Michael Ly returns to Jetpack Workflow to chat with David Cristello about how quickly his cloud-based accounting firm, Reconciled, has grown in the last couple of years. He’s managed to double the size of his company every year, and he plans to continue that trend.

Even though Reconciled is a multiple-seven-figure business, and it’s growing so quickly, Michael only spends about 50% of his weekly working hours on the business. What’s the secret to his growth? How does he restructure the company as it increases in size? And what advice does he have for other firms out there? Continue reading to find out.

Summary

• Customer Acquisition
• Company Structure
• The Benefits of a Team-Based Structure
• How to Constantly Grow
• Common Firm Mistakes

Resources

• Michael’s Previous Interview
• Reconciled
• Growbots
• Michael’s Presentation at Quickbooks Connect last year

Growing a Firm with Michael Ly

How is Michael able to continue to grow his firm, Reconciled, at such an amazing rate and still only spend about 50% of his working time each week on the business? According to him, it all starts with customer acquisition.

Secure and Dependable Customer Acquisition

“If you wanna grow at a modest rate,” Michael tells us, “you need to figure out a way to guarantee customer acquisition.”

This makes sense, doesn’t it? Growth depends on always having plenty of business, and that means ensuring you have a steady flow of new clients.

Michael started with what many of us start with: organic acquisition.

He used common tactics like networking on LinkedIn and other social media platforms. But, Michael tells us, this method isn’t predictable and dependable. This led him to turn to something accounting firms very rarely use: email marketing.

There are very few examples of email marketing for accounting firms. It’s practically unheard of. But Michael took inspiration from the model used by software companies. He ended up using a company called Growbots.

He would send very direct emails explaining the concept of cloud accounting, which is something many people don’t know about. Michael was sure that anyone that responded to such an email was probably looking for a new accounting firm ASAP, making them a red-hot lead.

The responses would lead to calls, which Michael was able to close more than 50% of the time. As a result, they started raising their prices until they were closing only about 30% of the time. This grew his revenue while keeping growth at a manageable rate.

Reconciled’s Company Structure

What structure does Reconciled have? Michael describes it this way:

• Michael’s Assistant
• Director of Revenue Operations (sales)
  • Full-time salesperson
• Director of HR
• Director of Operations
  • Head of Onboarding
  • Head of Small-Business Delivery Services
  • Head of Mid-Market

Under each of the three heads, there are team leaders, who are each in charge of a 3-to-4-person team of bookkeepers.

Why does Reconciled use a team-based structure, instead of having each bookkeeper be in charge of a certain number of clients?

Benefits of Team-Based Structure

As Michael explains it, when a firm gets to a certain size, you’ll be dealing with common issues among the bookkeepers on a regular basis.

For example, what if one or more of them get sick? What if one has maternity leave? At Reconciled, two workers had maternity leave in the same month.

With the Bookkeeper-client structure, that would mean a lot of clients that experience a break in their service. Either their account is put on hold when their bookkeeper is sick, or someone else has to step in, not knowing exactly where the other worker left off.

With a team-based structure, each team handles multiple clients. But if any team member is out for the day, the client experience will remain smooth and consistent.

In addition to that, hiring new workers becomes easy. When a bookkeeper has just been hired, you may not be ready to put them in charge of client accounts. With the team-based system, new workers can be trained within a team. They don’t have to be client-facing until they are fully trained.

In the team-based system, the team leader decides how to divvy up work among the other team members.

When to Restructure

Reconciled is constantly growing, which means that restructuring is necessary at different growth points, such as when your company has 5 to 6 employees. You may have to restructure again when the company reaches a dozen or so workers, then again around 20, then around 40 or 50 workers.

When thinking about structure and hiring, think about what position would be a smart hire according to your strengths. Michael wanted to focus on sales, which is a strength for him, so he was interested in hiring an HR person early, as well as a manager because those new hires would cover over Michael’s weak points.

Michael also admits that he hires around cultural fit ahead of specific skills of experience. When it comes to cloud accounting, the concept is so new that almost no one has experience with it. But he looks for people he connects with easily, people that would be a good fit in the culture of the company. He looks for passion above experience.

What mistakes people are making when trying to grow?

Michael has spent a lot of time working with other firms and talking with other firm owners, so what mistakes does he see others making? He shares a few key points.

First, he says, “Decide what you’re trying to build. Is it a scalable business?” Many people think they’re building something scalable but they aren’t.

For example, are you focusing on selling the business or the person in charge of the business? While having a personal brand is a plus, you have to focus on the brand of the business if you want to grow and scale. New clients need to understand that they are hiring the company and not a person.

Also, Michael points out that company owners need to focus on hiring new talent and talking to new talent as much as possible. “Act like you’re hiring, even if you’re not hiring,” he says.

You never know when you’ll need to quickly grow because of a huge influx in business.

All in all, Michael’s interview was full of great tips and concepts for firm owners to chew on, whether they are just starting out or already have a large firm. Make sure to use the above links to check out more about Michael Ly, Reconciled, and the other resources mentioned in the show.

ABOUT THE AUTHOR

Michael Ly is CEO of Reconciled, an online bookkeeping and business advisory practice based in Burlington, VT. Michael launched Reconciled in 2015; the firm has quickly grown to a nationally recognized Firm of the Future. Michael has also served on the Intuit® Accountant’s Council.

On this week’s Grow Your Firm podcast, we’re talking with Hugh Duffy. Hugh is the Chief Marketing Officer of Build Your Firm, a marketing agency that focuses on accountants and CPAs in North America. He’s also the host of the podcast “Accounting Marketing Doesn’t Suck” and is the founder of the Dental Accounting Association.

Our main topic this week is the importance of niching down your practice and why it’s the road to making your firm wealthy. This is a big hurdle for many accounting firms. Maybe this week’s episode will help you start making the journey.

Summary:

• About Build Your Firm
• Why is niching so important?
• Considerations for choosing a niche
• Strange niches
• Why you should pick something you know
• Automating your niche
• Why ten niche clients should be your goal
• And more!

Resources:

• Build Your Firm
• Accounting Marketing Doesn’t Suck podcast
• Hugh’s email – hugh@buildyourfirm.com

Pick Your Niche Now For Riches Later

Hugh’s mission is to take small accounting firms and help them from a marketing practice, development, pricing, and selling perspectives. One of the big things that they teach in marketing is that differentiation is everything. You want to excel at something that your competition does not. That sets you apart. This is what developing a niche is all about.

What happens when  you do this right is that the variety of work you have to do goes down. It makes things simpler, easier, and narrower in scope. When you narrow your scope, you can deep dive into that scope to create specialized services for that niche. This also reduces the number of competitors you have so you don’t have to compete on price. This lets you charge more and raise your profit margin.

Over time, like many of the guests on this show, you get to be known for being the best at something. Your niche could be in a particular industry or a particular service. It doesn’t really matter, so long as you differentiate yourself.

Also, by niching yourself down you make yourself more attractive to buyers. You won’t be a jack-of-all-trades firm with a lot of different clients. You’ll have a small focus that’s deep, and quite likely you’ll have automated a lot of the process along the way.

Choosing A Niche

The primary consideration is choosing who you want to work with, rather than trying to hop onto some sort of trend. However, there are three tendencies that come up for many of Hugh’s clients.

1. First, they want their clients to be single business owners. Working with multi-partner firms makes it much tougher to get a business decision out of them. Thus, good industry niches are ones that have a single owner.
2. Second, most of Hugh’s clients do not want to get involved with compliance activities. Working in that field opens firms up to liability issues.
3. Third, they want cash-based clients with a simple balance sheet.

This means a lot of simple clients that can pay your fee on a monthly basis and grow in lifetime value as your skills improve. Instead of going for a few big clients, Hugh recommends going for a lot of small clients inside your niche.

A Slow Process

One of the interesting things Hugh mentioned is that it takes the average firm about three years to transition completely into their chosen niche. This may be a relief to some of our readers and listeners! Often when we hear advice to niche down, there’s an expectation that it has to be done all at once.

Instead, it’s a slow defining of what kinds of businesses or services you don’t want to do and cutting them out over time. Keep the things you’re best at and what you enjoy doing and start to discard the rest.

Hugh also says that it’s okay if it feels fake at first to claim that you’re a specialist. Your first goal is to get efficient with your niche clients enough that you can grow past ten of that kind of client. That gives you enough data to know how to work well with your niche.

Once your client base is big enough, then you can delegate tasks for servicing these clients to your staff members. Gaining confidence in servicing your niche will give your foundation you need to start saying no to the kinds of clients you don’t want to work with. You can also start diving into the niche more by attending events and educating yourself until you become an expert.

Automation

One of the best things about niching down in today’s environment is that it makes things really easy to automate. Firms with a wide range of clients have to create processes and workflows for each type of client. It makes it difficult to scale upward. But if your clients are the same kind of business, you can lean into tools like Jetpack Workflow and other automation tools to reduce your labor costs.

Think about if you did accounting for a particular franchise. Each operation is exactly the same, and they all have to be serviced the same. This makes it really easy to automate. You can do the same thing by niching properly.

Also, by automating you can then focus your energy on creating higher-margin services like brokerage services, mergers, or whatever else your particular niche needs a specialist for.

Simplifies Your Marketing

Here’s another bonus to niching down. It makes your marketing much simpler. You can ignore marketing to everyone else and focus just on that niche through online marketing, direct marketing, or whatever works for that niche. By making them aware of your specialty over time through advertising, you can cement in their minds that you’re the go-to business for accounting in that niche. Plus, by specializing you can charge more right out of the gate, which will pay for the ads.

If you’d like to know more about this topic, take a listen to the full podcast linked above. If you have further questions, Hugh has provided his email, which we’ve linked here, and his personal phone number in the podcast. We want to thank Hugh Duffy of Build Your Firm for taking the time to speak with us today. Now go forth and niche your firms!

One of the challenges firms face when they grow is acquiring new staff to help out. But finding local staff can be a much bigger challenge than you think, which can make the idea of outsourcing accounting work to another country attractive.

While it can be much cheaper to outsource the accounting work to another country, you can get poor-quality work back unless you take some important steps. Our guest on this week’s episode of the Grow Your Firm podcast, Nick Sinclair, is the founder of TOA Global, an offshore provider of many professional services. Many of the firms we’ve talked to have mentioned his company and they’ve been on our radar for some time. We’ll be talking about the most effective way to outsource some of your accounting firm’s work to another country and how you can get the most out of your offshore hires.

Summary

• TOA’s business model
• The two models of outsourcing
• Why quality problems may be your fault
• Hiring by task, not by role is the smart way to outsource
• Why money is NOT the big reason accounting firms outsource
• Why you should onboard a remote worker slowly
• And more!

Resources:

• TOA Global’s website: https://www.toaglobal.com
• Nick’s email: nick@toaglobal.com
• Nick’s LinkedIn: https://au.linkedin.com/in/nicksinclair

Create a Strong Workflow System Before Outsourcing Accounting Work

So, what does an offshore provider give firms? TOA is, in essence, a labor hire company and facility manager. They provide dedicated full-time workers in the Philippines to accounting and financial service firms in other countries. TOA manages all the employment side of things so you and the workers can focus on productive work. Currently, they have 1,450 people on staff and they’re doubling in size every year.

One of the first things Nick talks about is that there are two models of outsourcing accounting work. The traditional one is where you send work to an outsourcing company in another country. That company does the job and sends back the work, then you review it for errors and send it back if necessary. This back-and-forth is inefficient and takes a lot of control away from the firm.

The other model is more like remote work. Instead of sending work over there and having the outsourcing company decide how to handle it, the company gives you a dedicated resource that works for you. The outsourcing company is the legal employer and handles that side of things, but you can train the worker how you like. This model has been around for some time, but it’s pretty new in the accounting industry.

One of the advantages of outsourcing is that it allows your more senior staff to focus on higher-value work. Nick says that one of his company’s fastest-growing segments is AIS because partners are spending so much time doing administrative work that doesn’t bring in money. The average accountant is spending 40 hours a month doing this kind of work when it could easily be outsourced.

Quality Issues Are Often a Symptom of Poor Workflow

Here at Jetpack Workflow, you know we’re really keen on creating strong workflows for your company to increase efficiency and allow you to scale. Nick says that strong processes are also needed when you outsource tasks to a remote worker. In his experience, the problem is not that the remote worker cannot operate to the level of your standards, but that the standards aren’t clearly defined for the remote worker.

A firm may come to TOA and have poor processes or no processes and expect the company to just know what they want. Or they have a process but it’s all in someone’s head and the outsourcing firm has to tease it out.

If you have strong workflows with checks and measures, the quality of work that you get back from an outsourced worker will be no different than your local team. If you’ve tried outsourcing in the past and didn’t get a good result, you may want to examine and document your processes before trying again.

Hiring By Task, Not By Role

Documenting your workflows allows you to hire people for tasks instead of roles. Many firms would prefer that a new hire be able to take on a large task, like preparing a business tax return, straight away. They have to work really hard to get the new hire up to speed, and in an outsourcing situation, this is even more difficult.

However, more innovative firms are breaking up these larger tasks into smaller chunks and assigning the parts to different people. This lets more junior people gain experience doing something easy, say reconciliations, while the more experienced people can focus on the harder portions of the project. Another good task for a remote worker is all the grunt work needed to onboard a new client, like getting passwords and setting up bank feeds and all the other cleanup work needed to get someone new into your system.

If you want to get the best out of an outsourced worker, hiring them for tasks rather than a role is a fantastic way to help them understand your way of doing business while still freeing up time for your local, more specialized team. As your remote worker gets more skill in your methods, you can move them up to more challenging tasks. Plus, by having all these steps all documented in a workflow, it lets anyone else take over that task as necessary.

Is It All About Saving Money?

Nick says that an accounting firm in the U.S. can hire three to four staff through his company for the same cost of hiring one accountant. They may not have U.S. accounting experience, but they will have a similar level of general accounting experience. However, and this may surprise you, most of TOA Global’s clients are not outsourcing to save money. They are doing it to build capacity or because they cannot find local staff. Plus, they may not have the time to train someone one-on-one locally because they’re buried in work.

Nick has a lot of other ideas on outsourcing in the full podcast, including the full range of services that TOA provides and how he onboarded so many workers (100 a month!) in such a short span of time. He also shares how he was able to get out of managing the day-to-day aspects of his outsourcing firm. Take a listen to the podcast for all the details!