Who's Really the BOSS?

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Rachel Dillon: Hi, I'm Rachel Dillon, and together with my husband, Marcus Dillon, we lead Who's Really the Boss podcast, where we highlight the joys and challenges of running a business with your spouse or family. Our mission is to strengthen families and businesses by helping listeners avoid the mistakes we have made so they can lead and.

Live happily ever after.

Rachel Dillon: Welcome back to another [00:00:30] episode of Who's Really the Boss podcast.

Marcus Dillon: Hey, thanks for having me back.

Rachel Dillon: And we are actually recording today's date. The date of recording is April 15th, 2024. So in our accounting world, April 15th is a pretty big day.

Marcus Dillon: Accounting and mostly tax world, right. Uh, so the 15th, we've got a deadline internally of financials out by the 15th. So every 15th uh [00:01:00] has a little bit of push. But then obviously a few times a year you've got a tax deadline on top of that. And this is the big one. This is the individual interest. So it's good a lot of our friends are wrapping up, uh, stressful season or another season. Hopefully it wasn't too stressful and ready to, uh, maybe reboot and see what went wrong on the other side.

Rachel Dillon: Yeah. And I would say that there's, uh, some varying opinions or maybe stages [00:01:30] of accounting firms, uh, in that there's some who are experienced maybe another year of the worst busy season ever. For some, maybe this was their best busy season ever. Uh, and then, you know, for others, they're maybe contemplating trying something completely different, you know, for an upcoming busy season. So, um, really wanted [00:02:00] to talk through. We a few years ago decided that it was our last, worst busy season ever, that we were not doing that again. And so do you want to talk a little bit about what that was that we were never going to do again?

Marcus Dillon: Uh, work as hard as we did. And so I feel like that was the season of 2017. Um, which would that have been, 2017 or 2018? Oh, wait, [00:02:30] the year is 2017, in my mind. Um, but yeah, the.

Rachel Dillon: Year was 2017.

Marcus Dillon: Okay.

Rachel Dillon: Filing 16 tax returns. Yeah.

Marcus Dillon: Yeah. So we had over a thousand clients, uh, I think a thousand individual clients, uh, 2000 kind of tax projects in our tax program had just recently merged in, uh, my mentor's practice, kind of all things, um, were high, uh, high stress, [00:03:00] high clients. Uh, as far as the number and just trying to figure it out that first season. And we walked away exhausted and were beyond our tipping point as far as just said that was it. Nothing like that ever again. And I feel that now, so many years after 2017, I guess seven years after 2017. Um, looking back, that was the beginning of [00:03:30] a better shift in our business and to where we're even at today, where for the most part, tax season does come with a little bit of additional, um, workload, just because you do have that extra filing or filings during that window. Um, but other than that, you know, we try to spread the work out evenly throughout that quarter and really approach the upcoming deadline. Um, you know, with, with Grace and [00:04:00] able to make estimated tax payments on behalf of clients, make sure that everything was filed, that needs to be filed. And we did that. We wrapped that up last week. Um, Thursday, we kind of had a push at the beginning of April, at the end of March, just to make sure that every client had been taken care of.

Marcus Dillon: They had sent in everything that we need or were started. And then it was working maybe a little bit, uh, that that first week of April to kind of get everything in, get it to the client to make sure that they know where they [00:04:30] stood. And then leading up to April 11th, April 10th, we knew that we needed to be done because of the way April 15th fell on a Monday. We needed all filings kind of submitted on that Thursday so we could work through rejections on Friday, not require anybody to work through the weekend, and also kind of make sure that payments were scheduled and accepted, um, by April 12th, which funny story. Uh, our, [00:05:00] uh, 2023 tax payment got rejected because I did not, uh, transfer the tax, uh, dollars out of the tax account in time. So even us, like, got rejected on Friday. Got my email on Sunday that I had to resubmit that payment today, the 15th. So things are built in even for people like me who procrastinate and wait. And then something happens with the IRS.

Rachel Dillon: I [00:05:30] feel like you're giving teasers every year. We always do an episode where we go over what tax season was really like for us. So you're giving away some of that gold or just teeing people up for that upcoming episode of what our tax season really looks like, or what tax season looks like in a CAS ferm. And so really, our solution way back in 2017, we had started some advisory services. We had started trying to package and do all inclusive [00:06:00] services and offer advisory, but I don't think that we were 100% committed as the two of us and the team definitely wasn't. They still didn't really understand what that meant, what that looked like. We hadn't really done a good job explaining that to everyone and what that would entail. However, for us, we just knew we weren't doing the seven days a week, all the hours working, working after, you know, the kids [00:06:30] went to bed. We weren't doing that again. We weren't filing 2000 tax returns in a season or in a year. To be fair, some of those definitely were extended. And so we just knew that's not what we were going to do. So we really leaned into CAS and we thought, this is going to be the magic and this is going to be easier. Um, and, and we even mentioned on a previous episode about a caution about trying to take the easy way [00:07:00] out or, you know, whenever you choose the easy button, that's not really always what you get. And so today we wanted to talk through for anyone coming off of maybe your worst tax season or that this busy season is the catalyst of okay, I'm finally going to jump into advisory. Now's the time I got, you know, all of my busy projects really done. I have some time to focus. And so I wanted to go through the [00:07:30] hard truths about CAS. Now that we're, you know, this many years on the other side of it. And so just some things that we've learned and some things that were surprises to us that we didn't really know before we got into it.

Marcus Dillon: Yeah. So the hard truth about cars is everybody's talking about it. Um, as far as the theory is concerned, maybe some of those people who are talking about it have lived through it in one season or another. Maybe they [00:08:00] still own a firm, maybe they don't. Um, so this is just, as you said, our experience from 2017, whenever we accepted our first CAS client and we actually looked back, um, at, at this here recently to prepare for a webinar that we're doing. And one of those first CAS clients is actually still a CAS client today. It looks a lot different of a relationship because he's grown his business and we've grown with him. And so, um, it's been a good [00:08:30] journey. And we're going to talk through that on the webinar. Uh, by the time this post, that webinar will have already happened. So it'll be there in our resources. If you want to look back, um, at that financial kind of benefit of the team of three in that journey with that client. So, um, I think the main thing that is said a lot of times is that you need to repurpose your existing clients into CAS relationships, and people say that like it is the easiest thing, like no one's ever thought about that before. [00:09:00] Um, maybe you they just say it in a way where it's like, duh, like, we should be doing that no matter what.

Marcus Dillon: And I think you want to give credit to most Ferm owners or most Ferm leaders, that whenever you do have a new prospect that comes into your pipeline, um, you want to fully serve them. You don't approach that prospect to say, I want to do the bare minimum for this prospect, which may be an annual tax filing. And so whenever [00:09:30] someone says you just need to sell client advisory services or client accounting and advisory services to your clients or your prospects, that is a very easy bumper sticker, blanket statement of business advice. And so for us, the the main thing that we had to start with is that realizing that not all clients will convert to CAS. And so I know that that's the first point that we wanted to talk through today. And it [00:10:00] goes, uh, counter to what a lot of people in the market today as far as how they coach others to build a CAS practice or to grow a CAS practice. It's not as easy as you would think. So we need to give our listeners and those other CPA firm leaders a lot of grace, because we know that you're not approaching prospects trying to sell the bare minimum.

Rachel Dillon: Yeah. And so we actually did this, we actually started [00:10:30] we made a list or pulled a list of our current clients. We looked at what services we were providing and what services for their businesses. So our business clients looked at what services we were providing, what services they were getting outside of our firm, and we started going down the list of would accounting services. So talking about, um, bookkeeping and [00:11:00] payroll and even like sales tax. So just related accounting services, we were already doing their tax returns. That's how they were clients. So would these related services. That would 100% help us to prepare the tax return. Would these be valuable to the client. So looking at who was actually providing that, were they trying to do it in house, were they paying a separate bookkeeper and was the work that that bookkeeper doing? Was it good? [00:11:30] Was it coming over to us? And um, were they doing that effectively? And so that was one of the first things we did. But then we had to approach the client and tell them all the reasons that we thought maybe having all of those services in one place with our team would be more valuable to them, and we had to explain and show the value that they would receive, why? That would be a better solution for [00:12:00] them than however they were currently doing it.

Rachel Dillon: And so I just have to say, the reason that this is a point in this conversation of hard truths is that not every single client saw the value as we saw the value. So whether that was in my communication or our communication to them of that value, or whether they just. Didn't value the same things at the same [00:12:30] level that we did, so they didn't place the same amount of value, um, on those responsibilities as we did. And so not all of those clients accepted. And one of the things that they said, um, one of the clients I remember, they said that they were very happy with how their services were right now, like they had no problems. So why would they change? Why would they change anything? They were very happy. So then on our part, it's like, man, we're serving them so well. We're bending over backward and cleaning up the mess [00:13:00] of the payroll notices and the bookkeeping, having to do another cleanup after we get it from an outside bookkeeper. And they don't see that because we're taking care of so much of it on the back end and not even sharing all that we had to go through just to get their tax return to them.

Marcus Dillon: Yeah. So you brought up a great point. Um, a lot of times, those clients within an annual tax client roster, they may have an existing bookkeeper that may have even been [00:13:30] the referral in. And so you're not going to compete with that referral partner in that sense. It wouldn't be the right thing to do. Maybe they've got somebody in place that's a family member, like a spouse who you're there to help kind of clean up and make sure that that relationship is still okay. The bigger relationship, whether it's a family relationship or some other dynamic, uh, versus just being a bad bookkeeper in the business. So the first thing that you have to do, and it's sometimes painful, is communicate everything that you're [00:14:00] doing, communicate all the journal entries that you made or all the cleanup that was done, even though it may seem overkill, um, you kind of have to show your value and prove your worth. And so I think from a basic standpoint, you could include all the ages or all the adjustments you did in that QuickBooks file that would be low hanging fruit. But then you could also do kind of a, uh, management like a memo to the client, maybe, and say, hey, this is where we started. This was your PBC file [00:14:30] or prepared by client. And here's all the work that got into it to get to where we're at today, where it's a nice, clean project. And so after doing that a few different times, you start to build up the confidence and the value that you bring. And so for us, you know, using real numbers and where we're at, we had over 2000 clients at that time and where we're at today, less than 5% of those clients made that cash journey with us.

Marcus Dillon: So what that means is for us that [00:15:00] where we were a very heavy annual only client roster in 2017, we were not able to convert 95% of our client base to CAS. And so the bumper sticker advice of people that just tell you, hey, you should go convert all your clients to CAS is probably not going to hold 95% of the time. So what that means is you can convert a few, but you also have to take an approach or a line in the sand to where your point was. [00:15:30] We're doing all this great work and the client says, hey, it's working for me. I'm not going to adjust how we do business to benefit just you as my CPA firm. And so you have to be prepared at that point to say, in that case, we're no longer the best fit for this relationship and be prepared to refer them on. And whether you get monetized, you know, on that referral outside of your firm, but you can't continue to keep doing that same high level of work, not getting paid for it [00:16:00] and expect anything to change with the client. So for us, we saw 95% change and the 5% that we were able to go in and kind of grow with us, they for where we're at today, they replace that other 95%. Right. And then we had to go find new clients, which in our case, having a a new a fresh conversation with the prospect or a client that actually wants those services is a much [00:16:30] easier conversation than trying to convince an existing legacy client that they should change for the benefit of the firm, not necessarily for what they need out of that relationship.

Rachel Dillon: Yeah. And even when we talk about that like a fresh new prospect, most of the time they're coming because they have a pain point. So then when we're going through that, a lot of times having this full service with the accounting advisory and tax, um, all [00:17:00] in one, I guess, service offering that helps to eliminate some of the problems that they're coming, that they're seeking a change for anyway. The other thing that really helped to communicate the value of what we were doing was we were preparing after the fact tax returns, and sometimes that meant we were also preparing after the fact bookkeeping, because nothing, nothing or not much had been done throughout the year. And so being able to point out tax savings [00:17:30] that could have happened had we been proactive instead of waiting until the year ended, and then having very limited tax strategies to save that business owner money. So any time we could present like a tax savings analysis to, uh, current clients, maybe now their former clients, but to the current clients who maybe were only having a tax return done or even now to prospects, that's one of the best ways to communicate value, because you can also say in [00:18:00] that here are the savings that are being missed because you don't have anyone advising you properly. And the reason no one can advise you is because no one knows your current accounting. They don't know your current financial position until after the year has ended. And so just being able to communicate that, um, and give them real examples, real examples of their financial data, of what they are missing out on that too. [00:18:30] Sometimes there's cost savings from having things in different places. Maybe they're paying a bookkeeper a lot, and then maybe they're paying a payroll company a lot. And so potentially there's some tax savings. But really it's the value conversation of this is what you could do with advisory, with someone who is looking at your specific data and advising based on that and not talking in generalities.

Marcus Dillon: Yeah. And 2017 [00:19:00] for us was that tipping point? It was our firm, which we started in 2011 through acquisition. We also made that other acquisition in 2016 of our my mentors practice and merge that in in that season. And between 2011 and 2017 when we were when we were creating the monster, um, what we actually did during that season was we referred out the bookkeeping work, we referred out the payroll work because those [00:19:30] sticky services at that time, we didn't see value in them. And in 2017 and beyond, we kind of regretted doing that, because now we had these external bookkeepers that we kind of had to work with and play nice with, that we had referred out work on existing clients, and sometimes it was just pure economics where it didn't make sense for a CPA firm to be doing that. But at the same time, it was sticky services that now we, looking back, can easily see how to grow and how to scale and [00:20:00] how to do that with, uh, different levels of employee versus very high touch, high technical work like tax and audit is typically built around as far as in those firms. So those are one of the early mistakes that we made. And we kind of had to play nice, um, in a season. And then ultimately, whether those bookkeepers or those payroll, um, companies no longer fit the model or those clients no longer fit our model, then [00:20:30] we had to make a decision to move on with the relationship.

Marcus Dillon: And so I know that the mentor, uh, his practice, what he did, he also referred out a lot of the bookkeeping work, which after the fact, after we merged all that in, it was like, man, we would have loved to have those clients and the bookkeeping work that went along with, because that's what we were building in 2017 and going down that road. So all that to say, we've made plenty of mistakes, uh, and learned from those mistakes. [00:21:00] And that's kind of why we want to have these conversations, because nobody's perfect. And when we look at where we were in 2017, what we built up to that point, and then what we built the next seven years after and continuing to build, um, we have a lot more former clients than current clients and that 95%, um, retention or conversion rate, if you will, um, is kind of shocking or eye [00:21:30] opening at the end of the day. So the last thing that I'll say about this, and we talked about that line in the sand, we actually learned that through our IT company, um, our IT company at the time was a small family.

Marcus Dillon: Lee owned business and they were more of the break fix shop. So your computer would break, your internet would break. You would have an issue, you would come in and they would fix it. Right. And so CPA's, our business was no different. [00:22:00] They these clients would come in with this problem. They needed to file a tax return and we would fix it for them. We'd put a band aid on it and then we'd go down the road. Well, what we saw happen with that IT company who ultimately became a client is they shifted to a very similar model, this all inclusive model, and they only gave their clients two options. You either go this model or you go find a new IT company. And so it was very it was very, [00:22:30] uh, bold approach. We respected them a lot for making that. And as their IT company, as their IT client, we actually made the switch and followed them down that all inclusive path. And it kind of gave us that confidence, um, in 2017 and 2016, to say, okay, if they can do it. And they survived, and we saw the results on the other side of that for them financially, it's like, hey, what's to say we can't make this change as well?

Rachel Dillon: Yeah. And you mentioned that, [00:23:00] uh, 95% of those clients went away, but not the first year, not all. At one time. That was over, uh, years of refining the client list and continuing to offer them the full service, um, accounting advisory and tax services, uh, multiple times, depending on their type of business, uh, maybe even the profitability of the tax work or whatever projects we [00:23:30] were currently doing. And so we did not cut all of them. We did not give an ultimatum to every single client year one. That was a transition that has happened, uh, actually every year since 2017. So that's that's important too. You don't want to completely turn away 95% of your revenue, um, all at one time. That is that would be a really hard truth about cats. I would say one that would be really hard to come back from if, uh, [00:24:00] if you depend on your income for your family and your team depends on your income for your for their families. Yeah.

Marcus Dillon: It's that analogy of giving blood, right? You can't give 95% of your blood and expect to make it. Um, maybe maybe you go under. And that's part of the plan. Uh, I did have somebody ask me one time, knowing what I know now, uh, would I have just sold it in 2017 and kind of started a CAS practice? Um, from from the proceeds [00:24:30] that were had from that. And for us, for my journey in this, I can say that we made the right call because we learned a lot through those transitions, and we were able to monetize and exit clients as needed throughout the relationship. So we can probably touch on that here when in a bit. When we talk about team and capacity and how much capacity there exists in the in the business and the team that you have. Um, but ultimately we did it that way. And that's kind of how, um, [00:25:00] that's kind of what led us to this point. So I would say all that, all that with clients may not and most likely will not convert. So that is a very hard truth, um, that you have to realize going into this. And that's also why you kind of have to invest in a sales approach to have new conversations with new prospects, because just going through your existing client list may be fruitful to some extent. It's not going to bear [00:25:30] all the fruit for a CAS practice.

Rachel Dillon: Yeah, for CAS, uh, messaging and strategic marketing are important so that you're bringing in the right type of clients so that your CAS business can be successful. Um, the next thing that we wanted to talk about, another hard truth about CAS are the processes and technology needed. The processes and technology for a CAS firm do not are [00:26:00] not necessarily the same or identical to a tax practice. The two can't run exactly the same. They're just different moving pieces that need to be taken into account. Um, when you're considering a Casper.

Marcus Dillon: Yeah. And even if you think back to let's go back to 2017 and before, and I know a lot of CPAs who have annual client bases will understand where we're going. But maybe you have a first [00:26:30] in first out kind of intake and work flow system, where you have clients that you'll see a few times a year, maybe just once a year. And depending on when they submit their information, it kind of goes into this pool of work. And depending on who's available to work on that project, they pull it based on this first in, first out. So it's kind of visually thinking about a file cabinet drawer and you put the incoming in, um, further in the back. And then [00:27:00] whenever kind of a client gets to the front, that's who's getting pulled and living through multiple firms that did that, including our own, uh, you may get selective and you may skip over some of those projects to go find some of the better projects that are easier to work on and kind of cherry pick some of those files. Uh, I am guilty of that myself. But, um, there's there's inherent like, just chaos could ensue with that if you did that same model for [00:27:30] a CAS ferm. Um, if you aren't proactive with CAS and aren't having regular recurring touch points with that client throughout, whether it's monthly, quarterly, or an annual CAS client, which we don't have those annual CAS clients because we do want sticky services, we do want ongoing relationships throughout the month with our clients. So, um, it does help to have the same team month after month, week after week.

Marcus Dillon: Serve that client so that the client feels [00:28:00] confident in who is working on them. And there's not knowledge lost from team member to team member. Um, so obviously that's why we do what we do. And our team of three model and kind of how we approach clients, uh, which we won't talk about too much today, but you think through just the, the overall system of that first in first out and how that could not apply to where, where most firms are going in a CAS market today. And then if you even think about like the broader scope of [00:28:30] like just technology or workflow as a whole in the, you know, in the firm, then what got you to here as far as like where we're concerned in 2017, the technology that got us to here in 2017 definitely did not carry us. From 2017 to 2024, there were investments, continued investments in technology and evaluating which technology will serve clients in an ongoing basis. Which technology allows for ongoing [00:29:00] conversation or data to be shown in new visual ways. And so those are the pieces where if you were just a break and fix type, shop what you use for your internal purposes, mainly being your tax software or your, um, kind of write up software is what I would call it. Um, back in those days, that is not what you're going to invite a client into to work with the client in a CAS relationship? [00:29:30]

Rachel Dillon: Yeah. Some of the some of the questions that we had to answer as far as processes and technology for, um, our CAS berm, what we were transforming into and what we do now, really, how will we track and monitor the frequency and the timeliness of the projects that we're doing? So of getting the financial statements out, we mentioned we get those out by the 15th of each month, or that is our target at least to get those out. So how do we control the ability to do that? [00:30:00] Which also leads to how do we access client data. How does the team access client communication so they know what's been said to the client, what's been communicated, what's been asked, all of those types of things, and then how are the team members assigned work. So we set up a team of three model. We have plenty of episodes, webinars that you can go back and listen to. If you haven't heard about the team of three model and what that looks like in a CAS ferm, [00:30:30] but these were some of the questions that we had to ask. Because if if I'm telling a prospect that we're going to meet with them quarterly and we're going to, they're going to know their financial position every month, every single month, they're always going to have current access to current financial statements. Then I need to ensure that the team is able to do that and then that the team is doing that. So those were just some of the things that we had to make sure of [00:31:00] that were a little bit different than what it looked like for just tax projects.

Marcus Dillon: Yeah. And the as far as the bar, the bar has been lowered the further we go down the technology rabbit hole, um, if you will, today versus back. A decade ago. So making sure we have anytime, anywhere access with clients if they're not on the right. Accounting software system. They're just not a good fit for us at that point. [00:31:30] And much like we would try to convert clients from an annual client to a monthly CAS client, sometimes you can't convert a client and their accounting software. Sometimes they are just too deep or it is too industry specific. And as a firm, as a as a firm leader, you have to decide whether you're going to do this one off engagement or if you're really going to invest and grow in that type of industry or with that type of client. And so those are the things that [00:32:00] we look at. Obviously, for us, we, uh, are a qbo home. Um, we kind of make sure that everything for the client is within qbo, uh, if they use it or not. So some of our clients never log into Qbo, but they have access to. And it's just the nature of their practice or their business. They may rely on our team giving them information about what their GL is, their GL home, and then they rely internally on like their practice management software, which [00:32:30] kind of is really drives their day to day in their business from a production and collection standpoint and everything like that.

Marcus Dillon: So, um, that's how we kind of serve our client base. And then we have others that, you know, fully use all functionality of Qbo or majority of it with R, AP, all the fun stuff. And then you've got another challenge because you've got another set of, uh, hands and eyes in the books throughout the month. And sometimes you, uh, you see that as a challenge. So one [00:33:00] of those just that's where we've kind of felt really called to lean into, um, is how we how we work alongside our client and make sure that we are answering questions and having good conversation throughout the month. Um, the last thing that I would say as far as just technology and maybe some of those processes too, um, that are built on old technology, um, you have to be very careful and aware that you are continuing to evolve as a firm and [00:33:30] that you're just not hoarding old software. And whenever you look at how how firms grow and how they go out and purchase new pieces of software and have all the high hopes for it, and then they integrate only a fraction of that software.

Marcus Dillon: Um, you may become a hoarder at some point, and you may have to evaluate kind of your software cost or your dues and subscriptions, depending on where you track that. And I would encourage anybody just to make sure that you've always [00:34:00] got your software cost, your total percentage, um, in mind as far as a budget item for your firm and where we're at today, as far as the different firms that we see, uh, we would assume most would be 8 to 12%, um, for the most part, in that technology range for software budget, um, some may be lower just because of the different variables, some may be higher because their revenue just isn't high and they're trying to build some [00:34:30] cool things out. So, um, but really that 10% rule is where I would think most firms fall plus or -2%. So, um, but yeah, I would just encourage you, if you're listening to this and you think back a few years and you're like, we, we have evolved so much as far as the software that we use on a day to day or week to week basis. But why are we still paying for the old stuff? Um, maybe maybe it's time to go clean house.

Rachel Dillon: And so really, the last thing that I would say or add in to [00:35:00] the technology part of this conversation, and it's hard for us to remember we've been doing it so long, but we want to make sure in a case firm that we are setting up ACH with automatic recurring payments we don't want to wait for after the fact where somebody has to, um, submit for us to be paid or write a check or call with a credit card number or something like that, paying after the fact every single month. That would be cumbersome to have to track down payments [00:35:30] that maybe don't get paid on time or don't get paid at all, versus in a tax practice. If it's an annual project, that's not something that's as big of a deal because it's only one time of year. While the volume may be high, I remember and personally did have to call and track those down when they didn't get paid. Uh, it's a much, much better model. Uh, much easier on us, for sure, of having that automatic recurring payment that we kind of control. [00:36:00] And if something happens as far as with that payment method, we know immediately and can, uh, you know, kind of ask the client what's going on.

Marcus Dillon: Yeah. And that's a that's a great point where there's tools out there like ignition. There's other softwares that do that for you, where you send an engagement letter. There's a merchant service piece on the other side of it, and it kind of has this recurring payment aspect. There is an annual recurring payment. You get paid on the front end or it's a monthly deal. Um, it just kind of goes in [00:36:30] line with the services that you offer, but would always recommend you being able to control your cash flow. And it also that comes up so many times with um, CFO clients that we advise is as cash becomes an issue within a client's business. And then we look at are and see all this old are that they aren't collecting, but they're still incurring expenses, whether it's team or hard cost to to do that work. It's just [00:37:00] it's that option to start getting paid in advance or more timely. And so whenever you think about your CPA firm and Cass, you are doing these services throughout the year. So you have to get paid timely. And it's not it's not an option to not do that. And I've spent some time dissecting our financials over the last few weeks and, um, just kind of even went back to 2017 and what that year was. And, um, it was a great [00:37:30] year from a revenue standpoint. We did over $1 million prior to April 15th. Um, 80% of that was tax. Go figure. Um, but in that million dollar year or beginning of the year, we only finished the year around 2 million. So we collected $1 million prior or we invoiced. Let me say that right. We invoiced prior to April 15th $1 million.

Marcus Dillon: And then the remaining almost eight months, we just only [00:38:00] did another million dollars. So and then looking at, you know, if we had $1 million in sales, that means we had $1 million in the bank, right? And that was not the case. We only had, I think it was about 3 or 400,000in the bank, and then we had 3 or 400,000 in are at that time. So it was just it was not a great approach. We weren't proactive as we are today back then. And so those are the things that you just kind of think about. And um, yeah, $1 million prior to April 15th, something that [00:38:30] it came with a lot of scars, a lot of baggage, and a lot of, uh, wounds that have healed over the last seven years. But, um, are is a tricky, tricky thing. And you need to make sure that you stay on top of it. So that weaves right into our third point, which is really management style. So one of the other really hard truths about Cass is just the management style. And so if you are a leader in a CPA firm and you want to approach Cass and [00:39:00] you feel called to do that, just realize that the way you manage your firm as a tax or kind of annual shop will be completely different as a Cass practice. So whenever we look at management style, there are a lot of different things to weave in. Obviously, we already touched on, you know, how you invoice, how you have some of those sales conversations, but what else did we see over the last seven years? And really looking at management style, uh, what were some of those hard lessons that we learned?

Rachel Dillon: So one of the things was. [00:39:30] Depending on how many people hold the relationship within the firm. So how many team members hold relationships with clients in the firm? If only the owner is the main point of the relationship, there is always going to be a capacity issue. So we have to make sure in a case firm, there are multiple projects for every client that need to be done, some on a monthly basis, some on a quarterly, [00:40:00] some on an annual. That means the owner cannot be the end all be all to every single client. We have to hire and then empower our team, um, to work with the client to deliver the information, to have conversations, to have relationship, we have to trust our team so that we can serve clients. If not, the practice isn't scalable, so you're not really better off one way or the other. You're just kind of trading things [00:40:30] back and forth and you're still, as the owner, busy and overwhelmed and unable to get away from the firm ever. Because there's always going to be a client or a team member that needs you. So definitely hiring the right people, um, and then training them and allowing them to build relationships with the clients themselves rather than having to go through someone else all the time.

Marcus Dillon: Yeah, that was definitely something that we had to learn early on. [00:41:00] And so the different management styles with Cass leaning into that obviously was something that we took and embraced and being able to, I guess, elevate and think through whether it's a client relationship or even a team member relationship internally. Um, you only have so much that you can give to everybody. And whether or not you try to limit your number of clients that you work with or your team size, maybe you [00:41:30] feel called to just only work with a team of X number of people. Um, either way, something that we've kind of learned and latched on to here recently is, um, Andy Stanley. He kind of talks a lot about due for some, which you wish you could do for many. And that doesn't mean that you just become so, uh, disconnected or autonomous that you don't work in work or pour into clients or team members, but maybe you just have a select few that you [00:42:00] work with and you go deep with. And by elevating those client relationships or elevating those even leaders on your team, it's amazing how far that will go throughout the organization and other relationships to to grow your firm or just become more profitable without it all relying on you as the owner. Which CPA firms are, are so notorious, uh, for for having the partners in those firms being the highest production entity, [00:42:30] if you will. Um, and that's something that just isn't attractive to us. Uh, that's what we built prior to 2017, no doubt. But we kind of had to quickly change the model, including the management style of how we embraced others versus just ourselves.

Rachel Dillon: Yeah. And then just talking a little bit more on that team the team needed. So in a, um, traditional tax practice, you, [00:43:00] you need some people who can prepare tax returns, some people who can review tax returns. Sometimes the reviewers are the same ones that are, um, relaying that information to the clients or answering client questions. And so that looks a little bit different. Uh, when you look at bookkeeping and payroll, these are not necessarily the same skill set required. Um, as, say, someone who is a tax preparer, reviewer, tax manager, something [00:43:30] like that. So a little bit different skill set that's needed. And financially you probably don't want to hire someone who, um, has the credentials and the skill set to do. Tax manager and above work, um, to maybe do some day in and day out bookkeeping or payroll tasks. So that's something else. Is that just your team makeup? There may be some. There will be. There will be some different positions needed that [00:44:00] you may not already have in your firm. There may be people in your firm doing other things that could fill those positions, and then there could be some positions, um, that again, they get a different role or list of responsibilities based on what's needed and how they're going to work with the client in an advisory firm.

Marcus Dillon: Yeah. And whenever we go back, even for our journey, and we look at the the family photos from year to year, where [00:44:30] it's, we've taken shots for Christmas cards that we sent to clients, and we used to physically mail Christmas cards to all of our clients, even in those 2000, um, different project years. And man, postage and Vistaprint during that time was a very real thing. Um, but I look back at those family group shots and it's special to do that because you kind of take into account all the different people that helped you build the business and where you were in that, in that stage [00:45:00] of life as far as the business was concerned, or maybe even personally as well. And so, um, it's something that it's easy for me and probably most owners to connect with. It was like, oh, when that person was here, man, I just, I remember we were doing this all wrong and we were doing this right. And so, um, if you haven't done that in a while as a firm leader, maybe it's time to go do it and see how far you've come since those, uh, since those times. But in doing so, we've always kind of maintained the same [00:45:30] size of team, and that was on purpose during the evolution from these annual client relationships to more of a high touch point cash practice. Um, we knew that less than 20 people was kind of what we wanted to manage as far as like just number of relationships and things that we had, uh, in mind. And so whenever we looked at that and even compare ourselves with number of clients, revenue, team size did not change that much. But just because our [00:46:00] number of FTEs did not change, maybe the cost of those FTEs, the payroll burden from a month to month, or payroll to payroll did change because maybe we had someone so high technical that was on the team.

Marcus Dillon: And then over time, we shifted more to a base level employee to where they can come in and do great work at a lower price point than that technical person could. And we see this opportunity [00:46:30] now with other accounting firms doing this with outsource with different contractor relationships. And if if you feel that you can only get things done with people who are CPAs or credentialed in some aspect, you're thinking about this all wrong and missing a huge opportunity because we're we're at what I've learned over these last 13, 14 years is sometimes the person without a college degree and all the street smarts in the world [00:47:00] can outperform the CPA that has the book smarts as far as when Cass is concerned. And so, um, that's just something to think through. And we're going to continue to pay well and do what we can to kind of make sure that the team member is compensated and killing it from that perspective, if they're doing great work here. But I would say, like we were able to make that shift and know that team members would [00:47:30] would have to change or evolve. And you take something, for example, um, such as we no longer have an audit practice, but we had someone that kind of managed the audit practice back before it was no longer a thing. And that person is not here today. And it's just how do how do you continue to evolve your team list, whether or not you feel that the number of team members you're called to serve is changing?

Rachel Dillon: Yeah. [00:48:00] So to wrap up everything that we've said, we probably could have said it in one sentence. The hard truth about CAS is change is required. You're changing your firm, the model of your firm, the services offered in your firm. So with that, changes are required. So whether it's the client makeup or your processes maybe aren't effective in a advisory setting, um, technology might not [00:48:30] be sufficient to, um, transition with you into offering advisory services. There's a lot of things to think about, but the one thing to remember is that it's not going to look the same as it currently does in your firm today. If you're adding or changing, um, to include client advisory services.

Marcus Dillon: Yeah. Now you summed it up well. So those are the four big points. I'm sure there's a lot that we didn't really speak on, but given our experience, like those [00:49:00] are the the four things to watch out for for sure.

Rachel Dillon: All right. This has been a good conversation. Hopefully we didn't scare anyone away out of offering advisory services, but I think sometimes the picture is painted of either this is the best way to go or the only way to go, and we just want people to go into it with eyes wide open and knowing what to expect. Thanks for hanging with us to the end of another episode. Leave us a review with your thoughts, comments, and feedback on Apple [00:49:30] Podcasts or Spotify. Be sure to subscribe to our podcast so you don't miss any future episodes. Join us again next week for another great conversation.