What goes into the recipe for accounting firm success? Randy Crabtree of TriMerit Specialty Taxes and the Unique CPA podcast goes over the ingredients, and how best to combine them.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Dan Hood (00:03):
Welcome to Omni the Air with Accounting. Today I'm Editor-in-Chief Dan Hood. Every accounting firm's recipe for growth is going to look and taste a little different from the other firms, but the interesting thing is there seems to be a common set of ingredients that no matter how you combine them, always appear Somewhere on that menu. Here to talk about those ingredients and how best to combine them is Randy Crabtree. He's the co-founder of Trier Specialty Taxes. He's the host of the unique CPA podcast and he's the man behind the Bridging the Gap conference and almost as important as all those things. He's a member of the advisory board and a speaker at Accounting, today's firm growth form, which is coming up May 21st and 22nd in San Diego. So if you love what he says today, you can see him there. If you hate what he says, you can also see him there and explain why he's wrong on a million different things. I don't think you will though. I think you're going to find that he's got a lot of great stuff to say and a lot of useful insights to share. As always, that's why we keep having him back on the podcast. Randy, thanks for joining us.
Randy Crabtree (00:52):
Thanks Stan for having me. And I was just going to add, if they go to the conference, the Firm Growth Forum, they don't have to go watch me speak, so there's plenty other speakers there if they don't agree with me.
Dan Hood (01:04):
That's true. It is not mandatory. You're just trying not to be accountable for what you're going to say here today. You'll be able to let him him know, give him what in terms of what he says at the conference. No, as I said, we're psyched to have you back to talk about this topic in particular growth. It's tied into the conference, but it's also just something that firms are perennially thinking about, and I wanted to just sort of talk about some of those ingredients. I don't really have that list per se, breaking down, but just sort of general categories. I know you have some specific thoughts about ingredients that'll go into it. I'm going to tweak it more from a broad category point of view, and you can bring in the issues, the ingredients you think are important. When we talk about one core element of growing Affirm is service offerings and having the right client roster to support those service offerings and to support growth. How do you optimize your service offerings as you're looking at an accounting firm? If you want to go beyond just being the main street CPA, you've got to be a little bit more specialized, I think, and you've got to think a little bit more about your service offerings. Is that right?
Randy Crabtree (02:10):
Oh yeah. Service offerings are huge and it depends on the size of the firm too, so you can offer more services the larger you are because you don't want, I mean, if you're a $2 million firm and you're trying to do everything for that client, it's really hard because you can't be an expert in everything. And so from a service offering standpoint, whatever it is, I am a huge, huge proponent of niching, of becoming a niche practice. And because if you can concentrate on one or two things, again, you're a million dollar firm, one or two things, boom. You could become the expert at one or two things and really be able to show your knowledge to your clients, be able to show the value you bring to them. And lemme give you an example. I've been in accounting since I think 1987. I probably should know that, but I think that's the year I started in the profession.
Dan Hood (03:06):
Long enough is really, you've been in long enough to know what you're talking about.
Randy Crabtree (03:08):
Yeah, so what I'm saying is I'm really old, so I've learned things over the years and actually I graduated college in 1985, so I was doing other things before I got into public accounting, but by 1989, I started building my own firm on the side. By 1991, I went into my own firm and as a generalist, as anybody that grows their firm or builds a firm, what you do is you just take on every client because you want the revenue. And the mistake I made back then was I'm just going to continue taking on every client and I'm going to try to offer everything to every client and not at some point in time realize these are the clients I like working with. This is the service I like to offer. Whether it was just taxes or whether it was audits, which it wasn't. I'll tell you that it wasn't audits, whether it was financial,
Dan Hood (04:06):
Anything wrong with audit
Randy Crabtree (04:07):
There, but for me there is. But no, I appreciate auditors big time because they have a skill and a passion and the knowledge that I just never had. But that's important. That's what I look at it is like, Hey, what's your skill? What's your passion? What's your knowledge? And try to find those intersection between all those, and if that somehow can also define a niche, that's where I think that it's so important from a service offering. So a niche can be, when I grew that firm, we helped everybody. We helped the doctor's office, we helped the Burger King, we helped the construction company, the dentist, the lawyer, all this. So could I be an expert in all those industries? There's no way I could, it just wasn't possible. Did I realize that at the time, no accounting was accounting, in my mind, tax was tax.
(05:01):
And so what I should have done and found that client base at that level of the firm I had that I liked, Hey, I enjoyed working with the professional services, so maybe a lawyer, maybe an architect, maybe something like that. And then try to build your service offerings specifically around that niche. In 2007, I started Merit. Is that the year? Yeah, this year in 2007, I started Trier after I sold my generalist firm. And we ended up being a niche around portions of the tax code around a service, around tax credits and incentives. And so you can niche in an industry, you can niche in a service offering, you can niche in a personality type. I like working with husband and wife owned businesses or second generation owned businesses or something. And so from a service, I think defining the service you can offer is much easier when you define what that niche is. And if you could start concentrating on a niche. So for me, that's a huge part of growth is being able to concentrate on one or two specific areas that you're passionate about as well. Alright, I'm rambling there. Is that, did I answer correctly? Yes.
Dan Hood (06:18):
Yes, you got a hundred percent for that. No one will confront you at the firm growth forum and complain about that, but I think you raise an interesting point, which is one that that's a great way to grow because you can become an expert and people will begin to recognize you, an expert, and that will bring in clients and that if you're a generalist, you're limited by geographically who's around you mostly. If you're a specialist, your level of expertise can elevate you above your local geography and give you a much broader client base. But you also raise the point of if you're going to grow, you don't want to grow doing stuff you don't like with people you don't like because you're just going to be doing more of it, right? Yes. If you don't like it when you only have five clients that you don't like, you're going to hate it when you have a hundred clients.
(07:06):
And if you don't like doing 40 hours a week serving a particular niche, dealing with medical practices, I'm going to pick on medical practices. It's a difficult and unique niche and be the billing there can be crazy and blah, blah, blah. If you don't like doing it 40 hours a week, you're going to hate doing it 60 hours a week and 80 hours a week. And that inevitably at some point, we're going to talk about capacity in a minute. So I'm sort of leading up to that. But at some point you're going to end up doing a lot more of that work. If you're growing now, you maybe then manage it better and so on. But as you're growing, you're going to end up doing a lot. So don't do it if you hate it.
Randy Crabtree (07:39):
No, and that's where that passion part comes in. Enjoying an industry, enjoying, enjoying working with the medical practice practices, just the intricacies of what they do. And in my history, and I don't mean to say anything negative about the medical practices, but they don't concentrate on the financial end. They concentrate on the patient end, which they should. That's what
Dan Hood (08:01):
I want from my medical
Randy Crabtree (08:02):
Practice. Exactly. And so if you like being able to support them so they can concentrate more on the patient end, maybe that's something you just get so much satisfaction out helping them, making sure that they're doing things accurately from the financial side and you really enjoy that and you're passionate about it. Not that you should work 80 hours a week, I don't want you to go more than 40 or whatever, but if you have to put in extra hours, at least it's something you really enjoy doing because you see the benefit of what you're doing with them. So yeah, for sure. That I think is a huge part of it.
Dan Hood (08:35):
And this is worth saying. I mean, I think at some point if you're intending to grow, you can have a small practice and make a great living. One of the nice things about accounting, you can make a great living, the relatively small practice that doesn't require a lot of extra hours and that sort of stuff. But if you want to grow, I think it's safe to say at some point you are going to have the weeks where you do 80 hours growing. Now later on, you can manage that better as you get bigger. But that transition, as you say, from a practice that takes anybody who can sign a check to a practice that's focused in the areas you want to be focused on with the people you want to be working in, you're going to have to do, there's going to be a period where you're doing extra work to manage that transition.
(09:13):
Part of that transition is going to involve capacity in a couple of different ways, managing your capacity as you switch from too many clients who can sign a check to just the clients you want to work with, you're going to be dealing with capacity issues on two fronts, one capacity around how many clients you have and who you're serving. So we might talk a little bit about how you handle that as you grow, and then also maybe a little bit about staff and delegating and outsourcing and all the different things you can do to manage the inevitable bumping workload that's going to come as you grow. So maybe we start with the client aspect of that. How do you get rid of people? I guess one way to start over, when do you decide to get rid of people? When do you decide that you're comfortable saying, you know what? I'm not just going to take anybody who brings in revenue. I'm going to start focusing on the people who bring me joy.
Randy Crabtree (10:03):
Ooh, the people who bring me joy. I like that you're quoting Kristen Keets now.
Dan Hood (10:08):
I stole it from somebody I don't know. Kristen. Perfect. Thank you, Krista.
Randy Crabtree (10:11):
Yep. Who's also on the advisory council. I think
Dan Hood (10:14):
She'll also be there,
Randy Crabtree (10:16):
Confirm growth person. So there's a couple ways to look at that when we're talking about clients. There's the easy version and the easy version is just a C or a decline. It's a client that is just, your employees just cringe when they call or you get the email whether they fit into your niche, whether you got to the point in time where you have a niche or not, even if they fit into that niche. It's just that's the one when we want to grow, we want to have happy people that we're working with when we're trying to grow. And even like I said, if that's a niche client that works for you and they're paying their bills and everything, but they're just a pain in the rear end to deal with, that's easy. You just have that conversation that you don't even have to tell 'em this, but internally you're looking to grow and you just don't fit into our plans right now.
(11:14):
And you invite them as a friend of mine, Diana Crawford says, you invite them to be successful elsewhere. And so from that standpoint, I think you make the process as easy as you can. You help 'em through it. You even help them find somebody new. When I talk to people, I'm very fortunate I get to talk to a lot of people in this profession and I hear these stories and what they do is they just hold them their hand through it. Sure. Is there a little pain I have spending more time that I'm probably not going to get paid what I should for this, but you're going to help 'em through that process and you may be even helping somebody else that wants that client, that needs client that is growing their business. And so you do everything you can to hold their hand through the process.
(11:58):
And then once you've done that, you've opened capacity now to take on that AB client in your niche. So that's the easy, I should say, that's the one that should be the easy decision. It still seems to be a hard decision for many clients. I just gave away revenue. Well, look at the big picture. In the long run, you're going to generate more revenue. You're going to be dealing with a happy staff and dealing with clients you like. The harder one is the clients you like that are paying their bills, that are generating revenue for you, but just don't fit into your growth plans because you've decided you're at a level of the point in your career, in your business growth that you want to start concentrating on a niche. And your niche is the we'll stick with medical. Your niche is the medical profession and this is a construction company and you like 'em, they're your friends of your brothers and all this stuff, and they're a great client.
(12:59):
But if you're going to continue to grow the way you want dealing with a niche that you want, it's just time that you have to let that go. And so that's the harder one, but you still do the same process as you explained to 'em. We're going to concentrate on niche. And I keep saying niche. It doesn't have to be that. It could just be they just don't fit into your plans. And so then it's again, it's just the whole help 'em through the process and really feel good about inviting them to be successful elsewhere in this situation. So I think it's something that I think too often, and I think I said I think a lot today, so we can edit some of that all
Dan Hood (13:42):
The time. You're constantly thinking, this is why we have you on the podcast.
Randy Crabtree (13:47):
No one
Dan Hood (13:48):
Can see this is why we do it. Audio too. You can see the steam.
Randy Crabtree (13:51):
Exactly. Nonstop thinking. Now I completely lost my train of thought. We're going to get it back here in a second.
Dan Hood (14:01):
Well, you raised a lot of great points about, and I think there are a lot of elements to growth to growing that the people may not realize how many difficult decisions you have to make. These are only some of them. How do you get rid of clients? And if you don't get rid of clients, you're storing up trouble for later. If you're not keeping the right clients for the business you're growing into, if you're keeping too many of the businesses that you used to be as opposed to the business you want to be, you're just storing up trouble for later, it's going to be worse later. It's ripping off a bandaid kind of thing. But you can do it as you say, and I think this is important, you mentioned it a lot, is you can help people be successful elsewhere by offboarding them properly.
(14:46):
And I think I've heard people say, you don't have any obligation. Obviously you want to be polite. These are people who helped get your firm going, they brought in revenue for you, blah, blah, blah, but you have no obligation to find them another CPA. I think it sounds like you feel similarly that I think you have a little bit of a duty to do what you can to help them get somewhere else. Obviously if they're difficult clients and no one wants to work with them, that's their problem. You don't have to go to the ends of the earth with them, but some effort to help them move into find a new home is reasonable and professional and decent.
Randy Crabtree (15:21):
I think so. And it's honestly our personality as accountants that we want to help everybody and that's just helping them, like we said, multiple times that continue to be successful. One thing, let me add real quick, we didn't even touch on onboarding, but onboarding is so important when we talk about the client aspect because a couple of things even prior to onboarding. I mean, if you have one red flag in this process of bringing on a new client, that's probably not going to be the only red flag out there. So you might want to consider pretty your onboarding process is analyzing that and seeing if there's a time to stop the onboarding. But more so I wanted to just concentrate on the onboarding from the standpoint that have a system in place. I mean not let them know, here's the technology we use, here's how we're going to work with you.
(16:12):
Here's obviously explain they're never going to know this ahead of time, but explain the whole billing process. And for most part, what I've seen more successful firms do lately is they don't even send a bill. They're prepaying for everything the clients are paying ahead of time and have those systems in place. But the biggest thing I just wanted to, and I know I don't want you don't have a ton of time, but the biggest thing with onboarding is set the expectations. You as the tax advisor, the accountant set the expectations because too often we let the client set the rules that they want us to follow, and that's not how we're going to build a business that we're happy to be part of. And then having as Dan and Kristen Bose bringing joy to our business, and so make sure that you are the one setting those expectations.
Dan Hood (17:01):
They also don't know what they're doing. I mean, there's one party to this relationship that's an expert in accounting and tax and there's another party that knows nothing or they wouldn't be going to the expert. So the accountant should be setting the agenda. There's also, and I say this only because anybody who runs malpractice insurance brokerage or agency is bringing their hands at this point saying also have an engagement letter and set the rules because otherwise the client will come back and they'll have all kinds of weird and unreasonable expectations. So I mean, think it's implicit what you were saying, but just to highlight that again for all of our friends in the insurance community, make clear that people know what service you're offering and what services you're not offering and how you're offering them and so on, just to protect yourself. Inevitably, even the nicest of clients circumstances can turn them into a litigant,
Randy Crabtree (17:55):
Especially if you are doing as Ron Baker, another participant in the firm growth form, right? Ron is there, right? Yeah. Oh yeah. It talks about with the subscription pricing, you have to identify the services that are included in that subscription pricing and which are going to be add-ons, and that should be part of that contract because you don't want to have any questions down the road for sure.
Dan Hood (18:17):
This is all, I mean, all of these things sound like, Ooh, it's awkward to bring this stuff up at the beginning of the thing. It's way less awkward and way more profitable than waiting till the end and hearing them say, well, this bill seems really high. And then being, oh, okay, I'll just write it off. Or yeah, we won't charge you for that. There's going to be an awkward conversation at some point. One awkward conversation gets you way more money than the other awkward conversation. Correct. Since we've talked about pricing and that opens up a whole other can of worms that go along with growth, which is operational and management structures. And there's so many elements to this. I'll let you touch on whichever ones you want. If you want to start with pricing, that would make sense. Thinking differently about your pricing as you grow moving from hourly or tax form based pricing, however you want to, whatever you're doing currently to the kind of pricing structures that one, enable growth, but also to tend to go along with larger firms. If you're growing, you're growing into a larger firms, they tend to think differently about their pricing and how they manage it. Maybe we can talk a little bit about that to start.
Randy Crabtree (19:20):
So for me personally, I think that I talk about mental health in the profession quite a bit and firm culture as well. And I think one of the biggest negatives that contribute to bad mental health and to bad firm cultures is the hourly billing. That's my personal opinion. And I know there's some times where people say we just have to, and maybe it's on an audit or maybe it's on some kind of service, but for me personally, there's just no positive incentive when we're talking about selling hours rather than selling results rather than selling an outcome. And if I'm charging by the hour as an employee, do I have an incentive to be more efficient and to work faster? Well, maybe I don't want to see as much of my time written off, which that can be it, but I don't think that's a good incentive out there.
(20:18):
But hey, I'm going to bill more if I work slower. If I come and sit at my desk, and I'm not saying people do this, but sit at my desk on weekends playing Tetris on my phone because I'm sitting here. I mean, I know that's really not, we pass ethics exams, so that's not what we're doing, but there's no incentive for that. The client doesn't like it. They want to know what they're paying for something. But the mindset can be, well, if I want to advance in this profession, I have to show that I billed more hours than anybody else this past year when in reality it should be whatever. We were more profitable this year than last year or I was more profitable and I put in less time. And so from a billing standpoint, I mean I can't compete with Ron Baker, I'm talking about value billing or subscription pricing.
(21:06):
But I'll tell you, I think those are things that you have to be looking at implementing, especially as you're growing. Because when we're talking about growth, just top line revenue is not necessarily the biggest growth factor. I mean, in reality, we should be looking at our bottom line, what's our profitability this year? And if I can do that profitability in less hours, I should consider doing it. So looking at subscription pricing and looking at integrating advisory services and looking at integrating these high value services that you can show I can, Hey, look at everything I just did to you, and this is easier on the tax side, but look at everything we just did over the last year. We just saved a hundred thousand dollars in taxes and you paid us 30,000. The value you can show for that for this past year. So when you're analyzing the growth from a standpoint of how does pricing fit into that, I think you have to look at subscription value based, some other model other than billing by the
Dan Hood (22:09):
Hour, right? Well, and Ron Baker would raise the point that if you're selling by the hour, your inventory is limited, and if you get faster, your client reaps the benefits of that, assuming you bill honestly, which we know every,
Randy Crabtree (22:27):
Yes we do.
Dan Hood (22:28):
But if you're selling on value, then you're reaping the benefit if subscription based service to somebody and you can find a way to do it faster, the time freed up is yours and the value freed up is yours as opposed to going to the client. Not that we don't want the client to get value, but they're already getting the value of not having to do their own accounting or do their own tax work. That's the value they're really looking for. So yeah, I mean people have been talking about these new forms of pricing and we went from value based and now subscription based seems to be a much more commonly described version of it. But either way, something away from the billable hour, it makes a lot of sense. We're going to take a break in a couple of seconds, but I want to talk real briefly ahead of that about accountability and delegation of authority and responsibility within a firm as it grows.
(23:17):
We did a story recently where I was talking to a bunch of people about firm structure and a lot of them made the point that when you're a three, four person, four partner firm, it's easy for everybody to get around the table and make decisions. I mean, it's certainly possible the four people can disagree just as vehemently as 20, but it will take them five times as long to disagree. So even if at least with four people, if you're going to disagree, you're going to disagree quickly. But as you start to grow and as you start to add more people the ability to be nimble, the ability to make decisions, the ability to manage everything disappears, it becomes much more difficult to manage a larger group and make decisions quickly. Do you have any thoughts on that element of growth? The degree to which as you get bigger, you have to structure yourself to account for the fact that you can't see everybody every day and you can't talk to everybody every day.
Randy Crabtree (24:07):
Yeah, for sure. But you said quickly that's the problem, but I'll go as fast as I can. So I do have a lot of thoughts on that because honestly, this is not an area where I really feel I'm strong at, but I feel it's important to get people that are strong at that setting up structure, setting up KPIs and processes and procedures. That stuff bores the heck out of me. That doesn't mean it's not important. And so for us, I can use trimer as an example. Seven years ago we were two partners today I think we're eight, I'm not sure the number, but wow, that's weird that I don't even know the number, but I think it's eight. And in that process, seven years ago I was managing partner. I realized that that was not something I was equipped to manage growth, to make sure that we had these structure in place that we can continue to run a business that one has a good corporate culture while still keeping nimbleness.
(25:12):
I mean, we were 12 people seven years ago. We're 80 people now. And so in that growth, how do we continue to be nimble, make quick changes, especially with us, we're relying on tax code. If tax code changes tomorrow, which it won't tomorrow, but it could in a week and a half, we have to be prepared for it. And so how do we do that as we continue to grow? It's just making sure that you find people that have the passion to manage those aspects. And just because you're a partner in a firm doesn't mean that you have those skills. And so it doesn't necessarily even mean that's a partner role. Not all our partners head up one specific division of something or another, but we have other leaders of our head of this incentive team, our head of that incentive team, but they all communicate to each other once a week on a meeting and just get best practices and make sure everybody's in the same line. So that's kind of how I look at identify your strengths and if it's not there, don't make your role that make your role what you enjoy. There's plenty of other people that do have that management process, procedure, KPI, roles that'll help during the growth process.
Dan Hood (26:26):
Cool. Well you expand that you just talking about too often partners end up doing things that as you grow bigger, a partner can no longer do. And it's things like marketing it. A partner who enjoys working with technology may be able to handle a four office might be able to get that up and running, but when you've got an 80 person office, you need an IT guy, you may be able to handle hiring a part-time receptionist with two or three partners, no problem. But if you've got 80 people, you've got all kinds of HR issues you've got to deal with. So that I think as say all those structures, it's the ability to be a good manager. You got to find people who are good at that and who like doing that. And then you got to find also people who fill these specific sort of back office structural roles within a firm as you grow.
(27:13):
And you can't at some point you got to say this is no longer something that we as a partner group or I as an owner can handle. I got to delegate that to some experts. Just as a business owner goes to a tax pro, you want to go to an HR pro or an IT pro or whatever the case may be. You mentioned culture and I'm glad you didn't. That's where I want to go next. I know you love culture, I love culture. We've talked about culture a lot, but I want to take a quick break first and then we'll come back and talk about how culture might change as you grow.
(27:46):
Alright, and we're back with Brandy Crabtree talking about all the things that go into making a firm successful as it grows. You made the point, you can be a successful firm and stay small, that's fine, but if you want to grow successfully, all the things that we've been talking about so far in the session are important things you want to consider as you get bigger. Just say everything changes as you get bigger if you want to grow. So you need to be prepared for that. You need to be thinking about that. And one element of that is culture. As I said, you and I have talked a lot about culture. I was on your podcast to talk about, it's a fascinating topic and one that accounting firms have been starting to grapple with but still have a long way to go on. And we're going to just make it even more complicated by saying that as you grow, your culture may have to change and maybe we could talk about that.
(28:32):
I think, let's put it this way, a lot of smaller firms may not have a culture or may not have an intentional culture. They may just have the culture of this is what it's like to work with these two, three partners or this one owner, whatever their personality is becomes the culture of the firm. But as you grow, do you have to build a culture? Do you need a culture? Are there cultures that might need to change as you grow? It's a huge topic. I don't even know where to start with it, so I'm just going to throw the word culture at you and listen to what comes out.
Randy Crabtree (29:02):
So for me, culture, the more I've looked at as I've gone through all this, my mental health presentations, it just started evolving in my mind that everything starts with culture and creating this base of great firm culture. I know we had the discussion where you can build a culture that's not great, but you can still be profitable. It's just not maybe sustainable, but it's doable. But creating this great culture where people feel comfortable, people feel a part of it, people feel like they're contributing and valued and all this, starting with that, if you are in a growth mode, even from the very beginning, you're just starting your firm and it's just you. I think you have to be thinking culture. I think that's going to be so significant, even if it's just you because you can create a culture with your clients as well at the beginning, Hey, this is the culture we have here between us. And so I'm the fun guy culture, which is maybe why you could see that I was no longer equipped to be a managing partner seven years ago because we can't just grow based on fun. But
Dan Hood (30:15):
That's still, you can, but again, it's in the same thing in the same way as the culture based on cruelty is you can have it, it just may not be sustainable, right?
Randy Crabtree (30:24):
But it's a big part of it. So I think I was able to continue that aspect of the firm, not that I'm solely responsible for creating the fun culture, which I think we have, but to keep that in mind, I think you had to always have that there. And this is something that I learned my very first job been public accounting. It was just a really bad experience and the culture was pretty much that culture I think that you and I had a discussion about before where it's just work, work, work. We don't care about anything else. We don't care who you are, we don't care what you think, we don't care. And then it's like, okay, I'm not going to create a firm that that's the culture. And so setting the base of culture, and really by doing that, you just have to value people.
(31:10):
You just have to enjoy people. I mean, I honestly feel like I love everybody I work with and that's cool. And you can do this very simply. You could do it very easily. To me it's a culture where people feel valued, where people feel included, where people feel like they're contributing and people feel rewarded for it too. It can't just be all that there has to be, they have to get a reward out of it. And so I think you could do that very easily just by treating people as humans and not as you're filling a job title. And so for me, that's the most important thing now. Yeah, as you grow, does that get more difficult? Even two years ago when we were 40 people, it was easier for me to know everybody and talk to them about their kids or their weekend or whatever.
(32:08):
It gets harder. But I think you have to just instill that at each manager level as well. They understand that the people that you're managing are not the project manager or the auditor or the accountant or the tax advisor, but they are that person. And so if you consciously make a decision that that's how we're going to treat people, that we're going to treat people as humans, that culture will still be cultivated. You may not be as the leader or the starter or the founder. You may not be able to do that completely with every person, but if you instill that in the people that you've hired, you hire good people, then that'll continue.
Dan Hood (32:49):
Well, and that's one of those things that's as you go right, you got to have people managing that at every level. Interesting. You say you can't know people if you've got 80 people, you can't know everybody. Or as you get to 40, you can't know everybody. You also can't know what they're contributing, right? It's difficult. It's not just that you don't know who their family is and how old their kids are and stuff like that, but you're also, it can be difficult to know how valuable are they to the firm or occasionally you may need to part with an employee how damaging they are to the firm, but that may be the word. But so it's difficult. Again, the culture has to include that sort of focus on people at all levels. And that's got to end up being part of the culture too, is to make sure that we do that at every level and that we're all paying attention to it everywhere.
(33:32):
Cool. Alright, we could go on. As I said, there's a million other points we could talk about in terms of ingredients for a successfully growing firm, for growing a firm successfully. However you want to play those words, put those words together. But I do want to sort of jump to a slightly broader topic for our last five minutes or show. And again, I know that's way nowhere near enough time for these sort of thoughts, but we've been assuming that people want to grow, should you grow, why wouldn't you want to grow? Why would you want to grow? What's the upside? More money. But we know you can make a very nice living as a relatively small firm. There's lots of demand out there. What's the attraction of growing?
Randy Crabtree (34:12):
Of growing? So honestly, I think sometimes the attraction of growing is ego. I got to build a big firm, which it should not be the way to do it. I think the attraction of growing is just creating something that you'd like to be part of that other people like to be part of. And so if that's the case, great. Now profitability has to be a big part of that. And so if you're at a point in time where I know many firms, I don't know if I'm saying names, I'm not going to say names, but I know somebody that I know has built a firm that they've got to about 150 people and they've done this in a really short time, and they did this very strategically. I mean, they're a really impressive firm, but it took a lot of money to do that because with marketing and hiring and everything else.
(35:04):
And so for them, I just talked to these people recently. They decided that this is a point in time where they're going to slow now because they have to make money at some point. We all need money. This is just part of it. And so they're going to throttle growth right now while they feel like they've got the system. And it's amazing to me that they have the system and the process and the procedure going from four people four years ago to 150 people. Now they've just done it from a management standpoint. They're an amazing firm. But again, it took a lot of work and a lot of money to do that. So now they specifically are throttling growth while they get everything in place. Well now they don't have to spend as much money on that, get profitability up, but at then some point in time they'll use that profit that they generate over the next couple of years to do the next surge of growth. And so from that standpoint, that's just one example. Somebody who is also, I keep throwing out, people are going to speak at the forum, the firm growth forum, May 21st
Dan Hood (36:08):
And 22nd.
Randy Crabtree (36:09):
Sorry, May 21st, 22nd in San Diego. I'm looking forward to that. I am pretty sure she's speaking there. Elisha Jones. All right. So Elisha and I just had a conversation and she is at a point in time where they're doing that off-boarding clients that are good clients because they just can't grow with the capacity that they currently have. And in that process, they want to start converting to a specific type of client. So they're kind of going to stay even from a growth standpoint while still changing the makeup of the firm. They're going to add some new clients while subtracting some other clients so they can continue to do all the work that they need to with the current staff they have. Now, once they get that new base of clients in that meet the niche that they're looking to service, then they'll throttle up growth again.
(37:14):
So they're throttling top line growth right now while they transition to this new service offering or firm offering, and then they'll build it up. So there's many different ways that you can look at should I even grow? I mean, hey, yeah, you can make a lot of money in this profession. Side note, let's go on a tangent too often we undervalue our services. So part of growth is making sure we value ourselves because we undervalue our services way too often, especially when we're starting in growth mode because we just want clients. It's hard to transition a client that you've been given a deal to take that deal away down the road. So that's a reason to even throttle growth. Let's just get that high paying client in first before we grow as well. So there's many different options of why we should grow. One, we should grow, should we grow. But believe me, I can ramble on this for 20 minutes. So let me see what your thoughts are on it.
Dan Hood (38:13):
Well, I think this is the way you've described it. I think I'm envisioning it right? I think a lot of people think of growth. And again, one of the points where I wish podcasting wasn't an audio medium, it was more of a visual medium. But people think of growth as that sort of a smooth line going up. Whereas really in some cases it might be better to think of it as a series of steps. You brace, you develop a lot of new clients, you bring in a lot of new work, you bring in a lot of new niches maybe, or you explore new niches and then you digest it, right? You get to it and you see this one place where you see this commonly is firms that do a lot of acquisitions, you'll see some firms that do one acquisition a year and then they bet it down and they bring those people in and they get it all together.
(38:54):
And then when they're settled that then they'll go do another acquisition. But you also see firms that will do four or five, six acquisitions in a year, and then you won't hear for them for a year and a half as they're sort of digesting all that, bring all those people on, getting them into the culture. And as you say, you have a culture with your clients. So if you're bringing on a lot of clients all at once, you then have to onboard all those people and initiate them into your culture. And then if you're bringing on staff to handle that sudden influx of new clients, right? You've got to inculcate them into your culture. So there's that sense that you might want to be prepared to in your growth journey to do it. As we said, you go from a base camp up to a resting spot, and then you climb to the next stop and you weight there and recruit your strength and then you go up again. So it's not this smooth progress of every year we'll add two to three or 5%. Some years you may add 20%, and some years you may not add much at all as you try to make sure that you've got all the ingredients you need made, all the changes you need to make to accommodate that larger size.
Randy Crabtree (39:59):
And so with some of the things you just said there I think are really important because as you grow, and this we talked earlier about it's that culture aspect has to evolve with the growth. One of the most amazing, I think stories that I've seen recently is Richard Pelman from ario. They've grown and when you just said acquisitions, they've done it through a lot through acquisitions. I'm sure there's been some very good internal growth as well. But I had a question for him. I was talking to him about how do they integrate all these cultures into this new entity Because really, I mean, let's say six years ago, they were 75 million. I'm not sure the numbers, but 75 million and now they're probably over 400 million in revenue, is my guess. And they've done a lot of this through acquisitions. And so I'm curious. He's actually All right, I'm going to do a plug here. He's actually going to be speaking on this topic at our conference, bridging the Gap conference, which is in August, July. Yeah, it's in July. It's a
Dan Hood (41:03):
Great conference. I went last year. Highly recommend it.
Randy Crabtree (41:06):
And you did awesome there and thank you for being part of it. But that when you look at growth, we didn't even talk about acquisitions. I think that's a huge part of it. And Richard, I think you probably couldn't find a better teacher to learn from or somebody with experience to see how he's done it. I'm pretty sure there's been articles in accounting today on what ario has done and their growth, look those up and see what's going on there. But that's somebody that has been able to do it through acquisitions and internal growth. And as far as he tells me, keep a culture in place, which is important to him. I know,
Dan Hood (41:43):
Right? No, that's a very exciting firm with a lot of well worth watching. We cover them a lot. But that's the thing. There's a dozen as many as 20 firms out there that are similarly worth watching. And then I will say there's lots of smaller practices that maybe don't get the press. They're not as big size, but they're doing exciting things as well. This is at all times well worth paying attention to what other firms are doing. And there's enough examples of firms that are growing really successfully really well that you can pay attention. You'll there be a lot of them at the Firm Growth Forum. Sorry, this has been all about log rolling. In our time, Randy and I just alternately promoting each other's events, but they are great events and well worth attending. There's a lot of useful things to learn from them.
(42:26):
It is a complicated subject, right? Growth is, we've just really just touched the top, the tip of the iceberg here. There's so many different important elements to growth and managing growth and making sure that it doesn't overwhelm you, that you achieve the results you want, but without losing track of how you want to be and how you want your business to be. So I'm glad we had a chance to start talking about it, but it's a conversation that's going to go on and on and on, not just at the many conferences that we're busy promoting, but on our podcast and just in the profession as a whole, because it is a thing a lot of firms are looking for. So remaining thanks. Thank you so much for joining us. We'll look forward to continuing that conversation with you here on your podcast and in many other places. But for today, thanks very much.
Randy Crabtree (43:07):
Thank you.
Dan Hood (43:09):
And thank you all for listening. This episode on the Air was produced by Accounting Today with audio production by Adnan Khan. Ready to review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest, and thank you for listening.