Twyla Verhelst is one of the Top 50 women in accounting. As a CPA, Tech Entrepreneur, and leader in the New Accounting Professionals Program at FreshBooks, she works to expand what it means to be an accountant and build relationships that last with small business owners. 

In this week’s episode, David talked with Twyla on the rise of the progressive accountant. What is a progressive accountant, and what does that have to do with being your authentic self? What are accountants doing that might intimidate clients, and what can you do about it? We dive into that and more.

Podcast

Key takeaway topics from this episode include:

•  What is a Progressive Accountant?
•  What Clients Want
•  How 2020 Changed Business
• Tips to be a Progressive Accountant

Links from Today’s Show:

• Connect with Twyla on Twitter
• Connect with Twyla on LinkedIn
• Freshbooks accountants page

What is a Progressive Accountant?

According to Twyla, being a progressive accountant is about much more than just being pro-tech.

Technology continues to evolve, and it continues to revolutionize how businesses function and grow, so staying on top of advances in tech is key for any accountant or firm owner. But it isn’t enough because it ignores the human aspect of business.

As Twyla puts it, a progressive accountant uses technology to create new experiences for their client. They focus on building a positive relationship with their clients. It’s about being tech-savvy and relationship-savvy.

Yes, data is important. Technology makes it easier than ever to compile and organize data and to better predict the future. But what you do with that data is more important. Can you communicate that data in such a way that builds a better relationship between you and your client?

That is key to being a progressive accountant.

What Modern Clients Want

Things have changed for businesses since 2020. The pandemic, the lockdown, and the economic tribulations — all of that has influenced the mindset of many business owners today.

Many of your clients may not care as much about historical data. Because 2020 was such an anomaly, and a year many are eager to leave behind, clients don’t want to be bogged down by looking back. Historical data isn’t as useful as it once was.

What do clients want instead?

Twyla suggests many business owners are looking ahead. They’re consumed with questions about the future. What will happen in the months to come? When will the economy open up again? How will it open up again? What exactly will the “new normal” look like, and how will that affect their business?

What will the market look like in 2021 and beyond? If the pain points and needs of customers have shifted, businesses will need to reevaluate to ensure they’re still providing something people will pay for.

Twyla also observed that people are focusing on making their own lives as easy as possible. Of course, there are many ways in which accountants can help them do that, making various aspects of business, payroll, and taxes as frictionless as possible.

Other Ways 2020 Changed Business

The dynamic of small business has definitely shifted in 2020, and it isn’t clear how permanent many of these changes will be in 2021 and beyond.

For example, many businesses have moved most of their operations online. Their employees may work from home most of the time. And even brick and mortar businesses started moving to e-commerce models.

This affects accountants as well. Say you’re accustomed to serving only brick and mortar stores. You may find that many of your clients are now e-commerce clients, and that will mean learning how to better serve them and help them through that transition, if you haven’t been already.

In 2020, many small business owners came to realize that they needed their accountants for more than just doing their taxes. They depended on their accountants to help them stay afloat and manage their changing business.

When government stimulus packages and loan opportunities came about, many small business owners learned the hard way just how important it was that their books were in order at a moment’s notice.

2020 has definitely changed the shape of our world economy and how businesses function and grow. Accountants have an opportunity to help business owners weather these changes, making themselves vital business partners that owners will depend on.

Your Authentic Self

The words “authentic self” might feel like an unusual topic for our show, but Twyla explains how important it is to ask deep and personal questions about how you show up as an accountant or firm owner.

What does your client relationship look like? What is your place in that relationship? What are you doing to strengthen it more than ever before? These are key questions Twyla raised, urging us to use them to analyze ourselves as service providers.

Many business owners are intimidated by their own accountants. The financial and tax side of their business is an area they don’t understand. It makes them nervous, so they avoid it. When you, as the accountant, show up speaking jargon, perhaps because you want to be as professional as possible, you may promote a negative relationship, an air of intimidation, between you and your client.

But what if you, as your authentic self, work to break down those barriers? What if you improve not just the quantity of communication with your clients, but also the quality of said communication? What if you could get your clients to see you as their “business buddy,” as Twyla calls it.  What if you create a relationship with your client that they can’t live without?

Then you’ll be more than a service provider. You’ll be a business partner. You’ll become the person business owners turn to when facing big business decisions. You’ll have gained your client’s trust.

As Twyla put it, “You’re still an expert. You’re just an approachable expert.”

Tips to Being a Progressive Accountant

As we’ve seen so far, being a progressive accountant means being authentic, personable, and approachable. It means resisting the use of intimidating jargon and focusing on building a relationship of trust and support with your clients.

Being a strong accountant doesn’t always mean having all the right answers. Sometimes it means asking the right questions and being willing to do some research to help clients find the answer they need the most.

It means reaching out to your client and being curious. Try to get to know them. Try to understand how their business works and how they think as the owners of that business.

When you better understand your clients and their business model, you’ll be able to better identify their pain points and see how you can better help them.

Try asking them: “What keeps you up at night these days? What do you want to accomplish over the next 90 days? How can I help with that?”

By being more personable, more authentic, and more curious, and by bringing your best game toward business practices, accounting, tax law, and technology, you’ll become a central part of your clients’ businesses and life.

That’s what it means to be a progressive accountant.

Recast Episode: This episode was originally published on April 19, 2018, but it’s a favorite among our Growing Your Firm Podcast community, so we’re bringing it back. Have you been listening to the podcast since the original airing of this episode? Share this post on your favorite social channel to let us know!

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Brannon Poe, Founder of Poe Group Advisors and Accounting Practice Academy and author of Accountant’s Flight Plan, revealed how to sell your accounting firm for 7-figures. He also touched on what to look for when buying a firm if you’re looking to level up. Most of Brannon’s clients are in the latter group as firms seek to accelerate their growth.

Podcast

Summary

• How to sell your accounting firm for 7-figures
• Two core pieces to make your firm attractive to buyers
• What an acquisition looks like from a cash receipt perspective
• The #1 critical mistake when acquiring a new firm

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How to Sell Your Accounting Firm for 7-Figures

Brannon Poe, the founder of Poe Group Advisors, is a CPA and started out in the firm brokering business in 2003. Today, with his company, he helps clients with buying, selling and growing their firms. Most of his clients are in Canada or in the Eastern United States. If you hop over to his site, you’ll get some real eye candy for the types of firms that are selling and what they receive at close. 

Recently, Brannon started a coaching workshop called Accounting Practice Academy to help firm owners navigate CPA firm growth. Many of his clients are making revenue of up to $5 million. While that might not sound massive, accounting firms tend to sell for a 1X multiple. If you make $5 million per year, assuming you own close at 100%, you could potentially leave the table with a $5 million dollar check. That’s where Brannon’s 15+ years of expertise come in. 

By following what he shares today, you’re setting yourself up for a big payday. If you’re interested in how to sell your accounting firm, pay attention. Right now, Brannon sees a massive trend coming where baby boomers are beginning their final sprint to retirement. He expects many firms to go on the market for selling in the coming few years. With his brokerage company, he looks for high-quality firms. Those are the easiest to sell and the process goes much, much smoother. Let’s define this.

What Makes an Accounting Firm a Good Candidate for Selling?

Before you sell, you must understand why someone buys. Perhaps you’re on this side of the table right now. Today, acquiring a firm could be the fastest way to get a leg up. Maybe you’re struggling with growth; maybe you’re breaking into a new city or even country. Going from $1 million to $4 million in one year is a tough stretch for anyone. 

But, when you acquire a firm and make that same jump, you have resources at your disposal to help with the leap. A key thing to look for is a high-quality firm. Brannon describes such a firm with two characteristics:

1. Owner hours are as low as they can be.
2. Cashflow to the owner is as high as it can be.

Let’s dissect each characteristic.

Owner Hours Should Be as Low as Possible

Owner hours = how much time the owner is in the business running it. 

To be frank, a good owner should be taking a lot of vacation. One of Brannon’s top-selling firms has an owner taking 6 weeks of vacation — sometimes all at once. 

Cashflow Should Be as High as Possible

The second piece is cash flow to the owner. This is pretty self-explanatory, but it means more money than not is making its way to a firm owner’s pocket. Not hard to see why. 

You open a firm to make more money while pursuing what you’re good at. Does it make sense to see little return on that risk and effort? Of course not. According to Brannon, if you’re under $1 million in revenue, your owner should see over 50% of cash hit their pocket. Over $1 million, that number should come down naturally, but not too much. 40% is a good number. 

One of Brannon’s previous clients was a $2.5 million dollar firm. They had just 6-7 people. The owner took home $1 million dollars each year. They had great pricing, and their clients resided in the $5 million – $50 million. Their multiple to sell was actually above 1X and that $1 million dollar take-home was probably the cause. 

Let’s break down how to become an enticing firm to buy. If you’re not there yet, it’s okay.

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After brokering for 15+ years, Brannon identifies three core ideas to becoming a high-quality firm:

1. You must be good at pricing.
2. You must be great at selecting the right clients.
3. You must have an all-Star team.

You Must Be Good at Pricing

The first bit about pricing has been repeated on our show, but it goes to say how important pricing is. You must charge enough and beyond to account for your expertise, not just the hours you spent chained to your desk.

You Must Be Great at Selecting the Right Clients

Next, you must select the right clients. Brannon’s example showed a firm only working with 8-figure clients for the most part. Do you think these rich clients were bantering about price? Probably not.

You Must Have an All-Star Team

Finally, you must have a rock-solid team. If you’re going to take a few weeks off throughout the year, you need to have peace of mind that your team will take care of everything while you’re out. 

Now that you know what to do and how to sell your accounting firm for 7-figures, let’s look at what a transaction might look like.

The Actual Business Dealings of a Firm Acquisition and Selling

Here’s an approximate breakdown of how his business dealings go:

• 50% of Brannon’s businesses get cash at close. This means the selling firm walks away with the fully agreed-on amount, and the cord is cut. 
• 40% of deals are seller-financed with some stipulations on earnings. 
• 10% of Brannon’s deals center on earn-out provisions. This means the seller gets paid based on receivables from the seller’s former clients. 

Earn-Out Deals: Issues to Watch Out For

Here’s the #1 critical mistake buying firms make during this process: They try to get the best earn-out provision deal possible. 

Brannon doesn’t like earn-out deals because there are too many negatives to watch. When a seller’s payout is contingent on the buyer’s future performance, there will be some controlling issues. Sellers will start staying on, trying to do things their way to make sure they see their payouts increase. Soon control issues, like management problems, appear. Then, your new clients will turn to their security blanket, your seller, thus causing confusion and resentment. 

Lastly, earn-out provisions eat into your cash flow. While you’re trying to grow a bigger business, money is finding its way out of your account and into your seller’s pocket. It’s part of the deal, but it’s crippling. Acquiring is a serious step to take in a business. You want to make sure all of your ducks are in a row. This is what you can expect after an acquisition.

What to Think About Before Making an Acquisition

A major worry when you acquire is, “What if all of the clients I just bought leave me?” It’s a valid concern. What would you be buying in the end, anyway? 

In Brannon’s experience, he sees 2-4% turnover as fairly common. You probably see that in your current business. Brannon recommends handling the transition with as much care as you put into the work you do for your clients (be it tax, compliance, consulting, etc.). Clients don’t want to go through the hassle of finding new CPAs. It’s up to you as the new owner to make them feel comfortable.

Market the Revamped Business Without Spending a Dollar

Brannon offers coaching to help buyers with the transition. He also helps advise in marketing and growing the revamped firm without spending a dollar. If new buyers or existing practice owners want further perspective in growing their business, they can participate in the Accounting Practice Academy that Poe Group offers. 

Here’s the secret: Selling firms tend to lay off the gas with internal opportunities. They’re ready to cash in, so they don’t put in the extra grunt work. When you make the acquisition, you could find estate planning needs, advisory, opportunities to increase prices, and more. You should have these in mind before you sign on the dotted line.

What’s Your Goal?

Another point to consider is your goal for the acquisition. Buying a firm should not simply be a way to improve your current firm. Every firm you acquire will become more of what you already are now. It’s not a magic pill to prosperity. In one instance, Brannon’s client had a 60% cashflow-to-owner get sold to an owner with a 40% cashflow-to-owner. Fast-forward 5 years, and the new owner hasn’t seen 60% back to himself. He was seeing 40%.

Pro Tip: Any business you acquire will only become more of what you are now. Nothing will change unless you change your mindset and your processes.

Consider the Cost of Acquisition Per Customer

If you’re making a big play to increase your client size, make sure you factor in the marketing costs. What’s the cost for acquisition of one client in your current firm? Compare this to one customer in the firm you’re looking to acquire. If the former number is lower, then you might be better off spending your money on marketing your current business, not spending the time and money on M&A. These are just a few of the conversations you’ll need to have right away when you’re ready. 
Let us know on Social: What was it like to buy and/or sell your accounting firm? What other tips should we include?

Jason Staats is a principal at Brenner LLP and is the founder of Launch FA and the Realize Community. He’s focused on building better tools and solutions for modern accountants and firms, as well as building a future of accounting and small business with “no code.” In today’s show, Jason shares three key trends and tools he believes are changing the shape of accounting and small business.

In today’s program, we’re trying something a little different: the 3×3. The guest shares 3 trends and 3 tools for the accounting industry!

Podcast

Key points from today’s show:

• How Brenner has recently expanded
• Trend #1: Looking Outside the Usual Tech Stack to Help Businesses
• Trend #2: Tools That Wrap an API Around Legacy Tax and Accounting Software
• Trend #3: Using Bespoke Integrations to Create Custom Workflows
• Reprogram Your Mindset

Related Posts:

• Understanding New Tax Laws for Businesses in 2021
• The 7 Habits of Highly Successful Accounting Firm Owners
• Is Business Banking Dead?

Jason’s Recent Work at Brenner

Brenner LLP has been principally dedicated to providing tax services for the last 75 years. More recently, thanks in part to Jason’s efforts, Brenner has expanded to providing other, CAS, or Client Accounting Services.

The business model Brenner has been using to extend these new services is interesting. They don’t advertise these services publically. Instead, since they have a client list of thousands for their well-established tax services, they handpick which clients they want to offer new services to.

Could this be a business model other firms follow? Jason thinks so. An accounting firm may acquire a tax firm’s clients, then slowly roll out new services to a select few clients. This would mean more billable services, thus more income, without all the cost of marketing to acquire new clients from scratch.

Of course, the model isn’t for everyone. It would only apply in certain cases. But it is interesting to think about.

Now, let’s dive into the three trends and tools Jason has noticed in the accounting community. There are some juicy tools to check out from this list.

Trend #1: Looking Outside the Usual Tech Stack to Help Businesses

Because Jason can see the most popular apps and software being used each year, he’s noticing many tax and accounting firms offering a richer variety of services to help their small-business clients. The tools firms are using include B2B applications and other services that are outside the fences of the accounting industry.

One example is UCALC, a versatile embeddable calculator. Firms can add this tool to their websites so people can Calculate tax rates or run other calculations for free. This is a tool people may come back to again and again. It’s like having a marketing funnel embedded right on your website, creating a fresh way to find clients without paying for advertising on Google or social media.

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Subscribe to our weekly newsletter, and get 32 free accounting workflow templates today!​​

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In the accounting world, and in the world of taxes especially, the legacy software we use rarely plays nicely with other tools or systems. Unfortunately, many firms don’t see a way out of using this legacy software. Until recently, this has made using these tools very labor-intensive.

For example, you may design a form to help clients send you information you need. But since this form doesn’t play nice with the legacy software or tax suite you use, you still must manually enter information from the forms to the client’s file within the software.

But what if there’s another way? Many accountants are designing add-on tools that wrap an API around that legacy tool. That way the tax suite you use can integrate with a third-party integration tool like Zapier.

Jason gives the example of Electroneek, an RPA provider that includes a visual flow designer. Electroneek offers a companion tool that allows integration with Zapier, allowing it to work alongside countless other cloud-based tools and services.

Trend #3: Using Bespoke Integration Solutions

Adding to the concept of integration and tech, Jason points out that many accountants and firms are designing their own custom integration solutions. Integration tools like Zapier and Airtable make this easier than ever.

Accountants that learn how to create these custom integrations can identify pain points of their clients and then create bespoke software solutions to help them. Creating such a solution for a single client may not be cost effective, but what if you have dozens or hundreds of clients in the same industry or with the same need? Then creating a custom integration solution could mean thousands of dollars a month in additional income for the firm.

As an example, Jason points out that many of Brenner’s clients are in the dental field. A common problem many of them have is reconciling batch deposits from customer payments. Until recently, many dental offices wouldn’t do this at all because it’s very time intensive. And firms couldn’t reasonably offer this service to most small businesses because of the raw labour hours required. No dental office could afford that.

Then Brenner designed a bespoke integrated service that automatically reconciles payments and deposits. Once the software was finished, they could offer the service to hundreds of clients for a small fee. That added up to a large profit that will only grow over time.

Because tools like Zapier and Airtable make integration easier than ever, and other visual software development options are becoming available, many accountants and firms can now design complex software solutions using no code.

Jason hopes to continue to unite accountants in his community at Realize to build these tools and make them available.

Reprogram Your Mindset

This kind of outside-the-box forward thinking is new to the accounting world. Many firm owners now realize that they can go beyond the software already out there and create new tools and services for their clients.

To do this, you may have to reprogram your way of thinking. Jason suggests surrounding yourself with others that are thinking about these same things. He’s recently started reaching out on social media to find others interested in the new potential technology can offer.

We have to stop thinking in terms of labor and start thinking about creating our own tools and software.

Designing tools and software will only get easier with time.

Of course, both Launch FA and Realize are designed to help you connect with like-minded forward-thinking accountants and firm owners and get a more outside-the-box mindset!

If you liked this format of “3×3” or digging into three top trends or tools, let us know so we can do it more often in the future.