Building a 7 Figure Firm: The Darren Root Interview
This week, we’re excited to release our latest interview with Darren Root, CEO of RootWorks, President of Root & Associates, and author of the popular titles “E-Myth for Accountants”,
“Intentional Accountant”, and “Youtility for Accountants”.
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In this episode, we talked about:
- How Darren was able to sell off 80% of his clients from his accounting firm and build his dream practice
- The critical characteristics of a Next-Generation Accounting Firm (R)
- His approach to building businesses that run independent of him (and much more)
Click below to listen:
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Key Summary Points
Roughly 50-60% of CPA firm owners spend their days working on to-do list items that are urgent, yet not important. Things like answering emails, jumping on calls, diving into details about which engagement letter was sent to what client. A vast majority of their time is spent doing the wrong things.
Does this sound familiar to you?
In today’s podcast, we jump into the ongoing discussion of how accounting firm owners can stop doing work they hate, and finally start building their business around the life they want to live. This is Darren Root’s mission for building a Next Generation Accounting Firm and the topic we dive deep into to provide a valuable insight on how to help you build and grow your firm.
Let’s Start At The Beginning…Darren Root’s Background
Darren Root spent a majority of his childhood watching, learning and working alongside his father as a practicing accountant. It was during this time, Darren began to develop his understanding of how CPA firms should be run, the old fashioned way.
After graduating college at Indiana University, Darren went to work for Deloitte in the tax department focused on US-based tax returns. In a few short years at Deloitte, Darren’s entrepreneurial spirit was reignited and he left Deloitte to open up his own accounting firm.
Launch Of Root & Associates
During the first year, of opening shop in Indiana, Darren described the process as a bit slow. He had to put all of the pieces together, one by one, and begin announcing himself as a professional tax partner.
“Here is my recommendation for businesses that first start out: Give yourself at least a year before things really start kicking in.” – Darren Root
Just like he recommended, after roughly 1 year of opening his doors in Bloomingdale, Darren started growing his book of business, very quickly. At the time, it was just him and one other staff member but as the firm grew, he hired additional help.
Within 3-5 years of opening his business, Root & Associates grew from $0 in Revenue to roughly $1M of revenue, and Darren Root had yet to turn 30 years old!
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The Growth Of Root & Associates
Darren contributes his growth of $1M in book of business in just 3-5 years to 3 different key factors:
1. Location was great
Darren was opening his shop in the town he went to college in. This is the same town that hosted 50,000 students and provided opportunities for people to open up small businesses and be successful.
2. He Knew The Movers & Shakers In The Town
During college, Darren worked at men’s clothing store where he became acquainted with all of the “Movers & Shakers” of the town. This simple one on one interaction allowed Darren the opportunity to build a network of potential clients, fairly quickly.
3. He Gravitated Towards Technology
Darren opened up his firm, roughly 30 years ago, and at the time, technology was just starting to show it’s face among the accounting industry. Though he always worked in an old-fashioned accounting firm (watching his father), Darren knew technology was going to play a big role in his firm. So he welcomed the changes of technology in his new business.
So building a 7 figure firm in just under 5 years sounds like pure bliss…right?
Not exactly…
Struggling To Stay Afloat
As previously stated, Darren did know how to run an accounting practice. The old way – by watching his father crank out 80-hour workweeks and be smothered with client deadlines.
Within 5 years of launching his firm, he saw himself repeating his father’s past. Darren was working himself to death. Plus he had a wife and three young children at home so the responsibilities were tacked on to the client work and office drama.
“I thought to myself: Wow, I’ve grown this firm, but my life sucks” – Darren Root
The Path To A New Life
It took a long time for Darren to realize change needed to happen. He struggled to maintain his large book of business and continued on the struggle train for 5-6 more years. The pain continued to grow, and grow, and grow until he finally decided something needed to change.
Around this same time, Darren walked into a bookstore (remember this was pre-audiobooks) and ran across the first book that would change his life:
E-Myth by Michael Gerber
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At the time, Darren called himself a technician. He was a technican at Deloitte, turning out tax returns. Then he grew his own accounting firm, still recognizing himself as just a technician, not a business owner.
“After reading The E-Myth, I began to realize all I had done was create a technical job for myself and I’m not actually running a company. What I really wanted to do was to be an entrepreneur and run a company. And that was not happening.” – Darren Root
Right around the same time Darren was having his first epiphany, he revisited his bookshelf and reread a book he thought was geared towards running a business:
7 Habits of Highly Effective People by Stephen Covey
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After Darren reread Covey’s book, he began to realize that the book had nothing to do with business, but everything to do with being empowered to take control of your life, the way you want to live it.
Darren quickly started to see how he could implement various practices into his life, that was trickle down into how he ran his firm. If he put important things first, it could turn him from being in a reactive position to a more proactive, less stressed business owner.
10 years into his life of running Root & Associates, Darren decided to make a change. And a big one at that….
Leaving The Practice He Built To Start Over
Darren knew that in order to create the life he wanted to live, he needed to start over with a blank slate. This time, taking all of his previous knowledge, skills and expertise, coupled with this new found idea of creating a different kind of business, he left his firm to start over.
“I woke up one morning, after having these ideas from the books rolling around in my head, and thought to myself, I need to go create a business that will support the life that I want to live.” – Darren Root
Darren decided to give 80% of his client base to another partner and cherry picked the clients he actually wanted to work with. Roughly $350,000 worth of business.
Root & Associates: The First ‘Next Generation Accounting Firm’
So there he was, at 40 years old, creating a brand new accounting firm again. But this time, Darren took his best clients with him on his new venture and told them he was going to do things differently.
The Goal: Build A Business To Support The Life He Wanted
With this new goal in mind, Darren set out to apply the ‘E Myth’ & ‘7 Habits Of Highly Effective People’ concepts to the mission of Root & Associates. He wanted to create the beginning of his business, with the end goals in mind.
In order to implement his goals, Darren Root knew he needed to create a company that could be leveraged by other people.
“What I wanted was a business that did not depend solely on me. I wanted to create a company that could be leveraged by other people.‘
‘So I had to do the kind of services that allowed me to leverage them as a team. Instead of building a set of services geared around my skillset which is what most practitioners do.” – Darren Root
Shrink The Services Offerings = An Increase In Profits
Originally, Darren’s old firm offered roughly 40-50 different services. Any time a client asked for something, the firm said: “Sure, we can do that.”
This mindset had to go. Darren had a skillset in US tax, so he wanted to limit the amount of services to offer and train his staff to be experts in those core areas.
From 40-50 services, Darren knocked down their offerings to just 4-5 services. A few of them included:
- Bookkeeping for service based businesses
- Payroll
- Client accounting for service based businesses (not manufacturing, etc)
- US-based residence Tax Work
Darren believes the key is to understand the product that you are going to deliver. Then, create a system around the product being offered and train your people to learn how to implement and deliver this product. The outcome provides a great consistency throughout the firm, and less and less stress (as he is no longer trying to offer auditing services as a tax professional).
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Success At Root & Associates
Darren thought that if he knew how to do excellent service for one particular client, he could go out and find similar clients that fit his niche expertise. This would lead to staff not having to learn different services all the time and finally allow Darren to create a company that he could manage.
“Let’s create a company that does not depend on you, that you can create a product and be really good at delivering, and then find people to do just that.” – Darren Root
Darren goes on to mention that accounting firms run into this problem, all the time. They want to create a business around what’s comfortable & natural for the owners. They have a skillset, go out and create a bunch of clients around their particular skillset. Then have to be the one doing all the work and wake up to realize they are extremely stressed and unhappy.
This is where RootWorks.com come into play.
The Beginning Of RootWorks
After Darren made the transition, he went from $1-2M with 19 people at his old firm to Root & Associates now which has $2M in Book of Business with just 10 people. Darren has no direct client responsibilities and gets to manage his business the way he wants.
Darren began helping software vendors in the accounting space try and grow their company. He started teaching the CEOs of these software companies to stop trying to sell to accountants. Instead, educate accounting professionals how to make their lives better with this software and this will in turn make the partners want to buy the software.
These same software companies decided to fund Darren to create a new platform to tell his story and found it was incredibly successful.
“During this process, I found that firms were starved for this kind of information. There were so many firms in his old position, looking for a better life. I saw that there was company here and created RootWorks.”
Within 3 months of starting Root Works, Darren was asked to be the executive editor of CPA Practice Advisor. He realized the impact of marketing by having his picture on the first page of the magazine being sent to 40,000 CPA firm owners.
All of a sudden, RootWorks hit the perfect storm.
“We started this new company and got the chance to showcase the company through CPA Practice Advisor and quickly became a household name.” – Darren Root
What is RootWorks?
Essentially, RootWorks offers entrepreneurial strategy, coaching and products to help you transform your practice into a Next Generation Accounting Firm®.
So of course, your next question is:
What is a Next Generation Accounting Firm?
Inside Rootworks.com, Darren and his team outlines the vision of a NGAF:
“At the very pinnacle of the model is the definition of a Next Generation Accounting Firm:
‘A business built on focused intention, with unmitigated entrepreneurial spirit that enables you to have the life you want.’
‘It runs on a business model that supports an environment where you can be present in all aspects of your personal and professional lives to have the greatest impact on family, staff, clients, and community.’
‘A business that operates independent of you; creates a better working culture for your firm; offers security through recurring revenue; fosters creative thinking; evokes excitement with each new stage of evolution; inspires the next generation of professionals; and is built for transition to support your legacy.” – Rootworks.com
At RootWorks, Darren and his team preaches the stance of defining the future that CPA and accounting firm owners actually want. They hone in on 3 different questions to ask yourself:
- Who do you want to serve?
- What do you want to service?
- How do you want to deliver this service?
To learn more about how to model your firm after a Next Generation Accounting Firm, check out RootWorks’ Firm Model here.
Show Links:
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