If You Don’t Fix THIS, You’ll Never Sell Lessons From CEO at Decimal Matt Tait #239

Hey everybody. Welcome to the Unemployable podcast. I'm Jeff Duden. If you started your career as a practicing lawyer, then spent years founding and operating tech and service companies before realizing accounting and bookkeeping deserved a complete makeover, co founded a company called Desmold with a vision to turn financial operations, booking, bookkeeping and tax planning into a tech enabled services, then your name can only be Matt Tate. Welcome Matt.

Jeff. Thanks for having me. I really appreciate it.

Yeah, yeah, right. Excited. We've spoken before and close to my heart, you are a up and coming Brandy new franchisor. So you are on the right podcast because we do have a pretty deep audience in the franchise space. Although don't steal any of our homefront candidates from this podcast please. No, I said I was looking at home front, you know, kick them back our way. But. But no, there's always enough for, for everybody out there. But I have an opening question for you and it really goes towards tech and AI, which is, as we'll learn, a big part of what you've done here with Decimal. Will standalone AI service companies, all of these that have just popped up, survive at and large, or will AI be a utility that just makes large existing industry leaders better?

I actually think it's somewhere in between to me and that's the lawyer in me. I, I picked the gray area in between your two answers. Right.

Are you billing for this?

No, I. You know, even when we started Decimal, I swore I would never track an hour after doing 8 minute increments for a long time. It's painful.

Yeah, we could never figure out how you build 26 hours in a day. But know, hats off, someday I have.

A not safe for work story about that.

Okay.

My first boss told me what to do first day on to answer your question though. So to me, when you're talking about professional services, the, the real glue and I think really good stuff in professional services is the trust, accountability and credibility that human beings have in servicing and helping other humans. AI can't do that and I don't believe they will do that. So to me, when you talk about these AI only businesses, I don't think they can exist as they stand alone and I think they have to have a component of that trust, accountability and credibility. But then you mentioned the kind of bigger older school players and to be frank, I don't see a lot of them truly being able to adopt and adapt their entire model around where AI is going. I think they're going to be too slow. I think it's those Middle ground of companies that try to find the hybrid between that of understanding the truly trustworthy human component. But then how to leverage AI, and I would say other technologies to do the work that it's capable of doing. I think that's the most important kind of grouping that will end up exceeding and succeeding.

Yeah, absolutely. If you don't have legacy systems to replace, you don't got sacred cows. You have institutions, institutional ways of doing things that have people and process and existing, sunk cost and technology, you can be more nimble. Exactly. AI, it operates exceptionally well in the vacuum. And if you want to be nimble and you want to create something new and you don't have to replace anything else, then it will do that for you.

It will. And, you know, one of the things that we've seen in AI is the rate of change is increasing dramatically. It used to be that you could pick a software and it could be your core, functioning operational software for a decade, and then the cloud kind of made it so that as long as that software was improving, you could probably use it for five to seven years. Now you are seeing the rate of change decreasing to months, if not days. And so you have to be nimble enough to be able to keep up with that change and picking something and saying, all right, I won't have to think about this for another decade. That's simply a given loss at some point.

Quickly, before we get into what you've created with desmo, can you talk a little bit about your early career, how you got into law, how you pursued that career, and then ultimately why you left it?

You know, I love doing things like this or speaking at conferences, and the bio that they give makes you sound way cooler than you really are.

Okay.

Yeah.

So for me, you wrote it?

No, my team did, and they don't allow me to even approve it. Now, I grew up in a family of entrepreneurs. We were at a family reunion about two years ago, and there were 60 of us in one house. And I looked, and 12 people in that house either were or had run a large, growing business. That was the kind of company I kept as a kid. So when I was kind of graduating college and thinking, what do I want to do next? I asked my two favorite entrepreneurs, my dad and my grandpa, and I said, hey, what do you think I should do? And separately, they were not together. They gave me the exact same piece of advice. They said, you should go to law school. You're going to be a business owner someday, and it'll save you a hell of a lot of money on legal fees. Yeah. So I took that advice and went to law school. Started at Georgetown, finished in Indianapolis where I'm from, and practice for a few years. Always knew I wasn't going to practice for very long. My wife would tell you the best thing I ever did was go to law school because that's where I met her. And then I decided to get into the tech space here in Indianapolis and had a chance to work in a couple of great tech companies, had a chance to run a couple of them, and then started some. And this is Decimal is now my fourth business. And I've had two that did very well, one that failed miserably and Decimal, which has exceeded all of them combined. And it's just kind of been a fun roller coaster of a journey. But this recovering attorney now runs a very large accounting business.

If you hadn't had the first three businesses, would Decimal be as successful as it is today?

No, it wouldn't. Not even close. I'm hard headed and so I learn better from failure than I do success. Also, I think as you get older, you start to realize what's truly important and what's not. And learning in my past companies how to find my identity as a person and as a leader helped me to surround myself at Decimal with the people that made me better and fill the gaps that I had. I think when I started my first business, I thought I had to be perfect. I had to do it all. I had to tell everybody I was perfect, pretend to be perfect. What I found at Decimal is being imperfect is actually a better superpower and it allows the other people around me to be imperfect too. But for all of us to kind of work together for a more perfect goal. And that more than anything is what I needed to learn. You know, I'm a big baseball player and fan and I love baseball when it kind of comes to an analogy for life and business because sometimes you just fail more than you succeed. But if you succeed just enough, it's great.

Yeah, it's. Success is really in the margins and you know, and so is failure. And it's these two or three little seemingly disconnected things that catapult you forward or hold you back. And it's sometimes it's not clear what they are in terms of capabilities. Would you say that the capabilities that you walked into Decimal with based on your previous experience was leadership, how to build a team, and then also delegation?

It is. I always joke I'm really good at talking people into jumping off a bridge. I'm really bad at Getting them to line up to do it.

You know what, we're not gonna sign you up for the suicide prevention hotline then.

No. Hopefully there's water or foam pits under that bridge. Yeah, to your point. I'm good at helping see the future in a vision. I'm good at setting a culture and developing a great team. I'm good at leading people through the necessarily hard parts about being in a growing new company. You know, we exist in a world where no company journey is linear or one out of a million is. And so you have to be resilient and you have to build resilience into your business and into your team. That's what I'm good at. I am not good at managing day to day operations of 100 Person Company and I need help to do that. I'm not good at building technology, but I'm good at understanding what technology needs to do and I need people to help me build. So I've got a co founder who's our CTO and you know, he's 26, 27 years old and he's smartest person in most rooms he walks into. And he's great at kind of putting that technology infrastructure, process, vision together. And then I've got Michael, who's our CEO and he's the one that we need an adult in the room and he's the one that helps make sure that, you know, everything's on track, the businesses are running well, and you know, it's my job to just stitch it all together and stay out of their way.

When you're interviewing somebody for an important position, you look for an athlete and what is it about that person that's going to say I think this person is somebody for decimal.

It's funny, I, I used to love hiring, you know, the classes of people that my brother was hiring at Accenture in Bain, when he was consulting former D1 college athletes, colonels and up in the military. And, and I found some great people that have all of those characteristics. What I have found to be better is a sense of self worth and humility. Tell me what you're truly good at and what you're truly bad at. Tell me about your failures and what you learned from them. I ask weird questions that get people really thinking through, like, is this really what I want to say in a job interview? As I look to hire people, I want to understand who they are as human beings, what they like doing. Because I'm not. It's not just important to look for. Can they do the job? Can they do the job on the team that exists and can they move that team forward? And when you talk about athletes and athletics, I think you and I probably both grew up playing a lot of sports and both of us had kids that are involved in sports. I love athletics and I love that team mentality. But you have to look at people and say, you have a role on this team and your job is to do that role. It is also to help the team move forward. And as I've succeeded and failed at hiring people, I've found that some people are just good individual performers, but not good team members. You see that a lot in salespeople. You can find great salespeople that are terrible team members.

Yeah. So what I talk about athletes and business athletes. It's not necessarily the sports athlete per se, but I also look for people that are relentless, people that see the value in preparation. It was a Bobby Knight that said, I'm not looking for somebody with the will to win. I'm looking for somebody with the will to prepare to win. And, you know, people that will put the hours in. People that when they show up in a meeting, they're going to be paying attention and they're going to be asking the right questions and really looking for the meaning behind the words. And, you know, they're just like, good, and they can. I, I've. I've seen them in all walks of life. I've seen people that have never done anything athletic in their life, but man, they're so competitive and they're so sharp and they just, they. So I guess it really is the will to want to win, win in the moment, win in the conversation, and not only for themselves, but more importantly, they want the company to win. And those people come in all shapes and sizes, man.

They do. And you know, it's interesting when you find somebody that you didn't necessarily expect. Had that kind of feel.

Yeah.

And then you hire them and you're like, oh my gosh. And you. Where I love to see it is operationally when a new hire or somebody who hadn't been around very long is, Is just struggling to keep up and they're the person that leans in and says, hey, let me help you, or hey, you need to be held accountable here. I love seeing that when other people that are on similar levels hold each other accountable. That I think is a sign of that true business athlete you're talking about. Because you see that on teams in general, where it shouldn't just come top down, it should come linear and laterally Too. Yeah.

I look for pace not only in the way that they think, but in the way that they act. I look for tempo, which is something different than pace because like in Six Sigma, if it's too early, it's wrong. If it's late, it's wrong. You need things on time, you know, and things need to be, especially if they're doing anything with negotiation. Like, okay, what is the conversation that needs to be had first, second and third, and when and why? So there needs to be measured tempo in the way that people execute business to be efficient. And then ultimately, invariably, when things go wrong or they get behind, I look for somebody that will rush the conflict. Like, I'm not, oh, I don't want to read the bad email, I'll read it tomorrow. Or I don't want to have that conversation. They can't wait to, you know, because bad news ages very poorly, by the way. And you can something off just by rushing right into the conflict and not blowing it up. Like with saying, you know, if there's a great phrase that we I use in training, it's up on my wall. It says, the person who can most accurately describe reality without laying blame shall emerge as the leader. And so if you can walk into any conflict and not start just blaming people and looking for who's at fault, like when there's something that goes wrong. If somebody says the first question is, well, whose idea was it? They're just looking for somebody to blame. They're really not focusing on solving the problem. Like I'm, like, it doesn't really matter whose mistake it was because it was mine. But, you know, I'm looking for somebody that can, you know, is looking to rush to it, solve the problem and keep moving, man, if you can find those types of things. And I, you know, we just had a conversation, executive meeting about a 23 year old here, and there was one perspective that said she's too young to put in front of these people. And I said, well, for the last two years, everything this person has done has been excellent, on point, followed up on relentlessly. This person might not have the experience today, but I guarantee if we give her the right coaching in 90 days, she'll be better than anybody mediocre person we've gotten hired that already has the requisite experience. So I'll invest in the athlete and then invest in the regimen and then you end up with a better player for longer.

When I think what you hit on, there is something else I look for, which is I'm looking for Systems thinkers. I want people that are thinking outside of the box, but also understand that there is good in the box. So I don't want people that are always going to solve things as one offs, but are also going to put the systems in place to make sure the next time it happens it's an easier solution. Or how do I work within the system to solve the problem or do I need to rip out the system? Like to me, I want people that are viewing a problem as its holistic sum of parts in addition to the fire that they see. And so those systems thinkers, and you can find them, they're easy to find in engineering teams and operators, they're harder to find in salespeople and kind of first, second job out of college. But finding a good systems thinker and you learn about that when you learn about how they solve problems and you really talk them through, why did you do that? How did you see the problem? What did you miss? You know, looking back, what would you have done differently? You can answer those questions because when you find true systems thinkers, they're also the ones that aren't looking to assign blame. They're looking to find the ultimate solution that solves the problem today and when it pops up again tomorrow.

Well said, Matt. What is decimal and who does it serve?

So decimal is bookkeeping and tax. We spent five and a half years building one of the largest fastest growing bookkeeping and tax companies in the country. And what we ultimately said was, you know, I am a recovering attorney running a large bookkeeping and tax firm. I would rather help other people do it. And so we started this year franchising decimal. And our goal, our way to have a larger impact, is to say, hey, we want to help you start your own bookkeeping and tax firm. We're going to give you everything you need to be successful to do that. And that's the technology. A lot of AI like we talked about earlier, a lot of outsourcing, globalized teams, a lot of just the playbooks and systems that led us to outpace and outgrow everybody else in the market and the technology that Jacob and his team have built. So that's what we are today. We're the first AI enabled bookkeeping and tax franchise in the world. And we haven't really talked about it much, but it's already growing faster than we had hoped or thought. So I think there's a lot of opportunity in the kind of AI enabled professional services and bookkeeping and tax in particular.

Who's an ideal customer are these small businesses? Mid market. Who do you work for typically?

So the right end customer for a decimal franchisee is that small business, usually about 500k to a million to 20 million. Most of them are on QuickBooks as a ledger. But it's quite a wide array of businesses. And you know, you find that they, they either try to do it themselves, which I don't know if you've ever tried to do the bookkeeping. I did it on my first company and it cost me like eight grand to get it unwound and cleaned up at tax time.

Yeah.

So that's always a bad idea. Or they're, they're just picking a bad accounting firm or accountant to do it. You know, the, the small accountant that everybody loves, that trusted local person typically hasn't built a good firm. They're not good with systems and technology. They can't invest in it, they can't grow, they just can't keep up and do everything that you need them to do. And the large firm is too pricey and they'd rather focus on doing other more expensive service lines. So the decimal franchise is that perfect blend of that small local trusted person that trust, credibility and accountability, but then all the scale of a multimillion dollar platform. And that's what we're, what we're able to do is serve those small businesses around the country and do it remotely.

It sounds like the fulfillment of the product is largely going to come from a centralized resource and technology. So what is the role of a decimal franchisee?

That's great. You get this having run multiple businesses yourself, those of us that run companies, you're juggling multiple flaming swords, wearing multiple hats like it gets crazy. If you are a decimal franchisee, you need to focus on growing, adding new clients and helping the clients you have. And you get to hire a much smaller team than if you built your own firm. And decimal franchise services will handle the rest to help you.

And in terms of scope of services, obviously the entry level, the entry point to business is going to be bookkeeping. It's a huge pain point for most businesses. So you'll start with bookkeeping and then accounting, which would be the reporting aspect of it.

Yeah. So the way we think about it is it fits into four buckets. The big one is bookkeeping. Hey, so you need something you have to so that you can do. The second one, which is tax, will help with tax. The third one, which I think is actually the most important and it ends up being the entry point more often than not, actually. And that's the operational Help, you need help paying your bills, you need help getting paid. Invoicing, you need help with payroll. How do we help you make sure that your business is operating on a day to day basis? And then you get to the advisory. How do we help you move forward, make good decisions, M and a exit or just simply good growth? Those are the four buckets that a decimal franchise and that decimal has always done is, you know, make sure that you can pay your bills, get paid, track it all, and plan for the future.

When you talk about tax, are you talking about tax strategies? Are you talking about tax returns?

All of it. It's hey, number one, most important, you have to file your taxes. I'm shocked at how many people struggle with that. 1. But we'll make sure you file your taxes.

It's a good idea.

Two is, you know, most business owners are kind of like me. We want to be legal, but we also want to figure out how to pay Uncle Sam as little as possible. So how can we help you with your tax advice and make sure that you're optimizing all the credits, debits, loopholes, et cetera that you can to make sure your business and your personal lives are healthy. And then three, you start to look at, hey, 1099s. We're getting up to January. I can't tell you how many businesses struggle with 1099s and making sure that everything is filed. And then we can do some sales tax help too. So those businesses that are kind of CPG and wanting to sell more into multiple states, it fits a lot of buckets.

Yeah. So being a small business owner for years and maybe sometimes a medium and large sized business owner as well, there's tools out there. For example, on the accounts receivable side used to be a tool called Invoice Sherpa. So there are tools that you can use that do many, many of these things. You mentioned QuickBooks as one, but then there's all these other kind of plugins and standalone type apps. Does your system incorporate and have APIs with these things or do you provide all in one solution for all of these things?

No, we're tapping into the best products that are currently on the market. Got it. Because you should be using AI enabled expense reporting software or credit cards like Ramp, you should be, you should not be writing checks. So use ramp or bill.com for bill pay. You should be using invoicing in a way that automates payments and integrates into a ledger. The operational side is about picking the right tools for the Business, integrating them together. And it's about eliminating as much time and data entry as possible for the business, the business owner, and for us, the provider.

At what point do you start having conversations with your clients about exit in terms of advisory for sale of a business or, or if not, what other areas do you provide advisory?

So I ask and, and we've trained our teams. They haven't let me actually sell anything in years. They still call the old legacy clients the Matt Tate specials. But what we, what I do and what we train our sales folks and now our franchisees to do is start on your first call and ask a business owner, what's your goal? What is your goal with your business? Is it to sell the business? Is it to grow the business? Is it the M and A side? What is your goal? And you should start with that in mind and then work a path forward. And that path involves day to day operations. It involves advising. Most of our advising is on, hey, what should your business KPIs be? What are the most important levers in your company to help you make the most money and be successful? And then you start to look at what are your product or service lines. I can't tell you how many businesses we run into that they'll tell us, oh, you know, 70% of our revenue comes from this product and 30% comes from these two. And I look and I'm like, well, 70% of your profit comes from those two products and 30% comes from your big revenue. That's a problem. How do we help you fix that? How do we help you see the numbers in that? Is it cost? Is it price? Where do you really work to improve the quality of your business? Are you looking at M and A? How do you evaluate another company? How do you do diligence? Who do you. We don't necessarily do some of the diligence aspects, but we can help you find a trustworthy provider. We like to be able to make intros. The decimal franchise system is a community. We already, we launched our first franchises a month ago. We have already had multiple referrals between franchisees. Hey, this guy does this better than me. I'm gonna, I'll bill you for it. He'll do the work. This way you have an expert like, we wanna make sure that everybody has the introductions, the operations and the execution that they need to succeed for their end client.

That was my next question was, I'm thinking about who a franchisee would need to be. At a minimum, they would need to be kind of a general business Generalist to be able to identify, at least execute on your customer engagement plan, asking the questions, starting with the goal, working backwards through operations and having some inquiries about tax and maybe asking for tax returns and stuff like that. So now you've kind of done this intake from a customer. But most people aren't the 1 percenters that know how to do everything. And so they'll, so I can, I can imagine that, you know, you, you, if they don't know what they don't know, that there's gotta be a resource that they can go to, whether it be another franchisee, somebody at the home office or a third party company.

You know, in our first set of franchisees we have one who is not an accountant and he already has an accounting manager that helps his clients.

Got it.

And they do the accounting and he does the kind of operational support and advising, he advises them, business owner to business owner. We have another one that is a, I guess technically an accountant, he and his business partner. But they're a small cap private equity group and they wanted to turn expense lines from their 12 brands into profit lines and they've already grown their firm and so they're looking at this as an investment, as an additional company in their portfolio. The third one's an accountant. It's his second firm. He sold one a couple of years back and decided to kind of get away from running a firm. Wanted to start his own and said, gosh, I don't want to start from scratch and this is way better than doing that. So sometimes it helps to have that accounting background, but it really helps to more have that business strategic advising background where you can talk to somebody, business owner to business owner, rather than debit.

To credit, if you would have come to me with this concept and asked my opinion on whether you should franchise it or go direct now, I will always make the case that franchising is the greatest wealth creation business model ever invented and that businesses are a high class asset and they create financial security and economic freedom for families on Main street usa. And franchising is the best way for people, if they don't have a business, to get into business and to put that in their portfolio and take advantage of the tax code and all of that. So that's kind of my standard message about franchising. That being said, and many of the tax firms, the Jackson Hewitts of the world, they're franchised, so there's a precedent in this space. But if the tech's really that good and if you can engage customers remotely instead of Face to face, which I'm a big proponent for face to face business development. Were you on the fence about franchising it at all? Did you have some thoughts that you could take this direction and grow it globally?

Absolutely. And we did that. You know, we, we started decimal January of 2020. So great time to start a company. And Covid wasn't your fault.

It's just a coincidence.

I know, but it was awesome and it sucked for like five minutes. Yeah. What it taught everybody was it's okay to do remote things. Right. And when you are a remote business and a. In a world, in a sea that wasn't remote, it just, it skyrocketed things really, really quickly. And you know, for us, in five and a half years, we grew our business to service over a thousand companies. So we grew really, really fast in the space and, and we grew to be a really big, big company. And what we learned in doing that and building the infrastructure around it, we made acquisitions, bought a company from KPMG about three years ago. We bought another firm last summ. We looked at doing these. Should we just continue to grow organically? Should we do this acquisition? Private equity is in its infancy in accounting, but it's just going like gangbusters.

Right. And you. And you did a cap raise for if I remember correctly, 12 million.

We did, yeah. And so we, we are the fast growing type. This is not a lifestyle question for us. So we wanted to see where we could have the biggest impact and make the most economic sense for us. So we looked at the rollup. What we looked at when we started to look at about 150 firms was their margins were not what they should be, their operations were not what they could be. And yet there are 85,000 accounting firms in the country and they're all struggling. And then we started to look at kpmg. We started to look at some of the bigger firms and how they operate the. They call it cascade client accounting services and how they operate their bookkeeping businesses. And we said, oh my gosh, like how we do it is so much different and so much better. Why don't we just license this to people? And then subsequently we had started growing our own division of franchise or and franchise multi location franchisee clients. And so that gave us an inside look at the economics of everything. We said, you know what I. And what private equity does when it enters an industry is it barbells it. You have a bunch of big which then creates a bunch of small and very little in between. And so if there are 85,000 small accounting firms out there today. There's probably going to be a hundred thousand in the next two years and they fail at a 60% clip.

Right.

How do we utilize the momentum to start firms but then help them to not fail? And we just saw a huge opportunity. And then as we talk to our clients. You're right. There's so much power in being able to look somebody in the eye in person. I love remote. I genuinely think it's a great way to grow the right type of business. But we really saw the opportunity to have a larger impact through franchising versus running a growing globalized company. It also, as three people who are non accountants running an accounting business, it feels great to have the idea of, hey, can we just help other people do this rather than having to do it ourselves? And so it just, it kind of hit all the right notes and we think we hit the market at the perfect time.

Yeah, I would agree. I had Sean Clark on a couple of weeks ago and matter of fact, I think he's going out today. Go High Level founder.

Oh, that's awesome.

Yeah, man, he was great. And I actually that I will ask a question about how you do customer service because he has a really innovative way of doing it. But you know, as I was thinking about your concept getting ready for us to have a conversation, I was like, I wonder if they could have done similar to the Go High Level, which is they basically went to agencies and they built customized instances for specific industry segment groups. And then the marketing agencies generally would push the product into the small businesses. But I think it works for Go High Level. But I don't think it works as well for you because think about it. Your franchisees can go to every chamber of commerce meeting, they can go to every BNI meeting. They can go literally up and down the streets and knock on every door business and half the people are going to be like, yeah, man, we've got a bloated accounting department that, you know, takes a lot of management or, you know, or, or whatever. And you'll never get the saturation for a model like this without somebody who's just constantly out there being the face of decimal in the community. Because it's not a pure tech play because there's, there's so many variables in what a company's going to need. And if you look at your four buckets, like they could feel really good about two of them, but the other two is a huge problem for them and they know it. So now your person can go in and focus on that.

So.

And I would say that they can really enter at any point on the spectrum here.

And that's what makes the barrier to entry for a client so much lower than it could be, is that we have that ability to find the pain and then what we talk about. And my first ever boss in sales said, find a product or service you can sell that has a land and expand mentality or the tip of the spear was what another boss said. Like, how do you get the tip of the spear in and open it up and land and expand is you want to get as many hooks in like we want to. If you want bookkeeping, great. We'll help you with bookkeeping. Guess what? At some point we're going to show you how. If we helped you with your bill pay, it would save you a ton of time and money. And guess what? We're also going to see that your payroll system you're running is really terrible. And if you put gusto in place instead, it would make your life so much easier and would also save you some money. And. And guess what? If we helped you with your taxes and this stu, your tax bill's probably going to go down and we can save you. So we just have this ability to continue to roll in and expand into really being the trusted advisor for these business owners.

Yeah, yeah. It's like circle the customer.

Yep. Or somebody else explained it. Get as many hooks in as you can because if they pull one out, you still have three more.

Yeah, yeah, absolutely. Absolutely. How many staff do you have?

So decimal today is still four businesses. We still have our firm and we're a franchisor. We have decimal franchise services, which services our firm and the other firms that we're starting. Between them all, we have about 106 employees.

Okay.

And so we're a pretty good sized team as a just franchisor and servicing our clients in the franchise system, it's about 18 people. I think six, seven in the US and another 11 in the Philippines.

Okay. And what is your. What would somebody say your leadership style is?

A combination of overly. My smirk gives it away. Fun but demanding and disappointed. Dad, I've heard is the. The hat I like to put on frequently.

You know what disappointment I have found through my career is the greatest motivator for your best people. They don't want to let you down.

That is. I just got out of a meeting earlier and my team is going to miss the deadline that I set for them. And I looked at them and I asked why and I said these are very good reasons. I totally understand. I'm disappointed though. I really thought we could hit this. We all agreed on it. It wasn't my deadline, it was yours. And, and as I'm sitting here I'm getting slack messages that they're going to hit the deadline. So yeah, you know, I agree with you. It can be a good motivator. But I think praise is too. I am a deeply transparent and authentic boss because what I found in my life is that talking through my own failures is the best way to motivate people to. You know, I fail on a daily basis and I like to talk to my team about it and our franchisees because it makes it okay for them to fail and then stand up and be better the next time.

Product line extensions do you see for decimal, if any?

Well, there are a lot of ways we can go. I'm really excited to build this community of franchisees because each person that joins is going to add something new that other people can do because you can offer it and somebody else can service it. I think by the end of this we're going to have thousands of decimal firms that are going to create one of the largest overall accounting communities and firms in the world that can do everything. Audit and a test aside, because there's a lot of regulations and that I'd like to stay out of it entirely. But all of the business day to day accounting things that people need in advising, I think we're going to be able to do all of it and I'm excited to see that community grow.

Do you see a future in business broking, business brokering or kind of investment banking for your group? Because you will have, as soon as there's any sales activity, you're gonna see it because they're gonna start asking the questions. They're gonna need to get prepared. They're gonna, they might be bringing somebody in to start looking at add backs and things like that. So you know, if I were knowing what I know now and knowing where I really fell short over the years, I would be making sure one of the biggest education pieces for your clients would be what, what is the, what do the financial statements need to look like at the end of the year? And then what would it really look like to convert these to ebitda? You know, what would the, what would the add backs be? And then you know, even if you had below the line right what, what was pushed and you did the exercise with them and said did you know that that was, that failed project was a one time expense? You Push that below the line. Did you know that you push this below the line and then as. Because that is. I do this all the time with our franchise owners because we have some people that, you know, something, want to sell their business and they're like, well, this, these are my financials. And I'm like, no, no, no. But that's not what it's going to trade on. That's really not your cash flow. Yeah. So, but it's, it's like, it seems like people don't get that education until it's almost too late. Because what they've done is they printed out their P and L and their balance sheet and they sent it to a prospective buyer unadjusted.

We're. There's a broker I know that's in the accounting space and he's owned his own firm in the past and he's. I think there's a pretty good chance he's going to buy a franchise soon. And one of the things that he wants to offer people that I think is just going to sell like crazy is, hey, get a snapshot of what it would look like if you tried to sell your business today.

Yes.

What would the market tell you? I think, to be fair, I don't think it needs to be every year, but every two to three years, every company in the world should get a snapshot of what their business would trade at today. What are the economics of my company? How would that look? Because it's not just ebitda, it's all the other things that go into, building into ebitda. It's how do you play yourself in as a business owner? Are you too involved? Are you not involved enough? What is the trading on it that I think too many business owners forget? And that's why we like to start with what is your goal? Because if your goal is ultimately to sell your business, you cannot be the singular foundational part of that business. And you see in professional services, accounting, law consulting, et cetera, where the, you know, the single biggest biller, the single biggest personality, the biggest seller is the owner and that immediately devalues the multiple on EBITDA or revenue or however you're coming up with a calculation for a sale or an acquisition, there'd be so.

The EBITDA calculation that exercise educating the business owner what goes below the line. That would be value add number one, and then value add number two would be out to the right of the P and L and the balance sheet would be benchmarking. Okay, so until you, until you start benchmarking to a small business owner who's not thinking and say, do you realize that, you know, your legal expense is 12% of revenue? What, what is going, like, what's going on here? Why are you spending so much in legal or your account? You have a controller, you have an accountant, you got a bookkeeper. And then you're paying these outside people. You're spending 6% when you should be spending 3% on financial services. And all of a sudden, like the, the thing about it is, is business owners will act if they know what to do, if they know where to focus.

I agree with you.

Yeah. And look, I'm only telling you this because these are my failings. Right? Until, until you get a great. Like I always knew in business. So I'm a, I'm an operator, but I'm a builder. And you know, there's different types of CEOs, there's, there's Mark, there's promotional CEOs, which I fall into. There's operational operational excellence CEOs, you know, there's product CEOs, there's finance CEOs, which a lot of them are, have a strong finance bent to them and things like that. But we all have our strengths and weaknesses. So I know, like to your point earlier when you started, I have to surround myself with great finance because I just won't, I won't relentlessly 14 hours dig through and find that extra 2% that'll fall to the bottom line because I'm, I'm fat in this area of the business. But I need somebody to do that. And it's pretty easy when you've got a million dollar or two million dollar service business or whatever it is. You guys are helping people with a bank account business. Yeah, I mean it's, it's, it's pretty easy to do. And you could easily make a case that, you know, hey, we just, by us being involved last year, you're making 4% more to the bottom line, which, which is another 80 grand.

You know, it's interesting to me. I don't, I think people need to understand the finances of their business. They need to understand the levers of their company. I don't necessarily think they need to always understand their financial reports. If they're on the smaller side. You need to, the larger you get, oh, sub $2 million a year. Businesses can run on a bank account and a credit card. Mentally, you need to have everything. Like I know what's coming in, I know what's going out, and I've got a good measure of what that is. But you need to be able to understand what you're seeing from an economic perspective in your business. I am selling this much and I'm making this much. And that kind of marginal view of your business is more important than a chart of accounts for you. Your chart of accounts should look like that. But, like, truly, you need to understand the underlying stuff that goes into it. And that's what I think most business owners actually lack is that translation. I think they have the desire to understand their business, but they don't know how to understand it. No one's ever, like, taught them. The first time I ever had to look at a P and L, I was running a company, and I got brought in to run it for somebody else. And they said, hey, you have a great tech background. You're a recovering attorney. Why don't you run this legal tech company? I was like, great. Perfect combination of my careers and my skill set. And he said, well, great. Here's your business, here's your P and L, here's your balance sheet. And I'm looking and I'm going. I never learned how to look at any of these. And at the time, I lived next door to my grandpa, and he'd run a lot of businesses over the years. And I said, what am I looking at? Like, explain this to me. And for weeks, I would just go over there daily and he would talk me through it, and I had to learn it. And now I fundamentally understand how to look at my business. And I actually very rarely look at my financial reports because I pull them all into KPI reporting. And that translation layer, I think is important. There's an interesting statistic. About two years ago, we had 600ish clients, and we ran a test to see how many opened the email that contained the link to get to their P and L and balance sheet on a monthly basis. And then we did reporting on who clicked on the link. 600 businesses under 30% opened the email. Under half of them clicked the link. Under half of them stayed on that web page for more than five minutes. And these are businesses, all of which have 2 to 20 million in revenue. That's insane.

And by the way, the incredible statistic.

There was no correlation on revenue either.

Yeah, and. And by the way, as a franchisor with hundreds and hundreds of franchise owners out there, they don't. They don't. They don't. They don't. They're not interested in the nuances of the health of their business from their financial statements.

By and large, the Ones that are typically end up better for sure.

Yeah. Yeah. Wow, that set me back right there.

Aren't those crazy numbers? I mean, like, you, you're not surprised. You've worked with enough business.

Oh, I knew it.

Enough franchisees, like, that's not surprising. But then when you actually spell out the data and what's interesting there, somebody asked me last year, they said, hey, how do you think the economy's doing? And I said, let me give you a statistic. We've got around thousand businesses that we work with and our payroll costs amongst our company are down 10%. So it's thousand companies, payroll costs are down 10%, 10%. That tells me that there is an issue with the subset of businesses that we work with. And we're not seeing it in terminations and layoffs, we're seeing it with no refill. Somebody leaves, we're not refilling the position. And when you talk about like business brokering, I actually think data brokering, the data that we get to run through is a fantastic subset of the US economy of purchasing, of just activity that I think has a, a really, really, really big potential to it.

With that view, what is the evolution of outsourcing or even offshoring to small businesses?

I mean, so my third ever hire at decimal was somebody in the Philippines. So I fundamentally believe in a globalized workforce. I think that technology should do the foundation of, should be the base layer and foundation of as much work as can be done. On top of that, you should have a staff that is at a lower cost point than the US Doing as much work as they possibly can. And you're hoping technology continues to eat into that. And then you have your US staff doing only the stuff that your Philippine, in my case the Philippines team and technology can't do, which at this point is client relationships and final quality check. And I can tell you that quickly, AI is taking that final quality check pretty, pretty shortly. Yeah, yeah. So that means that I am now deploying and our franchisees are deploying US staff members to relationship only.

Right.

And activation, I think is. It's perfect. It's trust, it's relationship, it's retention, it's how do you do dramatically affect revenue? Because in accounting, and I think you see this in a lot of professional services right now, the trap is that you have people doing the work and managing the relationship, which means that when the work gets busy, the relationship suffers.

That's right.

And the relationship is more important than the work. You have to get the work done. So I'm not saying that you can't get the work done, you shouldn't do it, but you want grace. Build a good relationship. Yeah, great output is meaningless at retention time.

Well, that's what we're finding and aspirationally, that's what we're doing as well. As our tools evolve, our tech gets better, then there's less time in preparing data, doing data analytics, and all of that time can be spent at activation of new opportunities or servicing our existing customer or franchisee base.

Yeah, I mean it's. I'm going to go back. Trust, accountability and credibility. That's what people do well. It is the backbone of relationships and that's what we need to focus on. And so I fundamentally believe in a globalized workforce because my US staff members won't do things at the cost that can be done just as well, if not better, at a much lower price point. So why should I have them do it? Also, they're not happy doing it. Like you and I talked earlier about how you struggled in past businesses. I hear this all the time to find good bookkeepers or good accounts payable help. They don't like that job, they don't get paid well for it, so they're constantly looking for another one. Why not find people that are good at it, like doing it, and also are at a better price point?

So to double click back on something, you said people's labor payroll is reducing by 10% and I assumed you meant that was in the customers that you're bookkeeping for across the board. So what that tells me is that you've got aggregated data and you've probably got information rights from your customers, which is probably a nice secondary value driver for decimal as a business. But what are they doing with that? They're not backfilling. But are they. Is it a growing business that is reducing their payroll? And again, what are they automating and how are they doing it to reduce their payroll expense and yet still maintain customer service? Because in my experiences, businesses are growing right now.

I think you are seeing people leaning into what technology can do better. I also think you're seeing people lean into what a globalized workforce in the Philippines or India or South America can do as well. I think what you're seeing is that people are now finding the price point that they want to solve a problem and then figuring out how to find the tools to solve that problem at that price point. And it used to be that we had an economy, a group of people that were I'm going to hire and this person's going to do this job and now you're looking and saying this person is going to accomplish this role and they may have other things or people helping with that task.

We've covered product line extensions. I gave you my ideas about how to bring more value to your customers. Is there any non obvious things that you're thinking about at decimal that you think could be opportunities for you?

I mean, like I said, I think the data side tends to not be as obvious as people think it is. AI is certainly a focus for us. We're building agents, we're using agents within the products that exist. So that's a big focus. Globalized workforce, those are the easy targets. But to me, you talked about benchmarking and that's harder to do than people think because you need to have some semblance of scale. You need a group to aggregate that data from. And so making sure that you can do that. Well, I think that is an easy thing that every business owner that can should do is if you can benchmark against your competitors or your friends wins, you should do that. And the data side of things, I think is really, really an important aspect of that.

There's a trap, and we have it all the time. And I'll have a brand president and say, well, our average KPI for this particular expense is this. And so the implication is, well, that's what it should be then. No, that's not average. That might be average, but that's not ideal, you know, and so people are going to be like, oh, well, I'm there, that's fine, I'm just like everybody else. But do you really want to be like everybody else? Or, you know, the question is, who are the people that are doing it the best? So average benchmarking can be kind of a false flag in terms of a.

Great example for you. The average gross margins of a bookkeeping firm are somewhere between 18 and 21%. The average gross, the average gross margin for decimal is just below 60%.

Okay.

The average should be like, the target should be close to 50. And so if you're playing on averages, you're running a bad business. You should be playing towards the ideal.

Average is just one data point above. You suck.

Yeah, right.

That's a one of my favorite.

I like that.

Yeah, it's one of my favorite T shirts. It's about as bad language as we get on the unemployable podcast right there. I hope it didn't offend.

You've been watching mine, huh? You've been watching, watching Mine, I am notorious for going off the rails with my language, but my kids are in the other room and I'm trying to be nice.

Well, that's good. You drop F bombs finance.

Yeah.

Let's see your F bombs.

P and L. P. L?

Yeah. Well, you know, I'm not sure what. So what's worse, bad accounting or late accounting?

Bad accounting. Everybody now has late accounting, so that's just the norm. That's your average.

That's your average.

So bad accounting is worse.

Awesome. Awesome. What. What should I have asked you, or what do you want anything else you want to talk about before we nudge this towards the barn?

No, I mean, I think we've. We've covered everything. I've really enjoyed the conversation. I mean, we're, we're very new at the franchising of this, but we're very good at the doing of the work side. And so we're, we're excited for franchising, we're excited to grow, and we're excited for where the, the scope of technology is and is going.

Yeah, you get a great opportunity there and you serve a big deed, and I'm confident that you're going to do exceptionally well. So congratulations on all of that.

Well, thanks, Jeff. I really appreciate it.

Yep. Now, if you want to play along, I've got a curveball and a fastball for you right down the middle. You ready?

I told you I'm a baseball fan.

I know, I know. That's why I adopted that just for you. That's not true. Everybody gets it before, though. I do that. How can people best get in touch with you?

Just connect with me on LinkedIn. I post all the time. Connect with me on LinkedIn. I also have my own podcast. After the first million, we'll be doing a new season kicking off in January. Jeff's promised to join, so I'll get a grill him like he grilled me. Yeah, but both of those are great places to start.

That's just Matt Tate. T a T A I t@ LinkedIn. Perfect. All right, here's the curveball. Gun to your head. You have to start a new business, and it can't be any. Anything that you're currently doing. And you have to start it in the next 30 days because you have to. Where do you see the opportunity in the market that if you were forced to do it, you would go, am.

I trying to build a lifestyle business or generational wealth?

Don't care.

Okay. I would consult, I would build a consulting company on the deployment of AI in professional services.

Okay, where is the next professional service that you would go to outside of the ones that you're currently in?

Well, I'm currently in accounting Law would be an easy one for me to go into. And they're actually much better tools, much more mature tools for lawyers in AI than there are for accountants right now.

Yeah, I think you have to be careful with drafting. So we, we deployed a AI based contract management system and we put our 479 contracts in there. I just found out we had 479 contracts in there, but we can ask it anything and the answer comes out and that's great. Now drafting, you know, AI is a bias creating machine and it's going to try to please you and give you the answer that you want and it might even give you justification that didn't exist. So I still like good old experienced brains drafting our touchy legal work and things like that.

I would agree.

I think it'll, I think it can get there.

What it's. As somebody that's worked in a big firm, it's removing the need for the young associate, the legal research, the finding of things. We also use it to review things. It's great in reviewing terms and conditions to see where standard objections have come from or standard changes have come from and what you've put in. Like it saves a lot of time and money for that type of thing. And I think what it's doing is it's removing the same. And they'll shortly remove the triples, but the home runs and grand slams will always be needed for kind of a human drafter.

Fair enough. Great answer. Last question. Fastball straight. Did you bat right and throw right or what did you do?

I hit left and threw right. So I was shorter to the first base on the left side and I was a good pole hitter. So hitting it over the right field wall was fun.

Yeah, that's. So my brother's son, which is my nephew, is a pitcher for NC State and he's one of the top draft picks for next year's draft. I think he's going to be skipping his senior year and heading straight to wherever it is that they take baseball players. But he always said if you love your kids, you'll teach them to throw right and bat left.

Yep, that's what my dad did. I've. Yeah, I've. I enjoyed baseball. My son's kind of getting into it. My daughter likes softball.

Okay.

But my wife and I were both. My wife was a college diver and baseball helped me kind of get into college and stuff. And so we're just letting our kids enjoy it and. And get into enjoying whatever they like to do.

That's cool. Was your wife a gymnast?

First she was, and then she picked up. It's crazy. She picked up diving in eighth grade, and she won a state championship, I think, by her sophomore year.

That's an amazing sport. I. That's one that I'll never do, but I'll always watch.

Oh, yeah. My son's getting into it. It's fun. I. He'll joke. He'll. He. He's already adopted my joke that people ask, like, oh, was your wife a swimmer? I said, no, she was just really good at falling into a pool.

Fair enough. Very little splash. All right, here we go. Fastball straight down the middle. If you had one sentence to make an impact in somebody's life, what would that be?

Tell more people you're proud of them.

Oh, that's great.

Years ago, I asked my grandpa what was his favorite business book, and he gave me a book about Mr. Rogers, and it was about how he used to sign his letters ipoy, and I'm proud of you. And he said, more men need to tell each other they're proud of them, and it's something that's missing from our society.

I love that. That's a new one. Thanks for being on, Jeff.

Thanks for having me. I appreciate it.

Yeah, it's been a good time. I'm Jeff Duden. We're here with Matt Tate, and we have been on the unemployable podcast. Thanks for listening.