This was a great meeting of minds on practice management! We had Roger Knecht on the podcast discussing insights from his post secondary course for accounting professionals, Universal Accounting.
This podcast touched on:
- Opportunities in the profession
- Service offerings
- Staffing issues and solutions
- What drives practice value and client retention
- Improving time management and profits
Roger Knecht’s course has a big focus on training and certifying staff while documenting, delegating and duplicating operating procedures. We shared a lot of opinions on building the value of accounting firms and a belief that you should be both selective with your clients and your time.
You can choose a great lifestyle and a great business. This is the time to be a creative, engaged accountant and become an integral part of your client’s success.
We know you are going to gain a lot from this conversation whether you’re a new owner who recently acquired a firm or a seller looking to optimize your firm for an exit.
You can watch the podcast here or listen to the player below.
Time stamp:
00:35-Introduction
3:37- Staffing challenges
6:00- What to do before you make a new hire
7:30- Procedures
10:14- Service offerings
11:30- Key struggles
17:00-Valuation of a firm
19:28- Strategies for staff retention
27:00- Owner and staff fit
32:00- Accessing clients
41:00-Automation benefits
43:00- Book recommendation: Atomic Habits by James Clear
44:00-Book recommendation for a practice owner: In the Black- 9 Principles to make your business profitable by Universal Accounting
44:42- How to connect with Roger: LinkedIn, Universalaccounting.com and Universalaccountingschool.com
Transcript:
Brannon Poe:
Hi, I’m Brannon Poe, founder of Poe Group Advisors and creator of the Accounting Practice Academy. You are listening to the Accountant’s Flight Plan podcast where we talk about stuff in the accounting world. If you’re looking to buy or sell a practice, we are the premier accounting practice intermediary firm in the industry, check us out at poegroupadvisors.com. If you’re a firm owner looking to build a more profitable practice while actually reducing owner hours, sign up for our practice management workshop, which only runs a few times per year. Learn more at accountingpracticeacademy.com.
All right, welcome to the Accountant’s Flight Plan podcast. I’m very excited. I have a guest today who also helps people build better firms, and I’m sure we’re going to have some really good conversation on firm management today. So a little bit about our guest. This is Roger Knecht with Universal Accounting, and for more than 20 years, Roger has personally helped thousands of accounting professionals start and build their businesses. In that time, he’s created programs to address each aspect, running an accounting business and helped author Red to Black, the How-to Guide for Accountants to help clients with the most common challenges faced in business, which is cash flow, and, In the Black, nine principles to make your business profitable. Also, Roger has a podcast called Building the Premier Accounting Firm. So got it there in the background, awesome. Yeah, for those of you watching, he’s got quite the background. I like that, Roger. Welcome.
Roger Knecht:
Well, thank you. Yeah, this is going to be a lot of fun. I enjoy the opportunities to do this.
Brannon Poe:
Yes, very much so. Glad you’re on. And just, I’d like to start, just a little bit about yourself. How did you get into this? How did you get to where you are right now? What was your journey like?
Roger Knecht:
Yeah, happy to share it. So it started back in the ’90s. Yeah, I’m that old, so there you go. In the ’90s I was actually working in direct hire, permanent placement, temporary placement type opportunities. I was working with Robert Half International’s Accounting Solutions, taking accounting professionals and placing them in different responsibilities, roles within companies. Some of those were temporary assignments, others were management and so forth. But the evolution, if you will, into the accounting happened to be where I, in needing candidates, I needed employees that I could place on positions, found Universal Accounting Center. And I found that a lot of the applicants that I was using, the graduates of the programs that Universal offered were very, very competent, very capable.
When they placed, they did well at the positions that I was putting them in, and I just really got to know the school quite well as they put people through the programs and graduated individuals. So it was through that I got to know the owners and got involved with some of the principal players there at Universal Accounting. And a position became available, an opportunity presented itself. I took it and 23 years later, I’m now the president of the organization. So I’ve been running the company for about 10 years now. We started in 1979. I’m the third president of the business, and it’s been an amazing experience.
Brannon Poe:
Awesome. Wow. So you came up on the staffing side, things have definitely shifted some since you’ve started out in staffing.
Roger Knecht:
We could go over all the technology that’s changed in the last 23 years.
Brannon Poe:
Yeah, I just saw this in Wall Street Journal report came out talking about how fewer people are going into the accounting profession and how that’s putting … I’m sure you’re seeing it. We’re talking to CPAs every day and they’re talking about staffing challenges.
Roger Knecht:
Yeah, it’s a creating a vacuum, you’ve got more people in the profession leaving retiring and such than coming in is what the fear is. So it’s creating a vacuum, a lot of opportunity. And so for those that are interested in the profession, great potential, I consider it. I jokingly say it’s the second oldest profession. And so my point being is it’s a very stable profession. There’s a lot of change going on, but I think it’s for the better. So if anyone’s interested in pursuing the profession, getting committed to it, I’d definitely encourage that.
Brannon Poe:
And those are a couple of things that I would say. I want to talk a little bit about trends that you’re seeing. We’re definitely, the staffing is a big one right now. I actually think that is going to present a huge opportunity for firm owners.
Roger Knecht:
Why do you say that?
Brannon Poe:
Because it’s going to force them to make some adjustments that should have been made a long time ago.
Roger Knecht:
Okay.
Brannon Poe:
So I think that this constraint becomes an opportunity if you look at it with optimistic eyes.
Roger Knecht:
Well, there’s a few things going on. I think there’s a good deal of consolidation going on. You’ve got a lot of the larger firms that are now merging with the medium sized firms. The medium sized firms are acquiring the smaller firms. And so there’s a little bit of consolidation going on within the accounting profession, but I also believe there’s a perceived need change that’s occurring from the client side where the clients are having greater expectations. They need certain things to run their businesses that as accounting professionals, we need to be providing what our deliverable is, I think is changing. But when it comes to like you’re referring to you got a staffing issue, you’re trying to grow your firm, but you’re running into these challenges. How do you train competent, loyal employees that show that they’re dedicated to the company to have skills that are conducive to what the clients need and train them in bookkeeping, accounting, tax type services. There’s a lot of challenges there. Offshore accounting, trying to actually leverage what that is so that you can now grow your business on the backs of some offshoring. Lots of discussion going on. So yeah, I’m curious what your perspective may even be on this.
Brannon Poe:
Yeah, I see all those things, but too, I’ve often coached accountants like, “Hey, if you’re going to grow …” you start getting busy. You start to feel like you don’t have enough time in the day and you don’t have enough capacity in your firm. The instinct has always been to go out and hire, get more help. And I thought long ago, just looking at firms, looking at some of the metrics like owner hours and profitability, it’s like, wait a minute before you go in, hire and just keep doing what you’re doing. Maybe you need to analyze what it is you’re doing. Are you accepting the right kind of clients? Are you pricing your fees accordingly? Are you getting into things that you shouldn’t get into? Are you dividing your focus so much that you’re not being effective in certain areas? And so I think this, having the staffing strength is forcing people to think about some of those other practice management issues. And they’re not just continuing on through inertia and just growing these sort of unfocused, unintentional growth by hiring. So that’s where I see the positive.
Roger Knecht:
Good, good. Yeah. One thing I would add to this is as a firm owner, I think evolutions, there’s stages that each will go through. I mean, if you’re at that solo entrepreneur stage where you’re just independently servicing your clients, you’re at a different place than someone that’s maybe a partner and a firm with many accounting professionals that are working with various clients, offering a number of services, different challenges, different issues. But at that beginning level, even at a mid-level, the biggest challenge that I think is being faced is the ability to document procedures, delegate those procedures, and then duplicate them. And so what we’re trying to do here is just basically, as you were describing, find ways to grow the business. And too often the business owner is the bottleneck because of their inability to either document, duplicate, or delegate. And so what we want to do is address those issues as they’re facing them.
The other thing that I would bring up is I think the clarity of the services that are being offered is oftentimes lacking. I do feel that the firms fail to communicate effectively what it is that they’re offering their clients. And the clients are not clear on what it is they’re paying for. Therefore, this ambiguity leads to confusion on the deliverable side, what am I supposed to be doing for my clients? What’s the thing that they’re paying me to do each and every month, each and every year? And that lack of clarity causes, I think confusion and your efficiencies that you were talking to earlier, then determine how profitable you’re going to be at all this.
Brannon Poe:
Yeah, I would agree efficiency plays into it, but I think it’s client selection. What you’re talking about is the expectation of the client. I think there’s a big gap in what a lot of practitioners think that expectation is and what that expectation actually is.
Roger Knecht:
Agreed.
Brannon Poe:
And when you don’t have capacity, you don’t have time to really think about that and talk with your clients and figure it out really what it is they need and want. And guess what? They’ll pay premium prices for it. So if you’re not focusing on the value, if you’re not focusing on the value, you can make an efficient practice, but you’re still not going to get where you want to get with your firm just with efficiency alone. You’ve got to be strategic about giving the client what they want.
Roger Knecht:
Yeah. So your point of ideal client I think is very critical. There’s so many opportunities and definitely a lot of discussion about niche-ing, whether or not you’re specializing in certain industry spaces. And I think that’s a valuable discussion to have. But in addition to that, what I’d like to talk about are the distinctions between the services that the firm chooses to offer. Meaning if you’ve got a client that’s just wanting bookkeeping services, your deliverable is far different than if you’ve offered and they’re paying for accounting services. And those distinctions as I work with firms are not very clear what the difference between those two services are. When you get into the accounting space, that’s fine. You need to define it. The tax space is the same thing. What’s the difference between tax preparation services versus tax planning services and a firm that is trying to provide those needs to distinguish what each is and the client needs to know what they’re paying for.
But the big thing that I think is the next opportunity in the space of accounting is our ability to be offering CFO and advisory services. There’s a huge space there that we could be filling very competently. And I think there’s two things that play into it. It’s the confidence of the accounting professional to know that they can make a difference offering those services to their clientele. But the other thing is just the confidence. There’s competence to say you’re providing good services, but the confidence is to say you have the ability within to look the business owner and owner in the eye and say, “I can help you.” And that ability to hold your head high and clearly say, “I have a servicer that will really make a difference in your business,” is sometimes lacking. And those are some of the things that we typically have to address.
Brannon Poe:
Yeah. Well, let’s talk about the struggles, some key struggles. Because we’ve covered a lot of different trends and topics and gosh, we could go into a number of different directions, but I’d like to, let’s narrow it down a little bit.
Roger Knecht:
Let’s do.
Brannon Poe:
What areas do you see firms struggle with the most?
Roger Knecht:
Clarity of services. I find that they oftentimes struggle describing those. Second is their operating procedures, their ability to actually do the workflow efficiency. We’ve kind of touched on that, definitely the third being what you’ve just mentioned earlier of finding staff, quality staff to do the work, growing the firm. Yeah, there’s clearly a challenge with it. And then the fourth I would put in there is the opportunity to move into the advisory space. I think there’s a lot of firm owners that realize there’s good money to be had with their clientele offering that service, defining what it is, providing it in a very deliberate way is a challenge. But if they can define it and the client is willing to pay for it, I think they’ll find that there’s a very lucrative opportunity there. So I don’t know what direction you want to go in, but those are the things that I would identify are the conversations I’m having.
Brannon Poe:
What do you think the, what’s the root cause of Why are those definitions not clear? Why do you think those aren’t being communicated clearly from the practitioner to the client?
Roger Knecht:
I’m going to be very bold and say that the conversations I’m having with the accounting professionals, we don’t know what we’re doing. When I ask an accountant, a CPA, a tax professional, what each of these services are, I find that we as accounting professionals struggle. And I think it’s very sad that we then struggling ourselves, presume that our clients know what they’re paying for. So bookkeeping services, very different than accounting services. And I think it’s very important that a firm determine what it is they’re offering, what it is that their client’s paying for. Same with tax planning and preparation. The planning services is much more involved with, let’s say R&D tax credits, cost segregations, conservation easement. I mean, there’s a variety of tax strategies that a firm could actually specialize in and through that actually identify niches they’re providing to their certain industries. But the tax planning, there’s a lot that can go on in there, and more importantly, good money to be made.
But is your firm literally involved in meeting with the client over the course of the year to implement tax planning strategies to mitigate tax liability? It’s more than just tax preparation. And I think sometimes what happens is a firm will just casually say they do tax planning and preparation, and yet throughout the course of the year, they never meet with the client. They never come up with strategies or ideas of what the client should be doing to actually avoid tax. So where is the tax planning that they’ve said they’re providing to their client that the client is paying for? They’re not. When it’s tax preparation, why all of the extensions it’s, we need to be, I think, a little bit more deliberate in the services that we’re providing.
And definitely at the CFO and advisory services. I personally feel that the CFO space is so vague. What is it that’s going on? If I’m a CFO, I should be going in as a part-time CFO, a fractional CFO to my clients and working with policy implementation within the company to help them with capital, how they’re dealing with cash flow, how they’re dealing with collections. All of these things are policies that the company is needing to lean on that CFO for guidance. They’re saying, “Hey, I’m a business owner. I’m running a company, but how do I manage my relationship with my bank, with my lending institutions, the investors I have? If I’m actually working with cash flow issues, how am I dealing with my clientele as to how much the policy demands they pay up front for services provided versus after the fact paying for the services given?”
All of these things are decisions the business owner needs some guidance with, and the CFO role is meant to come in and answer those. And yet so often I think the accounting professional says they do CFO services, and yet none of these discussions are happening. Policy implementation within the client isn’t occurring, nothing’s changing. The company isn’t doing business differently, better, but yet they’re saying they’re offering CFO services. What are you doing? And that’s because I feel we are unclear what that role requires of us as accounting professionals for our clients.
Brannon Poe:
And a lot of the firm owners I think are just so overwhelmed with what’s on their plate that they don’t have time to do the thinking time and the planning time to get those things defined and really have those conversations. And that’s kind of where I see a lot of firm owners when they come to us and they want to sell or they want to get their practice in better shape to sell, we have to first look at what are they doing with their time and what are they focusing on? And I think a lot of accountants are just not taking the time to focus on the bigger picture of their own firm and managing their own firm.
Roger Knecht:
Well, and I don’t know if this is exactly what you were meaning by, but I’ll give you some information here that might be helpful to the listeners. When you look at the valuation of a firm, what it’s truly worth, especially for someone that’s preparing to exit the firm, one of the things that I think is clearly misunderstood is the value of the firm is not derived by the client list. It’s more derived by the operating procedures that exist within the firm that are turnkey. Meaning the more the firm is less dependent upon any key individual within the organization, the more valuable it is because it’s more likely that the clients will be retained and the quality of the work will be sustained. Now, the other thing that determines the value of the client, the value of the firm beyond the client base is the employees, the key individuals that are doing the work.
And so if you’re investing in quality and P quality people that are loyal to the business that are taking care of the clients, the firm owner then has a business that they’re selling, not a client list that they’re selling. And an outside person looking in is going to say, “Okay, this has value to me,” because when the business owner leaves and extracts themselves, I don’t have to run the risk of losing the clientele because the employees are in place. The processes are in place to ensure that there’s more of a sustainability to the business model. That’s what I want to buy. And so I think as a firm, what we need to be doing is realizing that the business owner, the accounting professional that owns the business needs to do a better job of extracting themselves from the day-to-day operations of the business. The more they can remove themselves from that client relationship, the processes in the business, the more valuable their company’s going to become, and all of a sudden them leaving is less of an issue. That’s the ideal business model. It’s a business at that point.
Brannon Poe:
Yeah, I totally agree with you. I see them struggle with that. I see them really struggling, and the staffing issue is making it worse temporarily. But like I said before, I think it eventually will make it better. So what are you seeing, let’s talk about the staffing issue. That was one of the big things that you mentioned. In your top of the list of things that people are struggling with. I’ve seen statistics that they’re just fewer graduates coming into the profession. What are you seeing as some good strategies that people are using to work through this?
Roger Knecht:
So I’m going to say something, and I am biased because technically universal accounting is a post-secondary school for accounting professionals. And so my point is we oftentimes find firms where they take an individual who has an aptitude for the job, they’re showing loyalty, they’re showing interest, they’re engaged, and they’re saying, “I’ve got a quality employee here that is obviously enjoying themselves. They appear to be loyal to the business. Let’s invest in them, give them the skills that they need to allow them to be more valuable in the organization and offer additional services to our clientele. And so my point is rather than trying to find out the marketplace, the individuals with the perception of the skills that we want, because on the resume it looks good, why don’t we take key individuals and train them? And what we do as an accounting school is we have programs designed to train individuals to offer bookkeeping services, tax services, CFO and advisory services.
And it’s in that training that the person becomes certified, and it’s through that certification that the firm is then able to say that in their business they have certified individuals in these very specific disciplines. How powerful it is for that firm to go out to the marketplace and say, in our business, we have certified professional book bookkeepers, we have certified professional tax repairs, we have certified profit and growth experts. Those designations are meant to actually then enhance the marketability of the firm. It enhances the employee, their ability to deliver certain quality services, but also it’s an investment in the employee. And what we’re trying to do is get them to feel a little bit more committed to the business, more engaged because the company just invested in them. And through that process, what we’re trying to do is elevate the business’s ability to provide these quality services. So my point is staffing is an issue, and sometimes rather than trying to find the person that has the skill, why don’t we take the individual that has an interest, a desire, a loyalty to the business, a work ethic, and why don’t we invest in them and give them the skill?
Brannon Poe:
Yeah, I definitely see the advantage of that. And what do you do for the owners? You said you also help owners. Do you have training specifically geared toward practice management?
Roger Knecht:
We do. So oftentimes you’ve got two situations. The business owner has basically met the limit of their expertise. What is it that they can do with the business? They don’t know how to grow it to that next level. And so we’re working directly with the business owner to help them become the lit leader they need to be. There’s five things that we focus on. The first being what we call engage and manifest. It’s the clarity that the business owner needs to have of where they’re taking the company next and then the steps to take that. It’s helping them become that leader. The next is understanding accounting. It’s not learning accounting as an accounting professional, it’s learning what is it your clients are needing to have you offer, and what are those three core services that I was sharing earlier that they need to consider? What are we going to do in our firm?
And this is where it becomes quite unique. Our business, we’re going to choose to do bookkeeping and tax preparation. My business, we’re going to do a counting bookkeeping and tax preparation. I’m going to do tax preparation and tax planning services. Every firm’s going to choose from those six services what it is they want to offer. The third is then increasing revenue. So often the accounting firm grows to a point of here’s where we are because of the contacts we have, the referrals we have, why don’t we take it to another level and implement proven marketing strategies to actually grow the business more effectively? Like you were talking, identify an ideal client, niche down, get really focused in a certain industry. All of a sudden increasing revenue becomes more of a focus and something deliberate.
The fourth is improving profit. This is where efficiencies come in. It’s working with the business owner to understand what are the business procedures, the tech stack that they should be using in their business to become more efficient and therefore be able to improve their profit margin, stop working nights and weekends, having some time off, but yet still provide quality services.
And then the fifth is building value. And this is, I think the key thing is the business owner recognizing that they should be building a business that is as self sustaining, living, breathing entity that is apart from them as the owner, they are no longer the company. People don’t do work with them because of who they are. They do it because of what their business is delivering. And all of a sudden what happens is that business owner starts to realize that they’re building a company rather than trying to do a job. And so there’s a whole evolution that goes on with the business owner as they go through this mindset of job to lifestyle to owner. And in that evolution, we’re working with them to achieve that. But that’s at the owner level, obviously with the staff, we’re training them to become professional bookkeepers, professional tax preparers, and the like.
Brannon Poe:
Awesome. Now where are you based?
Roger Knecht:
We’re based in Utah. Our headquarters are in Draper, Utah. But I actually work with clients all around the world, principally here in the United States and Canada, but definitely around the world.
Brannon Poe:
Okay. And is it in person training or is a lot of this virtually?
Roger Knecht:
It’s all virtual. So we used to, back in the day, we used to have 22 campuses around the United States. And so we did have a very physical, traditional classroom experience. We no longer have our classrooms. We’ve gone entirely virtual, but I think everybody today is very comfortable with that. We went through this evolution over a decade ago, so through that evolution, all of our curriculum is now delivered online. All the coaching and support we provide is both phone, email, digital, or remote like this is, so that’s what we can expect.
Brannon Poe:
And in terms of staff retention, what are you seeing? How are you seeing the training really help with that?
Roger Knecht:
It helps because one, what we’ve, and there’s a variety of ways of doing this, but to answer your question, when you get an employee and you’re wanting to invest in them, there’s a variety of ways of saying, one, we’re going to pay for part of the curriculum. You’re going to pay for part of it, and when you finish and pass, we’ll pay you back the difference of what it was you had paid originally. So there’s kind of an employee reimbursement program going on there. So that actually puts some teeth into the relationship. It’s to say that you’re needing to stay here, finish the program, and in getting these additional skills and a value to the company, we’re going to make sure you finish the curriculum well, that creates that loyalty and it gets them a little bit more engaged in the business, working deeper with the clients. And so we’re finding that employee retention is going up, they’re staying longer, that loyalty is there, but at the same time, their ability to deliver more services that can be billed at a higher rate goes up. So that’s what we’re trying to help with and we’re seeing.
Brannon Poe:
People like to be developed and have better opportunities. So I mean, it’s pretty common sense, right?
Roger Knecht:
Yeah.
Brannon Poe:
Can you chat a little bit more about buying a firm? You want to build a firm to sell. What if you’re on the buy side, I’d like to get your perspective on assessing fit like employees and clients and just general fit. Can you talk a little bit about your experience with that?
Roger Knecht:
Great question. I actually had this conversation to my podcast just the other day with a person who purchased a firm just a year ago, and he gave some great insights on it. The thing I would share here is definitely what I mentioned earlier, it is less the client list. It is more, first of all the employees, the culture that exists, the operating, standard operating procedures that exist in the organization. So let me give you an example of that. If the company is well structured and defined, it’s got a project management system and the work that’s being done is able to be delegated to anyone, which is to say everyone’s familiar with what the steps are and they can perform them. Although they may be assigned clientele, someone else can step in and pick up where someone else may have left off.
The reason why that’s so critical is because if you were to purchase or acquire a firm where you had competent accountants, CPAs, bookkeepers, tax preparers in the office, but they were all each individually doing their own siloed work, nobody knew what the other was doing, they don’t have any connection to the clientele, you run the risk of if that person leaves their knowledge leaves, their connection with those clients leave. And so what we want to do is we want to find that the firm actually has in place this operating procedure that ensures that the client is autonomously working with our experts, and in doing so, getting the same deliverable quality of service.
The thing I always am worried about is let’s assume that you’ve got three accounting professionals in the firm, but one accountant because of their experience being more audit or whatever, provides a certain type of service to the clients they’re responsible for the other person. Let’s assume that they have a little bit more of a tax background, so they’re a little bit more tax focused with that clientele that they’re assigned. And then you’ve got over here somebody that’s a little bit more accounting based and they’re maybe doing more analysis.
They’re providing reports, reviewing last month to the previous month, last month to the same month last year. They’re getting more into the analytical side of things. We’ll notice that the experience for the client is different with all three of these accountants that have been assigned the clientele. And so what we want to do is find that there’s a homogeny of the services being provided by the company, that it’s less dependent upon who they’re assigned to. And as I’m coming in to purchase the firm, I want to see that there’s proof of this. The other part is culture. With these last few years, are you working at an office? Are you more having people work from home? Do you have deliverables as to standards? What’s expected of all the employees? If you’re going in to buy the firm, it would be nice to assume that that culture’s going to exist and you’re not going to disrupt it too much. You’re going to complement it.
But if you’ve got in there a firm that they’re not like what you want, they’re not what you envision by you merely coming in and acquiring the firm, you might disrupt the status quo so much that everyone’s going to flee because they don’t like the ship they’re now on. And you don’t want to do that. You’re sabotaging your own success. The other thing that I would add to this is the services. What is your vision? If you’re coming into a firm that offers accounting services and yet you want to offer a whole bunch of tax services, is this to compliment the accounting that’s being done, or do you expect over the next year or two or three to evolve to where all those accounting disappear and all the tax becomes the emphasis of the firm? Well, if that’s the case, why don’t you just go buy a tax firm?
And so I think there’s some shiny object moments where the business is for sale and there’s an opportunity to acquire it, and you’re just like, I’ll just gobble it up and I’ll deal with everything later. This is a real way of assessing it. The third thing I’ll throw in there is the clients, if you take the client list, you can actually break them up into three distinct categories. Those that have been with the firm, let’s say over a year, and let’s assume that they’re paying more than $1,000 a month for services. You’ve got those that are B clients where they’re paying, let’s say less than $1,000 a month for services than they’ve been with the company less than a year, one or the other. The C clients are really customers in the sense that they’re not clients. We don’t see them regularly, we don’t provide a continuity of services. They’ve just paid us for services over the years. We have them on our client list, we can reach out to them and maybe they’ll have us do something for them. But they’re not clients, they’re customers. We do a tax return every year. We maybe do a project with them every so often. Well, I don’t have a hundred clients, I have 20 A clients, I’ve got 50 B clients and I’ve got 50 C customers. That’s very telling when you’re assessing what you’re buying. So anyway, it’s just some insights there.
Brannon Poe:
Yeah, no, no, that’s good. I appreciate your perspective on that. And we’re very big on fit. We feel like for a buyer to be successful, it has to be a good fit culturally, and we’ve very, very focused on that in the sales side, buying sales side on our business.
Roger Knecht:
Would you add anything to what I was describing there as to assessing the clients?
Brannon Poe:
Well, I think you have to look at what services are being provided, and make sure you’re competent and can-
Roger Knecht:
Contribute.
Brannon Poe:
… handle that level. I mean, if you’re buying a CFO firm, you need to have some experience and be very capable in that arena that that’s, I mean, that’s the only thing that I would say is, and can you communicate and help these clients to what they expect? I mean, if you’ve come from a H&R block for example, and you’re stepping up into a high net worth tax practice, well that might not be the best experience to prepare you for that.
Roger Knecht:
The only thing I would say, and it might appear to be a little bit of a pushback to that because I actually agree with you, I understand what you’re saying, is that firm owner that I just was speaking with, he had zero experience really with a lot of what the firm was doing. And as he purchased it, what he was relying upon is the fact that the firm already had in place accounting professionals with an accounting manager that oversaw that service tax services with a tax manager that oversaw the tax services. So in other words, they didn’t have to come in and necessarily replace the accounting manager or the tax manager as to the services the firm was providing. Those were the experts.
He’s hiring or purchasing a firm where the experts are in place. He came in more the CFO perspective. And so he was intending to add to the current accounting and tax services the CFO component. But notice he wasn’t a tax expert. The business had in place the tax experts, he wasn’t the accounting expert. The firm had in place the account … That’s what he was buying. And so when he came to the table, it wasn’t expected that he had much to contribute other than managing those people. He expected them to continue in their responsibilities as the experts. They were. He was bringing in a new suite of services that he felt complimented what they already had in place, and over the course of the coming years, he intended to take the client base that they already had and pull from those some CFO type opportunities. And so you definitely don’t have to go in and be, let’s say, equal to the people you’re hiring because that’s why you’re in place. They’re the experts.
Brannon Poe:
I would agree with you, as long as the firm is large enough to where if one of those people leaves, you can put someone else in that seat. Otherwise, if you as the owner, if you’re buying a smaller firm and you lose a person and you don’t know how to perform that work, then that’s going to be a pretty big risk for you.
Roger Knecht:
Yes, very much true. It depends on the size of the firm, obviously. Yeah. So hopefully you’ll have somebody that you can either hire or promote in the organization that can step into that capacity if it became vacant. But you’re right, you could be in a position where you have to step into that role and there’s a good deal of confidence to say, “If this gets disruptive in the near term, I can fill in where I’m needed.” Yeah, that’s huge. That’s huge.
Brannon Poe:
I guess where I’ve seen this risk play out is we’ve had people in wealth management want to buy CPA firms, and it doesn’t always work out well for them because they don’t know enough about the industry to be able to manage the team as well as they should, and they don’t there, there’s just some gaps in their knowledge that play out in a not so good way sometimes.
Roger Knecht:
And not to do a plug, but I’ll be shameless here, that’s an ideal customer for me only because of the fact that as the wealth advisor, they’re purchasing an accounting business and they just want to understand exactly how to run an accounting business. Well, that’s what we’re dealing with, is I’m working with those owners to help them run and take their business to that next level. And I look at it kind of like in a franchise model. In order to buy a franchise, you admittedly don’t need to be the expert in whatever franchise you’re purchasing. Rather you’re saying, I’m trying to buy a turnkey process that if I follow it’ll prove to be as it’s successful. People don’t buy subway chains and McDonald’s change because they are eager to go flip french fries. They’re trying to be an investor in a turnkey model. And so there is a turnkey business plan, a model for accounting firms, and the owner doesn’t have to be a CPA.
Brannon Poe:
Right. I totally agree with you. So that’s good. You have those resources to systematize an accounting practice, which is very different than our workshop Accounting Practice Academy. I guess our ideal client for that is someone who’s just grown beyond … they need to step back and refocus their firm in order to grow it to the next level. Most of our academy clients have more than they can say grace over, and they have to refocus their firm, which I think is a pretty big percentage of the accounting firms out there are encountering capacity problems.
Roger Knecht:
Yeah. Well, and to your point, I think that’s where the profession is today. I think there is a little bit of reinventing who we are and what we do as accounting professionals. I honestly feel that in the last maybe five, 10 years, as I’ve attended various accounting conferences, heard the speakers, spoken to the attendees, it feels like there’s a fog that’s going on in the accounting space where I was earlier today just speaking with you about how we need to be more clear and deliberate as to the services we’re offering.
I would take it a step further and say we need to be more clear and deliberate as to what the benefits are that the client receives when we perform those services. Why does the client pay us to do their bookkeeping rather than them doing it in-house, rather than them doing it with another firm? Same with accounting, tax planning, tax preparation, CFO advisor, why do they do it with us? And we have to be able to articulate that unique benefit that we’re going to give them that’s going to be returning the ROI of what they’re paying for. So I think the lack of clarity of the service and the benefits derived from those is a fog that we’re having to as an accounting profession more clearly define is how I’m going to say it.
Brannon Poe:
I agree. And I think this, go back, I think the staffing shortage is actually forcing people to do that.
Roger Knecht:
It is. And it’s causing us to become, and I’m going to just throw it out there. I think aside from CPAs, I think we need to be willing to take individuals that may not have gone through four years of accounting school and put them into roles of bookkeepers. We need to be willing to take a bookkeeper and after some years of experience, teach them the principles of what accounting services are. I know that there’s some states that regulate the use of the word accountant to be exclusive to CPAs, but accounting is not auditing and you don’t have to be a CPA to perform the roles of a lot of the accounting tasks. And so I would very much very confidently point out that an experienced bookkeeper can evolve into becoming a very capable accountant. So that is something is I’m very strong on.
And unless as an accounting profession, we’re willing to entertain that, we are going to be faced with a very serious staffing issue because we don’t have enough graduates coming out with four and six year degrees in accounting. So how are you going to fill that void when the clients are asking for accounting services?
Brannon Poe:
Yep. And yeah, it’s an interesting time to be an accountant. I think it’s a great time to be an accountant because even though you have these challenges within that, there’s a tremendous opportunity. I think accountants have more pricing power, more opportunity than they’ve ever had. And if you own a firm, guess what? You can choose not to run it the way you’ve always run it. You can choose to have a great lifestyle and a great business. Amen. It’s not one or the other.
Roger Knecht:
Amen. Yeah, and I do want to share, you said this is a great time to be an accounting professional and have an accounting firm, couldn’t agree with you more. The technology today that is available to the accounting profession, just comparing it to 10, 20 years ago, is so valuable to enable us to not replace who we are and what we do as a service, but to enable us to leverage that technology stack to automate so many of those laborious tasks that we used to do to give us the time to do more of the accounting and CFO and advisory work that is so enjoyable to go deep with our clients, to help them become much more aware of what they’re doing in their business, make more informed business decisions that they can use to actually make their businesses more profitable.
We can now be a engaged participant in so many of our clients’ businesses rather than a historian just providing these works and filing tax returns. We have a chance as an accounting profession to be on the proactive side of so many things. And that’s where I think the excitement, the creative space is. And as I work with accounting professionals, as they learn how to migrate from the financials, compliance work, the tax preparation that they can get into these other creative spaces, they actually enjoy becoming the expert and meeting with their clients in that area and becoming, yeah, I feel a much more integral part of their client’s success.
Brannon Poe:
Yeah, I agree with you. All right. Well, we’re coming up on kind of the end of our time. Oh, I got a couple of questions to close off. What are you currently reading right now? Anything exciting?
Roger Knecht:
Yeah, there’s a book called Atomic Habits that I’m reading. Great book. I have been reading a book by another person, Brendan Bashard, about successful habits, and his book is very good. I thought I had it here on my desk, I was going to grab it. But Atomic Habits, and it’s basically two things. It’s a very unique word, atomic meaning the minuscule, the myopic thing that you could do at an atomic level to really have an amazing change. And then the atomic, like an atomic bomb, such a very powerful, impactful type of change. So he’s addressing it from both points of view in the book, and I am finding that he does a great job of illustrating how very simple myopic changes can result in very big results. And so great book, enjoying it.
Brannon Poe:
Very cool. Awesome. Okay. If you had to recommend one book to a practice owner, to a practice owner, what would you recommend?
Roger Knecht:
Wow. You know what? I’m going to be biased, and I’m going to self plug. There’s a book that we offer called In the Black, Nine Principles to Make Your Business Profitable. It talks about the short-term, mid-term, long-term things that you need to be addressing within your business. It is a go-to book for me. I run my business using the principles from that book. So it’s a very much integral part of my business and I use it with all my clients. And so it’s a selfless plug. So In the Black, Nine Principles to Make Your Business Profitable.
Brannon Poe:
Nice. Awesome. All right. Well, Roger, how can people best follow and connect with you online?
Roger Knecht:
Please. Yes, LinkedIn. Love to make connections on LinkedIn. That’s a phenomenal place. Mention the episode here. I’d be happy to know where you connected with us. But you can also visit us at universalaccounting.com. We’ve got a great deal of resources there for free that are available to accounting firm owners, and basically you can take advantage of that. And then our programs, Universal Accounting School, each of those websites have a great deal of resources and information for accounting firms.
Brannon Poe:
Awesome. Well, Roger, I appreciate you coming on. You’ve given us some great insight and yeah, thanks a lot.
Roger Knecht:
I appreciate the privilege. No, this was a wonderful opportunity. Thank you for the conversation. You’re great. And I always leave with this if it’s about accounting.
Brannon Poe:
Thanks for listening to the Accountant’s Flight Plan podcast. If you like what you heard today, please follow us so that you can get updates when new episodes are released, and share our podcast with your friends and colleagues. You can also follow Poe Group Advisors on social media. Please visit our website for more information at poegroupadvisors.com
