421 7 Mistakes I Made Growing My Accounting Firm

Oh, today we're talking about the seven mistakes that I made growing my firm. Just seven of them. There were more. We're just covering seven of them. Because you know what? Growth, it's attractive. Everybody tells you that success is growth, and oftentimes you're willing to make compromises as a result in the pursuit of that success. So let me run you through some of the stuff that I got wrong to either scare. Scare you into not growing, maybe. But better. Maybe just to give you, like, a better, healthier path to growth. Let's do it. Okay. Number one, this one's kind of embarrassing, but it's more of a thing than I think we will admit. Oftentimes, number one was doing it to become the alpha. And this is especially true if you got. If you got a firm with some dogs in it. I don't care who you are. There's very much this, like, human nature. I need to prove to this other person that I can do this thing. Oftentimes, it's not even somebody that. That you work with. Oftentimes it's a past employer. I mean, a family member, the person who pants to you in high school. Like, it could be anybody. But oftentimes we try to grow so that we can kind of assert our dominance. And there's a lot of different versions of that. And it's not just a male thing. Like, it 100% is something that all sorts of different types of people do. In my own journey, I mean, I was coming up through a firm where I was trying to, like, prove that I was worth becoming a partner, because in most accounting firms, that's. That's. That's the top of the heap. That's like, in the little game that you're playing within that universe, as far up as you can go is that. And I would say in traditional firms, the thing that is probably most valued is rain making is being able to bring clients in, keep clients happy and all that, which has absolutely nothing to do with the doing of the work. And oftentimes, I mean, you've. You've all seen that people who are very, very good at one and very bad at the other. So while I don't think just doing it to be the alpha is necessarily a healthy thing, sometimes you may be in a firm where that's kind of your only choice. And it's worth, like, hitting pause to consider if the only way I can win in the environment that I'm in right now is to do something that'll take me to a place that ultimately I Don't want to be because being the alpha is like, that's winning business, usually winning business at all costs. Winning business that oftentimes isn't optimal for the firm, but is something that we'll do just to get there, just to get to partner or prove that thing or whatever that looks like. Like, the trouble is if you do successfully prove that on the other side of it, you still gotta deal with that mess that you just made. And so if that's the only way for you to get ahead, maybe we're zooming out a bit to think bigger picture about where could I find success in a, in a place that, that doesn't necessarily require this. Number two, doing it with the goal of getting to a different financial level. Personally, once you are past like basic kind of financial needs, like there's a, there's a number there, you know, between a hundred and two hundred grand USD for most people where you're doing good, like you're in a great spot, you got plenty, and you are going to get diminishing returns on, on money beyond that. But if like money is at the core of why you are, are trying to grow like personal wealth, you kind of got to make sure you have a really good reason for that. Because making 300 grand instead of 200 grand or 400 grand instead of 300 grand, like the marginal returns of that very often are not worth the added work and stress that is required to get there. And some folks are just builders where they want to make a thing that's bigger so it's more viable so that they can sell it for more money. The answer there is the same. Selling a thing for 2 million instead of 1.5 million. Is it more money? Yes. But did you just have to like, what did you sacrifice along the way? Some people are not wired this way. Some people are just wired to the extreme where they have to like go all out max. And that is, that is the only thing that they can understand. And that's like, if you're wired that way, that's fine. You're gonna do that no matter what I say. But for most of us who are like, I, I kind of just want balance. Like, I appreciate being able to run my own thing. I wanna make good money and I wanna have balance. Like if you're looking for that, just arbitrarily pushing things further to, to make more money beyond a certain threshold, the juice is usually not worth the squeeze. Number three, taking on clients before you have the right staff to, to service them, which is what most Firms do they, they bring in clients and then they scramble the interceptors to figure out how to actually get that work done. Rather than the other way around, getting ahead of capacity, having qualified folks that can do the work. In my fastest growth period, we added, or I added, I was about. And nothing's, nothing's just one person, but we added about one and a half million over 18 months. One and a half in ARR. That is. And we were like, you've seen the Wallace and Gromit gif where he's like on the train car and he's like putting down the train tracks in front of him as fast as we can. I was doing that with staff and there are areas where that's possible. Like for example, when we started hiring offshore, that was much easier to do. Like I could snap my fingers and in 30 days I would have somebody that was pretty good. And in my case, all of my offshore hires worked out. That won't always be the case, but if that's a tax person that you need or like a good onshore bookkeeper that can manage client relationships, in no world can you snap your fingers and know that in 30 days you're going to have somebody that's really good. During our, our, our, like my, my biggest, most sweaty growth period, we grew maybe one and a half million in, in 18 months. And you know, if you've seen the Wallace and Gromit jif where it's like the dog on the train car and he's like putting down the train tracks in front of him as fast as you possibly can, that's what I was doing with staff. I was just trying to grow and then figure it all out later. You, it's not to say you can't do this. You can, it's, it's just, ooh. There's a whole lot of trade offs to it, a whole lot of risk. There are certain roles where you can snap your fingers and like be, be reasonably sure that you can get somebody in to do that job. Like when we started hiring offshore, I was reasonably sure that within 30 days I could have somebody in that could do the job. But when it came to hiring a tax pro, when it came to hiring a good onshore bookkeeper that could manage client relationships, there was no world where I could with like complete confidence say that, oh yeah, like 30 days from now we've got this client that's, that's going to be coming. In 30 days from now we'll have a person who doesn't exist yet and isn't even on our radar who can do that work. Like, that's just not realistic. And so it leads to issue number four, where then you start making trade offs on who you'll let in and then the problem is just compound. So I absolutely need to have a person within 30 days. So what do I do? I go out and I find the best person that I can in 30 days and oftentimes that's not a very good person. And so now you've got these, these new clients that you're obligated to serve. You've got team members who are still just getting up to speed and like in no way have their legs under them to be able to serve all of this work. And to make matters worse, you've oftentimes compromised a bit on, on, you know that thing that came up when we were talking with them where we're like, that probably won't be an issue or we kind of fudged the qualifications we needed a little bit, or this person ended up feeling like a little bit too expensive for what we think they can actually deliver on. But when you've got the dollar signs of like those accepted proposals and that money coming in, you're like, well, we just, we just got to get that work done, you know, whatever the cost. And so you do that, obviously those engagements are going to be a problem. But then you keep doing that, you keep hiring the wrong people and keep taking in more work. And before you know it, man, you got a, you got a whole hornet's nest of not fun stuff that you're having to manage yourself. And it, it compounds the whole pressure of, well, I gotta do this to prove myself. But then in the act of trying to prove yourself, you're just like making a hash of things oftentimes that can blow up. And then you just, you look like a dummy because you can't actually get that stuff done properly. But all that stuff kind of just compounds and creates an even more stressful situation. This episode is sponsored in part by Carbon, the practice management system. Something that Carbon does that I love is they will literally tell you the stuff that they are working on and have like a big ta da event at the end of the year to announce. Like, hey, here's the stuff we're about to ship and here's what we're prioritizing for the following year, which that level of confidence and transparency. I like it. In fact, in the process of doing that, they probably actually get a lot of really useful feedback around, like, okay, here's what I Like about that. Here's what I don't like about that. Whereas if they didn't put that stuff out ahead of time and kind of just did this big ta da, they would have less information from their users than they have by like kind of involving them in that conversation. They did that at the end of 2024. Announced a whole bunch of stuff. Honestly, all the Carbon nerds and Carbon just hassle some real enthusiasts. They all turn up to that webinar and their show is like the highlight of the year. They got the popcorn out. They're like, oh, what are they going to announce? And a bunch of people did get excited and they went ran out to LinkedIn and they're like, oh, I'm so, I'm so excited for this and that and that and that. I mean, props to Carbon for building that level of fandom in your software tool. But also people, it's accounting firm software. Let's get some perspective. Probably not a lot of tools in your stack with that level of transparency. If you're in the market for practice management system Carbon, one of those tools you kind of have to consider. It's like on the have to look at list. Learn more about Carbon. Check out the link down in the show notes. This episode of Sponsored Apart by Teamup. You know, the greatest proof of something that actually works. People are doing it. People are coming back and doing it more. I got a report here from the last few weeks of the projects that Team Up's been working on. By the way, Team up, they help you hire talented accountants in the Philippines directly. You work directly with them. Can I just run you through, through like, I don't know, like half of of the things they got in the pipeline right now. Firm in Hawaii, hiring a bookkeeper. Returning firm. They're coming back for more. New firm in California, hiring a senior accountant. New firm in Australia. I'm so sorry. Oh, what was that? I'm so sorry. Hiring a tax accountant. Firms in Florida and Texas hiring senior tax accountants. They are returning firms. BC a returning firm from bc hiring a junior bookkeeper. Arkansas firm hiring an executive assistant. New firm from Colorado hiring a senior accountant. You get the idea. Every playroom accountant you can imagine, a whole bunch of firms are coming back, which tells me they've done this before and it worked. That's what I did. I started with one and then immediately hired like three more folks in the Philippines over the course of two or three months. If you're looking to work directly with folks in the Philippines, Team ups got the recruiters can help you do it. Check out the link in the show notes to learn more. Mistake number five that I made hanging on to those clients who needed me. Like me specifically. Not my firm, but me. There were those clients who, maybe they'd worked with you for a long time. Maybe you were the one that brought them into the firm. But whenever they call, they gotta talk to you, even for like, very trivial things. And sometimes, sometimes these are like premium clients, and so you let it slide. But, man, we like, perpetually underestimate the value of our time and our attention and just how much doesn't. Doesn't get done when we are tied up with something like that. And so you hang on to them for a year or two and you're like, you're otherwise out of client work, but you're still having to do some stuff for these clients, when in reality, who needed you even more than that client was your team, was your business, was the hiring process, was whatever the bottleneck was to get you to where you're trying to be. All of those things are vastly more important things that you're building for yourself. You're building the machine rather than that one client and what they're doing. Now, this is assuming that you are hiring people and all that and growing beyond just being just you or just a couple of people. And if that's the case, like, you have to. And this can be very emotionally taxing. We just have to be realistic about, like, what is the, the more valuable way to invest my time? Is it in building a thing for me or is it in building a thing for somebody else? Too often we get. We get flattered, or somebody puts a price tag on it that, that may be something that you couldn't have imagined a couple years ago. And so you will go and you'll build that cool thing for them. But then as soon as that engagement's done or if that person goes another direction, you're straight back to square one and you haven't built anything better for yourself. Now, number six, mistake. And this is a really hard transition to make when you are getting beyond it kind of just being you, or maybe realizing, I do want to grow. I'm enjoying this. I'm enjoying running a team. I want to pull more people in on the process, but it requires a really tricky change, which is bringing in clients that are great for the team, not great for you. Oftentimes those are two very different clients. In my case, I had like, some software expertise and just kind of some different things from my background that I could do that. Made me a really good advisor to a specific type of person. But my team, team, at least in its current state, they didn't have that type of expertise. And it is worth, like, building that into your team. Like, if you're going to serve a very specific vertical, get your team out to those conferences, get them reading the publications where those, those folks are all learning. That's really, really valuable. But until you've done that, like, you have to be. This is a very common mistake that I think legacy partners will make is they will. They will see something shiny, an exciting type of client, and they're like, oh, yeah, I can go do that. I can do that. Let's go do it. But the team is like, I mean, the team may not know absolutely anything about that st. And the team probably has a more realistic lens of like, how much am I actually going to be able to get out of the partner to help with this? And if they're always slow getting anything, then just piling on more clients that only the partner can serve. That's not going to make anybody's life easier. So as you're, you know, if you're settling into maybe serving a specific vertical or even just trying to work on the firm instead of in the firm as much, the makeup of your team becomes even more important because they have to hopefully have some sort of specialization or expertise or knowledge of a specific type of client that you can pull in. Because if all they are are generalists who are not as good of generalist as you, then, man, it's hard enough for you to differentiate your firm as a generalist. You being the top dog in a firm and, you know, the most capable. It is even harder to differentiate a firm full of generalists that are like, at the staff level, not at that really high level. Right. The good news is here, it's actually not tremendously hard to build that expertise into people. Doesn't take all that long as long as you found what that vertical is that you want to work on. Unless it's something very, very general like real estate or something like that, it's going to be hard to do. If you found that thing that's specific enough, man, a weekly newsletter, a couple trade shows, and your team members are like the. The leading experts in what you do for those people. And that's what we're trying to get to is what's the level of specificity where I'm not going to be going up against everybody else in the world trying to, you know, do more open Verticals like, like, like a real estate, like I mentioned, where there's a ton of folks and a ton of complexity. Instead, like, what is the. The client profile? Taxidermists, whatever it is, beekeepers. Realistically, it entails getting the team up to speed for you to actually get yourself out of that work. And oftentimes this is evidenced by you pushing a client to another person and then a bouncing back. If they go to that other person in your team and they don't have a positive experience or it's not as good as you, that's kind of the natural thing that's going to happen, right? Last one. Number seven. Winning at work while losing at home. I never, I mean, I did a bit of this. I don't think I got sucked too far down this rabbit hole. But it's an easy thing to do if you're not care careful, you can put the cape on for everybody at work, including your clients and your colleagues and everybody else around you. And you're the hero. And everybody's like, wow, he always steps up in a pinch. She always comes through for us. And the last people that then get served are all the people at home. So something comes up, somebody's got to work late. Like, if you're the first one to jump in and do that and be like, yeah, I'll make the sacrifice. I mean, let's get some perspective. What an awful thing to do, you know, and sometimes it just takes, like, recalibrating what work is and what your work relationships are. I got a whole heck of a lot of perspective of this after I sold my firm. Where you go in and you build these relationships with the people that you work with every single day and the clients that you serve, and they're real relationships, but they are a product of proximity and they are not what you think they will be in 95% of cases when you're out of there. When you own a business, for most people, unfortunately, you are a means to an end. You're the signer of the paycheck, you're the person that gets their tax turned on their month and close done, whatever that is within that, within that relationship, you can still, like, build meaningful relationships. But it all changes when you're no longer the one signing the checks, when they don't need you to prepare that tax return anymore, whatever it is. And I think because we want our work to mean a lot, we assign more value to that than we probably should. We think, oh yeah, we'll still be friends, we'll still go and do all of these things. And there's going to be a few people who, like where you still will have that, but a lot fewer than you think. But the people who should always be around, it's all the people at home who just want you to come home and spend time with them. Meanwhile, we're doing one through six here. We're, like, chest beating, trying to become the alpha at work, trying to prove stuff to people who are only in your life circumstantially because that's where you went to work or because you know, that firm got acquired by your firm in the past, and now you're trying to, you know, beat out that person for this and that. Like, a lot of those things happen by, like, no intentional design. Meanwhile, the nice thing about, you know, your immediate family, you've got control over. Like, like, you chose those people. Those are the, like, those are the ones that we ought to be putting on the cape for at the end of the day right now. Sure, there's balance and, like, will there be exceptions to that? Are you going to perfect 100% of the time? Do you sometimes have to go the extra mile for clients when, like, you leave them in a lurch because maybe you overextended yourself or something like that? Like, yes, there will be messy situations like that, but if the default, if the status quo is forever is, you know, everyone at work thinks that you're the hero, but then things at home aren't good and you're not engaged with what's happening, and that's kind of an afterthought for you. And I can. I can tell you this from someone who is. I don't have work obsessed is the right framing. But I super, super enjoy my work. Like, I'll go travel and I'll do stuff like this. I'll shoot a podcast. And people are like, why? You should be, like, out seeing the sites and stuff like that. And I do, and I try to do that, but I also don't have a problem working. Like, I'll get on a super long flight. And I'm like, oh, man, this is kind of going to be awesome. I can work for this, like, really long, interrupted period of time. And, like, you know, my siblings probably would be like, that's sick. You got a problem. And I'm like, if enjoying what you do for work and how. How you spend most of your life is a problem, then, like, I'm totally fine having that problem. But it does require balance, I think, especially, like, for me, especially since I had that sort of. That changed the calculation. So you go, seven things I got wrong when I was trying to grow. My rapid growth period was the least fun period I had on firm running, followed by the most fun period where I'm like, we're just going to stop and I'm going to get rid of the clients I don't like. I'm going to move on from the staff that. That where it's just not working. And then I had like a subset of that business after that. That was glorious. It was the super capable people, the clients who were great to work with, the projects that were profitable. That was a lot of fun. Like the next. By the next 18 months we spent refining that was just a much happier headspace and a much more fun workplace to turn up at any mistakes you made. Drop that stuff in the comments. Might save somebody some headaches. Because these things, these are the kind of things that play out, like across years and you look back and you're like, dang, shouldn't have done that. But like in a podcast like this and a comment that you read online, you'll pick up that one thing and it'll. It may not land with you immediately, but then nine months down the road, you may be in a situation and that one comment, or whatever it was, it comes up in your head and you're like, ooh. And it's just like this little ping that maybe causes you to hit pause or make a slightly different decision because they, you know, they picked that up in the podcast because that person took a moment to share that detail. You never know who you're going to help by doing that. So if you got anything like that, drop it in the comments. We'll see in the next one.