488 There Are Only 3 Types of Accounting Firms

You ever heard the expression that you are what you say no to? I heard that the other day and I'm like, is that true of accounting firms? Accounting firms are what they say no to. Doesn't that feel nice? Doesn't that just feel like, I know there's some sort of satisfying like, symmetry to that? Like, yeah, I need to say no more. But is that actually true? Here's the problem with that statement is that assumes that the only things we have access to in the world are the things that come to us. And I don't really like that. I don't know about you. I don't like just being along for the ride. I, I mean, sometimes that's fun. But I also like to think I have control over what my firm becomes and the type of people that I can attract to what I do. So I've been thinking through kind of this like three phase framework of what does it look like to go from being like a low agency firm to a high agency firm. That is we're actually taking control of where we're headed, ensuring it's something that we want to do ultimately because we enjoy it more and because it's a path to like a more profitable, more sustainable practice. Every one of us today falls into one of these three phases and there's a common set of fears. Anytime you're thinking about going from one face to the next, that's what we're going to talk about today. Let's get into it. Hey, if you're new here, welcome. My name is Jason. We talk about running accounting firms. I used to run a 40 person accounting firm myself and let me tell you, in 2025, not a bad gig, run an accounting firm. But as with all things, we only really know what we've experienced and we have all these sort of like limitations based on probably what we've seen. Other past firms who we've worked for, like what they were able to do, probably based on what we've successfully been able to do so far in our journey and maybe even some stuff that we failed at. And today, hopefully I can like broaden that perspective for you a bit to see the best of what I'm seeing from other firms and how their mindset can just be fundamentally different, doing the exact same work, but they think about what they do and really the control over their future in a completely different way. So first phase of running a firm and every single firm, I shouldn't say every single firm, most firms start here. The first phase of running your firm is you are what walks in the door, you are just, you are happy to take anybody who will give you money because in that first phase, most of us, we're just trying to put food on the table, right? You're not picky. And this, this is actually really hard because many times we are the high achievers and wherever we're coming from, we're like the top dog and very sought after. You may have a huge hourly billing rate and then you go out on your own and you know nobody and you're like, buddy, I just got to take whatever I can get. And that could be like really inane, low level, say, bookkeeping stuff where you're like, boy, this is not a thing I ever would have touched in a million years in my last role, but here I am. But you're willing to make that trade off because you're building something for yourself for the first time rather than building something for someone else. And who, once you take that red pill, you never go back. Once you start building your own thing and making sacrifices in the name of your own thing, like, it's, it's real hard to ever make those sacrifices for somebody else's thing. But for most people when they're starting out, they are trying to build a network, they're trying to get referrals, they are sitting back and whatever comes in, they're, they're, they're probably saying yes to it, right? But in less time than most people think, usually they hit capacity there. That is one common theme I hear from folks that are launching firms is they hit that limit faster than they anticipated. That's because there's just such a demand for what we're doing right now. I actually saw this framing from Alex Hermosi the other day where it was, it was talking about people like going into Hollywood and wanting to get into acting and all this stuff and how a huge percentage of those folks are basically living in poverty because this is this passion that they have and they will kind of do it at all costs. But such a tiny, tiny percentage of people actually find success in it. And the point of it all was like, what's the really not sexy thing? That's going to be much easier. I mean, if you think about the spectrum of sexiness. Listen, I don't. If I'm the first one telling you this, I'm sorry, but accounting is like, it's kind of at the other end of things. And it's why, frankly, like, it's so easy, like in the grand scheme of other types of businesses. Like imagine building A software startup or. I don't know. Like, I look at the state of running accounting firms today and it's not to say it's trivial by any means. And it's not to say that the whole existential dread of owning your own business for the first time and having to set your own boundaries, like that is all very hard stuff. But when it comes to building a business that can make money, we're at the good end of the spectrum. That is the end of the spectrum where there is so much more demand than there is supply and we can crap the bed every single day and still make a really, really good living. I mean, so much of the advice on this podcast is like, here's how to go from making 400 grand a year to 500 grand a year, which is like, wow, okay, yeah, cool. Now, not like not everybody's there, but also like, sometimes you kind of just gotta have perspective and like gratitude that like the market conditions for running an accounting firm are so, so good right now. But most people start out in phase number one. You're taking whatever walks through the door. And phase number two happens when you hit capacity for the first time. And I would say phase number two is you are what you say no to. So at this point you're just getting more selective with what's coming in the door. You have a more lead flow than you can possibly handle yourself. And so at this point you've usually traded like the fear of not being able to make money for all sorts of operational issues. And a lot of folks run away from having to say no by building a team. You just keep hiring people to do whatever work comes in the door. And in many ways this is like running from the core problem because it means you've probably got like very early clients who are still with you, who are a quarter as profitable as your new clients. And for a whole lot of reasons, it's very hard to get rid of those early clients, namely like loyalty. And they were the ones that kind of first put food on the table. And there's people who will hang onto those clients for decades because they were the first ones to believe in you. That's kind of what it feels like, the first ones to believe in you. And you want to somehow reward that by bringing them along on your journey. I my take here, and this is just a cold hearted take, and I recognize that, is that most of the people who will work with you in your professional career, you are a means to an end for them. They have to get a tax return filed. They have to have books put together so that there's numbers to go into the tax return. It doesn't mean that we can't build relationships and we can't be friends with them, we can't be friendly with them. But most of us conflate convenience, routine, them working with you for another year. We conflate all that to be much more personal than it really is for the client. Because more often than not, a client sticks with you. One, because they don't want to have to change, and two, because they know they can't get it cheaper anywhere else. In fact, that's the other side of that coin of they were willing to take a risk on you. What's a byproduct of taking risk? You're going to pay less. The people who are willing to take a risk on, like a early startup accounting firm, because that usually means a steep discount. It usually means they're the cheapskates. Now, that's not 100% of clients, but that's 90% of clients. And you might think you're the only one that has a client list where, no, everybody actually does love me. But I am here to tell you that is. That is unlikely. I mean, they could still. They can still like you. But at the end of the day, this is a business transaction. And so if I hang on to those people until the end of time, we gotta be realistic about are they getting my best, like, when that project isn't actually making me any money anymore because I've had to hire a big, expensive team, and my expensive team does the work, and I can't. That client can't even pay me enough to cover the cost of the expensive team doing the work. When your firm grows and really outgrows those clients, is that person really getting your best? Still? I would argue what we're actually doing by hanging onto those people is keeping them from being starter clients for somebody else. For another accountant who's at a different phase and needs those clients to put food on their table, maybe that's cavalier. I don't know. I think it's just kind of being real. So a lot of folks in that second phase, they will find themselves sort of paralyzed there, where they're not quite ready to get rid of who they have. So they're like, well, maybe we should just hire more so that we can help everybody. And a lot of this is actually, like, pride wrapped up in, ooh, it'll be impressive if I run a bigger team. It'll look like I'm. I'M being successful. So sometimes that's attractive. The notion of being able to build something bigger when really is all you're doing is like turning that treadmill from seven miles an hour to nine miles an hour. And oftentimes not even making any more money, just piling up more headaches. And it's interesting. There's a lot of really, really big, really, really mature firms who are still living in phase one or in phase two. I mean, you think about what the qualifiers are for big firms. The qualifiers for big firms are often just the minimum annual fee. They'll say, like, we won't work with anybody who's not paying more than 10k a year, 25k a year, or 50 or 100k a year. That's it. That's the only filter. And I would probably say in my firm running journey to like, phase two is probably where we spent most of our time. I would say phase one is probably where the firm was when I bought it, because we would do just about anything. I mean, we were doing tax returns down to like 150 bucks. And then moving from phase one to phase two was hard because you got to trust that saying no, there's, there's still going to be, you know, enough work coming in the door and saying no. And even firing some of those clients wouldn't somehow create this, like, cascading negative sentiment around your firm. That would mean you never find another client again. And honestly, you don't even believe that you can do number two until you just do. It takes. I mean, it takes years to actually believe that the thing that you've built can be durable. Like, it takes. I've heard the framing before of like, your internal identity perpetually legs like two years behind your external reality. That is what everyone else sees in you. And like, what is actually happening. You, you kind of don't let yourself believe it until you've sat in it for a while. I mean, I still have that in my business now. Like, I'm just waiting for this whole Internet grift to fall away and just go back to running accounting firms. But that's what keeps us from moving from phase one to phase two. We keep saying yes to things. We oftentimes build a team because we're afraid of sending anyone packing, losing that revenue, even though it might not be profit. And we haven't built up the confidence to be able to say no and trust that there will still be yeses down the road if I say no to this one. This episode is brought to you in Part by Maker's Hub Hot off the presses. We recently did a video on the main YouTube channel. If you've seen it yet, it's kind of like a masterclass for how to automate the accounts payable department. Soup to nuts from beginning to end. From how you wrangle all the bills to how you extract the goodies off the bills, to how you get them through like an accounting approval that is making sure that the stuff on the invoice is correct and that the correct accounting codes are associated with every single item on a bill to payment approval. Which is completely different because usually a different group of people have the keys to the castle to be able to make payment. But because most systems combine those two approvals, you end up with like the person who can make payments approving like the factual stuff on the bill when it's like they may not even actually know whether that was invoiced correctly or not. Clear through to like how payments get released, what accounts they're coming from, when they're going out the door. Super cool stuff. This is like the, the area of accounting that AI has most impacted is accounts payable. I did a load of AP management in my firm. Even if you don't do it, you got clients who do it. I would super recommend actually you share that video we just did with clients that are doing this stuff because it completely changes how you build your in house accounting team. But for you as the firm, if you do this work, it's. It's actually a big time opportunity right now. So get out there and do it. Learn more about makersup. Check out the link down in the show notes. This episode is brought to you in part by Kanopy, the practice management system who I'm co hosting some events for over the next few weeks. Totally free events like unrelated to Canopy, just about workflow in general. We're gonna be in Dallas, we're gonna be in Austin, we're gonna be in Minneapolis and we're gonna be in Boston. Okay. If you're anywhere near there, I wanna see you. I'm gonna do a keynote. We're gonna end with with a Q and A. It's like a half day sort of thing. I think you get a few hours of cpe. They're gonna feed you lunch. What more do you need? Gonna be some smart conversations, but also just a great hang. Spots are pretty limited for these events. I think we're targeting about 70 attendees for each. Those are gonna go pretty fast. To learn more about those events, check out the links down in the show notes, that's phase two, hard to get into and probably where most firms are and as far as most firms ever get. But there is, there's a phase three phase. And I would say phase three is you become what you pursue. And the main difference for phase three is learning that I actually have control over like what the universe sends my way. So let's take two accounting professionals otherwise running identical phase two firms, one accounting professional heads down, doing the work, talking to clients all day, every day, doing right by the clients that they have, but the rest of the world otherwise doesn't know that they exist. And man, this is probably 95% of accountants right now where you just focused on the business. And if a client wants to send you a referral, that's great, but that's kind of all that you ever do. And in the age of the Internet that's just such an unoptimized way to run your business. And a lot of this is, is like we don't yet know how to get out from under the work commitments that we've made and we literally can't find the time. We may be working 70, 80 hour weeks just trying to get the work done. So we haven't like built the skill of, of delegation we or we haven't built the skill of capacity management so that we're not perpetually overworked. And you tell yourself like, well, we just haven't found the right person yet. Like, no, no, the problem is you let too much work in the door. If you don't have the person to do that work yet, why are we doing that work? And so it kind of requires building the skill of being able to like kind of get your, your time and your days under control. But then that second professional, the one who's like willing to go out and talk about what they do and that, that could be going, going to a trade show, could be doing a podcast interview about how the new tax bill impacts phlebotomists. You're willing to be visible simply talking about what you do, be it on social media. Maybe it is creating some sort of like content of your own. Like, you know, if you enjoy having conversations about this stuff, do an interview podcast, if you enjoy writing, do a newsletter, you enjoy making dumb jokes, start a YouTube channel, whatever version of that can be sustainable for you that you think you'll enjoy. Maybe that's putting, putting out your own content. But even short of that, it's, it's simply like going out and talking with people about what you do. Meeting, you know, consultants in the space who already have a network of folks that you want to work with. We're not entitled to the universe even knowing that we exist. And until we're like out there and there's some sort of surface area for people to see and hear about what we do, then they won't. And most of us today, we're heads down, focused on like doing right by the people we have. And all we got's a webpage to show for it. And the result in firms like that is you've got a client list that is largely stagnant, usually general. They don't have like a common sort of set of problems, and as a byproduct, not super profitable, as opposed to the professional that's out there and more folks are seeing them. If that professional can speak to a specific problem that you have confidence in your firm solving, then a lot of things get easier. For one, you got a lot more people coming in the door so you can be more selective about who you want to work with. Two, you're able to churn out old projects that aren't as profitable because you have that solid intake of leads. Three, people will actually find you because you're speaking to that specific person like you're talking about a very specific thing. If all you got is a website that says we give people peace of mind and do tax and bookkeeping, then your website has to be better than the 20,000 other websites that are exactly like that. And better isn't design aesthetic thinking. Our website looks snazzy, isn't a solution that someone will pay for. But speaking to a pain, someone's feeling very acutely in that moment and they know how much that pain is costing them. Then they see what you do through the lens of opportunity for them. So that's, I think that was number three. Speaking to a specific type of person means people will actually find you. And when they come to your website, like they will actually be interested. We think by going general we can speak to everybody, but by doing that, you really speak to nobody. Particularly today with social media algorithms that can find very small specific people with specific interests, we can talk about super specific things in a very micro niche way in order to serve more specific problems. Number four, it gets easier to staff that firm because when everybody's coming into your firm with similar problems and similar backgrounds and all that, your team looks like wizards because they've worked with a bunch of those people. As opposed to bringing in general clients across all sorts of different domains. You're then kind of reliant on your sort of unicorn universal abilities, which are much more rare. But if we're bringing in our 100th taxidermist, your staff, they're more. I mean, they're, they have greater expertise around, like all the pains that those taxidermists face than the taxidermists who are coming in. So that just gets fundamentally easier to get the work out the door. And then the last one is you've now got a really interesting way to attract staff to your firm. All the ways that we attract clients to our firm that really the same things apply to the ways that we attract staff to our firm. If the careers page on your website is basically the we provide peace of mind, like chicken Parmesan basic version of a careers page, why are you entitled to anyone wanting to come to work with you? Right. You want to be for somebody very specific. And this is where serving a specific type of client makes it way easier to be attractive to a specific type of potential hire. Because you can hire people who. They're into taxidermy stuff. And we'll be like, well, I'm never going to find that person the same way that we're afraid of getting specific about the clients that we serve. But those people exist on the staffing side too. And until we speak more specifically to who we need, those folks won't find us for the same reason that clients won't find us until we get specific. So phase three is you become what you pursue. It trades inbound, whatever the universe is serving up to you for outbound now, manifesting this stuff, because that's real. You wouldn't know that I existed if I didn't put content out online. And maybe that feels like an oversimplification, but the same thing applies to you. Just think how many more people will know that you exist and know that you do what you do. If you just do the little list bit of putting yourself out there, showing up. And even if you don't like doing the Internet thing where you're out there invisible, I mean, even just showing up at a trade show wearing a T shirt that says I do tax stuff, or ask me a question about the new tax bill, or I do bookkeeping for taxidermists, and then walking around that taxidermy show, you would be amazed at how quickly you can build connections in a network like that just by being helpful. And I know if you're an accountant, you're. You're allergic to the notion of marketing, but that is good. Marketing is just being helpful. And meeting people and making connections. Now, the big fear of number three, this third phase, you become what you pursue. Number one fear for folks is they're like, ah, but what about if the, you know, whole taxidermy industry goes belly up? The risk of getting specific, what if my niche goes out of business overnight? Something happens there, right? That's the perspective of somebody kind of in that phase two spot. And honestly, that's the fear of anybody who hasn't done number three yet. The biggest detractors to building a niche accounting firm are the people who haven't built a niche accounting firm. Go talk to people who have. There's a reason they're still doing it. Number one fear is, what if I go into a space and then something happens to the space and it wipes out my whole business? Here's, here's the better way to think about it in my mind is the real gift of moving to number three is having the mindset of a phase three person. The mindset that says, I actually know how to go out and build it and bend the universe to my will and get this stuff to come in the door. I actually have control over the stuff that's coming my way. That's the real gift of getting into phase three is knowing that if you had to do it again, you could. In fact, that's the most important thing that you learn because. Because that phase three firm, that ought to be a more profitable way of running an accounting firm because it's just being done in a more specific way. And to be clear, if you're working with a niche and that niche is not more profitable than your general work, that's not a niche to work in. This is only worthwhile if this work is more efficient to get out the door. It's more profitable. Like, if it's not vastly better, then we're doing something wrong. But the person that, that has the agency and the power to go out and build that, that's the gift, man. The fact that they now have built the skill of doing that. And when it comes to niching down, like, you're not going to get it right on the first try, like you're going to check out some stuff, it's not going to work. Niching down doesn't look like, like burning the ships and doing this big sort of YOLO thing, like, no, it, it happens one client at a time. And you only really commit. You only change your name from Johnson and Sons to Taxidermist R Us when you're totally convicted. That. That's A much better path. It's one of those things where like the idea of it is more scary than when you actually like zoom in and think about what the day to day execution looks like. But then if something does happen to that category, you have the ability to build it again. A really good example, we do these sort of roast of firms where people will anonymously submit to me information about their accounting firm and I kind of give em some feedback. We did one not that long ago where a first year a new firm owner had grown their firm to about a quarter million a year. Top line by working exclusively with retail fabric stores. And they were crushing it. And they had a great website that had like all these helpful lead magnets for that specific type of person. They were growing really fast. I don't know if they've been impacted by this or not, but you may have seen like a whole, was it like Joann's or something like that? A whole bunch of fabric stores have gone out of business in the last year. And so I was curious, I went back to that person's website and you know what it says? It says they're the best accounting firm for e commerce hiking gear companies. So let's, let's get inside the head of that person who started their firm in phase three. I hope they still listen to this podcast. Let's get into the head of that person. And I don't know if this is why they changed or not, but say they went into a niche and they just started a firm, man. Like it's not even two years old and then something happens to this niche and like throw it out the window and they're like, man, that sucks. What are they going to do? Are they going to go back and be a general firm? Because they just launched and they built a niche firm and just within 24 months that whole niche burned down. That's a pretty good argument for going back to being a general firm, right? Wow. Why didn't they then? That whole website is built for a very specific type of avatar, the new niche. It's because I think once you like make that mental transition of being like, oh, I'm actually in control, then you never go back from that. Even if there's like an asteroid extinction sort of event within that space. I think that genie doesn't go back in the bottle. And I know way too many firms that are like just elbows deep in a specific space and so bought into it and are like, yeah, I would never do it another way. I know so many of those folks now that I'm just. I'm vastly more convicted than I ever was before. That once you believe you have that control, like, it just totally changes how you run your firm. It can't not. So. Phase one, you are what walks in the door. Phase two, you are what you say no to. Phase three, you become what you pursue. Because we didn't go out and. And, like, start our own business, decide to do this thing for ourselves, just to sit back and cross our fingers that the universe, like, sends us some clients. I don't like that, man. Like, I got. I got. I got my hands on 10 and 2. I like having control over where we're headed. And it's not to say that you ever have total control, right? But the more agency you feel like you have, the more you can kind of set yourself up for success, increase the likelihood that that stuff comes in the door that you actually want. Friends. I'm in the middle of quite the string of events, so I've got eight live events in four weeks. I know probably a bad idea. In fact, as you're listening to this, I think I'm on my way to Texas. So July 31, I'm in Austin, Texas. Would love to see you there. Bring the squad, come hang out the next day. August 1st, I'm in Dallas. Next week. August 7th, I'm in Minneapolis. August 8th, I'm in Boston. Come hang out. Let's get some dunkeys. More info on all those events@jasononfirms.com events. Hey, you're looking great today. Thanks for being here. You doing something new with your hair? You've been exercising? None of my business. Thanks for being here. I'll see you in the next one. Sa.