Transcription
The single largest driver of efficiency in most accounting firms is how effectively you can request and gather information from your clients. Think about this. We've automated so much of our work, but where things fall on their face is when we're doing the the document, the information gathering hoke pokey with our clients. If you just had everything you needed to do that project in one sitting, how amazing would that be, right? But we don't. We do the whole stop-and-starty, end up touching the project seven times and now it takes way longer as a result. And the most efficient firms that I know, they approached this information gathering problem in a very different way to what I think is still the norm in most accounting firms. Today, we are pulling back the curtain on just how they are doing it.
Also today, a new segment, accounting firms gone wild. We are looking at some of the wildest accounting firms that are up for sale right now. Stuff you wouldn't believe. Plus, we're helping an accountant niche into acupuncturists, helping a bookkeeping firm grow faster with legal firms, helping your clients get to a better bank, and what to do when that person just leaves you the most stupid Google review you have ever seen in your life. All right, welcome to the Jason on Firms podcast. Let's get into it.
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How do you do, fellow accountants? My name is Jason Stats. You have tuned in to the podcast where over 1,500 accountants come every day to get 1% better at running an accounting firm. You hit subscribe in your podcast player. Do the math on that. You're going to be 365% better at running an accounting firm. That's not true. We only publish twice a week. Let's get straight into this workflow hack. There are so many things that I see. Like I have a window into now thousands of accounting firms. I feel so privileged to get to have so many of these conversations from my private community that is now over 900 accounting firms to our live events. The event series we ran this last spring had almost 1,600 accountants out at it, to all the stuff on social media, podcast listeners, all that. I feel so fortunate that I have a level of perspective that I never had when I ran my own firm. And I wish you could see just how different people do the same things. And so, what I'm always looking for when I'm thinking, like, how can I be as useful as possible to people, is what are the things that some firms are doing completely different that have a huge impact on how you can price a project or the amount of work that goes into getting a project out the door. And these kind of become the cornerstone things that we talk about on the podcast to try to get you from a place of this tunnel vision where you may just do something one way because that's the way you've always done it until you realize, well, there's actually a totally different way to do this. And this was, these were like the biggest step-change moments in my accounting firm where I would have one conversation with somebody else running a firm and I'm like, "Hang on, you do what?" And it's just like, your mind is blown, the scales fall from your eyes and you're like, "Well, yeah, no, that's actually way smarter than what we do."
Today we are talking about one such thing, and it centers on the P word. Okay, should I say it? I'm hesitant to even say the P word because it, it creates such division inside the accounting firm word. The P word, here it is, portals. Something that the majority of accounting firms still hate, something that a, a growing number of accounting firms swear by, but also something that can be used in awful ways, but also amazing ways. And so, if we bring this back to kind of this big struggle for a lot of us, how efficiently can we exchange information with clients, we've seen the bad version of this where the work that goes into like the follow-ups and all that becomes a job in and of itself. You get into a project, there's the work of figuring out, "What do I need to ask for?" And then before you even ask for it, the work of going back through all the stuff that you have to make sure that you don't already have those things because you're going to look like an idiot if you ask for something that you already have, right? To then send that request out, to then remember three weeks later, "Huh, they never responded to that request," and, and like doing the work of, across the 50 plates that you're spinning, "Who do I need to follow up with right now?" To then get half of those items back from the client. And one of the items is page 1, 3, 5, 9, and 7 of that thing that you actually needed. And this whole work of figuring out what you even need, who you need to follow up with, when should you be following up, like, this becomes a half-time job. And most accounting firms, this is still left entirely up to their professional staff to navigate based on vibes, based on gut feel, creates a lot of client friction. Often times when like, you get beyond the third time that you're asking for something and you're like, "Do I just stop at this point?" And then that same client gets mad at you six months later when they're like, "Well, why didn't you tell me I needed to do this?" or "Why didn't you follow up with me again? I was traveling." It is maybe the worst part of being in public accounting.
Honestly, the solution that that our tech partners hold out and say, "This is, oh no, this is the very obvious uh way past this," it is to stage all of these requests inside of a piece of software that will then make automated follow-ups to your clients. It's as simple as this, gang. You just, you just set up all these requests and then you set up the reminder schedule and your clients will get those automated emails and they'll be like, "You're right. I did forget to send you this. Let me log in right away and give you all of these things. Thanks for getting in touch, robot." That's what our software partners would lead us to believe is the ultimate solution. And the truth is a little more messy. That is truly the ceiling of the best, like, information gathering process. The best that it can go. That is the ceiling is you use software to stage all those little requests individually. The software follows up with your client and your client is is standing by at their email inbox, specifically their spam folder, when that message comes in and they're like, "I'll get right on this," and they dutifully submit everything. But if you've ever actually tried to do this, you know that that is probably not going to be reality.
So today, I want to play a game of of good portal, bad portal because I see a lot of great ways that people use portals. I also see a lot of really bad ways that people use portals that can lead to frustration, to even abandoning it altogether and just saying, "Well, this doesn't work." And it's like so many things in running an accounting firm where you can have a negative experience and write something off based on a set of assumptions, but then you look at the next firm across the street and it is almost like they are living in a completely different reality. And it requires digging into the nuance of what is one firm doing and another firm not doing. So, I've pulled together a collection of, I think, examples of really good ways to use it and bad ways to use it because if it's me, I am still going to strive for what is the best possible way we could manage this. And I do believe that staging your requests inside of your practice management system in most cases and letting machines do follow-ups is the best way, like the highest ceiling way to automate information gathering. On top of that, I am a big advocate of letting machines do these trivial requests so that your professional staff is not doing it. Because if your relationship with your client is reduced to sending you to-do lists, like honeydew lists of, "Hey, can you give me these seven things?" and follow up and follow up and follow up. If that is 80% of the communication that you have with your client, how's your client going to feel the next time they get an email from you? They're going to be like, "Ah crap, I got to go do this thing for my accountant again." And even though this is totally wrong, their perception of what you do will be reduced to what they see. And you could sink a hundred hours into this project behind the scenes, but if the only times they bump up against you and see what's happening is when you're requesting information over and over again, mentally they will reduce you to an admin, to like this assistant who just once a year helps them gather all of their documents and puts the numbers on the forms, which is infuriating, right? To me, this is maybe the best reason to let a machine do the requests so that you don't have to. But if you tried to do this, you know, it is not that simple. You don't just flip the switch one day and your client's like, "Oh, great. Yeah, no, I'll talk to this machine and respond to these promptly."
So, good portal, bad portal. Good portal use: loading information requests into the portal and actually putting thought into those automated reminders. This should probably be a firm-wide policy, what those automated reminders look like, but also what delinquency looks like. After a certain number of reminders, be that after two weeks or three weeks or something like that, the client has to go into some sort of other status where they are now maybe de-prioritized, but at least notified that they're on the crap list now because of their misbehavior. Talked with a bookkeeping firm one time that sends a weekly update out to every single one of their clients for kind of summarizing the work that they did in the previous week. And part of that email will also request information if they need it. And it was something like, if they get two or three weeks in and they're still waiting for the same information, they will be notified that they are being charged a "cleanup fee" because they've been unable to do their work because the client has been non-responsive. I love that. That just makes me so happy. I was actually in a in a meeting with like 20 other firms when this person said that, and the shock and awe on people's faces of just like, "Oh my gosh, I absolutely love that!" like audible gasps. So automated reminders are great, but they're not the total solution, and there has to almost be a status that a client goes into when they are just straight-up ghosting the firm, be it ghosting the machine or ghosting the human or the combination of the two.
Now, bad portal. Bad portal use example is assuming your client's going to pay attention to these auto reminders, at least at first. The first time you roll this out, and a lot of people get frustrated here, is they try this approach and some clients engage with it, but most of their clients don't. And they're like, "Well, this doesn't work because my clients aren't engaging with it." And I think it's worth acknowledging that this is more likely attributable to the habits of your clients than it is an outright refusal of using that approach. And, and you might have a few clients who are like, "I don't want to do this." Like, "I refuse to do this." But again, don't let that dictate your firm strategy, what you do across the entire client base. Your good clients are usually just like, "Yeah, tell me what the system is. Whatever you want me to do, just I can follow the rules." But sometimes the stinkers kind of get in our head and like they kind of take up too much weight in the decision-making. You almost have to assume. You do have to assume when you're first doing this. People will not comply because habitually they will just do the same thing they did in the past. And we all get so many automated emails, they're probably not even going to pay attention to it or may not even see it initially. It may actually get pulled out of their inbox by their email platform, and they're going to have to go dig it up somewhere else. And so plan on having to communicate this and a number of times have to like re-educate the client on like, "Hey, here's the right way to do this," before that behavior actually changes. That is the way that we all work. It takes a few cycles of doing it a different way before that becomes the norm. That will absolutely be the case with clients submitting information to you.
Good portal use: having dedicated people on the team who are running tech support. This is an unfortunate reality of asking clients to use our software is there's going to be times when they need help. And if they are like going to everybody in your firm with all these little questions, oftentimes those folks uh may not have the bedside manner to be the best at helping with those things and also may just not have the training. So, it's worth having dedicated folks inside of your firm that are adequately trained that can be the first line of defense in helping those clients when they do get stuck. And spoiler alert, these people should not be your professional staff.
An example of bad portal use: staging lazy requests. Things like, "Send me all of your tax information." Uh, "Send me your stuff when you're ready." Never leave it up to the client to decide what to send you. And maybe this is something that we did in the past before we had requesting tools. But the power of these request tools is itemizing that list so that when they send you 80% of the items, they're still getting reminders about the other 20%. And this is where a project goes from being touched three times to being touched eight times before it can go out the door is like the long tail of the last few items that are trickling in. And that's really frustrating. But in a perfect world, your professional staff doesn't start work on that job until everything is in. And this is a reality that a lot of firms are living in and a lot of firms are not living in. Many firms are relying on professional staff doing personal human outreach to those clients, gathering every single detail, while other firms lean heavily on tech to do this. And admins manage all of the follow-up and all of the pounding so that it literally doesn't go to a professional staff person until everything is in. Two different firms doing the same work, oftentimes charging the same thing. But one firm will say that approach is impossible for whatever reason. Like, we are both living in the same world. Which of those two firms do you want to step into? So, as you're building information requests, get granular about them. What are the specific items that you need? Will there be a catch-all of like, "Well, there might be stuff that I just don't know about that they got for the first time this year or this month?" For sure, we can have a place for that. But never reduce it to "send me all your stuff" because that's actually just deferring the work of having to figure out what you need to request.
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Hey, real quick, accountant, if you're listening, do you work for a firm that just doesn't reward the sort of progressive, forward-looking uh thought leadership that you try to inject into the firm? Does it feel like you're just perpetually rolling a boulder up the hill? You know what needs to be done, but you look to your left, you look to your right, and you are just surrounded by old fuddyduddies that don't want to modernize how they run their practice. I got great news for you, my friend, as I am co-owner of Cloud Accountant Staffing. And what we do is take accountants like you and place them into amazing accounting firms. That is the whole business. We got like 15 people working full-time on just taking calls with people like you to try to find an amazing accounting firm we can plop you into where that like spirit of willingness to lean into change and move to something better is rewarded. Imagine not being fought every step along the way but working somewhere where they are actually hungry for people who have that attitude. It's the entire reason I became co-owner in Cloud Accountant Staffing. This, I can tell you, that was me at one point in my career journey. This, something like this, would have changed my life. It is one of the coolest ways that I can use my connections, being connected with a bunch of cool modern firms, to get you into an amazing place to work. Do it. Check out the link to cloudaccountstaffing.com down in the show notes.
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Good portal usage: having a clear plan to triage all of the stuff that is being submitted to the portal by your clients. Not all tools make it really easy to pull all that stuff back to the proper destination, like the folder that ought to live long-term. A lot of times these systems will just have this almost holding place temporarily for any files that get submitted, but then somebody has to go in and do the work of moving it to where it needs to live and notifying somebody or updating a status if something needs to change. And this is again another thing that your professional staff can get mired in, take up a whole bunch of their time that could instead be handled by admins. You make a clear process for exactly how documents are handled when they are submitted from clients because the tools that we use do not magically put those files and do all the things that we need to do with them immediately upon, like somebody has to come in and do something with those files. Let's make a plan for how your admins can handle this rather than your professional staff getting sucked into document triage. That's what we're trying to get them away from.
Bad portal use: I would say an example of bad portal use is forcing clients through it to fetch things. This is one valuable aspect of a portal is there's a self-service element when they need something, they can actually hop in and grab it. And some folks now, you will kind of the more extreme, you have to go by my process firms will sort of slap the hand of of the client and say like, "No, go in here, like you can get it yourself." I think we need to be willing to do both. We will fetch that thing for them, but when you do, also remind them like, "Hey, just so you know, you can log in anytime and grab that thing here." But I would stop shy of saying, "You have to log in here and get it yourself." We got to think about the world that we are moving into where like we are the premium human service provider compared to the automated service provider. And if we try to act like we're an automated service provider, it's kind of in conflict with what people are coming to us for, which is probably a slightly more white-glove experience. When it comes to the security of sending a a document, most practice management systems that have a good file management component, they give you a way to email files securely. So, not just as an attachment. So, we still have to make sure we are providing that information in a secure way. But at the same time, we can also tell them like, "Hey, next time, just know, like 24 hours a day, you can go and grab it yourself out of this system."
Good portal use has nothing to do with portals, as as many of these things do. Having a communications plan inside of the firm that puts your admins in front of your staff, in front of your partners to ensure that triage around information gathering, around stuff inside the portal, around help with the software itself doesn't default to the professional staff person. And this comes back to having this cascading level of availability inside of your firm. If the big boss is just as available as the most junior admin in the firm, don't be upset when the client won't go to the admin to get a copy of a tax return. The big boss has to be the least available person in the firm. Otherwise, everything will come to them. And everything includes all sorts of stuff that other people in the business can handle. And so when you create these issues of like, "Oh, now we got to run tech support for this new tool that we're rolling out to our clients," a lot of this is aided by having a proper uh sort of cascading level of availability inside of the firm. You can imagine how ugly this can get if a rollout goes sideways and you don't have like a properly thought-out availability sort of approach inside the firm and all of these tech support questions just start coming to your biggest, most expensive, most scarce people, that creates a mess. So bigger picture, we have to have a a very clear approach to what does it look like to get in touch with me? How are you allowed to do that? What's the expected turnaround time? Versus a more junior person who may be the manager on the account or an admin who we can make immediately available to you.
Bad portal use: When a client tries to get you to sidestep the process, which in some contexts is okay, we have to always make sure that we're still reminding them of how we actually want them to do this thing. There's some situations where you shouldn't sidestep the process, like a client emailing you a whole bunch of sensitive documents. That's a situation where you probably just have to say like, "Hey, that we just can't do this." But if it's a more fringe situation where it's not the end of the world if you help them out and you let them sidestep it, know that you still have to recommunicate what the actual process ought to be. We can't assume that people aren't doing it because they're unwilling to comply. The much more likely uh scenario is that they're just doing it the way that they've always done it and they're not thinking and dwelling on like what our process is nearly as much as we are. And so plan on having to do that re-education with folks, and if we can do it in a courteous way that like there's no problem in doing that.
Two more to go. Good portal use is not rolling that portal out to your clients at the very beginning of switching to a new system. If you're rolling out, say, a practice management system that does 14 different things, the client-facing rollout ought to be one of the last things that you're adopting. The stickiest thing to change is the client-facing thing. Like training them on a new process is harder than training your internal team on a new process. And this is why I wouldn't lead with the client portal when you're rolling out a new system for a number of reasons. Among them, you don't know the system that well when you're first getting started either. And if you have confidence in the other aspects of the system to then bring the client-facing component to them, you will do so with a different level of confidence. But there's also a world where you're rolling out a platform where you get halfway through it and you're like, "This sucks. I actually don't want to do this." And if you find yourself in that situation, I've been there before. It is awful. But if you find yourself in that situation, you're going to be thanking your lucky stars that you didn't put it in front of the client yet, right? And so always focus on the internal workflow aspects first and the client-facing part last because that is the stickiest, the hardest thing to change. Imagine a world where you've trained all your clients on how to use the client-facing aspect, but all the internal stuff sucks for your own workflow. It's a nightmare for you to work with. You don't want to find yourself trapped in that situation where your clients are fully bought into a system that you yourself are not bought into. This is why we wait to do the client-facing bits last.
Last one, bad portal usage. Please don't use the portal uh that you built yourself with AI. This is a bridge too far for DIY homebrew software building right now. This is one of those situations where like a really core function of the portal is the security of the portal itself. And there is nuance to how you do this that probably goes beyond what we should be dabbling in ourselves for now. And it is not as if buying off-the-shelf software will leave you short on client portal options because seemingly every app in the accounting ecosystem comes with a portal because software companies understand just how sticky this makes an app. If you get your client bought into that system, then it's going to be less likely that you change, right? And so we do struggle with the issue of like, "Well, I don't want to put seven portals in front of my client." In some situations, this is a valid concern and other situations it is not. The biggest thing I look at where I'm concerned over putting too many portals in front of the client is the frequency with which I do so. So, if I have, for example, a year-round bookkeeping client and they're constantly in this one system month after month, but then I have this other portal maybe for gathering their tax information and we only do that once a year, I'm not that worried about using this other portal one time a year. I will communicate that that to the client like, "Hey, here is where we manage the tax process. You're going to go through this one time. Otherwise, everything else it's still happening in the normal place." To be managing two portals like the entire year, all 12 months, that seems kind of lame, right? But if we're talking about a once-a-year workflow that we're sending somebody through, I'm I'm not too concerned with sending somebody down a different path than we normally do if it's that infrequent.
To reiterate, the huge opportunity with proper portal use is getting your professional staff locked in to focus time to be able to take a project from beginning to end because you have all the information in already. I mean, there's some projects where it's like, wouldn't that be nice for that to sometime actually happen? And even if it is impossible because maybe there's there's new stuff and there will always be new questions that come up once you do the work. Touching a project two times is a whole lot better than touching it eight times. And properly adopting a portal, it can have you touching your projects in ways they've never been touched before. All right, I know you can do it. What a great way to transition us to accounting firms gone wild. Let's get into it. Cuz you need a distraction from your own firm's inaction.
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It's accounting firms gone wild. This segment is a riff on Zillow Gone Wild. If you've ever seen like the Instagram account or now the hit HGTV show where they just take these ridiculous real estate listings and then they like show you this crazy stuff that's going in this house that's like a castle or people with probably deeper issues that have sunk millions of dollars into this very strange home remodel. This is the accounting firm version of that because there are many accountants among you that collect accounting firms like Pokémon cards. You were just always hunting for that next one, looking for a deal. And that is not most of us, but I will say there's an element of like, "Oh, there's an open house down the street. Well, we're not really in the market, but let's go check it out." I find there's a level of that with like looking at other accounting firms that are for sale, right? Like, I'm not really shopping, but we could take a look. Three firms, interesting firms I want to show you. How would you like to become the auditor of auditors? How about this? A CPA firm whose only product is peer reviews. They did $98 grand last year. That's the entire business is only peer reviewing other firms. Are you judgy? Do you enjoy that sort of thing? What if that was the only thing that you did? I will tell you right now, there's so many different types of like weird firms. Firms that like, you know, only do benefit plan audits or like there there's so many quote-unquote accounting firms that do weird, very specific things. And I love these types of firms, especially when they are firms that could particularly be aided by AI. And I don't know enough about doing peer reviews. We were peer-reviewed every few years, but I don't know enough about the process of doing peer reviews to know can AI help to automate this, but I love these sort of fringe firms that are going really hard on one very specific thing. Uh, so if you do any of test work, at least in the US, you need to be peer-reviewed every 3 years. Nobody likes it. This guy's in Utah. Has clients across five states: Utah, Montana, Idaho, Wyoming, and Nevada. Growing 20% year-over-year. Said most of the work's done at a $250 an hour rate. Recently raised it to $300 an hour. Fully remote, asking $100 grand. Obviously, the blocker here is you have to be a CPA firm. But talk about like, I don't know, a recession-proof type of business. Like, as long as assurance firms need peer review every 3 years, that's pretty cool, right? I think that's interesting. Especially if you're the type of person that's well-networked with other accounting firms and you enjoy enjoy going to accounting firm events and just meeting other folks to become the default firm for this. That is pretty cool.
Next, a CPA in the heart of Silicon Valley and Cupertino is selling not the firm, but a minority stake in the firm, 25 to 49%. You cannot outvote him. This firm was established in 1998. They do a bunch of stuff with tech companies. Hard to tell if this is like their succession plan, like trying to phase someone in, or if they're just looking for a roommate. But if you're into tech stuff, if you've got the skills but maybe not the network, I think this is interesting. They're asking for 275. They say cash flow is 225. I don't know if that means that you're paying half of 275 or what the economics of that are exactly. That's a lot to pay for half of a LERT license. Curious if any listeners have done this, gone out and done a firm listing for a minority stake in your firm. Is there any version of that that is a good idea? I know there's versions of PE roll-ups that do this now where they take a minority stake and uh, I mean, the opportunity there is like, well, you have someone you can sell the rest to down the road and maybe you get some benefits from sort of the shared services within this group. But in a situation like this, is there a version of this that makes sense or is this a red flag? Did this guy just need to scrape up a quarter million bucks real quick?
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Would it be nice if your meeting notetaker was just built into where you already work? Do you have repeated stress injury from taking meeting transcripts and putting them here and going through them and extracting the to-dos and parking the to-dos over there? If that's you, consider Carbon, one of this episode's sponsors, and a practice management system that has rolled [music] out its own AI meeting assistant built straight into the PM, which means you get on a meeting with the client and then after the meeting, stuff just, it just starts happening. AI does things. It's pulling out to-dos. It's parking the record of the meeting where it needs to be so that your team can see into it and it's all properly stored where it ought to be. It is just one way that Carbon makes running your accounting firm easier than it's ever been. It is the operating system for everything that happens inside of your accounting firm. It comes on the heels of them recently launching a built-in AI assistant called Kai. A lot of cool stuff coming out of Carbon lately. If you're looking for a smarter PM, a smarter place to run your accounting firm, learn more about Carbon down at the link in the show notes.
Hey, if you do tax work, this is the time of the year where you need to start buttoning down that tech stack for next tax season. Do not try to change your tax tech stack [music] after the fall deadline. You do not want to ride into battle on untested stuff, which is why I'm here to tell you about Sorban. Sorban is a tax workflow solution that sits alongside your tax software [music] to make getting 1040s out the door easier than ever before. The big thing, the huge time saver, it is automating your client intake, automating the generation of document request lists and following up with every single client until all those details are in so that your humans don't have to. or even to simply support your human so they don't have to go and do the digging into, "Oh, what do we need and what do we have?" But Sorban goes further than that. Sorban will give you a a review-ready like workpaper binder, actually pull all that stuff together in a format where it can be super quick and easy for you to review. It'll help you automate the delivery of the return once it's done, so ingest the whole tax return, split out all the stuff that can be e-signed and kind of all the to-dos for the client in a in a clearly more easy-to-understand format than just like the PDF return. All of that inside of Sorban and is helping volume 1040 shops get more work out the door than ever before. They're specifically looking for firms doing 500 1040s a year or more. If that is you, check out Sorban. You want to get cranking on this now so they can run some returns through it this year. So by the time [music] you get to next busy season, you are ready to roll. To learn more about Sorban, check out the link down in the show notes.
Last but not least, how would you like your own firm in Northwest Montana? I will tell you when I was looking through firms here, I got real into like destination firms. There's like a firm in Maui. It's like, "Well, what if you just started a new life?" What a way to start a new life with a new accounting firm. Maybe that's not what "start a new life" means. This is a firm in Northwest Montana, a very affluent area. They're doing a million in revenue. And get this, they are asking for 1.39. That's a weirdly specific number that they won't get because their justification for why they should get 1.39 is 85% of revenue is flowing straight to the owner. Okay? So, they're doing $1 million in revenue a year roughly and 85% of that is flowing to the owner. So, they've got maybe $80 grand a year in payroll, the rest in software and printer toner. So, they've got what, like a good admin, maybe a preparer. They exclusively do tax work. No bookkeeping, no payroll, no audit. And this can sometimes be an arbitrage opportunity where you come in and you buy a firm that does one thing with the plan of layering in all this other stuff. Like, for example, if you do wealth management, a firm like this is a great target in a very affluent area where they're going to do a high volume of 1040 work. You can come in and buy a firm, probably not at $1.4 million, but you come in and buy a firm like this and then you get all these rich people and a whole bunch of wealth management money from it. You don't even have to keep all of the clients. But if there are other services that you can layer in, it makes an acquisition like this totally a no-brainer. I mean, that's a hard business to run though, too. Like when you are doing multiple things like tax and wealth management. So, there's trade-offs to that. But the rationale that you should get a better multiple when selling because so much of the money is going to the owner cuts both ways, right? Because you see this, I don't know what the first thing you think is. First thing I think is, uh, this person's working a lot. A lot, a lot, and you have one person that's managing 100% of the personal relationships. None of the team is. And so the way I think of this is almost the opposite of what they're framing their value as here. I think the firm where you actually have a team that is managing the relationships and the business owner is is more removed from the business. That is the type of firm that ought to be trading at a better premium than the firm that is almost certainly just a sweatshop for the owner because somebody's got to come in and do that work and transition all of those relationships. And that is what you will always be blocked by in building an accounting firm is the number of relationships that you can manage. Now, if you're in a situation where you want to build that, like that is your vision for an accounting firm is I'll build a firm to, you know, $800 to a million a year. I will manage all the clients and I'll have a team of staff around me that do the work. Then that's totally fine. Like that's a great way to make a living. You can fairly easily clear a half million a year on a million-dollar practice with a good support team around you and you are the pretty face that's doing all the client-facing stuff. So if that's what you're into, this sort of firm might be a fit. Not at this multiple, but increasingly I think people are looking for what's the firm where the relationships are are actually already managed by somebody else so that it is not 80 hours a week that will have to go to you on day one. What do you think? Do you disagree with that? Like what's your gut reaction to that? This is a new listing. There's no world where they're going to get this multiple. Uh, the firm is somewhere near Glacier. And so that I mean, you could see a world where that's like somebody wants to make that move already and they're like, "I could get into this lifestyle." You're buying into an accounting firm that gives you an immediate network too. Like that's kind of cool. Like there are downsides to then having to transition all those relationships, but also what a way to jumpstart your um level of connection within a community, especially if you got some other bolt-ons that you can bring to the table, too. In my experience, rolling out bookkeeping in a 1040 shop, like an individual tax shop, doesn't work that great. It actually ends up being a lot of people either with no bookkeeping needs or very simple bookkeeping needs, and they're not willing to pay very much for it. This firm is better suited for a wealth management play as opposed to say a bookkeeping practice where you're you've got good monthly revenue because you can command greater fees kind of being the accounting department in a box for a bunch of small businesses. That is not a great wealth management play because wealth managers do not make their money on 401ks. They make their money on rich individuals. If you want to run a volume tax shop, obviously again easier said than done, but there's a lot of money to be made in wealth management. We almost went down that path a couple times. Fun firms. If you find a cool firm listing, send them my way. Pop it in the comments. There is an element of like, "Oh, there's an open house going on down the street. Should we go take a look, honey?" It is always kind of fun like looking into other firms and what they got going on, right?
Okay, let's dig into that mailbag. MAILBAG MAIL. >> THIS SEGMENT IS CALLED >> MAILBAG. MAILBAG. Do I tell me how I say bag wrong? I know people fight about that like major. Questions are submitted via email, via YouTube comments, social media DMs, really anywhere you can throw throw questions at me. First one here, I love this. This is such a good question. Although I'm not a licensed acupuncturist. It's a great way to start any question like you're already interested. Where is this going? I studied acupuncture and traditional Chinese medicine in Mexico. I want to meet this person already. As I'm starting to research the market though, I'm learning that it's super micro. Like only 8,100 acupuncturists businesses in the USA. Compare that to the proverbial beekeepers you always bring up, which is 115,000 to 125,000 in the US. What are your thoughts on this? Could it still be a feasible niche to focus on for my firm at a national level? So 8,165 acupuncture, those types of businesses in the USA, my knee-jerk reaction is yes, that that's actually plenty for you to build a micro-niche firm around. But it may depend on the scale of work that you want to do for these firms. Do you want a like a 1,000 client firm or do you want a 10 client firm? If I'm going to build a firm around, what's a niche? What's like a premium niche? Let's say private charter airplane groups. Like, so these are people who work with the owners of airplanes to charter their planes to people. There's a good number of these groups out there and they're decent. They're pretty good-sized businesses. Now, I could go to a niche like that, start showing up at aviation events, and I could run the full back office and compliance for clients like this. That's a very specialized thing that is comes with a bunch of compliance specific to them. As you might imagine, I could run that whole back office for maybe 10 clients and have a $2 to $5 million a year practice. Like, you're stepping into a role that is multiple full-time equivalents. There's not a huge volume of these charter groups out there in the grand scheme of things, but that's a very premium thing that you could step into. But if I wanted to work with pilots, pilots, these are people that do not own airplanes. They're just pilots. Then to get to the same size firm, two to five million, uh, you may need thousands of pilots to get there. So whether this is a big enough niche for you probably depends on like, what is the makeup of the firm that you want to run? I'm just going to make up some numbers here. Let's say that the average acupuncturist does $800 grand a year in revenue from a single location. If you are their tax pro, like if you're doing their annual tax work, I mean, you'll get, you know, $2 to $6 grand from these folks. There will be some that will go in for tax planning at like, you know, $15 a year, something like that. But if you're their tax pro, you're you're getting, you know, I don't know, maybe maybe four to 10 a year. But if you are their back office, you could command $20 to $40k a year from an acupuncturist clinic. You're framing yourself as like a a basically halftime FTE. Uh, you do all the bookkeeping, you do all the tax, you do all the payroll, you handle all that stuff for them, and so you can command much more money. You get 30 or 40 of those clients, that's a million-dollar a year practice. That's great recurring revenue month-to-month. And the notion of attracting 30 to 40 acupuncture clinics when there's 8,100 across the USA, I mean, that seems totally realistic. Like the goal would be to become the go-to for this specific type of person in the US. So, you're showing up on podcasts, you are speaking at like you are unavoidable at all the big events. To be able to pull 30 or 40
of these people out of 8,100. To me, that seems plenty big enough.
Next up, I'm evaluating banking options. I'm curious, what made you switch from recommending Relay to now recommending Mercury? They seem pretty similar. What would you recommend in one versus the other?
I I never stopped recommending Relay. What you probably saw was a Mercury ad. And that is a very important distinction. When you see me doing an ad, that is airtime that somebody has purchased. And we will only do ads for people that we recommend.
But that's not like a different level of endorsement, right? That just means that they have money to pay for marketing. And so in my app recommendations, both Relay and Mercury are still recommended. Uh the differences between the two. Mercury is a more engineered product. There's a lot to it. It's doing a lot of things. It's very, very capable and not in a bad way. Like it's really cool. Relay is sort of at the other end of the spectrum where it is simplistic, but in a good way. Like you don't always want a lot of complexity. still has good built-in like bill pay and recurring payments and stuff like that. So, if your appetite is more like I want the like product that will do a whole ton of things, feels more like a and it was kind of originally a banking platform for startups. Mercury is that whereas Relay is going to feel much more friendly and accessible to folks who are not those more technical people. Both are very good. You're going to get phenomenal like user management access which is a huge thing for us. bank feeds are going to be super bulletproof. So, either one is a good option. I run my business on Mercury. We've used Relay in the past. When I ran my firm, I was putting a whole bunch of people on Relay. Both are good options.
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Hey, real quick, I want to invite you to my super excellent weekly newsletter. My newsletter was like the start of my thought leadership journey. It's where I try to collect what I think are the most important things for you to see every single week, sent to you every Wednesday morning. Make sure you don't miss any of the good stuff, right? Increasingly, we're also building into that some like of the best evergreen thought leadership I've ever done. Trying to make that like the most action-packed, highest quality email you get to your inbox each week because listen, we're all busy. [music] All right? You're not going to see every single little thing that I put out. Goodness sakes, there's just too much. If you're not on my newsletter yet, check that out. jsononfirms.com or I'll put a link to it down in the
I'm curious to know what your thoughts are on me getting an enrolled agent license to build my accounting firm and hiring CPAs to do the tax returns.
Brother, yeah, you don't need CPAs. If you're an EA, you're fine signing returns. If you want to get into running a tax firm, like the shortest path when it comes to credentiing is absolutely an EA. And we're talking about US stuff here. CPA comes with a lot of other stuff, a lot of stuff that isn't relevant to running a tax practice. doesn't mean it doesn't have its own value, but what you don't want to do is sink 18 months into getting a credential and then find out you don't enjoy doing that type of work. I I don't think the CPA credential, in my opinion, quite comes with the exclusivity that we often think it does. There are over 600,000 active CPAs in the United States alone. And so once you get your CPA, you got to think about what am I then going to do next? Well, you're going to try to become one of one somehow. And a CPA does not achieve that having that credential. We just talked about a dude trying to run an accounting firm for acupuncturists. How are they going to become one of one? They're going to be the most visible person in the space. They're going to be writing guest posts for the industry influencers. They're going to partner with the software companies that are selling practice management software into acupuncture clinics. They're going to be speaking at the events. That is the path to being perceived as the guru within a space. And you will have to do that with a CPA or not. When it comes to who works for you, I don't I mean to me it doesn't really matter all that much. They could be EAS, they could be CPAs, they don't need to have any credential if you're signing the return. Um I don't let like the credential lead the way on what is the business that I want to build. So I'd say the bigger question is like who do you want to serve? And the EA is like probably the minimum level of credentiing in most states that you're going to want to have to be able to work with clients. Would anybody disagree with that? I I have a CPA, so like I I can understand the like coming to the defense of your CPA, but I also don't want to like put a really high barrier on people launching a tax practice. And to me, a CPA is a a bridge too far if all you want to do is 1040 work for people.
I own a bookkeeping firm focusing on law firm owners. I create a lot of content and do some advertising, but I want to go faster. I've thought about doing a booth at continuing legal legal education seminars. Unsure of how that will work. Thoughts on that as a marketing strategy? How do I get in front of more people? How do I get in front of more of these firms?
The answer is always volume, baby. Doing more. And for most folks in a firm, that looks like getting out of production, getting more out of the doing of the work so that you have more uh bandwidth for the promotion of the work. But in practice, I mean, I think the best thing most of us can do here is getting out on the road, showing up at a bunch of events, being unavoidable, speaking. In what we do, it's very rare that you ought to really need to be an exhibitor. There's so many back doors into conferences from partnering with the software companies that sell into these firms and like helping them out at their booth or a lot of these packages that these software companies will get will come with stage time. Like you can be the person on stage for their stage time. You have so much to offer people that it's it's unlikely that the highest ROI path is becoming a a platinum partner. So consider the ways that you can get into these events that don't require cutting a check at all. I hear from a lot of people who are just like, I will just buy a ticket as an attendee and just wear a shirt that says I do taxes for whoever those people are and they will make tons of connections literally just walking around in a t-shirt. And so you do you do want to be focusing on the right things and in-person stuff that is like the easiest way to connect with people. But so much of this is simply about volume, being able to do more. There are so many areas of my business where we found success simply because we did more than anybody else. This podcast used to be a daily podcast. For 346 weekdays in a row, I published a podcast and you probably weren't listening back then. But it is because of that volume that we figured out the production machine. I got better at delivery through that volume of writing. My I mean my ideas and thinking about how to do this stuff just got much more clear. I did two YouTube videos a week while running a 40 person firm. I host local events. We did a run of 20 cities in less than two months earlier this year. The unsexy secret behind a lot of people's success, it is simply doing volume. So what does it look like to you to do more volume? It probably means getting other stuff off the plate. So your secret becomes, well, I'm very good at delegating this other stuff. I've [snorts] built the machine that allows for me to do more volume than the other people doing the same thing. Also, partner with every tax law firm out there that you can find. That wasn't clear. Accounting firms that do tax work, there's a lot of those. You're a bookkeeper that works with legal firms. There's loads of partnerships that could be built there because tax shops are looking for bookkeepers they can trust to do that work. Well, whatever you got to do to get in front of those firms, that could be a tremendous referral source.
What suggestions do you have on responding to those dumb onestar reviews on Google where they don't actually say anything? They just leave an empty one star.
I actually don't have a great answer for this. Are you able to respond to Google reviews if the person didn't write anything? Like, can you can you type out a reply? If so, I'd probably do something funny like, "Show yourself, you coward." Or, "Tell me more or thanks for stopping by." If you have some wisdom to share here, put that in the comments. How do you handle someone just leaving a one-star review with no text? Generally, with Google reviews or people that leave negative reviews, it is never worth fighting over the facts because that just becomes this big ugly thing. There is a way that you can look um magnanimous without getting into the specifics. So, it's something along the lines of, "Sorry it didn't work out in the end. Best of luck to you in the future." And that may be infuriating to do because what they're doing may be completely BS, but you don't also want to negotiate with terrorists. Like, you call them out on something and they're going to be back with just something else. That is a race to the bottom. Other business owners know you're going to get some maniacs in your Google reviews. We also know, and this is hard to admit, that behind every maniac, there is just a seed of truth or probably something we could have done to to prevent that. Or if we make a little change to our systems, maybe the same thing doesn't happen next time. But that's that's part of what makes it so infuriating, right? Is like, you know, that this is like totally unfair. But there's just like the littlest littlest grain of truth in there as well. So don't get don't like get sucked into a battle there. But when people don't even leave any commentary on it, I don't know what you could do in that situation.
Three to go. I started my own firm this past spring. Good for you. I did it while working at a top 200 firm. Can we the whole top whatever vernacular? People are so impressed by this. We are top whatever. We're calling out top 200 now because you're 173. We're a top 173 firm. Anyways, I was working at a top 200 firm which was acquired in the summer and I was let go. Oh, should have should have finished the sentence. I'm sorry. T's and P's. I have approximately 20 clients pulling in around 20 grand in fees. I have an offer from a larger local firm I interned with in college. The offer is in a senior role paying low six figures with a quote path to partner. Listen, I'm on path to partner at that firm. Path to partner right now is anyone with a pulse that will say yes to a job offer. They have solid work and the firm is growing. What do you think?
So, you've already made the jump. you're on your own building your own thing and then someone comes in with a juicy offer. Unless you absolutely hate doing your own thing, I think there's a version of you that will probably kick yourself if you don't follow through on your own thing a little bit further to see if this is something that you enjoy. In a perfect world, I would say give it a year or two of trying to build your own thing and see what you think of that. That firm that you're going to, half the people in that firm dream of one day doing their own thing. And you are a you are the hardest step into doing that that most of those people aren't willing to do. It's still going to be available. That partner track will still be open to you. It might they may even pay you better two years from now. And you'll actually have your own firm. You'll have an asset. You'll have a whole bunch of experience that you wouldn't have otherwise had. So unless you're really not enjoying the running of your own firm right now, I would try to say like wait it out a year or two if you can. This is the best part of being an accountant. If you are staring down the face of a hard decision is if things go sideways, what is the worst case scenario? You'll go back to being an accountant. You take a job at some other firm because goodness knows people are hiring.
What are your thoughts right now on AI creating citizen developers?
Ooh, this is a this is a phrase that I haven't heard in a few years. Citizen developers. The idea that like normies can build anything. We've been talking about this quite a bit on the podcast. Do accountants have any business building their own software? Um if you look at software itself it has always been on the path to simplification. Even just when developers are creating software like early days software you were writing like machine code like managing memory like it was all very very complex and all these layers of abstraction have come in that makes it much more accessible to write code to create software. But that's not just going to stop with developers. over time like we saw no code and like it got easier and easier to make things and so software will continue to get more trivial to build but at the same time I do think the good version of building software will probably remain out of reach maybe more than we expect and for me this this is because we talk about the logic of like why will people hire accountants if AI can do the accounting or why will people hire a tax pro if AI can do a lot of the tax work. It is because nobody gets out of bed to run their taco truck and wants to think about tax and wants to put in the work to do the accounting, the time to understand, should I do X, Y, or Z, what they're actually doing is delegating the stress and anxiety to someone else. They want someone else to be worrying about this thing for them. And when it comes to making really good software, I do think there's a lot of accountants who will not get out of bed in the morning and be like, you know what I want to do right now is make some software is to push a push another update to this janky thing that I made. That is just not what lights them up. And so they will be happy to trust people that are specialists and just use that stuff. Now, it is true if you really want to make stuff, it's never been easier and it will continue to get easier. But that does not mean that that is what I want to do when I get out of bed in the morning. Does that make sense? Most of us are not software people, right?
Last. I want to start my solo firm, but my job in forensic accounting and private equity feels stupid to leave. I'm making 200 grand a year with four weeks PTO and fully paid premium healthcare. What are you doing listening to this podcast, man? Just go buy private island. So, my question is, what do you think is a reasonable firstear net income for a solo firm doing CFO and business tax prep that I could expect if I only work 40 hours and have no client base already? and do you think I should stick with my nineto-5 for the time being?
I feel like you know the answer to this if you're tuning into this podcast. The very first line of the question, I want to start my solo firm. There is no such thing as handcuffs that are so golden that you should ride them out until the day you kick the bucket. We don't like consider enough what if you don't do anything like are there risks and problems with making that change? For sure, but usually you're getting to that change because the status quo is not okay and the status quo is not something that lights you up. Part of the problem here is it sounds like you're arbitrarily trying to get to 200 grand a year. Like like, well, I'm worth this over here, so I'd be dumb to come over here and make any less than 200k. You absolutely would not. There's a lot of people that listen to this podcast that would tell you you will be much happier making 50 grand a year, having full agency, full control of your time, all these things, than making 200 grand a year in a job that you don't enjoy. Now, that's some people. It's not for everybody, but certain people do want to do their own thing. and you literally started this question with I want to start my solo firm. So then the issue becomes my lifestyle. What's my burn? Have I built it around 200 grand a year or all the kids in private school? Do I have a a vast estate? How will I pay my house manager? If that's the situation you find yourself in, then it is about like how is there a way to like make a lifestyle trade-off where if I had control over my own job, I would be perfectly okay with this lifestyle. Most of us if we have work that we enjoy and is fulfilling and all of that we can get by without like without that much. And so if you absolutely need 200k in that first year it is worth looking at the lifestyle and seeing like can we trim the fat here anywhere. That is easier in some stages of life than others. But the question of how much money should I expect to make when I go out and run my firm man I could I got no idea. I talked with a guy at an event that was clearing over a million a year in profit on year three. So that's a possibility. wouldn't guarantee it, but I will also get YouTube comments from people that are like, "I've been trying to build my accounting firm for the last 10 years and I only have six clients." And I'm like, I don't I don't feel like I have enough information here to give you advice. So, how much where are you going to end up doing your own thing? I can't really tell you. I can tell you on average, most people build to capacity faster than they think they will. Now, obviously, that could be very different across folks. That will not be everyone's experience, but it is a very common uh retort that people are like, I wish I was more thoughtful when I built this book cuz I'm at capacity and now realizing I don't actually want a lot of this stuff that I've got. To me, in your situation, the north star is like, what's going to light me up? What am I going to be excited to do? Because another common thing I hear from people is, I wish I would have done it sooner. There will never be a time where it is the right time, but if you know you're going to do it, do it. Stop asking podcasters for permission, man. Do it. What's the worst case scenario? We'll say this again. What if it doesn't work? I bet somebody else would take you like, really? What do we have to lose? Dang, it feels good to be an accountant. Did I just say that? It does though, right? I mean, that like you're so so in demand. It's kind of wild. Especially the super smart folks that tune in to this podcast. Congratulations. You just got 1% better running an accounting firm. Appreciate you coming and hanging out today. Got any questions? Pop that stuff down in the comments. You stumble into a spicy accounting firm that's for sale. Let's talk about it. Have a great week. I'll catch you in the next one. >> [music]