603 He Runs a $400k Accounting Firm and Takes 8 Weeks of Vacation [But now he’s become the bottleneck]

Hey, Jason here. Before we get into the episode, we are just 2 weeks from the beginning of my 20-city live tour in-person events. These events we designed from scratch to be just for accounting firms. They are super fun. You'll meet a whole bunch of local accountants who also listen to the podcast. You get some continuing education. It's a bunch of snacks, an optional dinner. It is the only event I've seen where you can get continuing education credits with a drink in your hand. I want to see you there. It's happening in May and June. Did I mention this? Over 750 accountants have already signed up. I want to see you out there. To see the tour dates and get tickets for you and your team, head over to JasonOnFirms.com/events. Enough about your workshops. Let's get on to the actual episode. Most of the year they work 30 hours per week and will take 8 weeks off this year. Their accounting firm will do over $400,000 in revenue and their net income the last 3 years, $91,123. $123,000 to over $250,000 this year. I'm going to give you the deep dive on how this person built their accounting firm. I've got their full financial statements. I'll show you some things they're doing amazingly and some stuff that they can do better because right now they are blocked. Blocked by the owner. It is a problem that is so common in accounting firms. There's one person that has become the bottleneck in what the firm is trying to do. I'm going to give you the 6 most common causes of this bottleneck, how to solve each. But first, let's roll the intro and talk about this firm. If you're new here, welcome along to the Jason on Firms podcast, where people tune in every week to get a little bit better at running accounting firms. Whether you own a firm, whether you work at a firm, today I want you to get 1% better at the science of running a calm, profitable accounting firm. The owner of this firm anonymously submitted to me the inside scoop about their firm, including their full financials. By the way, if you want to do the same, check out the link down in the show notes. We've got an intake form. This is a fun chance to put the coach hat on and look into somebody else's firm and see what they're doing, which is sometimes easier than looking at our own firm. Yeah, what's that guy getting wrong over there? Let's talk about him. I don't want to talk about my own stuff. Let's get straight into it. This is primarily a tax firm, but most of the things we talk about today are universally relevant to tax and bookkeeping firms. 90% of their revenue comes from tax work. 10% comes from ongoing monthly bookkeeping. Last year, their top line revenue was $336,000. This year they're going to do over $400,000. But the even more important thing than that is what I shared up top. Their net income the last 3 years was $91,000, $123,000. This year will be over a quarter million. And we are— how far into the year are we? Only 4 months into the year. Now they're located in a decent-sized city. I would say a tier 2 city. They have clients in 35 different states. Their entire team is remote, but this is all that the team is. They have 1 full-time employee and 2 seasonal employees. That's it. So you got the owner, a full-time employee, and 2 seasonals. And right now they don't have much in the way of a specialization. So about 20% of their clients are clergy returns. Besides that, all they really have is an intake form on their website, and it asks for kind of specific details about the client's business. They said they only take clients from certain states. In the US, that's very common for a tax firm because state and local compliance is so hard. It is, it is exceptionally difficult to support clients in 50 states if your main bread and butter is tax work like this firm. So they're only taking clients from certain states and only service-based businesses. They don't touch sales tax, don't touch inventory, and they're only working with S-corps. Now, as an extension of that, they do a lot of personal 1040s for the owners. But the specificity here is service-based businesses that are S-corps. Only exception is they've got some 1040s that are doing that on a Schedule C, probably just not yet of the size where they've gone S-corp. A bit more about their team makeup. So they've got this one year-round full-time employee. This person started as an admin, moved into doing tax data entry, and is now a full tax preparer. He's about to get his enrolled agent and will soon start to take on his own returns. Man, I had so much luck. Hiring admins that ultimately became really good pros. In fact, many of the best bookkeeping and tax pros that I worked with had no credential. Like they had no formal background. They started in something that was, uh, you know, a pretty humble, humble role inside of the accounting firm, but they were just smart and they figured it out and they saw what everybody else was doing. I stepped into some pretty old school firms early in my career where the perception of the admin was the only brain cells that are required are those that will let the person answer the phone. And that is such a wildly arcane way of seeing admin right now. For me, admin was a humongous talent pipeline for like technical staff, especially when finding technical folks is so difficult. A big percentage, probably almost half of our pipeline for technical people was actually out of our admin team. Takes time, obviously, but that's why you hire really, really smart admins. We shouldn't be, uh, you know, setting the bar lower because they are quote unquote admin team members. It's also a great opportunity for people who may not have a specific domain skill set and are coming in in an admin role. If you can say, hey, we've had a lot of folks come in on this role, but then go down a technical track and now you've taken someone who maybe is at a crossroads in their career and you can actually show them a path to being a technical professional. Okay, so very cool. The full-time employee is someone that started with the firm as an admin. They've got another seasonal employee that works 30 to 40 hours a week during tax season. But, but only during tax season. This person has 20 years experience but no professional credential. Really doesn't matter in a firm like this, especially as the owner right now, and we're gonna get into this, is still the one signing off on all the returns. The other seasonal employee worked 10 hours a week last year doing admin, but this year is working 30 hours a week doing both admin and tax prep. So if you're scoring at home, they have one person with the firm who has been a tax pro for 20 years. The other two were hired as admins and are both becoming tax pros. Very cool. This was maybe the most rewarding part of running an accounting firm is seeing the, like, career trajectory change of the folks that came and worked with me, where you brought them in and where you left them. Tremendous amount of satisfaction to be had in that. Let me kind of paint the picture of what their annual sort of cycle is, the volume of work they're doing and what they're prioritizing different times of the year. In January, they're trying to get a jumpstart on business tax returns, but they said it rarely happens the way they hope it will. In January, the owner is averaging 40 hours a week. They collect about 40 to 50% of their annual revenue by January 31st. That is 40 to 50% of their annual revenue by January 31st, in the first 31 days of the year, and 80 to 90% by April 30th. In February, they're going hard on business tax prep and doing bookkeeping cleanup. Some 1040s start to flow in by the end of February, but the owner's still just averaging 40 hours a week. They also take a, a 3 to 4 night vacation at the end of February each year. So many things here that are just like unthinkable for the traditional accounting firm machine. Taking time off in tax season? In March, they are going whole hog on prep and returns and they're averaging 50 hours a week. This is the owner, not, not the staff. In April, they're wrapping stuff up, averaging 45 to 50 hours a week until the 12th or 13th. And then very little after that. Usually they're, they're gone for the week after the deadline. The rest of the year, they average 30 hours per week and take a total of 8 weeks of vacation per year between May and December. Gang, Running an accounting firm, not a bad gig if you can get it right. May through October, they're largely working on extended returns and taking in a few new clients. August through December, the focus is on tax forecasting for the following year. And then in November and December, there's actually very little work happening due to holidays and vacation time. They currently have 4 monthly bookkeeping clients but are looking to get that back up to 10. They have 8 payroll clients, so little in the way of like year-round work. And honestly, this is totally, I mean, this is the beauty of being able to run your own shop or, or, or to work in a small opinionated shop that is like, yeah, here's the lanes we wanna be in and the lanes we don't wanna be in. A lot of people will look at this and be like, well, what are you doing? What are you doing with the other 8 months of the year there, buddy? That's revenue opportunity. But there's also people that see the same thing and they're like, oh man, 8 months that are like pretty chill. That actually sounds kind of nice. So obviously yes, if you're trying to like optimize for the entire year-round cycle, you'd probably be leaning harder into bookkeeping, which is founded in fixed monthly fees and cash year round. But if you want to work 30 hours a week with, with basically one employee for most of the year, you could also just chill out. Now, there's a middle ground there where you could potentially take in some bookkeeping work, and that is what keeps the seasonal folks busy year round. Oftentimes folks who will come to work with you, like, they have life circumstances where seasonal may make sense for them. But there's also situations where if seasonal is the only thing that you can offer them, they may go find somewhere else to work if you can't offer them work. Year round. That could be an argument for taking in more bookkeeping work to keep those folks busy throughout the year. But at the end of the day, the North Star has to be the appetite of the owner. What type of firm are we trying to run here? And being able to paint that picture for the folks that come to work for you so that hopefully those things align, because there's an abundance of folks out there that would be perfectly happy just working seasonally. And that's only a problem for your business if it's not designed in a way that needs seasonal help, not help around the year. Now let's talk pricing. So this firm has offered, uh, basically a 3-tier pricing approach, uh, for the last 5 years. And it's kind of the— maybe the most basic version of 3-tier proposals that you see in the wild. So this is before an engagement starts, they're sending a proposal to the client saying, here are the 3 different ways that you can work with me, 3 different levels of support at 3 different prices. The most basic level is simply tax preparation with no year-round support. The second tier is tax prep and advice as needed. And the third tier is tax prep, year-round advice, and forecasting/planning. So this is proactively touching base with the client throughout the year, running a projection for what, you know, the following, or I guess the current year tax is going to look like that is going to be filed the following year. Basically tax planning, like the minimum version of that for most firms is checking in at the end of the year. More hands-on version of this is doing it mid-year and year-end. This is what I did in my firm. I had basically 3 service levels. I found that for me, the easiest way to describe tax planning service levels to clients was in when the actual touchpoints and the work would happen. I went down the path of like, you know, if you're at this tier, you can ask me questions throughout the year, but if you're at this tier, you can't. What I found was if people had a question, they were still going to ask me the question. And I didn't want to end up in a situation where they would send me the question. I'd be like, sorry, bro, can't help you because you're not on that plan that you chose 6 months ago because you didn't know that you were going to get audited or you didn't know that you were going to get a notice or something. So the way that I structured my tax planning was base level was just tax prep. The next level was just planning at the end of the year, and then the highest level was planning mid-year and at the end of the year. Because if you just do a check-in at year end, oftentimes there's not enough time to course correct. And so for certain people, doing that twice a year made sense. Bookkeeping and payroll clients pay monthly. The tax prep packages are all paid upfront. We're going to talk a little bit more about that. Remember how they said 40 to 50% of the revenue lands in January? January. Now they use— this is controversial— they use a simple Excel file to price returns. It's a hybrid kind of forms-based, that is tax forms-based and time-based calculator. Oh, and value-based. The triple hybrid that helps them standardize how they price their work and quickly do it based on a set of questions they ask every client with a, with only a couple subjective things like a 1, 2, or 3 scale of complexity. Their basic tier minimum fee for a 1040 right now is $550. So that is the minimum for 1040 work. And their minimum for 1120-S, so S corp business work, is $1,900 plus $250 for bookkeeping cleanup. Both of those are minimums which change with complexity. Those are— those prices are more or less the norm, I think, for what I would see for a firm like this. Doesn't mean they can't be higher. On the Excel pricing, some people love this, the simplicity of having an Excel spreadsheet where you just plug in some templates and it gets to a price that you can ship out the door to clients. And there are operational upsides to setting your pricing this way, namely that it's really cheap, namely that it's really simple, that anybody in your firm can do it the same way that you would do it. And I think people also make the argument that it is the most quote unquote fair. And so there are firms for which this makes sense and people that just want to stick with this, and that's completely fine. Let me make the counterargument. That is that I would argue there is no such thing as a fair price because ultimately how people value you will always be different. So let's take two clients. One client has a situation where had you done tax planning with them mid-year or before year-end, it would have saved them $10,000, maybe in a way that you wouldn't have anticipated, something they didn't even tell you so that you couldn't have predicted this. You only found this if you actually did the planning work. Another client, there's just not much going on. Like you don't have a way to really influence their tax outcome. And many, many tax returns are that way. Tax planning is not always worth it. Now, if I were to plug those two clients into my spreadsheet calculating what the fee ought to be, maybe one of them the price would be $700, the other the price would be $1,100. But you also just saved that person $10,000. What is fair in that situation in the eyes of the buyer? Because the person who you couldn't really save any money with tax planning, they may see $700 and say, that's super unfair. I'm not willing to pay that price. And it's simply because the value of what you're giving them as they perceive it, is less than the price you're asking them to pay. But this other person who paid $1,100, they're like, $1,100, man, you just saved me $10,000. I will take that deal all day long. And so fair for them is, is totally different. And so when we think fair, we think fair through the lens of, of what we know and what we understand as like kind of the average pricing and what other firms do. But what we don't see is into the people who are serving's circumstances and how that may influence what is fair. Factors like person A has money, person B doesn't. You just saved person A's bacon. Person B, there wasn't really much you could do for them. And so while there are huge operational benefits to simply pricing based on a spreadsheet, it's vastly easier. It's much easier to delegate that off the shoulders of the owner, which pricing is chronically one of the really hard things to delegate. The reality is it almost always leaves money on the table. It's not to say that one is always better than the other, but there's absolutely pros and cons to each. Quick word from one of this episode's sponsors. If you are getting, uh, warmer to the idea of offshore staffing, as many accounting firms are, something that I did in my own firm and had tremendous luck with it, wouldn't it be nice if you had someone you could trust to go out and find you the right person? You just pay them a flat fee to find you a great hire, like no middlemen, no ongoing charges. Wouldn't that be nice? If you're looking for that person, look no further. Look no further than TeamUp. TeamUp, run by actually a former bookkeeping firm owner who had tremendous success hiring folks in the Philippines, hired some local recruiters there. Now all they do is help place awesome accountants, be it, uh, bookkeepers, tax pros, virtual assistants. They source awesome local talent in the Philippines and they connect them with you. If you are into the direct hiring route when it comes to building an offshore team, that's TeamUp's sweet spot. They find you really good candidates, you hop on the interview, and you don't move forward until you've got somebody that you're absolutely stoked to have them come and work with your accounting firm. If that's you, if you need some, some humans to augment your AIs, get on the horn with TeamUp. More information down in the show notes. If tax season just punched you right in the grief bone, I have good news, my friend. There's a better way. We talk a lot about AI on this podcast, and the group that is using AI to automate a whole bunch of the 1040 process It is, it is one of this episode's sponsors, Soraban. With every like new headline you see around new AI models and new AI this, new AI that, the companies that are moving fastest using AI, they get better with every new AI model. And especially when it comes to the 1040 prep process, like if you're a US tax firm, oh my gosh, is there so much tedium still associated with collecting information from clients, getting it into the tax software, delivering it. It is a nightmare. If you are a firm doing like volume 1040 work, say 300, 500 1040s a year plus, this is a no-brainer. Take a look at Sorbet. We've actually done some demos of them on my YouTube channel. You can even see how it works. Definitely worth checking out. More information down in the show notes. Let me tell you about how they bill for their work because it's— it is— I don't know if aggressive is the right word, but there's a lot of people that will hear this and be like, holy smokes, I can never imagine doing this for my clients. But they do this in this firm because it's just the norm. It's how it's always been done. So I mentioned payroll and bookkeeping are charged monthly, but tax prep, all 3 tiers, regardless of how premium a tier the client opts into, is paid 100% upfront in January and February. But let's dig into the nuance of what that actually means. If a new client shows up in June 2025 and they want a 2024 return prepped and they pick the premium service, that is the service where they get year-round support, the client pays 100% before they even start the work. And year-round support is not prorated, even if they came on midway through the year. So the fee for service is for all the services provided to them within that calendar year. If they show up in May 2025 for 2025 tax prep but want year-round support, they pay the price for a full year's support as soon as they join. I'm not sure I explained that first part right. The short of it is, if they're going to file your 2026 tax return and you pick the premium option and you want year-round support, whenever they are engaged, clear up to the start of 2025, they will pay the entirety of what that costs. During the calendar year. But if they join the next year, the year that the return actually gets filed, you pay basically the base fee just for the tax filing. But if you want premium going forward, you also pay the entirety of next year's tax prep now. And a lot of firms split hairs over this where they're like, well, we can help people year-round, but if they join in September, we'll only charge them for part of the year. But that's not really fair to you because you're still filing 100% of a tax return the next year, right? And, and where I think people most get stuck on this, and we get afraid to still charge full price is when you have the double whammy of somebody coming to your firm in the year of the tax filing. And so you're charging them for the tax return that you're going to file in 2 months, but then it feels like double dipping to already be charging them for next year's tax return, to have both of those things stacked up. And so you're worried clients will go away because they've got this big check to cut when they first come and start working with you. To me, that is a reason to offer payment terms. It's not a reason to bend your policies around folks coming to you late in the game. And so what I would do in that case is for new clients coming in the door, if that was a concern, we would extend payment terms, you know, 6 months or spread it through the end of the year. It is, after all, a one-time thing. They're paying us for the following year's tax prep. They're also paying us for the tax prep for the year that has just closed. We can't be afraid to double dip there because there's tremendous benefits to your cash cycle not happening like after the return is even filed, man. This is such a big factor actually in accounting firm acquisitions. The notion that most traditional accounting firms still are, are so far in arrears and the timing of when they bill for work versus when the work is done. Like there's a world where a client brings you their tax information in February and the return, for whatever reason, doesn't actually get filed until October, but it's been picked up and put down 20 times throughout the year. And then the tax pro goes on vacation after the October deadline and they finally get around to invoicing for that work in November. That is work that's been happening since February. Compare that to what this firm does where they say you're going to pay us for your tax return in the calendar year of that tax year. We're talking about a 20-month swing in the timing of payments from the start of the calendar year, from the start of the calendar tax year, clear to in the worst case scenario, the November of the next year when the tax return is filed. Those are two different firms. Getting paid for the exact same work 20 months apart. Isn't that wild? And you know what the, you know what the November firm would say? We could never do that. Our clients are used to XYZ. And so it never changes. You never dig yourself out of that hole. And that, that firm is also letting in new clients who don't even have that expectation. They're letting in new clients under that old rule set, making it even worse. We have more control than we think we do. It's the fear of the client pushback, right? That gets in the way of it. But at the very least, don't let any more clients in under the old regime, under the old system that you don't even like. Okay. Sales and marketing. How do they find their clients? I get clients from my Google Business listing and from referrals and from my own posting on Facebook and LinkedIn. Clients predominantly came from my own network and referrals. I ran some paid ads in year 1, $10,000, but I halved it in year 2, spent $5,000, and I've essentially spent $0 on ads since then. They have 375 1040 clients, 45 business clients, 4 bookkeeping and 8 payroll clients. Lesson learned. Yet another accounting firm that didn't have success with paid ads. Now, tech stack. You ready for the most humongous tech stack list you've ever seen? Here are the tools that they're actively using: QuickBooks Online, TaxDome, Calendly for scheduling, Zoom, Loom for recording short videos to send to clients, Ultratax, Canva— it's like a graphic design platform for social media— Adobe Premiere for video editing, Adobe Acrobat for PDFs, Mailchimp for email newsletter, Zapier for connecting different apps, Typeform for their new client survey, RC Reports for S corp reasonable comp studies, Fax.plus for faxing stuff to the IRS, BlueJay for tax research, Gamma for generating AI slide decks. Actually, actually very useful for delivering a tax return, like creating a quick visual to go with a delivery video. G Suite. So Google Workspace. Wix for their website, Tax Help Software for downloading IRS transcripts, using Microsoft Office as well. So they're on Google Workspace, but they've got Microsoft Office for Excel and Word. ADP for payroll, Later for scheduling social media posts, ChatGPT, Track1099, tValue— what a classic— for amortization schedules, and a teleprompter app for recording videos. Now, stuff that they've used in the past that they no longer use: Halista Plan for tax planning, MoneyGuide Pro, something they explored for financial planning. AssetMap, also financial planning. Scribe. This is the app for creating kind of automated SOPs. Mighty Networks. At one point they had an online community for personal finance coaching. No longer doing that. Gusto. They ditched Gusto. Drake for tax prep. They've since dropped that for UltraTax. DocuSign, no longer using that because of TaxDome. BookGel. I guess that was a pricing tool for bookkeeping clients. And Taxaroo for online tax organizers. Presumably that's been replaced by TaxDome. If anything is missing here, it's a tax intake tool, a dedicated tax intake tool. TaxDome has a version of tax intake, but it's not as good as the best of breed 1040 intake automation tools. That's the biggest time-saving opportunity for a firm like this is just saving time on collecting 1040 documents. We saw how many, how many 1040 clients do they have versus business clients? They have 375 1040 clients and 45 business clients. A 1040 intake automation tool will save you a huge chunk of time on all 375 of those 1040 projects. Leaders right now are Stanford Tax, Soraban, and Trusts. Otherwise, tech stack looks great. Now here are the pains of the business and here are the things that they're enjoying. The pains. They are the bottleneck in every way. Stuff is blocked by this. Projects are blocked by the owner right now before they go out the door. They need someone else to review and sign returns. They say they have 2 people in the pipeline. So folks who are building their expertise now, they also said they could probably use a virtual assistant. Things aren't bad, as you can see by my average hours, but they can always be better. So main pain, they're the bottleneck. We're actually going to go deeper on this. Last, what they're most enjoying is talking to clients about taxes, being the trusted advisor. Sometimes they take enjoyment out of doing the prep, but it gets old. They love to do the tax reviews/signing on about 150 to 200 returns. Instead of 350 to 400 returns. The plan's in place to get there with my two EAs. So their plan is to have the two folks that work for them ultimately signing and delivering more of the returns. That is one path. The other path is just doubling down on a more premium client. Like, I know so many folks who have done more drastic cuts than this. We're talking about going from, say, 400 to 200 clients. If your client work, you know, if you're running a 40% margin right now, And it's hard with a firm this small to determine like, what, what is my margin really? Because I'm not factoring in my own compensation. But let's say your accounting firm is running a 40% margin. In order to do half as many clients, you just need to be able to justify a 40% price increase, right? 40% margin, 40% price increase. That's going to double the profitability of every project. Most firms have that at their fingertips. Over half their client base would agree to a 40% price increase if it's communicated correctly. On the other side of that is a firm where you're not only doing half the number of returns, but you're making the same money and half the time. Now, obviously, that is a very compressed discussion on exactly how to do that. But just know, like, if you right now are feeling like you want to do less work, which that is almost every accounting firm owner today, like if you came to them and you said, wouldn't it be nice to just like work with way fewer clients and they have direct access to you, just the people that you enjoy? People would say, yeah, like, honestly, that's kind of why I got into this. That's what I thought this gig would be. But somehow, inevitably, we keep getting pulled into running these volume shops because we're flattered by more people coming in the door. We're worried that one day that'll all stop, that'll all turn off, new people will stop coming to you. So you keep saying yes. And before you know it, we're helping so many people that the level of service has been compressed just so that we can get that work out the door. That is where almost every accounting firm ends up. Just know if you found yourself there, You can always get away from that. You can absolutely unwind that. In fact, you are better positioned to do so than someone who's not overcapacity, because what your clients want is more of you. And so when we do that framing of like, hey, sorry, we're doing a pretty serious price increase, the upside is, is to be more available, is to raise the level of service that I can provide you, which I know you want. And that is why people say yes. They're like, cool. I love you, but I would want more of you. Happy to pay another 40%. And you've got then a more calm business that's making the same money, doing less work. Now, on the subject of the bottleneck, almost every accounting firm has this right now. That one person is very commonly the owner. They have that person that is the bottleneck. Maybe they just don't have the same vision for how this stuff works that you do. But let me run you through what I see are the 6 most common versions of a person being that bottleneck in the firm. Maybe it's you. Maybe it's somebody else. And for each of those bottleneck drivers, how we solve them. Let's do it. My firm's on fire. I'm all burned out. Clients are calling. I'm pulling my hair out. Welcome to the Dirty Dozen. Welcome to the Dirty Dozen. Last year, I had over 1,000 accountants out to in-person events and asked them What is ailing your accounting firm? And what people said was centered around 12 different themes. Last week on the podcast, we talked about how many people said hiring in accounting firms right now feels impossible. Today we're talking about how to solve for that person that is the bottleneck. By the way, next 2 months I'm coming to 20 more US cities running the same events back. We had so much fun last year. It enabled so many amazing local connections for people. Folks, who listen to the podcast, who get the beekeeping joke, who are ready to fight about knitting. Imagine sitting in a room full of those people who are all from your local town, who are into the same thing. It's incredibly fun. Half-day events. A lot of people are traveling for these. Starts in the early afternoon. So if you got to make a drive in the morning, your day doesn't get too long. But kicking off here very soon. Oh my gosh. In fact, next week. Woo! Next week we're in Columbus, Minneapolis, and Chicago. The week after that— goodness, I don't even know. I need to get my life together. The week after that, Miami, Orlando, Charlotte, Atlanta, and Nashville. Woo-hoo! They're coming up. But to see all 20 cities and grab your tickets, go to JasonOnFirms.com/events. I want to see the whites of your little accountant eyes. That was weird. I want to see you there. That was less weird. Spring is here. It is spring cleaning season. The perfect time to clean out the dusty corners of your accounting firm and just get rid of the stuff that you don't want to be doing still. And for most of us, one of those cobweb-laden services that is just stuffed into the corner of the garage, it is bill pay. Well, good news, my friends. Artificial intelligence is here to help. You might have heard of it. The platform that's crushing it right now, this video's sponsor, MakersHub. Listen, nobody likes bill pay. Okay, it sucks, but almost every business has to do it, and oftentimes it's high stakes. It's messy. It impacts inventory. You're going after like savings. The details matter. You miss a, you miss a zero or a comma here or there. Oh my, oh my, oh my gosh. That's a big deal on bill pay, right? We are getting wildly good new AI models seemingly by the week right now. And honestly, MakerSub are the folks that I trust to like put this work. MakerSub have been been like arguably making the best use of AI models over the last 3 years to solve a very, very specific problem. The problem of bill pay. Nobody likes it. So if you do this stuff for your clients, or you have clients who deal with project tracking, receiving, construction people, and manufacturing folk, HVACsmen, super recommend you check out Maker's Hub. A great example of AI done well. To learn more, check out the link down in the show notes. Hey, just real quick, if you're using Outlook or Gmail to manage email inside of your accounting firm, Brother, those were tools that were built, uh, 20+ years ago and not for accounting firms like yours. If you haven't heard of them, let me introduce you to one of today's sponsors, Missive. Missive, M-I-S-S-I-V-E. It is exactly what I needed. I actually used a bunch of like off-the-shelf help desk sort of email tools in my accounting firm. Man, man, do I wish I had Missive. It's a vastly more efficient way to manage email across your your entire team because email is not a hill that anybody should be dying on alone. We did a demo on the main channel of it. If you want to see it in action, just search my name and Missive. Really cool, doing some cool AI stuff as well. We're checking out to learn more about just what you're missing by using Outlook or Gmail. Check out the Missive info down in the show notes. Okay, the 6 most common causes of this one person in your accounting firm becoming the bottleneck. Let me speedrun you through these 6 bottlenecks. Number 1 is the review bottleneck. Here's what this sounds like. These are real words from real accountants. I got to get myself out of the financial review and delivery so I can spend more time on onboarding. I only want to be the topside reviewer. I don't want to have to perform the detailed reviews of the tax return. I need the tax returns virtually done to me before they get to review. I'm having to spend too much time on it. Heavy is the head that wears the crown that is stretching around that big brain of yours. You're the smartest one in the building. And you know whose fault that is? It's yours. It's your fault. If you're the owner, I just, I'm so guilty of this myself. What, what we do is we grow, like the business grows over time and you hire for all the junior jobs inside of your firm. And then one day you stop and you look around and you're like, why can nobody else do what I can do? Like, well, because you didn't hire anybody to do what you can do. That's, that's a big factor. So the review bottleneck, how do we solve for this? Whether this is you that is the bottleneck or there is that person in your firm, Who is the bottleneck? The knee-jerk reaction is it's the people's fault. But what we often miss is like jumping straight to people. I think that's the wrong order. We got to think systems and then we got to think people. So very good example of this is allowing for review inside your accounting firm based on the complexity of a tax return, based on the complexity of a month-end close. The way review is normally approached in firms is people, after X number of years experience, crossed this magical threshold that can only be decided by management, and they are now anointed with the ability to review. And if this has ever happened to you, you know just how terrifying it is. The first time you put your Jan— John or Jane Hancock on that return, on that month-end close, then it goes out the door and you're like, seriously, nobody's going to look at that again? Nobody's going to double-check what I just did? I always thought reviewers felt a lot more confident than this when they sent stuff out the door. There's this mystique around review when the better way to approach this is for review being the collective responsibility of the entire firm. Because the most basic versions of review are administrative, are making sure— did all the numbers from this one tax form make it into the tax software? On bookkeeping, did the 12 transactions this month actually land in the financial statements? Like, the most basic versions of review are basically blue lining. Do I sound old when I say that? Do the youths even know what blue lining is anymore? It's administrative. It's making sure that number got from this place to that place. And so if you think about that as review difficulty level 1, anybody in the building can do that, be it a physical building or a virtual building. Now you can build an SOP around how to review difficulty level 1. Building an SOP around level 5, that's very, very hard. But that's not where we're starting. We're starting at level 1. And when I rolled this out in my firm, we did 1,800 tax returns a year, actually 1,800 1040s a year. When I rolled this out in my firm, 65% of the 1040s could now be reviewed by people who were previously just considered preparers. And so we took what in our firm was this humongous review bottleneck, and we distributed that workload across way more of the preparers. Now, this took time for the preparers, but a preparer spending time reviewing, that is more valuable than a preparer spending time preparing. It's upskilling them. It's higher value work. You still got to balance that. Like, do I have a prep bottleneck now? Right. But the solution to that review bottleneck, it is a more linear path to folks being able to do more and more review over time. The opposite of that is being fully reliant upon very expensive, very experienced people. And like, we still need very smart people inside of our accounting firms. But you know just how scarce those folks are. And what I see most firms doing is jumping straight to the people need, looking for that unicorn that has the cauldron of experience where they can do anything, they can review anything. And if you got that person, great. But I know a lot of people that have been looking for that person for the last 5 years or who finally found that person and they're paying so much money for them. And then that person sits there reviewing pretty basic work. So start with systems, then go to people. And if you are still blocked on people, consider how much time are we devoting to finding the right people? People don't just appear. You're not an Indeed listing away from finding your dream employee. Maybe it could happen, but if it was as simple as that, Man, we wouldn't have so many firms blocked on hiring right now. So it takes time to be visible, be out there, pound the proverbial pavement to find that right person. Bottleneck number 2, the knowledge bottleneck. Here's what it sounds like. The biggest challenge right now is currently transferring my knowledge to help my team be more successful in supporting clients. How do I duplicate myself with my current new hire? I need them thinking the way that I do. Knowledge can't be SOP'd the same way that process can. Now, that's not to say that process can't help what we attribute to quote unquote knowledge, but when you're used to doing the work your way and then somebody else comes along and they don't do it your way, there are some versions of that that are problematic. Other versions of that that aren't, where it's just another human, like they're always going to think about it from a different perspective. But how do you do that knowledge transfer day to day, just as a product of going through work? I did an interview with Mike and Ross Libby, a couple, uh, Canadian accountants. Ross has a generational firm. It was Ross's firm. Mike ultimately came and bought it. But the way that Mike kind of came of age in the firm was they literally were working out of Ross's house together, sitting back to back, working in the same room, taking phone calls 3 feet away from each other for years. And this is the way that knowledge transfer worked, like, for a really, really long time that has now been lost in most of our work setup. You may have the big boss closed off in an office. You may have a virtual team. You may have employed a whole bunch of millennials that are like, I don't want to be near you. I don't want to get on a call. Leave me alone. And so this like contact transfer, it never happens. And so you got to think about ways to manufacture proximity where it doesn't otherwise exist, because if you have proximity, a lot of this stuff just happens. And so that may look like pulling Squirt in on the next meeting with the client. It may look like giving them access to your AI meeting note-taker. So if they get stuck on something, they can go back and see how you have solved similar problems in the past. It's worth thinking about how do you give your team access to you? Is your, is your team afraid to come and bug you with questions? Do you have office hours where that's encouraged? Do you have your own AI assistant where you have kind of built some of your own thought leadership out and, and members of your team can use that as a first line of defense to pepper your AI assistant with questions because everyone to a degree is afraid of peppering you with questions all day long. Nobody wants to look like the dummy coming back and asking questions over and over and over again. I actually think AI assistants right now, like, that is a great way to let your team go fully weapons free and ask all the embarrassing questions. But I can tell you what won't solve this problem. Finding the right person, finding the unicorn. Like, nobody's ultimately gonna navigate every situation the same way that you do. And to be clear, they don't need to. But when it comes to expertise, when it comes to capability and applying it in kind of the tone and the voice that you want to be representative of your firm, that is best done by proximity. And it's not impossible in a virtual environment. I mean, you could record all your meetings and have that team member. In fact, this may be better than having Squirt sit in on the meeting. Maybe this is a modern version of it. Have Squirt go back and watch that meeting on 2x, 2.5x. Like then they are seeing how you're navigating this stuff. Bottleneck number 3 is the structural bottleneck. Nobody in the firm actually owns anything. You've got kind of generic titles for everybody, but no clear accountability built into those roles. Here's what that sounds like. We've got to strengthen our internal structure and more clearly define team roles and responsibilities so I can even know how to delegate. We're finalizing our org structure and accountability chart. we'll be rolling out EOS to build a solid foundation for our growth. EOS is great. EOS is often like framed as sort of this, uh, magic wand. And especially if you're a firm under 20 employees, EOS is overkill. It's not to say it's not worth reading the book Traction and understanding how that stuff works, but it's very hard if you're building a firm yourself to not accidentally build a machine that's totally reliant upon you. And that is like, that is what is worth considering is If you look at everybody on the bus and their roles to the degree that they're defined, if someone else comes in and looks at that, oftentimes they'll look at that structure and be like, well, who made that structure? And you'll be like, well, I did. And they'll be like, and what's the problem? And you're like, well, I'm feeling overwhelmed. I have a lot to do. And they're like, well, yeah, have you seen the structure? We create this machine that like only leads to one place and that is everybody being dependent upon you and that just being exhausting. I actually think what we need to do is the opposite. We almost have to bias for the fact that we will underestimate how much work we get sucked into. And so on paper, what is left for you or what is left for this bottleneck person almost has to look like a half-time job in order for it to actually be a full-time job, not a 1.5x job. And this is actually a really valuable exercise to do with your team, to just be real and be like, hey man, we got to get way more work off of me, but this is an opportunity for everybody else in the building. Let's design something that makes sense here carving as much stuff off my plate as possible because I'm not worried about that plate not refilling itself, but because we ought to design the, the machine, the structure to not always lead us to this structural bottleneck. Now, your first attempt at this will not be perfect, but the goal is to kind of keep iterating on this. Make this a conversation within your organization, and you will find as people come to work for you, they super, super appreciate that as well because there's more clarity around their responsibility. What's their domain? And there's some fear here because people are like, oh no, like everybody helps out. We're all willing to pitch in. There's a balancing act there where if it's a total free-for-all, that can also lead to like zero accountability. 3 more to go. Number 4, the meddling bottleneck. Ew, you say you're stepping back, but is anybody actually holding you accountable? You're in the weeds and 5 years later you're still in the weeds. It's just a slightly different set of weeds. Here's what this sounds like. I probably need to learn to step back and ask my team to do more. I get super stuck in the weeds. Part of my goal is helping my team level up, but I don't know how to balance that with just jumping in and doing the work. I need to continue improving my ability to delegate as we scale. A lot of this boils down to how do you value your time? And when I say you, I guess in this case I'm talking to the person who is the bottleneck. You have to somehow zoom out and consider like, what are all of the opportunities or problems in the business? If you're blocked on people, how many hours a week are we spending on efforts that will find us the right people? For most firms, the answer there is zero. You may be blocked on people for years, and yet we are not setting aside time to be like, I got to find somebody. What should I do? Like, run to Claude. You may not even know what those efforts look like. Like, run to Claude and be like, give me some ideas. Like, how do I just drum up more visibility for my business so that I can find the right person to come and work for my firm? And it's going to look like, well, how much of your website is geared towards clients versus geared toward the next person that may come work for you? Are you professionally invisible? Like, does anybody even know that you and your firm exists? Are you out there reminding folks that, that you're running a cool firm that would actually be a cool place to work? If you zoom out and think about like the big levers in the firm, it's not getting the next project out the door. It's usually down to systems. It's usually down to people. And the more important those meta problems in the business become, the more you value your own time, the more you're willing to be like, Yeah, I know I could get $200 an hour for that thing, but I actually see if we nail this, this is a way bigger driver for the firm. And admittedly, like, this is a hard thing. Like, it's kind of an identity thing too. How much time or how much money is my time worth? But how I got there myself was simply putting greater importance on the big hard things in the business that I knew needed to change. Strategy around pricing, restructuring the team, getting some people off the bus and some new folks onto the bus. Those were like the big things for my firm. In my firm, I went through the full progression from being a junior person to ultimately being an owner and getting myself completely out of client work. When I became an owner, 80% of my time was client stuff. Over the course of 2 years, I got totally out of client work. That's a hard thing to do. There's a lot of trade-offs involved there, but how you value your own time ultimately drives what you're willing to say no to and where you're even willing to push back on the team and be like, I don't know that you guys actually need me to help you with this. I think this is something you all can navigate. And that brings me to number 5, the escalation bottleneck. Your team is trained to ask you about anything outside the SOP, not because they're lazy, but because last time they came and did the same thing, you gave them an answer, you bailed them out, you solved the problem. What this sounds like: I need my team to take more initiative on their own rather than always asking what or if they should do something. I'd love for the team to be more proactive in spotting opportunities to take client tasks off my plate before I have to delegate them. "My team is so good at following my processes, but when something's not written, they quickly turn to me for help like my kids." Oh, sick burn. All right. I would say the leading cause of this is our past behaviors. This could look like really getting after people for not following the process in a situation where they thought maybe they needed to deviate. This could look like swooping in and being the hero. There are some folks who, like, going to you is just the easier path. Like them having to figure out on their own, like that is work. And so simply coming to you, it's easier. There's other folks where like there's so much fear around making the wrong decision about the potential consequences of that, that they don't want to be on the hook for that. And so they want you to make that decision. Two tactical ideas here for you. One, set thresholds below which the team doesn't need your input. There's a whole bunch of examples of this. This could be your admin team. It could be a dollar threshold on spending decisions that they make. It could be. Your, your account managers, the folks that manage your clients. It could be a client dollar threshold where, say, every client under— I'll just pick a number— every client that pays the firm less than $2,000 a year, you're able to make those client management decisions yourself. Or maybe every tax return under $10,000 in total tax, the team is allowed to make technical decisions without your input. There's a whole bunch of versions of this that we can do inside of an accounting firm. The goal is to enable your team. And is there risk in doing this? There absolutely is. But I mean, that is core of delegation. That's the difference between good delegation and bad delegation is being able to hand something off to another person and things not totally fall apart, things not ending up falling back to you. So first tactical tip there, set one threshold that you can agree to with your team that is a carve-out below which you don't need to get involved. Second tactical tip here, this is a tip from Dan Martell. If somebody comes to you asking How should a situation be handled? Rather than just giving them the answer or saying what you would do, set the expectation in the organization that if somebody needs that from you, they have to come to you with 3 different options and their recommendation. You want to force them to go through the thought, like the work of getting to a conclusion on their own. And if they really, really need your input, by the way, once they've done the work, they will often find that they don't. But if they really need your input, then it's also lowering the mental load on you. Because if they're just coming to you and saying, figuring it out or sending it off in an email, then you got to come up with the 3 options and the recommendation, right? So it's not only making your life easier, it's helping them get the reps in of doing the hard work of figuring out what's the right way to approach the problem. Hey, real quick, month-end close automation software. It has kind of completely changed what doing bookkeeping work looks like the last few years. And did you hear the news recently that this episode's sponsor, Canopy, they are working on their own spin on month-end close automation that is coming soon and will be built directly into the Canopy platform. Canopy, who you may have seen late last year, launched their own version of like tax intake built into the practice management system. Now they're going after month-end close automation. And it is all, it is all part of Canopy's vision to be the single sort of all-in-one place to not only manage the work of your accounting firm, but to get that stuff done. I almost cursed. You know what I'm saying? Canopy always kind of been like a feature nerd's dream, especially if you are of the mind where you're like, man, I want to consolidate more of my stuff, eliminate some tools you're leaning maybe more all-in-one. Canopy has been one of my leaders in the practice management system category for as long as my recommendations have existed. Excited to see what they're doing in the bookkeeping automation space now as well. But to learn learn more about Canopy, check out the link down in the show notes. Hey, real quick, do you need to hire any humans inside of your accounting firm? I wish you could see what I'm seeing through my own two eyes right now. I'm staring at a portal of qualified pre-vetted candidates that are champing at the bit to come and work for your accounting firm. These are real human beings. Aubrey, a bookkeeper with 3 years experience, $3,100 a month. Samuel, an executive assistant with almost 10 years experience, $3,000 a month. Maykal, a bookkeeper 6 years experience. He's got a CPA experience with, with Bill.com, Accounting CS, Deal, Power BI, QBO, NetSuite. Let's find a tax person. Mia, US tax accountant experience with CCH Access, Drake, and UltraTax. Oh, bless her heart. $4,000 a month. Gang, these are all super talented accountants that are ready to come and work with your firm through Cloud Accountant Staffing, longtime sponsor of the channel. They have a portal where you can go around and see see all the folks that they have pre-vetted and even book an interview directly with those people from the portal. You don't even have to hop on a call with Cloud Accountant Staffing. All these applicants have— they've got resumes, they've got intro videos. Can't tell you how many firms that I know who have been very happy with Cloud Accountant Staffing. Accounting, it is a universal language. Luca Pacioli, buckle up for this one. Not American, Italian. You know why? Because accounting knows no borders. Here accounting, there accounting, everywhere accounting. Accounting. Okay, you need some human talent in your accounting firm? Talk to Cloud Accounting and Staffing. Check out the link down in the show notes. Okay, last bottleneck, number 6, and this one hurts. It is the pricing bottleneck. The firm has priced their work with the assumption that the owner will do it all themselves, and the work is now too underpriced to afford the help that will solve for the bottleneck. Here's what this one sounds like in the wild: There is too much to do right now and we can't afford the help. I'm completely overutilized. I know I need to hire. I'm saving up and working on my marketing, but I am also losing my mind at the same time. The goal is to phase me out, but there is too much to do right now and we cannot afford help. So you're underwater because— so I want to be super, super clear, and I don't know that you can build a firm without hitting this at some point, without hitting this wall, because when you're starting a firm, you're like, hey, you got money because I got skills. Anything you want to give me, I'm happy to take it. That is step number 1 is like cash burn, solving for that. Can I pay the bills? Step 2, if you want to build a team, is can I actually afford a team with what I'm getting paid right now? Because while I'm willing to work for free, that's an, that's an unrealistic thing to project onto the people that are going to come and work for me. When you're in this situation, you are underwater because your prices are so low for a number of reasons. One, you can't hire, right? Don't have the money to hire. 2, cheap prices attract cheap clients in droves. A lot of accountants will say, hey, you get what you pay for. They'll see like a TurboTax commercial or a Bench commercial. Wow, $200 a month bookkeeping. You get what you pay for. And then we put a price on our website that's like super cheap and we're like, why am I— why do I have all these cheapskate clients? A cheap price on your website not only attracts cheapskates, it also scares away the premium folks. There are people that will get to your website and see a small number and be like, huh, this must not be for me. You get what you pay for. Cuts both ways. Now, the solution here, and pretty much every firm goes through this, like you reach these plateaus and you have to make some hard decisions. The solution here is usually an aggressive price increase. I'm not talking about a 5% bump. I'm not talking about, okay, well, if we do 5% a year for 5 years, then that'll be a 25% bump. That's not what I'm talking about. I'm talking about ripping off the Band-Aid, 25 to 50% bump right now. Like practically no firm makes it through their journey without having to do this at some point. And yes, clients will leave. But we just did the math earlier. A 40% margin firm. But we just did the math earlier. The reality is a 40% margin firm, increase prices 40%. You can do half the work, make the same money, or you can do the same amount of work and have twice as much money to pay your new hires. Running an accounting firm, it is kind of as simple as that. It all revolves around pricing, around the client experience, around how can we increase the perceived value of what we're doing for people. And it's not the first thing we think about when we get out of bed. We check our email and we're like, what dumpster fire do I need to dig myself out of today? And that is the hamster wheel that just, just leads to doing more rather than doing better. Not everyone needs more clients. Everyone needs better clients. And there are clients on your client list today who will happily pay you more money, especially if you'll return a call, if you will respond to their email. It's really easy to fixate on the clients in our client list who complain about pricing. Who are unhappy and by extension, but I promise you there are just as many, if not more clients on your client list who will very happily pay more than what they're paying right now. You just don't hear from them, right? You hear about the folks on the other end of the spectrum, the C and D clients. You also have A clients happy to pay more. What type of client are we optimizing for? If we don't increase prices because we're afraid of making mad the C and D clients, then I would argue we're building a firm for C and D clients, right? The clients who appreciate you, usually because you're solving more valuable pains for them. If we price around their needs, if we listen to them and put the C and D clients on mute, we're much more likely to build a firm that will attract more of those A clients. And before you know it, that client list is much more lean. The C and D folks are gone. Your headspace is actually filled with like what you need to be listening to. And the business is an order of magnitude more profitable. And it's really hard to visualize this. Like we get tunnel vision for today's profitability, today's circumstances, what is normal for the clients that you have today, which will look completely different than the normal for the clients you have tomorrow. And if you want any proof of this, look back 24 months ago. Look at the clients that you had back then. Look at the business that you had back then. Usually you look at those prices and you're like, wow, we were just giving it away, man. But we can't look forward and think the same thing's going to happen again for whatever reason, right? That for some reason that's really hard to do. If you are on that pricing bottleneck, step 1, math it out. Like actually, like dump your clients into a spreadsheet. Think this out. You got to have confidence in this. Most folks underestimate how many clients will stick around. They think, oh, my clients are going to be ticked. They're all going to leave. In the end, almost nobody leaves. But spreadsheet this out first. This will give you greater confidence in what you're going to do. And if you can find some other firms who are going through a similar transition, this is a very common thing. This is the value of, of community, of making friends that are navigating some of that same stuff, because having their support is tremendously valuable when you're doing something hard like this. If you're the person running a firm, the person implementing these hard decisions, that is a lonely road, man. Like, that's why we don't do it. It's like we're volunteering to go headlong into ticking a bunch of people off, disappointing a bunch of people. After all, this firm, it is our identity, how all of these clients perceive us, what they think of me. Isn't that what I am? Aha! That's how it feels, right? But that's not what you are. In fact, the most important people in your business are the people who work for you. The most important people in your life have got nothing to do with work, and your clients are what you use to support those other two groups of people. Now, you don't wanna be cavalier with the clients and like leave them in a lurch, but growth is, is hard. And a lot of us end up paralyzed for years being afraid to do the hard things that we know we need to do. Let go of the clients that we know that we've outgrown when the reality is those aren't good clients for you anymore. Like you've grown, you've changed. Those clients want you to be something that you no longer are. And once you've reached that point, that's when you find another firm and you say, hey man, my business is kind of going in this direction right now. I'll be totally honest with you, but I know this other firm for whom you would be absolutely perfect. I want to help you get set up with them because I want you to be totally cared for. And the reality is my firm, we're kind of just going in this different direction. That's the right way to make that transition. And to be clear, it's hard, but you want to be serving the people who want you to be what you're trying to grow into, not the person you used to be. Now, if you don't have that referral network yet of like other firms you can send work to, hang out online more, meet some folks on social media, uh, think about joining an online community. I run one myself. It's called Realize. Website is rlz.io. 750 accounting firms in there, most of whom are, are podcast listeners. Really cool collaborative folks. You can absolutely meet people in there who you can refer clients to. And/or come to my live event that's coming to your city, buddy. We did the math. 85% of American adults are within a 4-hour drive of a workshop that I am hosting in the next 2 months. I mean, if you're in a big city too, like the number of folks that I've talked to in Dallas that are driving down to the Austin event, get a carpool going, man. Everybody's hanging out together, just vibing. Put the podcast on. Like, not like a road trip where you sing to songs. A road trip where you listen to my podcast episodes on repeat. Don't do that. That would be terrible. Anyways, great way to meet local firms who are like kind of the ultimate candidate for you to refer work between each other. That's one of the biggest things I heard coming out of the tour last, last year is just the number of like connections that were made between firms. So you got plenty of folks to refer work to. Anyways, want to see you out at those events. Jasononfirms.com/events. Get your ticket, bring your team. It's an event that's kind of designed for not only solo firm folks, but for larger firm folks. To bring the team along and kind of be like a, a just a fun social outing for everybody. Kind of get the team in alignment. Wanna see you there, gang. Thanks for coming and being here today. Next episode, we are talking about an unbelievably cool new Cloud Cowork feature that we got, something that is especially relevant for accounting firms, and I wanna see you there. Okay. Until the next one. Toodaloo.