539 The $1,000/hr Accounting Service No One Talks About

Today we're joined by Dan Luthy, one of the most prominent speakers in the accounting profession around selling advisory work in your firm. And we're having this conversation today because advisory work, it is a hot topic. Many people now say in a few years time advisory work could be all that's left for accounting firms as AI gets more powerful. But I'm not so sure. Not because AI won't change the game, it almost certainly will. But because advisory can be an incredibly hard service to grow beyond you, beyond the unicorn on your team who has that combination of experience and charisma that is so hard to scale. They can do it, but it doesn't mean I can go out and find another 10 people that can deliver that service in my firm. So if you've ever wondered whether you can scale a hyper profitable advisory practice in your accounting firm, that's what we're getting into today. How to staff it, what tech is required, and how to even have that conversation with a client for the first time. So enjoy this conversation with Dan Luthien.

Advisory. Let's start. And there's so many things to talk about around advisory. Let's talk money though, like let's ground this in if this is going to be worthwhile for me, it's got to pay better than other work. Like, it's like it has to be the best thing for the firm. So walk me through today. Like what is a good advisory engagement for you and how does that compare to say a traditional cast engagement?

Yeah, I mean traditional cast engagement, we generally work with clients that are million to 5 million. So a little bit on the smaller end. Most sizes. Most of those engagements about 1500 bucks a month. For traditional CAs, our advisory services for those clients generally start around 1000 and then go up to closer to 5000amonth. That engages once a month or up to up to four times a month as a part of that process. That includes anything from a phone call on a regular weekly basis or once a month or actually creating reporting and context and information that navigates with it. But your point, 100% the value, the dollar is much higher with that. I mean I would say if we're looking dollars and cents on my bookkeeping time, if I'm looking at a multiple probably 4x in most cases based on comp 3 to 4x, I'd say 4x for our firm. And then when it comes to our advisory, it's probably closer to six or seven. Truly we're our margins are a lot better on, on our advisory services than it is on traditional cas.

Okay. There's a lot of folks that started in the space saying, I want to be a virtual cfo. And they roll that practice out and they realize, turns out I gotta be a bookkeeper too, because the information I have is awful.

Absolutely.

Did you start at one end or the other of that? Like, did you start in tax cast advisory? How did you Start.

Start transactional 100%. Started CAS on site with clients going through bank recs and everything like that, and got pulled into an opportunity to be their fractional controller, navigating through things from there, and then evolved from there outside of that. So, yeah, really. Really right there at the bottom. And I think the only reason why I was able to transition out of it was because my question was never about the transaction. When we were talking with the client, it was always about, now, where are you going? What do you want to do? What is your goals and objectives? And so transactions are valuable, but wasn't enough from a. From an actual conversation with the client regarding how to give value to them.

So you got sucked into it when a client actually went out of their way to ask for it. Like they said, can you come in and do this?

Yep, absolutely.

Do you think had that not happened, you would have, like, had the confidence or. Because a lot of it's an identity thing. Right. And I heard there's a lot of bookkeepers that'll watch this and be like, I'm a bookkeeper, I'm not a cfo.

Yeah. I. I think we're always put in those kind of situations, kind of thrust in the opportunity. I mean, I think about this first opportunity we had to work with with a online software solution, a client brought it to us. It wasn't us that were seeking for it because our workflow was fine. Right. Like, that's how normal most accountants are. Like, what we do is completely okay, don't change it. But client suggested, so we had to learn how to do it. Similar to this position. I think our clients give us the opportunity quite often to level up to it. Sometimes it's very formal, but most of the time it's, I need more. Like, what else can you help me with? And it's just the way they phrase it, and you have to be paying attention to it.

Isn't that also a trap, though? Because there's. There's never a level of more where the client won't still ask you to do another thing.

Yeah.

That may not be in your best interest.

Yeah. I mean, it's the. That. Scope. Creep. Scope. Seep conversation. Right. Like, how far are we willing to go versus a change in price versus I'm not qualified to have this conversation with you 100%. I think you're, you're right on with that. For me, when I first started going down that road, it was, I was confident enough in the relationship that they were okay with letting me fumble a little bit. I also had a really great mentor that I was working with that was really helpful in kind of giving me preparatory conversations and thoughts to go through, which anybody who's trying to get into that space, you really do need those experts who have been around for a really long time to give you feedback and give you considerations. But that was probably the really biggest piece. And I truly think, though that's very common. Your point where clients are always asking for more, they're always wanting like, hey, can you provide me a cash flow? Can you give me insights on what I should be doing with this or when to hire employees? You may not have the perfect answer for it, but there is ways to find answers to it or at least learn how to go down that road. Maybe not for that client, but potentially for the next. And it's making time to do it.

You said, you know, they have the capability or they have the experience or the expertise, the ability to actually deliver that. How do you know if you have that or not?

I, I think it's, I think it's like, for me, I think it's a lot like sports. You get good at it by continuing trying and failing and succeeding and finding out what parts you're good at and what parts you're not. I mean, every kid that starts playing baseball starts out being an outfielder in some way, shape or form and then they move up closer and learn other roles and positions. I think it's the same thing with this. Like, there's areas you're going to find that you're much better at more confident with. For me, I'm much more confident. Systems workflows, operational strategy and ideologies there. My partner, much more on the financial side, mergers and acquisitions, talking about all those kind of piece, you find where you're comfortable in that piece, but also being willing to stretch yourself is a big part of it too.

Are a lot of people just like doing this and then not charging for it or like don't have the language to speak about it?

I think it's very common that people are doing the first entry level portion of it. Very commonly. Software, I think is the first part from an advisory perspective, that there's A lot of accountants out there and advisors to some extent, or bookkeepers that they say who are actually talking to their clients about how to actually create better workflows. I think even from a financial perspective, I talk to more people who actually understand how to create a budget than not and actually what it means to stay within those boundaries. A lot of that is actually advisory based services that could be. You could charge a lot more for, than what you're regularly doing. And whether it's an annual upsell or whether it's a frequent reoccurring upsell, there's opportunity to charge more for those services that people are already doing.

Okay, Daniel, this is why I never did advisory in my firm. Okay, let's get real about this.

It should pay more. And I understand that, like it ought to be a higher, we ought to be trading at higher hourly rates. But in my firm, the people who are capable of advisory were the bottlenecks, the constraints of the entire firm. And so if I'm looking at the entire firm and how do we push through the bottlenecks, the constraints that we have today, if those people that are the constraints are the ones that have to do the adv, then where I landed was it doesn't matter how much we get paid per hour because the business as a whole, they're limited by these people.

Yeah.

How do you, how do you navigate that? Like, does it change the org chart? Like, how do you get that, how do you do that calculation when on the one hand you can see it trades at much better rates? But it's. It ultimately may make the main constraint of the business worse.

I think your point is very valid because usually you, you've made this statement before, and I agree with it completely, that the people who are most successful in advisory or in the ideology of advisory are people who are unicorns in our space. They're ones who are, who are not traditional accountant. They're people who have more, dare say, social skills and things to that space that are more encouraged to want to talk more about it. You're right. Those people do become the bottleneck. Which means if you're going to start going down that advisory space, you have to make a plan on how you're going to actually implement it. The biggest piece for us with it was deciding we're not selling this to every single client. First, it can't be a service we offer to every client because to your point, it's not scalable at that point in time. Also to the same point, it's not something that we can keep consistent. It's always going to have some sort of bottleneck associated with it. So we started with the concept of chunking specific periods of time specifically for projects we knew we could be successful when we really started to push and launch it, we started with very specific client engagements that we knew we could. And that was from current clients who were already asking for things that were beyond what they currently were already getting. But it also started with us telling our team to be able to be aware of those things. Hey, if a client asks for a budget, pass up the line. Maybe it's not a budget that the CFO or CEO needs to be getting involved with, but maybe it's a budget you can do. But let's at least know what. Who's requesting it. How often people are asking for cash flow. Great. How often is that coming in? Are they asking for something complex? Are they not merger and acquisition, any of those positions? We're actually getting more insight and information and it's just communication internally where we can say, yep, we're going to be willing to do that. Nope, don't have the time to navigate in that area. Picking and choosing is, I think, in getting started with is most critical piece because that's the only way that it can. You can actually deliver successfully. If not, you are going to run the bottlenecks where now you're overselling services and you have people who are getting paid $100 an hour for their work as your CEO or CFO and they can't do the rest of their job and they're doing basic rudimentary, in some cases, budgets to actuals, which shouldn't be done by someone in their role. Yeah.

So for people who are like, I don't. I may not even know what to listen for.

Sure.

Right. Like, maybe somebody says budget one day and you're like, aha, this is like maybe a way to tiptoe into it.

You said we, we executed on the projects that we know that, that we knew that we could do well.

Yeah.

So we wouldn't do it for everybody. We wouldn't say, hey, everyone will now be your cfo. You said more on a project basis. We see this need and we know that we can do it. How do you know that you can do it? Is it something that we've done for other people and had success with? Like, as you're getting into it for the first time, what does that look like to know you can do it?

Yeah. I mean, when I first got into it, it was early in my career on the Controller side. And it was like you. Like we mentioned, I was thrust into this opportunity by the client asking. And I was just intrigued. And they were comfortable me not giving the best advice, but also working through it to find the right solution. As we continued to move along, I was interested more in that conversation. So I personally spent more time researching and learning and developing those skills. And honestly, a lot of times probably sold gave away a lot of services like our, like everybody else does for free, just trying to be able to become better at those pieces, which gave us the ability to feel more confident with it. That being said, if your firm knows that you're like, if the leadership in your firm knows they're being asked about the same things on a regular basis, which could just be, I need to know what's happening in my business sooner. Like, that's an easy enough conversation to say. Like, is there potentially opportunity for an advisory conversation here? Is that a transactional conversation? Is that a discussion about potentially a budget? An actual. Is that a forecasting conversation that they need to have? They're trying to determine maybe like, how do I know when to hire someone? That's a conversation you can have about all that stuff as well, where you can dive in and actually do a break even on an employee. You can have a discussion around potentially hiring strategy based on when income and out, you know, outflows are going through. Potentially on when your marketing is expecting to invest. Like, you can have all those conversations just based on someone saying, I'm trying to do this in my business, or I want to get here. Can you help me navigate through that process? Those are the. I think those are some of the easiest parts when it comes to the advisory piece, when it comes to financial advisory, when it comes to operational advisory, which is where I tend to enjoy spending most of my time, it usually starts internally with the. This process is broken. My bookkeeper spending. My person on my team is spending three times as much time working on this workflow. We're not making the margins that we expected because we're doing.

We're running through a fixed fee model or something along those lines. Well, great. Now I know I have a problem that I can solve. And I can have a conversation with the client about improving their operational flow of data or information or invoicing. Now we can talk about systems. We can start about that, talk about that kind of stuff. And that is giving the client value. And we can charge for those projects. We can charge for those discussions because it's not that bookkeeper who's going through and implementing it, it's someone else in our organization. Those are one time. Oftentimes on the operational side, they're not something that's consistent. But you can lean into those conversations very easily. And I think those are easier now than ever before because of the amount of technology we have.

What percentage of would you say of your opportunities are inbound? A client saying, I got to figure out when to hire the next employee versus outbound. You saying, we see you have this problem. We think this would be a solution.

Oh, I would say right now probably 90% of ours come from inbound. Wow. Like, and it's. These are the questions we want our customers are asking and we want you to pay attention to and push them up the line.

That's really interesting. Okay. A lot of this, a lot of our struggle with it is probably that accountants, we struggle as sales people.

Oh, a thousand percent.

And that's to like walk into that uncomfortable conversation or to do that thing that you just hate where the client's like, yeah, could you help me with this? That and the other thing. And you're like, well, let's talk about the scope of your engagement. And just the cringe factor of that alone is probably costing the industry tremendous amounts of money, right?

Yes, completely.

So just, just in a very practical sense, like a client comes along and they say something like that, where they're like, we're trying to figure out when to buy this machine or hire this next employee or something like that. What is the non cringe version of that conversation where you're literally on the phone or on a zoom talking with them and you have to kind of pump the brakes and be like, listen buddy, you're paying me for bookkeeping. Like, we gotta revisit this.

Great example. I actually got on a call with a client yesterday. It was a project call. They were asking about how to convert from desktop to QuickBooks online and they wanted to integrate.

An inventory software. I was only there to help consult them on best workflow as a whole. We've been working on it for two, three weeks. We finally got to a conversation yesterday where they're like, I feel confident in who you are. I just need to vent for a moment. Here's where our business is at. Here's what I'm concerned about within our business. And I just listened to what was going on at the end. I said, no, those are, those are conversations we can have with you. I'm happy to have those discussions with you. Our engagement was only for this, but I'm happy to have A further conversation with what this can mean for. On an ongoing basis. And she said, great. It was just enough to not like, we weren't throwing out dollars. It wasn't. My scope is only this. It was. Our engagement was for this as a part of it. Luckily, it was only a project, so it was easy to. To trigger it from that perspective. But then it was. But this is what you're looking for based on what you're asking. Like, we can have a reoccurring conversation about cash flow or about payment cycles or any of those kind of things, because that's not what's included. And you understand what's included and what's not. It's a little bit different on a reoccurring. On a reoccurring engagement. Very different from that perspective. Because I think on your reoccurring engagement, like you said, because we're not supposed to track time, right? Like, we got to get rid of the time clock, which I think is completely false from that perspective. But most people just throw it in. And I think that's where sometimes we have to pump the brakes for a moment and say, the client's asking for something that's more valuable than. Than what I do today, or the client's asking for something I don't know how to do, but I know someone in my firm does. So let's bring the right resource in. I don't have to be the expert in everything. And I think that is actually probably one of the most important things that firms need to acknowledge now is you as an individual in your firm actually should not be an expert in everything. You shouldn't be the IT guy and the software guy and the financial person and the controller and the best book, best damn bookkeeper that ever existed. You should be really good at the things you do. You should specialize in those pieces. And firms, as they continue to grow, should hire those people who can do that so that you can give your clients higher value in the relationship.

So you said you're just talking with a client the other day about this. And I think as people listen to this, they're like, yeah, man, if I had a Dan Luthien, my firm, we'd be selling advisory work like hotcakes. And I think there's a bunch of examples like this, and I'm sure I'm guilty of it too. Like.

Let'S make the value pricing people mad. Ron Baker, like, brilliant at doing this stuff. Really good thought leader around all of this subject matter. And if everybody had a Ron Baker in their Practice, they would value price the heck out of this stuff, and it would be super profitable. But the reality is people don't. And that's a hard thing to scale. And that's why, you see, like Chad Davis has told us on the podcast, it's why we went to the budgeted hour, because it was a much easier thing to manage at scale with just the people that we have. So until the day when we can, you know, like, we'll get a piece of your beard when you leave to see if we can make more Dan luthies. But until we have that, who is the person, like, in the org chart today? You got Craig, you got Tina, you got all these different people. Like, who does that and is doing it successfully? Like, is having a Dan or somebody like that a prerequisite to doing that?

I don't think it's a requirement. I don't think you have to have someone like me or someone like yourself who is willing to ask the next question. I think there's plenty of people who are in the space right now that know enough about what they're good at right now or are interested in enough things that it just starts with the firm understanding and what people are interested in and understanding what people are actually good at. Great conversation with the firm last week where they said, I have an employee who just started working for me, loves crypto. So I connected him with the best crypto accountant I know. For them to tell me what they thought of that person as an individual didn't go to a client. No navigation conversation there. Now that firm's looking at starting a new potential crypto advisory practice for their clients, which means it may not be full transactional bookkeeping. It may just be some discussion or introductory pieces with some of their clients that may have crypto already, but they know enough about their team to be able to prepare for a conversation like that. For me, it's knowing what your team's interested in, knowing what they're good at. If you're a general practitioner like our firm is, it's a lot easier to find out what people are good at or what they like. And from that perspective versus maybe a niche firm where it's the only people you know are really, really good at this and they only are going to be able to be good at that. So I think it starts being comfortable with that. But also to the same point, it's listening to your client. Like, accountants are really good at being very transactional in our relationships, not just from a bank transaction perspective, but. But it's I give you this, you give me this. That's our exchange of goods. But the clients actually want you to listen to them. Just as much as you want your manager to listen to you. Just as much as you want to have options in your, in your recruiting strategy or your longevity in the organization, your clients want that too. So it's changing that narrative. I mean, technology is actually changing this faster than I think, than it was historically. I think we're going to see more people who are qualified to have further conversations because the transactional portion of will be automated at some point in time to an extent not perfectly, not 100%, but is going to get better. And so the people who are talking to those customers are going to have to get better at understanding what the customers want and what their demand is and what their need is. Because the tax return is not the only thing that business, that business owner, business owner is looking for. They're looking for how to grow their business. They're looking for how to be more successful in what they're doing or how to get better visualization or to get data faster. It's just trying to understand and learn those things and then start learning about it.

What I've got a hot take that bookkeeping, and there's so many people that still call themselves bookkeepers, which is fine, but I've got a hot take that bookkeeping has kind of already been largely automated by the historical definition of what bookkeeping was, which was like entering the records and classifying. Now it's like we're doing such a small percentage of the classification and we're doing no entry practically. But the boundaries for somebody that has never sold advisory, the boundaries for like, what is an advisory thing? Like, folks today, I think, struggle by selling bookkeeping that's actually controllership because they're doing way more than bookkeeping. Correct. Do you have like a vernacular in your firm of where is that line drawn, where it is crossing the threshold into what should be sold as advisory?

Yeah. We created very defined roles in our organizations. We have a bookkeeper position, we have an accountant position, we have a controller position, and we have a CFO position. There is limits on what that person is supposed to do when you're in that role. And if it goes outside of it, which accountants love to know boundaries, when it goes outside of it, they pass it up. It makes our managers have more responsibility to be paying attention when those situations come up. But our team has now been trained to have that conversation of this is now outside my scope of what I'm supposed to do.

Where do managers fit into that hierarchy?

Managers observe or managers maintain? The RCFO practice is separate from our transactional piece, but our controllership is not. It's in the same kind of vernacular. It's unmanaged, under the same individual. So bookkeeping, account and controllerships, all under the same person. CFO is separate from that side. But. But because that person is listening to all of that, they can navigate the discussion a little bit easier because the team knows when to stop as a part of it. I think that's actually a critical portion of it from a firm perspective to learn about those things that may be passing along and passing through. We had to get away from everybody doing everything from A to Z. A to Z was where we were losing most of the opportunity with our clients. When you had someone who was doing the bank rec, who was fetching the receipts, who was having the financial conversation with a client, not only were they missing out on those pieces, but honestly the quality of our work was less than what we have now. Because when you're thinking about the data coming in as a transaction all the way to the financial statement, you justify why you put things where you put them. You justify the position that goes along with it. And you're also not paying attention to the client and what the client wants in those conversations. You're trying to get to the net, the net end result, which you're looking for. But it, it actually doesn't meet what the client's looking for.

Yeah, well, and that's probably a question of like, what are the incentives of each of the people in that hierarchy? Like, is the bookkeeper's job to reconcile all the bank accounts. It's the controller's job to like oversee the month end close. Where then when a client brings something up, they're like, sorry, buddy, like I'm incentivized based on X, Y, Z. But then I guess in this framework, there's a path for them to hand that conversation off to someone else.

Yeah.

So in your firm today, besides Dan, I imagine you have other Dan's. Like, how do you triage A thing came up. What's the process for? It goes to this person or that person or Dan or somebody else.

Yeah. It triggers into our. So we're a firm of 20. It triggers into our director of accounting services. She's the one that actually is involved with the day to day of our bookkeepers and our accountants. She's the one that answers kind of their core questions and kind of navigates through a lot of those pieces, she then presents it to me. That's my part is over. The operational portion of our organization. So service delivery. If there's something she doesn't have an answer for or who to direct it to, she then comes to me. So we've created that tier of this is again like the bookkeeper. Here's the things where you can be comfortable with just pointing it to the next person in the way that it should. This is where we do a proposal change or this is where we maybe give up on a project or this is where we include it as a part of our fixed fee model or whatever it is. And if it's outside of those pieces, pass it up. I will say from my perspective, we serve about 220, 230small businesses every single month. She and I have an interaction at least every day regarding something a client's looking for. So I plan for that. I plan for that as a part of my role. Not only doing the operational portion, but knowing she's going to ask. I have to be prepared for that workflow to navigate to the next person. Whether it's nope, your team is being the one that does it or no, we need to get our CFO involved. Let's have that conversation.

You're just preparing for that triage process or that decision tree navigation to be able to know where to go.

I imagine most of the folks that you're selling, do you call it advisor, do you call it vcfo? Like what do you call it?

We Virtual cfo, Virtual controller services.

I imagine most of the people you're selling VCFO to are small businesses that have never paid for that before and may not even know the value of it.

It's funny, most, I would say most clients are looking for actual controllers roles, someone who can come in and give them system recommendations or give them how do I get from here to here better. But they know it as they believe it. As a cfo, I know I need a cfo. Well, what, what is a CFO to you? CFO is one who tells me where my budget is. A CFO is the person who makes sure that my data is flowing the right way. We call that a controller in our organization. And so that's part of the education process we have with our clients is if they hint towards like I need someone who has higher level knowledge. For years it was the, this has to be a cpa, right? We who's your cpa? Because I want to talk to them because they're going to know the best about what we should do. Again, I think that's hokey. I know a lot of CPAs who are not good at what they do and I know some that are absolutely brilliant. But you have to educate your client on what, where your services are in that bracket and who you should talk to and how. As soon as we have that conversation with our clients that says this is actually what we call controller level services. If you want cfo, this is the price range. If you want controller, this is the price range. Yeah, controller sounds a lot better. That's more in line. Yeah, I like the, I like that budget from that perspective, but the other part with it too, and I think this is where, this is where the unicorn portion does come into it. When it comes to our CFO being a small practice, we do introduce them to that person and give them the opportunity to have that potentially wowing conversation and convincing them of what they can do and what the value is going to be in that conversation. I've got plenty of clients who pay $1,000 a month for one phone call. The CFO's doing work on the back end, but it's one phone call for an hour and they're happy to pay that money because they know they're going to get value out of that conversation. They know they're going to get direction for the next month as they go through it. That person might be the unicorn, but also to that same point, they've trained into that experience. 50 or 30 plus years of experience working in our space. They're not afraid to ask the question. Not afraid, but they also have the willing to have the conversation.

I think a lot of us are still stuck on. We're selling things that have an expected price. Like you're selling a tax return for, for what the market price of the tax return is, or we're selling cast work for what it may cost them to hire an accountant and you know, pay them half time or something like that. Whereas the, the better framing for advisory work is here are the profit levers in your business and we can help you understand them and we can help you kind of like turn the corner on these things. And that ROI framing of what you can charge is, is vastly different. How do you, you said, you know, when we, when we have that wow conversation that kind of blows their mind. I gotta imagine it is ultimately getting down to, here's how we can be just a fundamentally bigger ROI driver for you. How do we, how do we find those opportunities in the business and reframe how we think about. No, like you're gonna pay me three times more than you've ever expected to pay an accountant. Because here's the upside.

Yeah, I, I, I keep saying it, but I think it goes back to it is you have to be willing to ask clients more questions than where's the receipt? The natural tendency of an accountant is to ask for the receipt, not to ask for what their business is, what they're trying to do with their business. We have to change that narrative. That's how you start having those conversations with the clients. That's how you start opening up the doors for those opportunities and learning what it is that your clients are looking for. It may not be the conversation of how can I provide you with a cash flow forecast that's going to be able to help you grow and scale your business 10x. Well, that's not what the client cares about. The client's like, hey, I'm having cash flow issues. Like, I'm trying to figure out how to pay my bills on time. Great. That's a different conversation than giving you a budget. That's a different conversation than you didn't give me your 30 receipts. We're going to shut off your ramp card for them. It's a very different conversation. You have to be paying attention to it. You have to be willing to ask that follow up more than what's going on. Firms have to change that narrative as a part of their practice. Whether you're the person who's going to service it or not, it shouldn't matter. But you have to be willing to ask that question. You have to be willing to log that and follow through with to the next person to make sure at least we know what the client's looking for.

There's a version of that that can almost feel scummy, though, where it's like, am I asking a leading question? To then come back and be like, well, here's the paywall. If you would like to get my answer, give me 200v bucks and we'll go and we'll have this, you know, expensive advisory conversation.

I think they're, I definitely think that can happen from that perspective. I think we all, so we have, I think we have to be careful with it, especially if we're offering everything as a value based pricing. Because value based pricing does encompass a lot of that. From the consideration of just how the statement is made. Right. Of it being value versus fixed fee. When you present it as a fixed fee model, there's an expectation of what I'm getting out of you every single time. I know what the delivery is. You can have the same ideology and how you price on a fixed fee model versus a value based. But if your client feels that it's value driven, the expectation is that you're delivering more every single time for what they need. So for me, I hate the value based pricing conversation because I think it's the wrong narrative. I think we have to be more, we have to be better about what services we're offering. The client is clear on what those outcomes are. No different than if I was to buy an iPhone if I've got I need 256 gig on it or I need 64 gig. If I run out, I know I have to upgrade, I know I have to move to the next thing. I know if I want better camera quality, I've got to upgrade to the next camera or whatever that perspective is. We have to change that conversation with the client. No different than, hey, I want a tax return. Well, you don't offer that service. How do I help you with that? Well, I'm going to point you in the right direction for it. I think we have to start thinking about our services in that same way.

Yeah, I'm kind of allergic to like educating clients. We talked about this a bit beforehand that like, if I have to convince them of why they need this thing, that's just an uphill battle as opposed to selling them. The solution of like here's the problem that you're feeling and we can solve that. Maybe that's why 90% of what you're dealing with right now is inbound. It's people saying like we have this issue.

When you talk about holding out our services and what we say that we do, there's a risk there of saying here's what we do and leaving it up to the client to be able to connect A to B, to say like, oh, your service here, that can solve my problem. Like do our services matter there or is it ultimately our responsibility to be the translator there to say here's the engagement we need to do to fix this?

I think it's our responsibility to be the person that says here's the engagement, here's what we needed to fix it. If a client comes to you and says I have a problem with, I mean, or I'll say this, I mean, going back to simple enough. If you have someone in your firm who's doing quality control, reviewing financials, high level person or doing an audit on your clients on a given basis, they notice that their receivable cycle is bad. Hey, you're over 90 days on every single one of your, every single one of your customers that you're working with, or 60% of your customers. Wasn't that an opportunity to have a conversation with the client about potentially adding value to them? It may not be a project, it could be your value based service offering from just saying, hey, let's send out notifications through QuickBooks now and everything's going to be solved for it. It could be actually looking at the entire system and saying, actually this isn't just a notification issue. This is how your contract language is going through and where it's missing, it's noticing those areas where businesses are also struggling and then being willing to have that follow up with them. Oftentimes we're already willing to do that or just not willing to go to that next level of conversation, which is here's the right tool or here's the right way for us to navigate through it, or here's our recommendation on how you should price that. I think the easiest way that we have these come through is customers that pay commissions. Hey, I have this very complex commission strategy that I'm paying out all my different people on and I don't know how to track it in the right way. I have the spreadsheet. It takes me hours every single month to figure out how to navigate through it. Yeah, that's a lot of work, especially if it's very variable, especially if you have different tiers and brackets because most systems are not built for massive amounts of variability. Maybe that's a conversation with the client to be able to help them change the strategy on what their commission structure is. That can be valuable from that perspective. Does it mean that you now have to have a full conversation around potential policies and procedures in your organization and what the change management piece would look like? Absolutely, it can. If you are, if you have any expertise in that, it's an easy way to have a conversation or to say, hey, we're going to schedule three more, you know, three hour phone call with you where we're going to navigate through this and help you build out the right structure. It's really easy to have that conversation, I feel, when you're recognizing, or the client's recognizing those moments when they need a little bit more help. It's no different than when a client comes to you and says, hey, I've been doing my books by myself for a really long time. I don't, I can't get to it as much as possible. They're telling you what their problem is. Our automatic idea now is, well, if I wreck your banks faster, if I receive your receipts quicker, I then can give you what you're looking for. But is that really what the client's looking for? No, the client's looking for tools to make the decisions in their business. We have to be willing to look past what our current workflows are to be able to have that conversation. I understand the context too, about the education portion. I think that's always a struggle. I mean, it's no different though, than the conversation we had five years ago with clients where it was, hey, we need to start using this tool because you don't have someone in your office to sign checks. So let's use bill, let's use ramp, let's use one of these AP solutions. You gave the recommendation no different than what we would be doing in this space. It's just on a reoccurring basis that you're having that financial conversation with them and in a higher level advisory discussion.

I think I made the mistake of overselling engagements. Like, like, new client comes in, they need a thing, and I can see what their problems are going to be in the future. I've got that, like, we have that pattern recognition where it's so hard when you hear that thing, you're like, oh.

You got to do this. Yeah.

Oh, here's the advice. But I think I made the mistake of selling too many things, spooking people when they hadn't felt the pain yet that those, like, later services felt. So, you know, for example, guy says, I don't want to do my bookkeeping anymore. He just wants his bookkeeping done. Yeah, right. Like, that's what, that's what he's feeling. Then you do his bookkeeping and he thought he was going to understand the output of it and be able to, like, take the balance sheet, the pnl, and make it actionable. And it's like, now he realizes he has another problem. And it's like, you almost can't see the next problem until the previous one is solved. So do you walk people into this stuff? Do you start with advisory engagements ever? Or is it like, this is a core part of your business where the cast practice is valuable because it almost unveils the problems that the advisory practice can solve?

Oh, 100%. On the latter, I think we, I approach it much more from a scaled approach. I think your clients have to feel confident that you can deliver something to them. And usually, like you said, let's solve for the first symptom that you're running into and then address the actual true problem that you're having, the true issue that you're running into. I agree with you completely. People who are really good salesmen when it comes to accounting services try to sell to the net end result. Software companies do it as well too on kind of their markup piece. Right? We're going to sell you all these things because you need it in your organization. But I can't implement everything in 24 hours. I can't do that in this period. Why would I pay for a CFO level service when my banks aren't even wrecked on a regular basis? I don't even know where my AP is. You have to take it in step. So generally when we start with a CFO engagement that has transactional work with it, we don't start billing on the CFO services until the books are current. Can't. They can't add that level. Or they. And it's not that they can't add value. They can't have a confident conversation with the client where the client feels like their output from the CFO or from the controller is actually valuable because the data is good. They have to know that that information is accurate before they start feeling confident in the consulting.

Okay, here's the biggest thing I've heard from CFO firms that many of them said they've struggled with a solution for this and it still has me paralyzed on how you build this long term. A number of people have told me, how do I build a team that can do this stuff capably and still there be enough in it for them to do it for me? Right? You like, you upskill these people straight out the door and they're like, why don't I just take these three clients and I can go do my own thing? How do you build that? Like for the long term? Or is that even the wrong goal? Like, is that a negative outcome if that does happen?

It's a really good question. I think for me there's, there's different steps in the process. I mean our virtual CFO is able to have. He actually ends up is a partner. So he does. Part of his work is billable, part of it is operational.

His biggest thing is he loves working with clients, but he knows that he doesn't want to do the preparatory work. So yeah, he's a partner, but the best incentive for him to stay in that billable work is someone else does all his preparatory work for him. The CFOs that are really, really good don't want to actually get lost in the spreadsheet. They want someone else to prepare that work for them. So they want all of that maintenance and stuff to be done. They want to direct them on where things need to go and then they have the conversation with that person. I think people who are CFOs, that, and I don't think they're terrible from this perspective. But I think it's not scalable if the CFO is always the person who's also doing the vetting and verifying and the data building. You can start with that as a part of your practice when you first get started. But you have to transition away from it. You can't have that person from A to Z every single time. It's not scalable at that point in time. Also, that person will then just say, I can build this on my own. You're charging $300, $400 an hour for my time. Why don't I just do that for myself with these clients, I don't have to do it in this space. You have to give them value. You have to give them individually find the answer of what they're looking for too. So it's, it's no different than any other role or any other position you have in an organization.

Hey, quick word from one of today's sponsors. Me.

Me.

Yes. I run a community Realize that is for accounting firm owners. And realize is kind of the secret behind how I've done all of my content and been able to like financially turn thought leadership into a business. About 100 firm owners in there realize is a systematic way to build connections with other peer firm owners. It's not a framework for how to run a firm. It's a way to introduce you to other super cool firm owners. Right now we're putting together small groups so you can have a group of like 5, 6, 7 other firm owners just like you that you meet with every single month run very similar firms. Having this for me, totally transformed firm running my North Star. Like my goal for you coming into this group is to make a new best friend, somebody that runs a firm. Because that was what I needed in my journey. The whole community is built around that. It's called Realize. Link down in the show notes if you want to learn more. Okay, so walk me through building the org chart, building the team of folks who can actually deliver on this stuff. There's, there are frameworks out there that you can buy off the shelf of. Like here is our coaching methodology. And the appeal of that having a clear framework is it's, it's more scalable. We can plug every client into this framework, whether it works or not. I don't know. But you could definitely see a world where it's then easier to plug your staff into it to scale that. How do you build the team to do this work? Are there frameworks within your firm where it's like we always do it this specific way, or are you just looking for sharp people that can take a client from A to B?

We started out with sharp people take it from A to B, but had to get to a point where it was much more standardized. And so how we started that with was we removed from our lower tier service offering any customizations to your financial statements. We did our preparatory work. We gave you the same financial package, we gave you certain KPIs that were consistent and we gave you the same type of conversation as a part of it. That's how we were able to train each role specifically to do those roles very, very well. Now they know the KPI, they know the financial statements, they know the outcome that's coming from it. If you want something more, you want to start talking about multiple divisions, you want to start talking about job cost in your classing. That requires a different set of eyes, it requires a different set of motivations. You're not just looking at it and saying, well, did we code everything to every single job you're actually thinking about? Does these numbers actually make sense for what's going on with it? Having people who are able to think about that next conversation? You have to find those people. It's. It is something you definitely can train into, I think from that perspective. But it takes time, it takes experience to, to navigate through it. Usually, especially in today's day and age where we have so many firm owners who are just getting started, who left practice, who left, you know, being in public or whatever it is. Most of them are that person in their organization. That's great. You should be that person who's starting that in your firm and bring someone else in to do the lower level items for you so that you can focus on those conversations. And it starts with that tiering. It starts with no different than someone who's starting a tax practice on their own for the first time. I'm going to do everything from A to Z and as soon as I get up to a point where I can't take any more, we're going to hire someone to do the technical work. Same thing has to happen with this within your firm to where you get that process. That's very Consistent. Once you get past that standard financial package that comes into it, you start offering customization to those packages or you start offering another level of consistency for it budget, actual, whatever it is from that perspective. But the client knows they're paying for that. They know that that's a part of the service that they're now getting at that different tier. You're not serving every single one of your clients in that offering. I mean for our firm from a controllership, we have 240 clients that we do transactional work for. Controllership is probably 35% of those. CFO is probably 10% of the total organization. Don't sell it to everybody. Not everybody needs it, not everybody wants it, not everybody who's willing to pay for it from that perspective. So you have to be thinking about that when it comes to trying to create that scalable approach. Who actually needs it, who actually wants to pay for, who actually wants to price it. I don't, I think it's no different than when you look at the three tier package pricing package offering. You're trying to get into the middle tier because that's of course the most lucrative for you generally from that perspective. But each tier comes to something different. Sell it in that same context.

We talked about this beforehand. I got a problem with how 90% of the education in our space is put out by software vendors.

And I like so many of them are shouting from the mountaintops, everybody needs to be an advisor or else like it's a scary thing now. And it's usually done through the lens of that's why you need our reporting tool. So tell me from a tech standpoint, does the right tool make it easier? Do you even need it or is that missing the point?

I think that my perception with it is most tools will get you the first 15 to 25% on value.

Only 15 to 25%.

Absolutely.

Okay.

And I think this is the reason why, at least again for us, why we're pushing so much to have tech automation in our firm is the relationship is much more important. The interaction with the client, understanding what their direct needs are because that's where the client's going to get the most value. The bank reconciliation gets to a tax return.

The bank reconciliation doesn't get them to making the decisions on when to hire.

Yeah but Dan, aren't we just like the right report template Away from that.

You, you hopefully someday you could be I for my biggest piece with it is is I don't think any tools as of this point in time take into Consideration all the variables that go on in a business and that from a tech standpoint and someone who works with a lot of tech companies and has lived in this space for a long time, they always come back and say, well, but most of the approach is the same, right? Cash versus accrual is the exact same ideology. Well, sure. What about a modified accrual? Is there a difference between an E Commerce versus manufacturing? Is there a difference between E Commerce who only sells on Amazon versus an E Commerce who sells direct out of their warehouse? There's a thousand different variables that go on with each of those pieces that you have to be thinking about. A report cannot produce all of that for you automatically just because AI says it can. Where is it extracting that data from? Where is it analyzing that information from? What's the consideration in the data pool that's going along with it? Sure, that's going to get better, I think over time, but I don't think it's going to happen by a tool saying it's going to happen.

ChatGPT is the greatest software advisor we've ever had. Agree or disagree?

Ooh, advisor for who?

Entrepreneurs, small business owners, the people we serve.

I think it's misleading to those, most of those people because they don't actually know what they're asking.

I think that they're getting information that's helping them, but I don't think it's very similar to the first introduction that you have with a, or with your accountant. Hey, I need you to do this because I, I'm just tired of taking care of it. Most of the questions that are being asked at Chat GPT are still surface level. How do I collect faster on my receivables, implement this tool, go down this road, maybe change your terms, things like that. Sure, all those really good things. But is that really navigating them to the right direction? I think it's a very helpful tool and I think it can because of its data set and because of the information it's pulling off of, will get better. But I also think that it's not giving always the best answer.

Let's think about this through the lens of a different industry. Does Chat GPT represent a risk to therapists?

Ooh, that's a really good question. How do you turn it to the context? Also with medical field right now, right? Some of the fastest medical field improvements are going on right now because AI is able to analyze data at a better rate. You can text cancer, you can look at that from a perspective. Images, CAT scans, all those Kind of things. They're looking for the same thing. Right. They're looking for anomalies that are consistent in every single one of those situations. They're doing multiple rapid tests when it comes to drug manufacturing. They're testing in a nonsense or non creative environment on creating what the output is going to come from. Those pieces from a therapist perspective, same context, they're giving you outputs based on the type or the phrase or the way that you put inputs into it. Is it going to answer some people's questions? 100% that level of context will answer those people's questions. If it's something that's repettable or repeatable, similar to the drug manufacturing space, similar to medical development, 100% I think it's going to be able to help advance that much more. I think certain parts of accounting are the exact same way. But I will say, are you going to feel more comfortable going to a doctor? And the doctor says, well my agent told me this, well that's great, but what about my life choices right now I have a choice to either take this medication that you just said is brand new, that's never been used before, or I can go through this chemotherapy process that has been used for the last 30 years and it's going to cause me a little more pain. But help me understand what are my options. ChatGPT is most time not going to do that. The tech, the tools that are going to be created are not going to be able to deliver to that piece. It's going to, you're still going to need that bedside manner to be able to help navigate through it.

Yeah, and I mean there's a hundred things to pick out there. Like they've done studies of the bedside manner of a doctor versus a chat GPT and almost everyone prefers chat GPT and if you think doctors are bad at that, just look at accountants. But also like you look at therapy, Chat GPT. It's probably growing the market for therapy because how many people are going to it for therapy who would never go to a therapist? And then does that ultimately mean like that increases the interest in advisory and the CFO and all of that by like, you know, growing the size of the market and somebody ultimately being like, you know, I've been talking with ChatGPT and using it as my CFO for the last month and it's actually brought me around to. It would be nice for there to actually be a warm human being on the other side of this that can add a little more context.

Well, I mean I would Say the best advisory conversations have come from clients who have tried technology and it didn't give them what they were looking for.

Didn't give them what they're looking for. In what way?

It didn't answer the question that they really had. Maybe it gave them a cash flow forecast, but it didn't give them decision paths on how to pay bills or where they needed to grow or how they needed to make those suggestions. They still needed other inputs in order to be able to get proper outflows from it. There wasn't an algorithm that could do a better job giving them that context. It gave them again, 15, 20% of the or 25% of the first portion of what they needed, but it didn't give them latter portion in that space.

And you're so right that it really depends on the questions and the prompts you're giving 100%. But you know what those questions can be. So how useful is it then for you?

Extremely helpful for the advisor. And I think this is where like in accounting space, this is where I think tools like bluejay are amazing from a tax perspective. The reason why I think that that tool is specifically better than like a ChatGPT agent or cloud or anything from that perspective is because the data set that it's pulling off of is tailored very specifically to what you're looking for. The way that it's even suggesting prompts are based on how you're trying to get an answer to the question that you need to have from that piece. It's not bringing in all the other ancillary information and all the perspectives and all the Reddit sub, you know, details that people have made on their perspective. Investor, PDR, oh, 100 or our favorite, you know, our favorite people on Instagram, they're telling you that you need to put a pool in your backyard because you use it as a full write off for exercise equipment.

Write that down.

Yeah, don't do that, do not do that. But it's that same context, right? Like when you have bad inputs coming in, you're always going to get some sort of jaded output with it, which is where the professional, if they're using those chatgpts or other sort of natural, you know, language tools that are much more widespread, you have to know some of the expertise to be able to say this doesn't sound right, this doesn't look right. Give me some better answer from this. Whereas with the Blue J tools, it's the like it's framed to be able to give you a better quality Answer based on what your, what your inputs are or based off what your questions are, because it knows the framework of what you're looking for. It's been built by people who are asking the exact same questions as you. And honestly from all the tax professionals I talk to that are using it far above, love it more than any other tool that they've looked at with any other solution, any other research guide that they've ever gone through. Because it does a better job focusing on the output of what they're looking for versus here's just a resource. And I think those are the kind of things that advisory firms need to start thinking about when it comes to potentially replicating who you are and replicating the service offering. To your point about the bottleneck, yes, there are people who are bottlenecks in firms as of this point in time. But how can you translate that into actually teaching people in your firm to be able to think better? How do you record those interactions with the clients? How do you get some sort of script of what's going on with it or the documentation or how they're talking? We now have AI that's reading your zoom meetings and able to process even the stuff that you visualize, you know, that you're showing on the screen, share as a part of it. Those are the kind of tools that I think are going to be able to help us educate that next level a lot faster than spending 30 years in the industry or having to fail like I did when I first started getting through that process. Because you're going to be able to ask better quality questions to these tools that exist in that way.

Let's talk about transcripts.

Yeah.

Are you letting the robots record your meetings yet?

100%.

Do you know what to do with.

That information yet right now? Yeah, that is a very good question. Right now we are aggregating that information. We haven't put it into a space yet, we haven't dumped it into an agent, we haven't dumped it into a GPT in any way, shape or form yet. We're starting to gather that information because we know not all of our calls are valuable. So for right now, we're doing some of our pre sorting on our own and putting some of that data together, trying to decide exactly how we want to put the information in the system versus just random data. Yeah, if we put random data in, we're going to get random response. And I don't want random response when we start putting that in to get good answers out.

Because it's useful if you have a specific question and you're like, what did they say? Let's go track that down. But earlier, you're talking about, I've got bookkeepers, accountants, controllers, and CFOs. And they all have boundaries where what they do stops. Wouldn't it be nice if coming out of every single meeting, we could see the transcript and say, this is a controller conversation, this is a CFO conversation, and that just happens 100%.

Do I think we'll get there? I think that there are tools that are moving in that direction.

If you had to pick one, who.

The one that I think is most interesting right now is actually Ping. They're brand new. Just in the last little bit, spent a little bit of time with them. They're starting to extract information specifically out of email communication and starting to look at financial information and what clients are looking for and giving you summaries and being able to kind of put it into buckets on who should be responsible for it based on the interaction and the engagement. Very, very interested in what they're doing. And I think it's still very early in their process, but I'm very interested in the direction they're going. I think they're thinking about in the right way.

Yeah. I mean, there's so many examples of this where it's like, every time a client says something nice, how do we go back and ask them to use that testimonial? Yeah. Like. Like client meetings really are like the sawdust of a professional service. They just happen all of the time. And the transcripts are this valuable context. We're not doing anything with it.

Like, there's.

And there's. There's tax applications for that, there's cash applications. But my mind first goes to advisory man. Like, you have a new person step into an engagement, and they're like, you're like, here's the last 10 months of how the person before you managed this conversation. How do we set them up for success? Like, you're saying, so you don't fall on your face in the beginning, and that learning trajectory is just so much faster.

Or you don't ask the same questions that have already been asked five times. Right. I completely agree with that. I think there's a lot more tools that are coming to the space with. I mean, vinyl is another good example of a tool that's coming out that's doing the exact same thing. The part that I like about these tools that I think is critical is interactions with our clients are a very big staple portion of it. But I think email is still probably one of the most, one of the, one of the largest data sets that we can use that we don't tap into well enough to understand. The nice thing is its words. That's where AI excels at its greatest advantage, is determining and pulling that information out based off of potentially tone or thought or theory of what's going on. Those tools that can extract that well and can aggregate it and can also build off profiles that you've created on the individuals or the role are going to be the tools that win when it comes to, this is an accountant task, or this is now send this to your, you know, create a carbon task for my controller that's assigned to this client that now has to do this, this, this. Because it was discussed with the bookkeeper. Those are the kind of tools that I think are going to win.

Yeah. I mean, because imagine, because everyone struggles with like one firm's definition of bookkeeping versus another firm's definition of, of controllership. And there's like, it's a virtually impossible thing to standardize as opposed to, let's say we had a platform that could ingest our transcripts, look at our emails and all this stuff and be like, actually, no, here's the platform's opinion on what you're actually doing. Is this what this person's doing?

That.

Here's where I'm going to flag the manager.

When this conversation comes up 100% and also to the same point with it is like, hey, maybe the bookkeeper had a conversation they weren't supposed to have. Does the manager know about it without the bookkeeper feeling like they're being tattled on? Because that's a big part of this too, right? Nobody wants to feel like Big Brother's watching everything they do. It needs to be framed and it needs to be put in a box where it's actually helping them to know where they can improve, but also maybe where they exceeded outside the scope of a service offering. It helps to be able to make sure you're aware of those things. Not to give away the farm, not to slap people's hands when they go outside the lines, or not to be in the position where even like from a, you know, historically with tax perspective, where you write off a bunch of time or hours, because we can't build a client for that type thing, but for someone to keep awareness in the firm as to what's going on. I think those are the critical pieces that we'll start seeing from all this data analytics from communication as a Whole.

For people that are interested in the whole advisory thing and like tippy toeing into that stuff. Do you have anybody you've learned from? You follow any where do people go to like keep leveling up how they think about that?

You know I the I love just connecting with people. Other advisors. I feel like those are some of the greatest opportunities to be able to learn listening to presentations they have or navigating from that perspective. Also, I try not to go into every situation expecting to have a thousand bits of data that come out of it. Sometimes it's a thought, sometimes it's a theory. It's just consuming information. I think specifically when it comes to clients around technology, I think Jen Davis is one of the best people when it comes to recommendations around that side of things. I think that when it comes to conferences and events, anything that's related to client engagement and relationship management is always going to be critical. I think I've seen thousand things from Nicole Davis that are phenomenal from that perspective. I don't think there's one company that's doing an amazing, amazing job with it. I think people are the people who are excelling at it right now. And so if you're at an event or you're in a local area or you know someone that knows someone in that space and you just want to learn about it, just reach out to those people. There's so many people who are willing to either coach you or consult with you or give you recommendations on where to get started or even at some of the events you go to finding those people.

If somebody were to go to one event in the next year to dig into this stuff more, where would you send them?

Honestly depends on what kind of practice you are. If I was just a cast specific practice that's in that 1 to 30 employee space connector scaling heights are going to be the the probably the two best solutions for that. If you have traditional CAT or traditional tax and audit as a part of your firm and you have CAS as a part of it, DCPA Engage are going to be two of those best solutions for you. I think there's plenty of other solutions that are out there. Those are the four that I regularly attend because I feel like the content's really good.

Okay, Dan, thank you so much for doing this, man.

Yeah, I appreciate it.

You're a legend.

Hey, thank you. You're a legend as well.

Hey, real quick podcast friends. I'm coming to a city near you running a bunch of live events. Before the end of the year. We're going to be at Intuit Connect in Vegas. We're going to be in Toronto, in Atlanta, Austin, Oklahoma City, Phoenix, Seattle, Portland, San Francisco, Louisiana, Atlanta, Nashville, Chicago, Washington, D.C. philadelphia and Boston. If you are there or anywhere near there within half tank's gas up there, buddy. I want to see you. We've put together some super cool events that I'm very excited about all around getting you and your team aligned. Heading into 2026, the biggest problem I had running a firm was I had an abundance of ideas but was always blocked by trying to get my team bought into those ideas and everybody working in the same direction. And it's why I believe the biggest way I can help you is actually getting your team inspired, getting everyone energized for the year to come. So it's not just you, but also because these are live events, you're going to meet a whole bunch of other local practitioners as well, which can almost certainly unlock some cool things for you. I'm especially looking at you solo firm runners and side hustlers where your team effectively is the people you meet along the way, the relationships that you build, the people you can go to with questions when you get stuck on this or that. Going to be a super fun experience. Including for some of these events we're recording like a live interaction, active version of the podcast where you'll get to be part of the conversation. Very, very excited for these. I want to see you there. To learn more, head over to jasononfirms.com events and I hope to see you there.