Speaker 1: You mentioned that you’ve done incremental updates, add-ons, changes, I wasn’t quite sure and I wanted to dig into what you meant by these incremental updates. Are you talking about adding different service packages to your existing umbrella or what did you mean by these kind of incremental updates?

Speaker 2: So we have done that as we have moved a lot of clients that came in through the acquisition who were simply hourly clients. We have moved quite a number of them onto packages, monthly packages, value pricing, really align us with them, aligning the outcomes. So we have done something, a lot of things there.

On the additional profit center side, one of the most recent ones that we launched was evaluation business, whether that’s valuing assets, whether that’s 499A evaluations for a start-up business, these are we call it growth lab analytics, it’s competencies that we have in-house that we were not leveraging. We already had the capability but it was something that we hadn’t developed. We spent more than 10 percent of our time figuring out how to deliver this well and really went out to the market with that. Again, there was several clients who didn’t come through us, been referred out, so the next time it comes through the door, we don’t need to refer it out.

Speaker 1: And that moving forward, that green light with going forward with the valuation services was, it was a similar process where it sounds like you’re constantly thinking or maybe this is even coming up in client meetings. We were talking to somebody on our panel and they said, “Well client meeting, in preparation for that recurring check-in, quarterly, yearly, monthly, whatever it may be, is seeing other opportunities we can help their firm grow.” And there are all kinds of different service opportunities that one metric that a lot of people don’t talk about is the number of jobs or projects per client, that’s a great way to grow by using existing resources. That can drive profitability because you’re using in-house items right there. So for the valuations

Speaker 2: Just to make sure.
Speaker 1: Pardon, go ahead.
Speaker 2: Just want to make sure we don’t go the way of Wells Fargo on that one.
Speaker 1: What do you mean?
Speaker 2: Adding number of products per client.
Speaker 1: Oh, yeah, yeah, yeah, yeah. Right.
Speaker 2: But that’s a very good point. What you’re getting at there is the client communication and the feedback loop. Where is the feedback loop with your clients to understand what they’re dealing with, what are their pain points? I think it’s something we’re all continually working on is getting that feedback, whether it’s through newsletter, through surveys, through the annual meetings with clients, quarterly meetings, whatever the cadence might be; making sure that we have a way to get that feedback, both directly when we ask questions but also almost more importantly, sometimes, is just kind of reading the tea leaves and seeing what they’re dealing with, what they’re challenges are, so that you can then identify if there’s a capability or latent capacity for the firm to build out and service a different need.

Speaker 1: How are you constructing the process so you know it’s going to be quality? Do you still have a feedback loop? How do you build out this factory for delivering valuation services in that context?

Speaker 2: Yes, in this case, it is an ongoing process, even in the bookkeeping realm. Figuring out what the processes are, optimizing those processes is an ongoing work for us as a firm. In the valuation space, it’s less … These are larger projects than, let’s call it a monthly, after the fact, bookkeeping client that’s $1,500 a month. These are more project based. It’s project management. I’d say, it’s less about the processes. It’s more about the infrastructure and the capabilities to roll this out. It does take a project manager to make sure that things are delivered on time for these key clients.
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peaker 3: Having that continuous improvement mindset across profit centers is key. We have been using Jet Pack for, you could probably tell me than I could, as far as how long we’ve been using Jet Pack. I as just doing work on it today to optimize the use of the tool and make sure that people are using it correctly. Going back to your factory, it’s all about training. You have to continually train people. New people, people who have been with the firm for 15 years. How to use the tools. How to use the new tools. How to read things. It’s a continuous improvement mindset

Speaker 1: Have you always had a project manager? How do they interact with the rest of the team? I think this is a topic area that could be very impactful, not really talked about in many firms. What’s been the evolution of working with a project manager in your firm and how do they kind of interact across the services?

Speaker 2: Our closest thing to a project manager is our director of operations. She does very much work across all the different services and is a node for communication, is a node for project management, is a node for scheduling. There is a wide variety of needs in terms of what that role of that nature requires across the different services.

Your advisory and analytics clients that we have, [inaudible 00:00:51] when is the meeting going to be or when is a staff member going to show up at my door to do my bookkeeping. It’s higher level information, communication. She’s working on that as well as managing client expectations on deliverables on that side as well as making sure that staff show up at the right place at the right time for the field bookkeeping services. She has a wide-ranging role. As we grow, that will continue to develop and we’ll continue to kind of break out the different roles that, different hats that she wears, but right now that is a very key role for us, to both understand the client needs as well as deliver on client expectations.

Speaker 1: If your specialty … Does this also apply if you’re are virtual firm? Have you seen interesting multiples, you know those one, one point two; for maybe traditional firms trying to maybe buy or acquire, or vice versa? Virtual firms to expose or extend their footprint.

Speaker 2: To be honest, virtual firms are probably a product of the last ten years, and certainly ushered in by the voluminous amounts of cloud applications that are available. Like you know, you could walk into your local Starbucks and probably see people who have started their own accounting firms there. So that’s a relatively new phenomenon. I wonder if what’s going on today in the M & A arena, is a problem with succession. And people haven’t planned for succession, you’ve got older partners and no talent on your bench to replace them. Whereas, a virtual firm usually they’re the young up and comers, they’re very sophisticated IT. Succession’s not a huge problem with them at this point, for the most part. So we’re not really seeing that much of a traditional firm versus merging in with a virtual firm. But what I will say, is with the sort of evolution of cloud software it’s making it much easier for firms to open satellite locations. Where maybe they’re not necessarily burdened with the expense of bricks and mortar, and overhead that a traditional office space would command.

Speaker 1: Yeah and it feels like for those, and correct me if I’m wrong, that maybe don’t have the succession planning; They view selling their firm as a way out. But then I imagine if you go done that path, that multiple is going to be shockingly low; Because if you don’t have the talent and systems in place, then the multiple or the value of what the asset that they acquire, is actually purchasing, is dropped dramatically. So is that a common mistake you see? Maybe the sole proprietor or the one partner firm, they’re like, “Well I don’t really know of anybody that can take it on, I’m going to try to sell it.” And then they’re shocked, both at; Hey this is a longer time line to actually do this; Or if you want to speed it up, the multiple that you thought you would get is significantly less than what you thought it’d be.

Speaker 2: Well and that’s a good point, but it addresses a larger problem; is that many people wait too long to start planning for succession. Ideally people should start planning for succession at least five to seven years before they want to slow down. Now that may seem like a long time, but again, with the evolution of technology we may email our clients everyday, we may call them, we may text them, whatever. But how many times are those clients actually in your office face to face? For many, many firms in the country its probably just once a year, and that’s at tax time. So if you’re going to slow down, say from full-time work in five years; when you think about it, that’s really only five client visits from most of your client base. So it’s pertinent to start planning succession early. Find the successor firm, and this way five years gives a nice timeline for that seamless transition. Because in the end it’s all about client retention; because if an accounting firm looses it’s client base you basically have a lot of empty offices and computers. Your client base, exhibit A, is the real tangible value of your accounting firm.