How to Grow Your Firm with Intention and Take Time Off- AICPA Interview

Brannon Poe

Brannon was recently interviewed on the AICPA podcast, The Journal of Accountancy. It is up on their website here for you to take a listen.

Courtney Vien, senior editor with the Journal of Accountancy, asked Brannon all about how and why it’s important to delegate. We have written several blog posts on this topic. If you don’t have work-life balance, you won’t have an easy time growing or selling your firm.

In this podcast, Brannon and Courtney cover some key observations he has seen selling and advising firms. They discuss how Covid-19 has helped shift the industry to more cloud-based applications, why firm owners need to gain perspective by taking time off, and knowing when and what to delegate to others.

This is a great read or listen for insight into how to grow your business with intention.

Our workshop, Accounting Practice Academy is all about transforming your practice- we even have a module that focuses on delegation! The next 8-week session starts on June 4th. Would you like to join us?

We hope you enjoy the latest AICPA podcast, we’ve highlighted some of the key takeaways in the full transcription below:

Courtney: What are you seeing in terms of buying and selling CPA firms this year? Has the pandemic affected that at all?

Brannon: Well, I think it’s accelerated the demand for cloud firms. We’re definitely seeing a much higher demand for firms that are based on the cloud and can be operated remotely. I do think the market last year, 2020, was — I think a lot of people decided to postpone the sale of their business. We’re probably expecting a lot more on the market this year. I could be wrong about that, but CPAs that I spoke with were so busy last year that a lot of the people that were maybe thinking about selling decided it was just not in the cards last year. So, we’ll see, see what happens.

Courtney: Are most firms on the cloud now?

Brannon: No, I would say no, not most. It’s definitely increasing. The pandemic has forced more firms to set up remote working, and there’s definitely a trend toward more cloud-based applications.

Courtney: In general, how prepared are most CPA firm owners when it comes time to sell or think about selling?

Brannon: It runs the gamut. I’ve had people call me 10 years prior to wanting to sell to kind of start the conversation and get prepared. Other people will decide sort of last minute that they want to do something.

I always tell people like, what’s the best way to prepare? The best way to prepare, if you’re going to sell externally, is to build a great firm. Build a firm that people want which means profitable and fairly low owner hours.

Courtney: So you make the claim that firms can actually be more profitable and more productive when owners work less? That almost seems like a contradiction in terms. Can you explain how that’s possible?

Brannon: Yeah, so, I think a lot of CPA firms — maybe less so now than used to be the case — a lot of them are high owner hours, high hours in general. It’s very easy to get caught in the weeds when you’re working on a day-to-day basis at that sort of high level — or high hours.

So, what we see is a lot of owners don’t take that time to back up, take time away from the practice to get perspective on the practice. Years ago I had a client who I was talking to him about his practice, and he let me know that he was going to be unavailable for about a six-week period. I said, “Well, what are you doing?” He said, “My wife and I are going on a vacation. We’re going to be gone for six weeks.” I said, “How do you do that?” He said, “The first time you do it, you wonder. You’re literally in the airplane, taking off, leaving your city, and you’re looking down and saying, ‘Gosh, I hope I have a business when I come back.’” He said, but now — he’s been doing this for years and years.

This guy had a really profitable practice. He had high margins. I think his cash flow to owner was over 60%. It was a one-owner firm. It was a really excellent firm, and he was able to do this. Obviously, he had a wonderful team that held things down. He had great clients. Those all take time to build. You know, if you’re building a firm, that takes time to hone in on. But you know, think about that. What happens when you go on vacation?

Everybody can probably relate to this if you take a true vacation where you’re not working when you’re on vacation. But you have to plan for it. You have to prep your team when you go. Often you have to let your clients know that you’re going to be gone for a little bit. So, all of that planning really helps. Then when you go and you unwind from the business, you often come back to a fresh perspective.

You have new eyes on the business. And you have more energy than you had before. So, that’s a perfect example of how working less can actually help you improve your business.

Our observation in selling practices has been that often the people who have the most balance in their schedule are the ones that are the most successful.

Courtney: Are owner hours something that people track and report when they’re selling or buying a firm?

Brannon:  They do. We always ask the question. I don’t know if they’re tracked and reported to 100% accuracy. I doubt they are. But I think people generally have an idea of what their schedules are like and how much they work. But it’s definitely something that buyers today are more and more focused on, more so than they were even five years ago, much more so than they were 10 years ago. So, owner hours, it’s important when you go to exit. If the business is built all around the owner, it’s not going to have as much value.

Courtney: So to be able to reduce your hours, you need to be good at delegating work. Is this something that owners tend to struggle with?

Brannon: They do. I think that is the key to building a better business.

It’s like the key is letting go. And, I mean, I struggled with this early on in my career. So, I think the profession sort of rewards perfectionism. Mistakes are expensive; you don’t want a mistake on a tax return, or an audit report, or anything. The work out the door, the quality, needs to be high. So, that’s the environment for perfectionism. CPAs often are detail-oriented anyway, so delegation is something that has to be practiced and worked on.

I’ll tell you a story that I experienced. I’ve been part of a coaching program where I’m coached. I’ve been in this program for 10 years. It’s called Strategic Coach. One of the members in there is named Rob Siegfried.

Rob started a CPA firm from scratch, from zero, to over $100 million in revenue. He pulled me aside after our session one day. I guess he had heard something I had said in the workshop and started asking me some questions. “What are you doing? What’s your day-to-day like?” I explained it to him, and he says, “Well this is why you’re frustrated. You’re doing too many stupid little things. You’ve got to let go of these little things. Somebody else can do those.”

So, you know, I had a small team but I didn’t have a personal assistant at that time — a real, true admin assistant. So, I came back to my business after the workshop, and I hired an assistant. Just basically let me delegate all the little stuff that I was doing myself. My revenue made a significant jump. I think we had a much higher growth — I think our growth rate doubled. We were growing pretty steadily then anyway. But my growth rate doubled. So, it was one of the best investments I’ve ever made and it made my life so much easier. It was just letting go of little tasks like — you know — it’s amazing how many of those little tasks can just eat away at your day.

Courtney: What are some signs that an owner or firm leader needs to delegate more?

Brannon: Well, I think if you’re experiencing stagnation — like if your business just feels like it’s not moving forward. You get frustrated. You’re overwhelmed. If your day-to-day business is, you’re just going from one thing to the next, like if you don’t have any gaps in your schedule where you can kind of take it easy and think and plan, you’ve got to let go of some stuff.

Courtney: How can an owner knows what they should be delegating and what they should continue doing?

Brannon: Well, it’s not as hard as you might think. We created this tool; we call it the Three Bucket Tool” You can recreate it; it’s really simple.

You take a piece of paper, and you draw two lines to make three columns down the paper. In the left column, we put “Keep”; it’s the keep column. The middle column is “Delegate One Day.” The column on the right is “Delegate Now.” What people find is that the stuff they want to keep is pretty easy to determine. Just as a guide, if you like something, if it’s high value, if your clients like it, you probably should keep it. The “Delegate Now” is also a fairly easy column because you know what you don’t like. You know what someone else can probably do just as well, if not better, than you can do it. So, those are fairly easy. The middle stuff is either you don’t have the team member to hand it off to or you don’t have a process yet.

So, that middle column, unfortunately, is the longest list of things that you want to delegate one day. That little tool can help give you a vision of what to let go of and rearrange your schedule.

Courtney: Do people tend to have issues wanting to go back in and oversee tasks that they’ve already delegated?

Brannon: Yeah. That’s probably the biggest mess you can make if you do that. When you delegate something, the person that’s getting the work, they need to own that project.

If you keep taking that ownership back, then they’re never going to take ownership of anything. It’s too high risk for them, and they’re not going to put their effort if you’re going to come in and do it for them.

I’ve got this client now who’s selling his firm. He’s got extremely low owner hours because he’s got multiple businesses. We had this conversation one day, and we were talking about different buyers. I said, “These buyers are going to wonder how your hours are so low because so many CPAs are overscheduled. They’re going to be like, ‘How do you do it? How do you keep these hours where they are?’” He goes, “You gotta delegate. You gotta delegate.” Now, this is a person who’s had multiple businesses for many, many years so he’s learned just through experience how to do this.

But he makes it sound so simple and it is simple, but it’s hard, OK? What he says is when a person on his team comes to him and says, “Hey, how do I do this?,” his response is “I don’t know, that’s what I pay you for.” He says, “It’s not that I won’t help them. It’s that they need to find the solution on their own and they need to come to me if they have a problem or a sticking point, they need to first come up with their own solution.” I mean, to carry that forward, I’ve heard this one strategy is if a team member has a problem, you tell them, “Look, come up with three solutions and then choose your favorite one.” So, you’ve got to let it be in their court. That said, delegation and abdication are very different things. You’ve got to give people enough instruction and enough detail about what you want for them to be able to carry out the task.

And they do need to have access. And you do need to have review. You have to think about that. You have to plan for those delegations. You can’t do what I call “drive-by delegations,” where you just sort of hit people with stuff and don’t give them any information. Then they just sit there and spin around and don’t know how to do it.

Courtney: What are some signs you might need to hire more people?

Brannon: Well, you go back to that tool I was talking about, the Three Bucket Tool.

If you’ve got opportunities that you can’t get to. I’m going to give you an example. Let’s say you’re really knowledgeable about tax planning, and you’d like to do more tax planning, and you know you’ve got clients who need more tax planning, and furthermore you know that you can get a premium price for that kind of work because it’s very valuable. But you can’t get to it because you don’t have the team that can do the other things that are on your plate and that middle column is really lengthy, you probably need to hire somebody. I think the mistake is people get busy with work that might be where they don’t have the margins for it. Growth for the sake of growth is not always smart. You’ve got to grow with intention.

I think knowing when to hire is difficult because sometimes people need to prune the work back before they hire. So, I think you have to make that assessment first. Do I have work that I shouldn’t be doing at all? That’s the first question before you hire. Then, the second question is, are we getting the margins that we need so that we can make a good hire and make us more profitable?

Courtney: Are there some tasks that you see owners doing that you think they absolutely should not be doing?

Brannon: When a person wants to sell their business the first thing that we ask for is this practice information worksheet. We get a breakdown of what their fees are, what type of work they’re doing. One thing that we see frequently is what I call “dabbling.” If a practice owner is dabbling in something — let’s say you’ve got one audit. Let’s say you have a small practice and you’re primarily a tax practice, but you’ve got this one client that needs an audit and you’re doing this audit. Nine times out of 10, you’re going to be better off not doing that audit going forward. Let go of it. For one thing, if you’re only doing one or two of anything, you’re probably not doing it well so there’s risk.

So, you’re taking on excess risk. The resources that go into something like that, just the — you know, being up on the compliance issues of that, picking it up once a year — it’s not worth it. You’re losing money, and you’d be way better off focusing on something else.