetings as turnkey as possible and ensure that the output of the meeting is standardized as well. You're grabbing the transcript, the following items, whatever it is. Like when you see a meeting on the calendar, you can tell by the vernacular there exactly what is going to happen in that meeting. And in a pinch, another person can even be swapped in to run that meeting because you know how to run that type of meeting. For firms of this size, honestly, EOS might be a big help pulling in an EOS implementer and working through that. As much as I don't like it and as much as that's a really painful organizational change to go through and to stick with. I just love like freeform, like I'm such a, I don't know, I guess an entrepreneurial or visionary type where I just despise structure in all its forms even though I know it's good for me. And so I'm just, I'm wired the opposite of all of the things that EOS says. For all the same reasons that I loved the idea of going out and running my accounting firm on mainstream tech because it was like the ultimate blank canvas upon which I could, I could express myself. And then I ultimately did what a lot of other people I talked to do where they come full circle and they're like, oh no, I actually just need something that I can make like as turnkey as possible so that we can flip pancakes every month and just do the exact same thing. And the accounting industry solutions aren't perfect, but I also can't lock down these totally open ended mainstream tools that will do anything. Like I'm not able to put those on rails to the degree that I need to anyways. Eos like that is, that is to a degree putting the company on rails. And particularly when it comes to meetings that are worthwhile and having structure to run those meetings, I'm thinking more internal meetings. Eos is really helpful. One other thought on tools. Oftentimes big firms will get sticker shock at software costs due to the volume of, you know, returns or clients or whatever that they're going to put on it. You know, the notion of if you have a tool that is like a per tax return cost or per client cost and you just, you're staring down a bill of like you know, 80 grand a year or something like that and you're like, I'm sorry, that's just unthinkable. Like I could hire somebody with that money. I think you have to, you really have to like dig deeper on that and not be shocked by the big aggregate numbers that maybe you haven't seen before. But because you haven't run a firm this, this large in the past, so much about running a big firm is keeping it as lean as possible and try not to do more and different with every new client that you add and not leaning into tech that will make each engagement a little bit easier. Even if it hurts a little bit to like cut the bill for that. It's absolutely a worthwhile thing to do. Because what you have to do instead is you have to like carry on more people that are generally low skill people to do this work that you're not particularly proud of. And it's not, it's not usually a source of inspiration for the business as a whole. It's like, it's that floor of people that are doing your C and D clients that is just kind of like this, this island of misfit toys sort of situation. I will happily trade software spend for, for people spend generally, particularly in this day and age where it's like it's not as if I have onshore accountants lined up out my door. And the really important thing to remember about software, because accountants have wildly different appetites for what they're willing to spend on software is our ambition as a firm is to continue going more premium and upmarket and finding more specific problems that are more painful for our clients so that they'll pay us more to solve those problems. And all that upside comes back to us. But when it comes to software on a per engagement basis, that's largely a fixed cost. And I'm looking for the things that will accelerate my path towards serving more premium clients. Things like cutting the C and D clients because they're taking up my capacity that could otherwise be spent finding more A clients. I'm talking about focusing the business more, not doing all these different sort of peripheral things that are not more profitable than the core business. Ultimately your firm, the attention span of your firm is going to be consumed by what it is that people work on. I learned this being in a tax practice and then I ended up with like a one and a half million dollar cast practice on my hands in addition to my tax clients. And I built this in like under two years. It was nuts. And I learned that the attention span of your company is always, is perpetually going to be focused on whatever it is those people's responsibilities are what they have to work on. It sounds kind of obvious, but this ended up being an argument for me for actually referring out a bunch of our bookkeeping work, outsourcing the initial prep and then just having my team do the review because we were so heads down on the write up on getting the month end close done that we weren't like serving our clients, we weren't focusing on the right things. And when I carved a bunch of that work out, the total perspective of the team shifted to something that was more advisory oriented, something that we could actually charge top dollar for. And if you are, if you are not buying software and instead carrying more people to do menial work within your firm, it is pulling the attention span of your practice towards menial things, not big brain stuff that we can charge a lot of money for, stuff that we already know that there's a solution for, we're just not willing to pay for it. And to me that's an example of where cutting the check, even if it hurts and we are spending more money on software than ever before, most firms are burning 4 to 6% and honestly that percentage is probably going to keep going up as tech's able to do more and more for us. But in my mind, cutting that check is, is like a flywheel that is keeping the company more lean and accelerating the rate at which we can get to the better stuff, where that upside is 100% mine, but that software cost remains largely fixed. All right, last thing to dig into, offers. When I look at a firm, I'm honestly only concerned about how they're bringing in their next client, because that is how a firm changes is one new client at a time. So I don't really care who you got on the bus right now. What I want to know is how do you hold yourself out currently? What's the stuff you're trying to go out and get? Because that's going to like, like the only way to reinvent a firm is by revamping that roster, that client roster. So it's at this stage that it gets really hard for a firm to maintain its voice. Like, the more stakeholders you have, the more clients you have, the harder it is to say something that doesn't break something or irritate somebody. The reality is you're either going to grow to a certain stage and decide we have to kill our customer today to find the best customer, or you're going to stagnate. Like, you kind of have one of two options. You can't keep going to the next thing without reinventing yourself and abandoning the thing that got you there. Like, you really do have to reinvent the team, the clients, the tech, all of that stuff. Leadership, your own limitations and assumptions for what's possible. All of that stuff has to sort of break each plateau that you run into. And if you're not willing to do that, honestly, like, I don't know there's any shame in that, but just acknowledge that as soon as you stop doing that and you don't have the willingness to do that things, things will stagnate because you're serving the same people, right? It's not, it's not, it's not changing, it's not developing a risk of that is losing the, the excitement of sort of those ambitious people on your team. And so you can end up kind of feeling like you're on this hamster wheel where you're like driving this out of control bus and you're like, I don't know that I want to be driving this bus still. But everybody seems excited and they've all bought into my vision. And I've definitely had that feeling some days. And that's why I always come back to like, there is no Shame to a more chill version of this, particularly as you go through different seasons of life. I've gone through sweaty seasons. I've gone through not sweaty seasons at all. Kids change that stuff big time. I think getting married changes that stuff. Getting old, having creaky bones, gosh, my body hurts these days. Nobody tells you you get, you hit like you get over the hump on 35 and you just spend most of your day stretching. What a waste of time. Stretching. Oh, I will say if there's an opportunity for bigger firms here it is to serve people with more money. And that, that sounds shallow and it is shallow. But ultimately, when your firm is solving valuable pains for people, a product of like, ultimately what you can charge for a good tax projection or for getting the business over a specific hump is going to be a product of how much money they make, how much money the business makes. Big firms, you know, as is the case with any firm, if you're not for something specific and if they don't feel like they can get something from you that they can't get elsewhere, then your firm is competing on the basis of doing more for less. That is just the default. Unless you are selling something that that client feels they can't get anywhere else, then everybody is competing on the basis of doing more for less. We like to think we're competing on personality and them liking us more, but it's not going to take much of a perceived discount for the same work for that person to jump ship. And so you need to hang on to that edge. Even when you're getting big and things maybe get a little more spread out, you need to hang on to that edge of being for a specific type of person. This is all also really powerful when it comes to talent acquisition. You need to be for a specific type of entrepreneur for the same reason that you need to be for a specific type of person on your team. Like, you need to have something to say. The youths more than ever before need to feel like what they do has an impact. And in accounting, like, ultimately, I think the, the highest calling we have is enabling entrepreneurship. And if you can enable a specific type of entrepreneurship that people on your team can align with and they can get behind it, they're like, yeah, I'm into that stuff too. In fact, I enjoy hanging out with those people and just kind of jamming with them. And that's, that's a cool job for me. If that's just something that is helping the world, if that's something that does some social good, if it's just something that they're into. Like, being for someone, it matters. And it's a mechanism to not only help clients find you, but also help the right team members follow you. Last thing on offers, acquisitions. Oftentimes people get beyond a certain size threshold, and it's when you're at maybe this 3 million range that you're like, yeah, we could roll up $1 million practices, no problem. And sometimes that's. It's never no problem. It's a lot of work. But if you learn to, like, find the right targets, like, it's something that can work, always look out for that $1 million practice that was being run by the owner. The more the owner is. Has, removing themselves from the client management and all that, always the better in a transition. If ultimately you buy them out and then that person leaves, you got a big old void that you got to fill. If they were doing all the heavy lifting before, but ensure that that that client base aligns with, like, what are the offers that our firm is standing behind right now? What are the best things that we do for people and the opportunities that we enable to differentiate us from every other firm that's out there. Every time you roll a book of business into your firm, like, those clients have to make a choice, and it is a pain to have to change accountants, but if they're going to jump ship, it's going to happen at the time of the change, and they're absolutely going to run the numbers. They're going to be like, can you actually offer something that I can't get somewhere else? Like, am I. Is this the best ROI for me? And honestly, when there's a forced time of reassessment like this, when your accountant comes to you and says, I'm sorry, I'm gonna send you to this other accountant, this is when their brain goes back through the old database and thinks, you know what? I saw that other person and they said something really smart. There I was at this workshop and this CPA came by that just worked with beekeepers. And I was like, oh, wow, that's a thing? And it didn't even cross my mind to work with them before. But now that we're changing, you know, I am a beekeeper, and I'm looking at this new person's website. I don't see anything about beekeepers. I'm going to go call that other person. Like the. This is what makes the best acquisitions, acquisitions that align with the offers you already make. So if you're doing real estate, if you're doing beekeepers or whatever it is. If you're doing creators, like content creators, this is where acquisitions can be pretty juicy, I think. But general acquisitions into general firms, it's interesting. People are pretty split on this. There's folks that will happily do this if it's the right deal. And then there's other firms who are just like, this is way more expensive than organic and we can get as much organic as we could possibly want. So why would we go out and pay somebody else for that work? And I can honestly, I can understand both sides of that circling back to like, man, it is, it is all about the stakeholders. Whether or not you go org chart or traditional partner structure, it probably boils down to the people that you have on the bus. And honestly, don't let the cool kids, don't let the youths tell you that you can't do traditional partner structure because there are totally chill ways to do traditional partner structure that avoid having to make a bunch of hard decisions and having to agree to do everything the exact same way. Like, don't feel like that traditional org chart is the only way forward because it's absolutely harder. Like it, it really is. That $1 million accounting practice, that's not a bad gig. You build your own little team, you decide how you want to do that stuff yourself and that's it. Growing beyond that in a, in a traditional partner model, it's really a bunch of those side by side with some resource sharing. Now if you are serious about like scaling, overcoming some of the limitations of that model, I do think there's some benefits to the org chart, particularly if you are wired like as a visionary, where you want to scale your own vision for how to do this stuff. That was how, that was how I was and that was what was appealing to me about running a larger firm. Then this is going to enable that for you. Like the org chart approach is probably for you. But no matter what, that firm can still be crap. It can still churn through people. It can still abuse the team members and not take care of clients if you're not doing the right things. Like that applies to both the org chart model and the traditional partner approach. You got to choose your own journey. It's going to depend on the people that you have to do that with you. There have been stages of my life where I. Where I've had people that I would have loved to do that with. And then there were other stages of my life where I didn't know anybody I could do that with. And so that's probably a, like a driver of the decision here. As much as I kind of dunk on like partnerships and say that most of them fall apart, there's also something to be said for like going through life doing business with people you really enjoy. Like, there's no shame in that. Like, that's not a bad gig. Particularly as running your own firm is, is honestly is inherently isolating if you are the one big boss at the top. Like, that's the value of community and meeting other people that run firms and all that. But if you got a buddy, if you got friends, you got people you really vibe with that you can do this with, that's not a bad gig too. You just got to find that, that structural model that's going to work for everybody. Because heading into it, like saying, no, we're going to do the org chart thing, but then basically having a whole bunch of CEOs, that's probably not the move. But you'll figure it out. This, this phase was the most fun phase I had in running my firm. You're like, you're over a hump where it's like, yeah, like I can, I can finally do the 10,000 foot view thing and feel, feel totally fine about being out of the client. Work, work on the machine at a higher level. I loved doing that stuff. So if that's how you're wired, you're going to love that too. That's all I got. Thanks for coming and hanging.