A Look at a Successful Tax Advisory Practice with Karen Manahan

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Hey, hey, it's Jodi Paidart here, the radical cpa. And I want to welcome you to Radical Ideas where we dive deep into a topic that will help you better manage and grow your firm. And this season of Radical Ideas, we're rethinking tax advisory. Yesterday we explored what a tax advisory engagement looks like and today we're actually going to see what a firm looks like after successfully building out a tax advisory practice. Today I'm talking with Karen Monahan, a partner at Wheelwright Monahan, where, where what she does today actually is tax advisory and the impact that tax advisory has had on her practice. So, so excited to have you here today, Karen.

Thank you, Jodi. Great to be here.

I want to give a big shout out to our sponsor of today's show, which is the Wealth Ability Network. I a network of CPAs and financial professionals who are focused on building profitable businesses and helping clients build a rock solid financial legacy. So with that, let's get started. And Karen, welcome to the show. And Karen, can you give yourself or give a brief introduction of yourself to our audience of who you are and what you do?

No problem. So my name is Karen. I've been a CPA in the public accounting world for about 13 years. For about the last five years, I've been the managing partner in the office doing the day to day operations of our team in my CPA firm here. So we focus mostly on entrepreneurs and have a team of about 15 that work with us here in our office.

Nice. So let's talk a little bit about your practice because my understanding is your practice is, is not like a traditional practice and you focus on advisory as well as doing the other stuff. So can you tell us a little bit about what, you know, advisory means to your practice and what services you offer and kind of the percentage of revenue or work that comes from actual tax advisory versus what I'll call traditional compliance work.

Yeah. So we don't, we don't separate the two. It's an all inclusive fee to work with us. It includes all the tax return preparation as well as strategy consulting, estimated tax payments. It is, we work on everything with you throughout the whole year. It's an annual engagement, so we can just focus on helping whatever needs to be done. So I don't actually know how much would go towards tax returns specifically versus the advisory or consulting piece of it. It.

So what about the amount of work can you talk to? Like, is it like 25% of the work is advisory and 75% is compliance or the conversations that are, I'll say, more strategic in nature versus like, I'll say traditional. Do you have this piece of information or like backward looking versus forward looking?

It's been really hard to tell. We used to do time tracking and billing that way, so. So I could tell, I could give you an answer specifically in years past, but this last couple years we haven't even kept track of that. I don't know, I could guess, but we just kind of blur everything together. We talk about quarterly payments, when we talk with them about the return, we mention upcoming things that they talked about us. When we talk about open items, it's just always continuing. We talk, you know, with the client whenever they need us about whatever is coming up. So it's been a great.

So I actually think this is good because basically you're saying we're a tax advisory firm, we're not separating tax planning from compliance. You're saying, look, when you get us, you get all of us and this is how we approach taxation from an advisory perspective. Is that the right maybe way to look at it?

It is definitely a mindset shift to think this way and, and it was hard to change, but that's how it is now and it's been wonderful and we're just getting better at it as the years go by.

Yeah. So I think it's really important to discuss this mindset shift because again, if you've always done it the old way, like, and now people are saying do advisory, do advisory. Now you really have to kind of flip it in your brain and say, look, we're being proactive and, and we're advisory and we're all year. And I think the next thing is, is when we think about advisory, a lot of people think planning is like one year. Right. Like it's kind of the next year. How do you think about tax advisory in terms of the lifetime value of a client and that it's like a continuous advisory cycle versus like, oh, that's the tax plan for next year. And then like we're going to start over. How do you, how, how is that, you know, built into your engagements and built into your mindset?

So when we start working with a client, it's actually required that they work with us on a strategy. So that's a short term and long term strategy for them, which is more of a consulting item. It actually doesn't include tax returns as the main focus in the beginning. In order to figure out what we can tell them about tax savings, we need to figure out what their long term plan Is, like you said, working with them year over year. And then each year you just keep updating that as things change. Always having to look out a couple years with changing tax law and making sure that their projections are a couple of years out, if, you know, if that helps them. And it always does. We have to look more than just one year forward.

So I love that too, because every taxpayer has a different goal and strategy, right? So, like, it's not a one size fits all, right? Like, obviously, different people have different needs and what their goals are different. So I love that you kind of cater it to the individual taxpayer. So when we think about, like, niches or specialties, everyone says, oh, you got to have a niche, right? Like, does. Do you have, like, a specific tax niche that you go after, or do you have, like, people on your teams who serve certain niches? And, like, how does that help you by having either a niche or not? Right. How does that help you either get new clients or service those clients?

I would say our niche is a broad niche. We are working with entrepreneurs, so that's in a niche in itself, but it's a very big one. And we don't have specialized people on our team. We don't have one person involved in real estate only. And everything goes there. We're all working with every client very seamlessly. So always we're in a team atmosphere, which helps us greatly on our internal side and helps the client know that they have a team, not just an individual person who knows what's going on in their account. And so we focus on entrepreneurs, small business owners, real estate investors, and a variety of anyone who wants to basically take control over their kind of financial freedom and do something, figure out what can be done and has a spirit about them. That's a very proactive spirit, right?

No, no, I love it. And I think you're right, because when you look at tax planning overall, like, there are specific things, like for real estate, et cetera, but there's so many things that fit everybody. And as long as, like, everybody's technical, which on the tax side, most people are, at least you can reach out to the person you know who sits next to you or whatever, who knows that, like, detail technical, like, you can do tax advisory as a whole. So is this the firm you grew up in, or did you learn how to do taxes at a different firm and come to this firm?

Pretty much the firm I grew up in. I started working with Tom Wheelwright, the partner, when I was fresh out of college at his prior firm. So he And I have been working on some of these same clients since I was fresh preparing tax returns. So I've seen the whole life of working with them, which is pretty cool. Being a preparer, reviewer, and now the partner signing their returns. So this is where I bloomed in this atmosphere of working with entrepreneurs.

So I love that too, because I think it shows that you don't have to, like, as we think about the next generation and how we teach the next generation, that you don't have to come into tax advisory with this, like, wealth of knowledge that you can do tax advisory as a young professional as long as you're taught what the tax advisory services are. Right?

Yeah, I was expected. I remember my first tax season being asked to do some calculations and, you know, projections for a client that wasn't just filling in the tax return, but which was hard, but I think I became better at it because I was put in those situations very early on and just expected to try. You know, I had to work really hard at figuring it out, but in the beginning, and that made it a little bit easier for me later on because I already had that personal growth. I had to really do it myself.

Yeah, no, I think that's awesome. So when we talk about tax advisory, what is like the deliverable? Right. Like, so if you think about compliance, you're gonna end up with 1120s, you're gonna end up with 1040. There's a document. How do you actually, like, say, we've completed tax advisory. Do you give them a report? Do you give them estimated payments? What's the tangible deliverable that the client receives, aside from the conversations?

So a couple things we do take notes and provide notes after every conversation. So that's pretty well documented. We have a picture of their entities and what they're going to do, short term, long term. We have actual projections whenever they need them sent to the client. And then to do that initial strategy, I talked about wealthability. Network has some really good deliverables to actually figure out a kind of a roadmap for them of where they are now and where they want to be. So that is the main initial deliverable for the client.

And when you're having these meetings, you pre schedule these meetings. So, like, when the client comes in, they know they're going to have either a meeting once a month or once a quarter. It's not like a random phone call that they call, and then all of a sudden you come up with tax advisory. Right. Like there's some sort of cadence of meetings.

Yeah. So our goal this year is to make sure that we offer to have at least quarterly call with every client providing them projections, asking them for updates. Really we're calling it just a check in call. It's not really focused on the quarterlies. It lines up with the payments so that we can talk about them at the same time, but it's really a check in for them. And if they want to meet more often, that's okay with us too. We have some clients that meet monthly, some that just meet twice a year and they're good with that. But ideally we want to meet at least four to six times a year.

And do you think the customers like these meetings? Like they show up and they're happy to be there, or they're like, oh, no, no, I don't want to talk about my tax situation. What's.

You're surprisingly happy. Once we've started having these, our staff has just kind of had a renewed positive sense on what they're doing too. And the clients tell us all sorts of things that they didn't tell us before. And so you know that because you had that meeting, you learned something that you need to now do or some new projection that's come out of it. And so the clients are quite happy to talk to their accountant, especially when they know they're not going to get any extra charge or bill or invoice for meeting with us.

Yeah, I know when I was in practice, that was the thing for me. It was like, now there's no surprises because you're meeting quarterly. So like to, nobody cares about extensions or not because there isn't a surprise. Like if you put them on extension, great. If not, that's okay too. And the thing about those meetings is they tell you everything, right? Like it's no longer like where, you know, they're talking to you in March and you can't, you can't do that strategy because it was, it happened after like, you know, they're telling you after you're in. So now you actually have the opportunity to be like, oh, how could we do this? So I, I think, I think scheduling these check ins is so critical and I think people do want to talk to their accountants more than like their accountant perceives them too.

Our, our calls, we sometimes need to cut them off because they want to just keep going. And so it's like an hour or half an hour sometimes isn't even enough to talk about everything they want to share with you.

Right. And I like to the fact that you're scheduling them because then too it just becomes another thing that gets done just like any other transaction you're going to record or tax return you're going to do. Right. It's just like on the calendar. And it's like, okay, this is how we're going to. We're going to do it, as opposed to like, gee, did I talk to this client? Or, oh, should I take them out to lunch? Which is like kind of the old school way of doing it.

Yeah. And our staff is prepared for it, too. We know that we need to get ready for these calls in advance, and we have the whole year calendar out with when we want to have the calls. We backtrack into making sure we're ready for the calls. And so it really helps us from an internal perspective as well.

Cool. So, okay, so now what about the payments around these services? Right. Because if you're doing advisory, obviously your. Your fees are going to be more than like traditional compliance. How have the clients responded to those increase in fees? Do they perceive the value? Are they getting the value? And do they, like, embrace them? Or are some people like, oh, no, I want to go back to compliance?

No, we've had a really positive feedback on this because we've demonstrated it well. First we explained to them what we were doing. We're very, very transparent in what we're doing. And then they asked questions, and we've answered all the questions they have about how it's structured. And then we just have to keep demonstrating what we said we were going to do. So if we tell them we're going to do all these things for you throughout the year, we're going to keep doing those and demonstrate the value. So there's really no reason they would be unhappy. If a client doesn't want that service, they don't need that level of help from us, then they might see, okay, it's not a good fit. We've had just a couple say that, and I agree with them. It was probably my suggestion that maybe we're not a good fit anymore. We're going to this method of working with you very closely, all inclusive, and you might not utilize it. They said, yeah, that's right. But for the most part, almost everyone has been very positive and happy with the changes that we've made.

So who has these conversations about, like, kind of the value perspective? Is it you as the partner or is it the team? And as they're delivering it, they're like, reinforcing the value conversation? Because I think a lot of times accountants have. It's hard for them to have those value conversations or to remember to tell the client that like this is going to save them X in taxes or whatever. Because like, we're just like, oh, we'll just do it, right. Like, and we, we think that, you know, the client understands the complexity of what we're doing. So is it you who's having these conversations or you, the whole team or how does that work in your firm?

It's definitely the whole team as at the top level, the partner group. We've explained what we're doing with our team very closely. So if that a question comes up, they can start to answer it. If, if they need us on the call, then we're happy to be on the call. So some of the main calls about explaining the changes, you know, the partner kind of wanted to be there just to kind of maintain that relationship. But we've always have a second person or two others from our office on every meeting so that our staff can hear the way that we explain things and then be able to be more comfortable taking over follow up questions or just kind of helping us out in the future.

So I love this, right? Because I think too often, and this goes back to a billing issue or how people charge, right? But when you have the ability to have the next generation on the phone with you, that's how they learn to have those conversations. You don't like, earn, like learn tax advisory through osmosis, right? Like it's like you have to be included in those conversations. So I love the fact that you're talking about having multiple people on the call and learning and having a process and structure around it because accountants love checklists and process and things like that and standardization to actually make it part of your whole practice as opposed to what I say, random acts of consulting or random acts of advisory. Right. Because it needs to be holistic in nature. So I love the fact that you're teaching like the next generation how to have these conversations, which I can honestly say has been the biggest missing piece from a succession plan as well. Like, that's why like, there's like most firms are having a hard time, you know, raising the next gen to take over as partner because they haven't really trained them along the way because of, I'll, I'll argue that it's the business model, it's the, the billing time and billing and all the other things that kind of get caught in a tax or in a firm in general that kind of create these barriers. But I love the fact that you're having these conversations Because I think it makes, it makes sense and it's the way to really put that advisory in your DNA which you said from the very beginning. Our first question, which you're like, yeah, I really can't sort it out because it's really just who we are and what we do.

Yeah. Our goal is really just to develop leaders. Our younger staff needs to become a leader and then those leaders grow into managers and those develop our staff. So the more that I can share with everyone, the more that a manager can share with the staff what's going on, the better we're all going to be. So really it's developing leaders to be a better firm overall.

Yeah. No, that's amazing. So what's the average length of like that your clients stay with you? Is it five years? Is it 10 years? Is it plus 10 years?

I would say plus. We really rarely lose any client if we're working with them, working on all their tax returns. Our goal is to be someone they don't want to part with. We want to be a team member for them and their coach, their advocate, be involved in not only just their tax calls, but be invited to other calls like with an attorney because we don't bill for our services. We can say, hey, can you invite us to that call? And so now we're involved in all their other real estate deals or with their partner at this other company. So it's really, we're hoping for a lifelong transaction together to help them accomplish their long term goals and really be a long term partner for them.

Yeah, I love it. It's such a holistic approach. So you know, everybody's talking about talent. Like it's hard to find talent, it's hard to get talent. How is your retention on talent? Do you feel that most, do you have a better retention overall that like than the traditional industry where people, because the next gen is like really learning that they're like happy to stay and they want to be part of your firm.

I hope so. I mean I think we have such a great team and I would say the only trouble is that we attract entrepreneurial staff as well. So sometimes they do go out and do their own thing and maybe even unrelated field because they've just, they're learning so much as well. So that's usually why someone leaves or does something, you know, on their own, different from the CPA world. But I've heard from my staff that they enjoy being involved in what we're doing and kind of the transparency that we talk with them about and also the client relationships. So even from like your first week with us, you will be on client calls, you will be working with clients, you will be emailing them directly. So that's a little different than I've seen in other industries where it might just be kept to the partner or the manager, but our whole group is involved so that you can see what you're doing makes a difference. And I think that I've seen that make a difference in our staff as well.

Right. Because I think CPAs, most people say they love helping clients and when you can see what you're doing to help the client, that's awesome. Right? Like so. So it's making a difference on their. On their life as well, which is kind of hard to always see from if you're just doing the numbers of the tax piece. Right. Like so. Like so. I love that. So. So this has been amazing, Karen. If people want to connect with you, if they want to learn more, how do they reach you? How do they. How do they find you to talk to you about, like, advisory in general or anything like that?

Sure. So you can find me on LinkedIn or if you're interested in this type of atmosphere, the Wealthability Network is a great place to go. You're a firm that wants to kind of learn from others similar to ours. The Wealthability Network is a great, great place.

Awesome. So thank you so much, Karen. Like, I think that this has been an amazing just season and experience because I think so many firms want to make the shift and they're starting to put together of the how. Right. The how and the why, which has not been traditionally offered up. It's always been like these random acts. So this has been amazing. And I love hearing from a practice owner who started in advisory. So you can't even say, like, you, you were taught all the bad habits of, you know, the legacy firms. So this has been awesome. I have to give a big shout out to our sponsor, the Wealthability Network, and I'll be back soon with a new season of radical ideas. So watch for me to share future launch dates here on Social and see you then. I'm Jodi Padar, the radical cpa.