Doubling Revenue to $2M within 12 Months of Acquisition w/Patrick Dichter’s

Podcast
Summary
In this episode of the Growing Your Firm Podcast, host David Cristello welcomes Patrick Dichter, the owner of an acquisition engine specializing in acquiring accounting firms. And owner of Appletree Business Services, a modern accounting and tax firm for small businesses.
The conversation delves into Patrick’s successful strategies for acquiring firms, his approach to client mix, and how his model differs from conventional accounting practices.
With a focus on efficiency and client care, Patrick emphasizes the importance of flexibility and performance-based compensation in the workplace. Tune in to discover valuable insights on navigating the accounting landscape and achieving growth through strategic acquisitions.
Guest Bio
Patrick Dichter: A Visionary in Accounting Firm Acquisition and Growth
Patrick Dichter is a dynamic entrepreneur and the driving force behind a successful accounting firm acquisition engine.
With a rich background in sales and digital marketing, Patrick has carved out a niche for himself in the accounting industry, demonstrating that innovative thinking and strategic execution can lead to remarkable growth and transformation.
Before venturing into the world of accounting firm acquisitions, Patrick spent seven years at a digital marketing startup, where he honed his skills in sales and client relationship management.
This experience laid the foundation for his future endeavors, as he learned the intricacies of business growth and the importance of understanding client needs. Following his tenure in digital marketing, Patrick dedicated three years to small business consulting and coaching.
During this time, he recognized a recurring challenge faced by his clients: inadequate bookkeeping. This realization sparked his interest in the accounting sector and led him to explore the potential of acquiring an accounting firm.
Patrick’s philosophy centers around the idea that small businesses are often underserved and that there is a significant opportunity to provide them with the support they need to thrive. He believes that accounting firms can be more than just compliance-driven entities; they can be proactive partners in their clients’ success.
This vision is reflected in his approach to client selection and service delivery, where he emphasizes the importance of bundling bookkeeping and tax services into a monthly subscription model. By doing so, Patrick not only smooths out cash flow for his firm but also ensures that clients receive comprehensive support throughout the year.
Under Patrick’s leadership, his firm has experienced impressive growth. In just two years, he has successfully acquired multiple accounting firms, expanding his client base and increasing revenue significantly.
His strategic focus on client retention and satisfaction has resulted in a high level of team stability, with minimal turnover post-acquisition.
Patrick’s commitment to creating a positive work environment is evident in his unique compensation model, which rewards team members based on production rather than fixed salaries. This approach fosters a culture of efficiency and accountability, empowering employees to take ownership of their work and contribute to the firm’s success.
Patrick’s achievements extend beyond financial metrics; he is also a thought leader in the accounting community. He actively engages with peers on platforms like Twitter, sharing insights and best practices for firm growth and client management.
His participation in professional associations, such as PASBA, underscores his dedication to continuous learning and improvement. Patrick is not only focused on his own success but is also passionate about helping others navigate the complexities of the accounting industry.
Detailed Synopsis
Client selection is vital for maintaining profitability and operational efficiency in accounting firms. As discussed in the podcast episode with Patrick Dichter, a firm’s approach to client selection can have significant downstream implications for pricing, compensation, fulfillment, and overall capacity.
Here are some key insights on how focusing on a specific service model, such as bundling bookkeeping and tax services, can streamline processes and enhance client relationships.
Importance of Client Selection
- Downstream Implications : The choice of clients directly impacts various aspects of the firm, including pricing strategies, team compensation, and operational workflows. By being selective, firms can avoid the pitfalls of a diverse client base that may lead to inefficiencies and increased complexity.
- Avoiding a Chaotic Workflow : Patrick emphasizes that firms should steer clear of a “spray and pray” approach to client acquisition. This method can result in a chaotic mix of service offerings and client expectations, ultimately harming profitability and operational efficiency. Instead, a focused approach allows for a more streamlined workflow.
Bundling Services
- Monthly Subscription Model : Patrick’s firm adopts a model that bundles bookkeeping and tax services into a monthly subscription. This approach not only smooths out cash flow but also ensures that clients receive comprehensive support throughout the year. The average client spends between $500 to $2,000 per month, with a median of around $850, covering both bookkeeping and tax services.
- Higher Touch Engagement : By bundling services, firms can provide a higher level of engagement with clients. Patrick notes that they do not offer bookkeeping-only or tax-only services, which allows them to maintain a consistent and proactive relationship with clients. This model fosters better communication and understanding of client needs, leading to improved satisfaction and retention.
- Team Compensation Linked to Production : The bundling of services also influences how team members are compensated. In Patrick’s firm, accounting managers and staff accountants receive a percentage of the fees generated from the services they provide. This incentivizes efficiency and productivity, as team members can increase their earnings by taking on more clients and delivering quality work.
Operational Efficiency
- Capacity Planning : A focused service model enables firms to better plan for capacity. By knowing the average revenue per client and the expected number of new clients, firms can map out their organizational structure and hiring needs. Patrick mentions that understanding client selection helps him determine how many tax professionals and staff accountants are needed to meet future demand.
- Streamlined Onboarding : With a clear service offering, onboarding new clients becomes more efficient. Patrick highlights the importance of having a dedicated onboarding process, which alleviates the workload on managers and ensures that new clients are integrated smoothly into the firm’s systems. This efficiency is crucial for maintaining operational effectiveness, especially when taking on multiple new clients.
Client Selection in Accounting Firm Acquisitions
In the podcast episode featuring Patrick Dichter, the importance of client selection in the context of accounting firm acquisitions is thoroughly discussed.
Patrick emphasizes that the clients a firm chooses to serve have significant downstream implications for pricing, compensation, fulfillment, and overall operational efficiency. Here are some key insights from the episode:
The Domino Effect of Client Selection
- Pricing Structure : Patrick’s firm adopts a monthly subscription model that bundles bookkeeping and tax services. This approach not only stabilizes cash flow but also ensures that clients are engaged throughout the year. By setting a median price point of around $850 per month, the firm can maintain a consistent revenue stream while providing comprehensive services.
- Service Offerings : The firm is disciplined in its service offerings, refusing to take on clients who only want bookkeeping or tax services separately. This focus on bundled services allows for a higher-touch, more proactive relationship with clients, ultimately leading to better client retention and satisfaction.
- Team Compensation : The compensation model for the team is directly tied to the services provided. Accounting managers receive a percentage of the fees for the work they complete, which incentivizes efficiency and productivity. This model aligns the interests of the team with the firm’s goals, ensuring that everyone is motivated to deliver high-quality service.
- Operational Capacity : By understanding the type of clients they want to serve, Patrick can better plan for hiring and capacity management. Knowing that they aim to bring on a certain number of new clients each month allows for strategic hiring of tax professionals and staff accountants, ensuring that the firm can handle the workload without compromising service quality.
Avoiding the Chaotic Workflow
Patrick warns against the pitfalls of a “spray and pray” approach to client acquisition, where firms take on a diverse range of clients without a clear strategy. This can lead to a chaotic workflow, inconsistent pricing, and ultimately, lower profit margins. Instead, he advocates for a focused approach:
- Niche Targeting : By selecting clients that fit a specific profile, firms can streamline their processes and create a more cohesive service offering. This not only enhances operational efficiency but also strengthens the firm’s brand identity.
- Long-Term Relationships : Building long-term relationships with clients who fit the firm’s model leads to better retention rates and more predictable revenue. Patrick’s firm aims to create a community of clients who value the comprehensive services offered, rather than just transactional relationships.
Key Benefits of a Percentage of Production Compensation Model
Increased Motivation
By compensating staff based on their output, employees are incentivized to work more efficiently. Patrick emphasizes that team members can take on more clients and increase their earnings as they become more productive. This creates a direct correlation between effort and reward, motivating staff to optimize their performance.
Flexibility in Workload Management
The model allows employees to manage their schedules according to their personal needs. For instance, Patrick mentions that if a team member needs to pick up their child at a certain time, they can do so as long as they complete their work and take care of clients. This flexibility can lead to improved work-life balance, which is crucial for employee satisfaction and retention.
Alignment with Firm Growth
As the firm grows, so does the potential for individual earnings. Patrick notes that accounting managers can earn a percentage of the fees they generate, which encourages them to focus on client acquisition and retention. This alignment of personal and organizational goals fosters a culture of growth and accountability.
Enhanced Team Collaboration
The compensation model encourages teamwork, as staff accountants and accounting managers work together to meet client needs. Patrick explains that the accounting managers oversee multiple staff accountants, creating a collaborative environment where team members support each other to achieve common goals.
Clear Performance Metrics
With a percentage of production model, performance metrics become clear and quantifiable. Employees can easily track their contributions to the firm’s success, which can lead to a greater sense of ownership and pride in their work. This transparency can also facilitate constructive feedback and professional development.
Attracting the Right Talent
The unique compensation structure can attract candidates who are motivated by performance-based pay. Patrick highlights that during the interview process, he explains the benefits of this model, which appeals to those who prefer a results-oriented work environment. This can lead to a more engaged and driven workforce.
Implementation Considerations
While the benefits of a percentage of production compensation model are clear, firms should consider a few key factors when implementing this approach:
- Training and Onboarding : Ensure that staff are adequately trained to understand the expectations and how to maximize their productivity within this model.
- Clear Communication : Maintain open lines of communication regarding performance metrics and compensation structures to avoid misunderstandings.
- Support Systems : Provide the necessary tools and resources to help staff succeed, such as technology for efficient workflow management and access to professional development opportunities.
In conclusion, adopting a percentage of production compensation model can transform the dynamics of an accounting firm.
By fostering motivation, flexibility, and alignment with firm growth, this approach not only enhances employee satisfaction but also drives the overall success of the organization. As Patrick Dichter’s experience illustrates, a well-implemented model can lead to significant growth and a thriving workplace culture.
Client Selection and Its Impact on Accounting Firm Success
In the podcast episode featuring Patrick Dichter, the owner of an accounting firm acquisition engine, the importance of client selection is emphasized as a critical factor in the overall success and profitability of an accounting firm.
Patrick shares insights from his experience in acquiring and managing accounting firms, highlighting how thoughtful client selection can lead to better pricing, improved margins, and streamlined operations.
The Domino Effect of Client Selection
Patrick explains that the type of clients a firm chooses to serve has far-reaching implications. This includes:
- Pricing Structure : By selecting clients that fit a specific model, Patrick’s firm bundles bookkeeping and tax services into a monthly subscription. This approach not only stabilizes cash flow but also allows for predictable revenue. The average client spends between $500 to $2,000 per month, with a median of around $850. This pricing strategy ensures that the firm can maintain a healthy margin while providing comprehensive services.
- Compensation Model : The firm operates on a percentage of production model, where team members are compensated based on the work they complete. This incentivizes efficiency and productivity, aligning the interests of the staff with the firm’s goals. For instance, accounting managers receive 17% to 22% of the fees they generate, while staff accountants earn 15% to 20% of bookkeeping fees. This model encourages team members to take on more clients and work efficiently, ultimately benefiting the firm’s bottom line.
- Operational Capacity : By focusing on a specific client type, the firm can better predict its operational needs. Patrick mentions that understanding the client mix allows him to map out the organizational structure and determine how many tax professionals and staff accountants are needed. This foresight helps in managing onboarding processes and ensuring that the firm can handle new clients without overwhelming the team.
Avoiding the Chaotic Workflow
Patrick warns against the dangers of a haphazard client selection process, which can lead to a chaotic workflow. He refers to this as a “Frankenstein world” of operations, where mismatched clients create inefficiencies and complicate pricing and fulfillment.
By being disciplined in client selection, firms can avoid these pitfalls and maintain a cohesive operational strategy.
The Importance of a Clear Value Proposition
Patrick’s firm does not offer standalone bookkeeping or tax services; instead, it focuses on providing a higher-touch, integrated service model.
This clear value proposition not only attracts the right clients but also sets expectations for the level of service provided. When potential clients inquire about services, the firm is upfront about its model, which helps filter out those who do not align with their approach.
The Importance of Onboarding
Onboarding is the first significant interaction a client has with a firm after they decide to engage its services. A smooth onboarding process sets the tone for the entire client relationship, helping to establish trust and clarity.
Patrick emphasizes that the initial months of onboarding can be particularly challenging, often representing a bottleneck in the workflow. This is especially true when new clients come in with messy financials or require extensive setup, which can overwhelm the existing team.
Dedicating a Team Member to Onboarding
To address these challenges, Patrick made a strategic decision to hire a dedicated team member to oversee the onboarding process.
This individual, Rekha, is responsible for leading onboarding calls, performing necessary cleanup tasks, and managing the integration of client data into the firm’s systems. By having a dedicated onboarding specialist, the firm can:
- Reduce Bottlenecks : With Rekha handling the onboarding, the workload is distributed more evenly, allowing accounting managers to focus on their existing clients and responsibilities. This reduces the risk of delays and ensures that new clients are integrated into the system more efficiently.
- Enhance Client Experience : A dedicated onboarding team member can provide a more personalized experience for new clients. They can address questions, clarify processes, and ensure that clients feel supported from the very beginning. This proactive approach helps manage client expectations and fosters a positive relationship.
- Streamline Processes : By centralizing the onboarding process, the firm can develop standardized procedures and checklists that streamline the onboarding experience. This consistency not only improves efficiency but also helps in setting clear expectations for clients regarding timelines and deliverables.
- Handle Complexity : New clients often come with varying degrees of complexity in their financial situations. A dedicated onboarding specialist can better manage these complexities, ensuring that all necessary information is gathered and that the transition is as smooth as possible.
Conclusion
In summary, effective onboarding processes are crucial for managing client expectations and ensuring smooth transitions.
By dedicating a team member to oversee onboarding, firms can significantly reduce bottlenecks, improve overall client satisfaction, and set the stage for a successful long-term relationship.
Patrick’s experience illustrates that investing in a structured onboarding process not only benefits the firm operationally but also enhances the client experience, leading to better retention and growth opportunities.
Timestamps
[00:01:46] Accounting firm acquisition strategy.
[00:03:24] Bookkeeping firm’s acquisition strategy.
[00:08:28] Growth strategies post-acquisition.
[00:11:00] National client acquisition strategies.
[00:14:36] Client selection and business growth.
[00:16:25] Client onboarding and payment structure.
[00:20:56] Client onboarding efficiency improvements.
[00:25:49] Niche acquisition strategy.
[00:27:09] Picking your lane in business.
[00:30:39] Scaling small businesses effectively.