Who's Really the BOSS?

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

Rachel Dillon: Welcome to Who's Really the Boss podcast. I'm Rachel Dillon, and along with my husband, Marcus Dillon, we share the joys and challenges of leading a $3 million accounting firm together. From team structure to growth strategies, we share our leadership successes and failures so you can avoid the mistakes we have made and grow a valuable accounting firm.

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: We are getting into the recording just before February, so we survived January, the team at Dillon Business Advisors and Collective, but Dillon Business Advisors survived January, and all that comes with year end financials to 99 and starting and pushing out some tax returns to clients so that [00:01:00] we were really thankful for their work and effort, but also, um, really impressed by the amount that they were able to get done and having those tax returns already going out to clients.

Marcus Dillon: Yeah, team. Team is solid. Um, you know, we're we're trying to throw curve balls at them as much as we can. They're dodging those as best they can and works going out and clients are being served, which is great. So couldn't ask for a, you know, a more, I guess, successful January to get the whole [00:01:30] year off to the right start. And, um, part of what we were telling the team from the very beginning, even like in retreat last year, all the way through where we're at today, do do what you can, what's in your control on a daily basis, because, you know, as we continue to grow into 2025 and go down this path, like you just never know what could land, um, in your inbox or on, you know, a variable on a certain day. But if you can control it, you can schedule it, you can get it done. [00:02:00] And we have a lot of planners on our team. So they're trying to tackle what they can whenever they can. So January is a good time to kind of get a good start going.

Rachel Dillon: All right. Let's give our girls our daughters update real quick.

Marcus Dillon: Yeah. So both are still alive. Um, one that our oldest actually, you know, she went back to college. Um, I'm sure a lot of, you know, our listeners and friends who have, um, [00:02:30] children in college, I don't remember scheduling of classes being as big of a deal as it is with this daughter. Um, I never dropped a class. I always went to what I was able to. I had my schedule months in advance. I remember going to a phone bank to set my schedule and doing that, and how antiquated that process was. But dropping classes, all the fun stuff, like you got 15 hours? No, it's 14 now. While you're back down to 12, you need to add a class [00:03:00] like what in the world is going on? So that's fun. That's what we're navigating right now. That same daughter, Kinley, who's at Baylor, she had a big, big goal of, uh, joining a sorority that a lot of her friends are in. And so she was able to get initiated and go through that whole path. So she is now a Chi Omega, which we have no idea what that really means or looks like other than we just now saw a, um, a dos, um, you know, email come across. And our deal with her [00:03:30] was, hey, if you want to be in this organization, you're going to have to pay for it. But come to find out, dues are only part of the cost of joining a sorority, so that's always fun.

Rachel Dillon: I think we I think we knew that part. But just to give people a heads up, if they're unsure, um, for Kinley, I think we got out relatively good in that Baylor Chi Omega dues are only about $1,300 a year, so that's good that she only has that amount [00:04:00] and she sent us that cost. But I told her two years ago if she wanted to do that, that was on her to do. Now for us where we get sucked in is when she needs the new outfits or the gifts for whatever friends or, I don't know, whatever event they have coming up. I feel like we get roped into paying for those types of things, but the dues, um, we [00:04:30] held true so far that she still has to come up with that. So thankfully it's about $1,300. No, I don't think that that's how I would spend my money, but I know that at other universities it's very different. Um, the dues are much higher than that. And she said the reason that their dues are a little lower is because they don't have sorority houses on campus, no fraternity or sorority Houses for their school, so that keeps their dues a little bit lower. [00:05:00] Yeah.

Marcus Dillon: So she's excited about that. Um, you know, give an update on Avery, the high school senior that's finishing out her, um, last year, you know, at home and all the fun stuff she's actually entering into, um, her final, like, swim events. Right? So it would be, um, district is this week, then regionals, then state, and then she'll be done from, uh, high school swim career standpoint and really just, um, you know, doing her club swim stuff, finishing the year [00:05:30] out well academically and getting prepared to move to Fort Worth, you know, to TCU and, and I guess August or September.

Rachel Dillon: Yeah. So let's we'll go with what's recent for us or what's current for us.

Marcus Dillon: So we had shared obviously a while back as we look for opportunities within DBA for team members. Part of it just comes down to we need to grow a little bit, and the way we do that is both organically [00:06:00] and inorganically. And so inorganic growth meant acquisition. Um, we always get the emails. I actually enjoy it. Um, to go through another firm's financials and see, you know, what they're doing, maybe something that I can learn in the process. Evaluate them, judge them. You know, if you will. Um, but I always get the broker emails, always dig in. And we started evaluating a firm here close to us in the Houston market. It was about a $900,000 acquisition. [00:06:30] I actually knew, um, the CPA after kind of was the blindfold came off of whose firm it was, and an introduction was made and it just wasn't a good fit. The client mix, the culture, the team that was in place, even though it was a really good revenue base and close to home, um, just too much like too much variety of two, different from who we are and what we do on an ongoing basis. So that one passed. Um, [00:07:00] and then the opportunity came along. Um, heard through a friend that another friend of ours was evaluating his next chapter.

Marcus Dillon: Um, so actually reached out to him after I learned that and just said, hey, man, like, let me know how I can help. We may be, you know, in the market for an acquisition in the near future. Um, if you just need anything, just let me know. I mean, we've done, you know, up to this point for acquisitions and a lot of divestures. So we kind of know both sides, but I [00:07:30] just wanted to be there as a resource for for him. Um, fast forward, we started talking. We started seeing what that could look like for, you know, him to ultimately sell his firm to DBA and, um, you know, we care for his team moving forward and his clients and, um, kind of plant in a new market, if you will. So that's, uh, that's where we ended up and we ultimately acquired that firm and are merging them in in 2025. And to [00:08:00] our surprise, we're doing that all at the end of January. You know, early February, we're welcoming a couple of new team members and a whole host of new clients. But there's a variety of reasons we'll get into why this deal. Um, and I hate to even say deal like why this, um, merger made a lot of sense.

Rachel Dillon: Yeah. And you really, um, just your natural curiosity, your natural interest [00:08:30] in what's going on in the market. You've been looking at firms for a really long time as far as just considering what's out there. We originally acquired a block of clients to start, um, Dillon Business Advisors, obviously under another name way back when. But Dillon Business Advisors, by finding a firm that was ready to sell, [00:09:00] the owner was ready to retire. And so what are some ways I know you mentioned something about getting an email or seeing something on a broker site. What do you do to stay current? Like how are you actually, what are you signed up for to hear about these deals and get these opportunities?

Marcus Dillon: Yeah, there's all kind of brokers out there and they're and they're multiplying. So, um, we're entering a market where M&A and accounting and tax is pretty, you know, heavy. You have a lot of outsiders [00:09:30] that are now getting into this space that aren't, you know, CPAs or industry peers. You have a lot of just investors or people that are told, hey, go buy a boring business. And by the way, a CPA firm is a boring business or an accounting firm because you would not be able to call it a CPA firm after you bought it if you're not a CPA. So, um, but yeah, there's all the brokers write apps po group. Um, just different ones. And there's now databases and websites that you can subscribe to. I'd be [00:10:00] real careful about that. Um, a lot of the stuff that I've seen, I've never bought a firm or acquired a firm off of the broker side or a list, but we have sold a firm, or we've sold a block of clients with a broker, uh, one time, and then that same firm bought some additional clients from us the next year. So there's legitimate, you know, transactions that occur there. What I've seen is if [00:10:30] they're there, they've already been passed over by somebody else. And even the block of clients that we listed with a broker had been passed over by two other CPAs that we went to first because they were at capacity. And it wasn't like, this is a bad list or anything, but it was, hey, it's just somebody else had the opportunity before it actually went to a broker, because a broker is going to charge a brokerage fee, right.

Marcus Dillon: And it's going to be anywhere from a flat amount, um, you know, upwards of 20,000 to a [00:11:00] percentage of the sale. And that could range anywhere from 4 to 10% given the size of the client block or the sale. So, um, if you're able to source some of these acquisitions in different ways, you totally can. And obviously it's helpful to know your peers kind of have very candid conversations, like, what's your succession plan? Like what's going on? And then when you hear of an opportunity like we did back in November, it's like, hey, you know, Greg's a great guy. Like, let me talk to Greg and see, like, [00:11:30] hey, are you like first? Like, are you good? Like what? What's going on? Like, fill me in and then, hey, like, is there an opportunity here? So that's kind of how that one organically went. But you know, back in 2011, 2010, the first acquisition we did like I grew frustrated with those broker websites and lists and actually pinned. Ah, I don't know how many letters at that time, um, to firms that were located [00:12:00] in areas where we wanted to plant, where we wanted to live, and where we wanted to own a business. Katy, Texas was one of those locations. It wasn't too far from home. Um, out of all the letters I sent out and prayed over and they got into the right hands, I think it was like 50 to 60 firms at that time, and I sent them out while I work for somebody else, you know, during tax season, because I wanted somebody else to receive that during tax season and then them to think, maybe this is the last year I have to do it tax season.

Marcus Dillon: So those letters, you know, got me job offers. [00:12:30] They got me offers to buy firms. Ultimately we chose one firm out of those. So we got responses to like 6 or 7 of those letters. Fast forward you know, 13, 14 years. We're still looking at additional acquisitions. We would love to be in the Dallas Fort Worth market, um, in the near future. We think that's really, um, a strategic goal of ours. And at the end of last year, at the beginning of this year, I did that same exercise where I sent out letters to [00:13:00] about 100 firm owners, um, in the Fort Worth Dallas market. And we've already gotten responses from like 3 or 4, because that stands out compared to the email from a random investor in New York or some person who's never owned a firm. Um, that hey, you want to sell your business to me? Like, you have no idea what it takes to run an accounting firm, but we do. And I think that's what stands out to people. I had a really good call with somebody this week about. [00:13:30] Hey, I got your letter. Would love to talk. It's a $2.5 million firm. Like it's going to be a big one, but we'll just see where it goes. We'll keep having conversations. We'll talk through what that means. And yeah, it's just turnover rocks everywhere you can. There's probably some opportunity within there.

Rachel Dillon: Well please don't tell that $2.5 million firm that you penned a letter. Because I was gonna tell you. Why don't you show our age and say how you contacted that first group of firm [00:14:00] owners for a potential opportunity to sell to this young guy?

Marcus Dillon: And you.

Rachel Dillon: Said penned a letter, and I'm.

Marcus Dillon: Like, yeah, I didn't, like, pull out my quill pen and ink.

Rachel Dillon: Uh, we actually had a computer and a printer. You printed them out, signed it, and then physically put it in the mail. I love, though, that we totally went back to that strategy again in 2025.

Marcus Dillon: You gotta you gotta stand out. That's the only way. Like. [00:14:30]

Rachel Dillon: Well, yeah, because in 2011, we were just kind of on that end of everything that comes in the mail is like junk mail. You just throw like it was shortly after that where almost everything you're like pushing it away because now everything's going paperless and everything. If it's important enough, it'll get to your email. Now we're in email deleting everything because everything in email is junk. So if it actually comes physical envelope in the mail, you kind of look twice at it before you toss [00:15:00] it in the trash. So especially this time of year when tax documents are coming through, right? You don't throw anything away right.

Marcus Dillon: Now, before we go more into this deal and talk more like we're even, we're currently looking at different homes in the Fort Worth market. Right. And we did that same thing. I didn't know.

Rachel Dillon: You were going to share.

Marcus Dillon: Just maybe maybe you're listening. Who knows? Um, but we actually wrote letters to a couple of homes that we like, and they're not on the market, but it's a neighborhood we like. We like the outside of the [00:15:30] home. We have seen pictures from a previous sale of the inside of the home. So we wrote letters to both of those addresses. And it was your idea. It was like, well, we have some extra Christmas cards, put our family Christmas card in that letter and send it to him that way. And it's like, I don't know, maybe those people will reach out. They haven't yet. Um, but it's like those people are weird. They sent us a Christmas card, like begging us to sell them our home. And it's like, you never know, you might hit someone connected to.

Rachel Dillon: The one on [00:16:00] LinkedIn. And after we sent the letter, he did connect and respond to you.

Marcus Dillon: But then he probably put two and two together. And he's like this. This is getting way too weird. I'm not. I gotta cut this off.

Rachel Dillon: This guy is creepy. All right, so that's a little bit about how we even are finding opportunities or potentially making our own opportunities, um, if you will. And so I think a biggest part should be the biggest part of [00:16:30] acquiring or merging is going to be due diligence. So let's talk through what was most important to you, what boxes have to be checked for you to continue exploring an opportunity.

Marcus Dillon: Yeah, and I'm by no means like, for those of you all that know me like I'm not a details guy, 80% is good with me. Um, but I do have when I'm paying attention and really trying to listen [00:17:00] and understand what's going on. You have to listen to what's going on, pray about it, discern it, you know. But listening is key. So in the conversations with our friend Greg, it was it was really listening to where he was getting excited. Like what gave him passion, what gave him hope for the future and leaning into that. So part of what he was sharing, just in talking, was some of the stuff that was going on in the firm. And I'm, you know, mentally making notes of, okay, this is going on. We need to pay attention to that. We need to address [00:17:30] it both, both from a client standpoint, a team member standpoint, and then just other stuff that is going on in accounting today. Right. Like just a lot of variables, you know, that to kind of keep up with. So he wanted to pursue a new chapter in his career and wanted to move actually pretty quick. So I saw that like, hey, as an opportunity, like, can we structure this deal the right way where it makes sense for both sides, de-risk? Um, dba's, you know, really effort as much as possible [00:18:00] because this isn't a completely new market. Saint Louis, we are not living in Saint Louis. So it's one of those where, um, we, you know, have goals to kind of reshape what that could look like.

Marcus Dillon: Um, and see, you know, just some additional opportunities in that market. But as far as, like a brick and mortar going into an office every day, firm like that's just not DBA. So as part of due diligence, I needed to pay attention to what really what was so [00:18:30] outside of like our culture and what we built here and pay attention to that. And is it is it big enough to concern ourselves with, or is it something that we can easily get over, or is it something that we're going to have to work on on the other side of transaction to really improve. So yeah, like moving more to a remote first organization is not something that DBA is going to budge on. Right. And then the other thing is getting some clarity, due diligence wise or around like what's the client makeup? What are their services, what [00:19:00] are their consistency, touch point, things like that. Now the reason the other reason why we got really excited after this started to really become a reality is because what they do or what they did now, what we do, um, is very similar to what DBA has done for the last 4 or 5 years, you know, with Cass and just some additional tax work and things like that, but some opportunity there, um, both with annual clients and some quarterly or monthly clients to move into a different service [00:19:30] level. So, um, you know, it's about 55% Cass, 45% tax, um, about 100 family relationships of tho the of the of the 22 family relationships one through 22.

Marcus Dillon: That accounts for 82% of the revenue. So I go in and I focus on those 22 clients. And, you know, if 18% of the rest don't, you know, don't really assimilate, well, [00:20:00] then we're just trying to capture, you know, a majority, if you will, and really serve people really well. Leave them with great options. So and we'll continue to assess, just like we did in other other chapters of life. Like if DBA is not the best fit for some of these people long term, what other options exist and what other options at local firms? Kind of how we've done some other divestitures. So that's also an option down the road. We're not immediately taking that, but I just think that you have to go into this ready to roll your sleeves [00:20:30] up, ready to really look at what options exist. Due diligence. We did dig into like the numbers. Even though I know him pretty well, I still requested bank statements, tax returns. We're all accountants, you know, so stuff should make sense. Um, there's everything was in line. So you start getting some of those questions answered, and then, um, the due diligence just kind of starts to fall into place, I would say, like we did not do like a quality of earnings or anything [00:21:00] like that. Contact clients. We felt like that would be overstepping their bounds there. So but yeah, that's that's kind of where we're at. That's the base of what we did. And that's the minimum what I would recommend anybody else do.

Rachel Dillon: Yeah. So you mentioned bank statements. You mentioned tax returns. Um obviously financials are provided fairly upfront. Is that something that's expected as soon as someone kind of raises their hand and says, I'm ready to put my business?

Marcus Dillon: I just kept asking for stuff. [00:21:30] He never said no. And that was, you know, if something would have been, hey, I'm not giving you that, then that could have been a red flag, right? You know, so, um, something for for us DBAs built around MRR, right? So monthly recurring revenue is the lifeblood of all businesses. And CPA firms still like annual annual revenue. So for us, we definitely needed a month by month PNL to know which months would be investments back in the business, which months would be excess cash flow, and kind [00:22:00] of hopefully that aligns with our, um, our thesis on why this is a good deal or not. But yeah, I looked at it rolling 12 then as we got closer to the end of the year, looked at it, you know, just by year, just made sure everything made sense with what we have learned to know throughout the process about what was going on with both team members and clients. And obviously, you know, Greg's pursuit of his next chapter.

Rachel Dillon: So do you remember what you requested to be able to rank those clients, like [00:22:30] highest revenue per client to maybe lowest?

Marcus Dillon: Yeah. So, um, what I did, Once you subscribe to those broker websites and what you get like some of those, you know, CPA firm profiles, I had Greg fill that out. Right. And I just I removed all the other stuff from another firm I just recently evaluated. And I sent it over to him and I said, hey, fill this out. There's just some general questions. You know, you put numbers in here. Owner hours worked. [00:23:00] Um, average price per ten, 40 per business return per monthly client, quarterly client, annual client. You know, just different things that would help us make sense if this is going to be a good deal. That was that was step one, you know, and I would say, um, the other thing to pay attention to is if he would have taken weeks or a month or something to put that together, I would that would have told me something, you know, like, hey, he's not really this serious about it. I may back off or go look for something different, um, depending [00:23:30] on our timeline. So, um, but yeah, I just started there. I mean, if y'all need a template, I can give you one. Just email me. Uh, and I'll remove everything needed if you don't want to contact a broker for it, but, um. But. Yeah. And then the thing that I'm excited about with this and the last time we did an acquisition was in 2016.

Marcus Dillon: It was my mentor Tom's practice, uh, which we still have some of those clients we have we don't have any of those team members any longer. We just look a lot different than we did the last time we did an acquisition. [00:24:00] And part of this is the team that we have surrounding us, like both from a leadership perspective and just an operational perspective. So Amy McCarty, our director of operations, is crucial to this success of this, uh, acquisition. Amy knows all the different software pieces in and out. And so she was able to request certain things really out of their practice management, which is practices. And we were able to pull write [00:24:30] ups, write downs, time spent per client. We grouped them by client family we knew going into this with the remaining clients, how many hours were worked historically year over year, the the price point that those clients are in and how much profit was there from a right up, right down. You know, so utilization and that's what we use to plan around. So we looked at existing capacity within DBA. Started to look at the team that was going to be coming over as well. And you know [00:25:00] that's ultimately what led us to go like, hey, probably need to go hire the next client controller if we're really going to move forward with this, because one, we're going to need some additional bandwidth.

Marcus Dillon: But then two, given our growth trajectory hopes for 2025, our goals, um, we just we're going to have to have somebody and add somebody. So that's those are the pieces that kind of put into play. Um, the other team member that we are so fortunate to have on our side, he's a new he's a new win and a new hire is Angel Sabino, [00:25:30] our director of technology. So Angel is critical in taking all the data and all the programs in assimilating those into our tech stack, right. And so we are starting with this known, you know, seller and a smaller team with a couple of team members and a smaller client list of 100 clients. And we're integrating it really as a test to see what the next one could look like and how we can improve upon it, how we can tell [00:26:00] our story to others that are interested in M&A, both from a sales perspective and a buying perspective, just to help others. But then also, is there an opportunity for DBA to do another one in the near future or future? Maybe. And it'll be better because of what we've learned in this one.

Rachel Dillon: Yeah. I'm glad you brought up Amy. She, you and Amy probably did much 99% of the due diligence, right? You two together? [00:26:30] Not. Not me. Um. And then Angel as well. Very integral in the making sure everything works. And Amy has a very deep knowledge of all Thompson products, but so does Angel has experience with Thompson products as well because we were on practices when he was our MSP way back. So there's ultra techs, um, even file cabinet at that time. But getting our new team members, um, [00:27:00] they even helped with that setup and making sure all of that data populated way back when he, um, had his own MSP and wasn't working directly for DBA. So the two of them really make this a possibility, especially a possibility in January or February, because we still have techs work that we need to do. So that's even though we don't have what we not 2400 tax returns, we still have tax work that needs to get done. This new [00:27:30] firm has tax work that needs to get done. And so the three of you really taking a hard look, a critical look at what we were actually getting, I think that, um, I was just the negative voice in like saying all asking the questions about all of the things that could go wrong. So you mentioned Tom's, uh, our acquisition of Tom's business back. And so those were my questions of how because we are remote and because [00:28:00] all of our clients, with the exception of three, are digital.

Rachel Dillon: So digital delivery of documents and delivery of completed either financials or tax returns either way. And so really that was my question. How many of these clients are physical need a physical location to drop off or pick up or meet with someone? Yeah. How many meet with only um, [00:28:30] the owner like the main relationship. Point of contact is the owner, because that those were two things that were. I think we didn't pay enough attention to in 2016 of how much time we would need to invest to try to win that relationship or build a relationship outside of the previous owner. And what we found there was that that was much harder [00:29:00] than we anticipated and caused, um, it caused a lot of, I'll say, people, not dissatisfaction, but almost. And that's what it collateral damage. Yeah. The our team felt like we can't do enough. We're not doing anything to make these clients happy. But all of our clients are happy and we're doing the same. So that's where we couldn't figure out, you know, what that was. So that that was more of my questions of [00:29:30] Ah, these are the clients able to work with remote team members and provide documentation remotely. And is the owner the main relationship holder for especially like the top 25 clients?

Marcus Dillon: Yeah. So yeah, all great points. You were definitely a voice of reason, a voice of pause. I get excited really fast and make decisions really quick based on gut a lot of times. [00:30:00] Um, I felt, you know, connection to Greg just knowing him as a friend for years. A lot of similarities and, you know, like, attracts like. So Greg, you know, believes in a lot of the same stuff we do is how he lives his life and his values and his faith. And in doing so, he attracts people that are probably similar to him. We all do. You know, you kind of have this where you attract people that are a little bit of a mirror, um, to you and a reflection of you. So his team members, um, we got to meet them And [00:30:30] they were they were great people and same with clients. We were excited because, you know, it's if somebody was not aligned, then it's likely that they wouldn't be on the roster, both from a client perspective or from a team member perspective. Hopefully not always the case, but hopefully so. Cultures somewhat aligned. The only part of cultures was really that remote first versus not remote first. Um, the piece there is one of the team members that is [00:31:00] coming over is the CSM. She currently works as a hybrid setup. She wants to work more remotely, which is great. We can help her to do that and help, you know, put some things in place to achieve that. The other team member that's coming over is a tax administrator. That tax administrator does work in office every day, which is okay for the near term because, you know, like you said, you may have some clients that still pop in and do some stuff, but those are the only two team members.

Marcus Dillon: Um, we did ask [00:31:30] as part of due diligence, like which of these clients, you know, ranked the 100 family groups, like who has been to the office in the last 12 months. So we knew that. And it was about like even Greg said, like, there's more yeses that they visited the office than I would have thought. And maybe they weren't even there visiting with Greg. Right. You know, so I think that's the other piece where, um, we would just have to dig in, but I can tell you, like, of those, you know, the [00:32:00] 82% revenue base of clients, it's kind of mixed. It's not everybody comes in the office. And just like we do at DBA, like our 82% that currently makes up DB, DBA, like, those clients aren't the ones that come to the office. The ones that come to the office are the people that you keep around, because maybe they have a special place in your heart or something, you know. But it's not not the business owners, not the people that view time is their most precious commodity. They figure [00:32:30] out how to get your stuff or talk to you in different ways. So yeah, that's that's something we learn. But we're going to have to move pretty quickly on this given tax season and everything that goes along with to do that really well. The team member we're bringing in, Tiffany, will actually, uh, part of her role in the very beginning will be, you know, helping us get through just some of those filings and some of the deadlines.

Marcus Dillon: So while it's not what we would consider like DBA structured work [00:33:00] initially, we just have to serve people and get them right. And then after tax season really begin to assess where there's opportunity, where there's movement. We've already built out the pod where, um, you know, essentially Heather and Tiffany will be and who will be in that pod with them eventually long term. And what a 2025 2026 outlook looks like as far as org chart and how we move to that. So all of that, you know, to build around like as [00:33:30] we continue to assess opportunities within DBA and grow. Um, we felt an acquisition was a was a way to kind of fill up, um, opportunity for people. And one of the one of the things that we really wanted to set out was we didn't want the DBA culture to dilute too much, both from a client or a team member perspective. So it had to be the right size acquisition. Um, we said from the very beginning it had to be under a million. Um, this is only about a 20% [00:34:00] acquisition. Whenever you look at DBA, it'll add about, you know, 600,000, 500, 600,000 at the end of the day, which it's 15 to 20% of our total revenue. So and only bringing on a couple of team members. So just not not like we're ready to absorb that $2.5 million firm with 20 team members. Like that would be a bigger lift. Um, so there's going to be a lot of learning in this, and I'm excited. As [00:34:30] long as we survive, I get to share the share the journey with everybody.

Rachel Dillon: So we talked about or you started talking about kind of assimilating this new business into DBA and looking at kind of what's happening first. The first thing that is really important to us and why this was strategic in size, in technologies used, in services provided, and then very importantly in values [00:35:00] was to make sure that DBA doesn't get diluted, which sounds like extreme or harsh, but to make sure that DBA, the culture, the structure, the everything that we know doesn't get diluted into something else. So something that I think is very important to all of us and something that we're taking action on immediately, is assimilating this firm into DBA and not running it as [00:35:30] two separate businesses, even though that would be easiest given, especially given that we're going to be in the middle of tax season doing it. So talk about some of the the things that are changing immediately, and then we'll talk through the things that are definitely staying the same because change fatigue is a real thing. But also we can't change too many things at one time. There's still work that [00:36:00] has to be done and still clients that we want to serve very well, no matter who they originally signed up with. All of those clients need to be served to the best of our abilities.

Marcus Dillon: Yeah. So let's talk about like, Tech Stack, because all of our friends who are listening and love to geek out on technology and hear how this is going to work. So ultra tax isn't changing. We're taking their ultra techs from a hosted environment and bringing it into our bubble, which Angel has built essentially [00:36:30] on Azure, and we'll just load those clients into our ultra tax file. Probably have to go get some additional states, you know, licenses and stuff like that, but they'll all be on the DBA signature block, if you will. Um, day one. So that one's real easy. Ultra tax. Um, they use file cabinet CSS, which we were on file cabinet CSS. We moved off of it and on to SharePoint OneDrive um 2018 2019 somewhere in there. So we're bringing over their [00:37:00] data, but it's not it's going to be housed. We're not going to add to it. And then we're going to make that a post tax season project to go pull some of that data out of file cabinet. Um, file cabinet is actually the one variable from a size standpoint. Um, for our Azure setup that we actually have to increase size and speed because of file cabinet. And so if you're using file cabinet, get off that crap. Like you got so many other options now to do. Um, he's also on ACS, [00:37:30] which is his bridge from QuickBooks or QuickBooks Online or Excel, whatever.

Marcus Dillon: Those financials are into ultra tax. We're not going to do that. We're either going to key it this first year ultimately, or do tally for some other solution moving forward. He's on shore prep, so no change there. We'll just continue to use Shore Prep for, you know, binder work papers. Uh qbo. Qbo is the stack on DBA and at Greg's firm. So just going to bring all those clients into our qbo. Um, [00:38:00] we may have to do some invites and some different things there to make that work, but we may also get our friends into it to see if they can help with that. And then the one, the one thing that is changing is practices is going away. So they were on practices for both projects time management, invoicing. We haven't used practices and 5 or 6 years. So we're going to bring the team into canopy. We're going to track projects. We're going to track time. We're going to do all that fun stuff. The one piece we're not using canopy [00:38:30] for yet for those clients is communication. So we're going to bring over. They use Liscio. We're going to continue to use Liscio under under their license for a few months, and then introduce those clients to canopy after tax season. So those are the tech changes Microsoft OneDrive, that's all in place. So it's just a matter of changing the Microsoft.

Marcus Dillon: We're going to set up new email accounts, have forwarding rules in place after the domains moved. But [00:39:00] yeah, like from a tech standpoint, a few things are changing from a team member perspective. But client facing nothing. And that was important. Um, during the the initial, you know, kind of assimilation, if you will. So from a team member perspective, the other things that are changing are like different healthcare, right. So you got to be mindful of that different PayCycle Semimonthly. We pay bi weekly, so you got to be sensitive to that. Also, just make sure that [00:39:30] you know the team member who didn't have like they just learned their world is changing, that they're not out anything. So Greg and I have worked to make this a seamless transition for them and make sure that both of both of our team members are are taken care of during the transition. Um, so I think those are those are really the main things. Um, we're not even changing like, we, we absorbed like the technology, um, as part of that. So like, they're going to still be using the same computers and monitors. [00:40:00] Angel is just going to be remotely monitoring those machines in the background, just like he does our laptops now. And eventually we will get new hardware for them. But really, it's not a goal, you know, in February.

Rachel Dillon: Yeah. Uh, some other things that are staying the same for client facing. We are taking over the lease temporarily so that clients who are used to coming to an office so that one of the team members who is used to working from the office, [00:40:30] that will stay the same at least until May, the lease is way longer than May. So, um, but those things I would assume we will offer digital delivery and digital, um, drop offs and things like that. Maybe some of them just haven't thought about it in a while because they're in the habit of coming. So I'm sure offering that here at the beginning. But what are your thoughts as far as [00:41:00] nurturing that client list, that client block? Because we know that still there is at some point there will be disruption. So what are your thoughts on churn on how to Reduce that as much as possible or what are you really focusing on?

Marcus Dillon: Yeah. Um, so the average on M&A, I think, um, it may be a couple of years [00:41:30] old, but it was always like 85 to 88% was retention. Um, so we would expect no different. Like because of the way that Greg has cared for these clients, um, you know, over the years and that he's just no longer an option to provide some of the services that DBA will. Um, we expect retention to be above 80%, and we're not changing any pricing or anything right out of the gate. Um, we've also reached an agreement with Greg to provide contract services through tax season. So like he's also going to be there. [00:42:00] We structured the deal where there's a floor and a ceiling. So he's got opportunity to either replace clients that churn out because it's not a fit or refer in better fit clients. Given Dba's acceptance of of new clients across the board. Right? So so there's opportunity there. That's what he's excited about too. Um, and, you know, I think the the location's not changing. We will be there for at least [00:42:30] two years. We've got a two year lease in place. Um, you know, we don't have to look for anything different. Um, so. Yeah, the the client, the client, you know, nurturing, if you will. Um, focusing on those top 22 relationships, you know, it's it's going to be if we can get an email introduction and a phone call, it will be, you know, 1 or 2 are really important relationships to both Greg and the whole deal.

Marcus Dillon: So [00:43:00] it's staying front, staying top of mind, making sure that they're good, that they know the team is still in place and that we're just going to improve service, hopefully from what they've come to expect. Um, some of the other changes we're making, um, and, you know, electronic signatures on everything. So when you talk about like picking up and electronic, like we're doing it all like so some of that was kind of mixed in the past with these clients. So it'll be electronic everything. As [00:43:30] far as signing options moving forward, um, how people pay. We're going to be moving away from CPA charge to, you know, hey, we'll just send you the invoice or we'll capture it a different way. But, you know, we're actually giving them more ways to pay now, which hopefully will lead to some better collection initially. But also, um, collection isn't an issue, but it hopefully it speeds up the process. And then that's another thing. Like we're going to flip them to monthly billing. [00:44:00] And if that's not part of how they want to be served, then there's other spots. You know.

Rachel Dillon: So when you talk about those top 22 out of this firm, out of this specific transaction or deal that we're doing. That was actually not something that owner that Greg was looking at or focusing on. He actually mentioned that he hadn't really ever pulled the client data or client lists in that [00:44:30] way. So I think that's a recommendation that we make to a lot of firms, is to look at your client list in that way, because a lot of times where a lot of the stress for your firm comes from is going to be like your bottom, maybe 10% of revenue, but it's a high volume of clients, which is why it gets stressful. And so really looking at that to determine, [00:45:00] is it worth all the effort we're trying to pour into these, maybe even at the expense of one of your top ten clients, because you're spending so much time chasing around or putting out fires with your bottom plants.

Marcus Dillon: Yeah. So that was a comment he made. Like, your analysis is great. I've never looked at the client list this way. Like, it's so helpful because what he's doing in his next chapter, he's actually maybe able to serve some of these clients. And [00:45:30] he, you know, the people who have big relationships with him make sense to, you know, do some of the stuff he's he's going to be doing moving forward too. So, um, yeah, it's no different. Like it's amazing how the averages work. So let's just say 20%, right, that that top 20% of his client base, those 20 ish clients out of 100. And those are family groups. It's going to be multiple returns or multiple entities for some, um, 20% make up 80% [00:46:00] of the revenue, right? So that's where you focus your attention and you don't you don't totally dismiss the other 80% of clients or the other 20% of revenue. There could be opportunities in that. But what we're seeing, our efforts, our priorities are focused on that top 20% of clients. So, um, yeah, that's that's what we're going to do. That's what we're going to focus on. Um, you know, making phone [00:46:30] calls, just 20, 20 phone calls. Um, so and just trying to, trying to make sure that we get in front of those people. There's also as part of the relationship moving forward, there's a couple of key referral sources that we need to make sure also know what's going on in that market. So you know, it's getting in front of them telling the story, you know, answering questions, making sure that they know that there's now this new opportunity, that there's this new capacity for referrals and really getting them excited [00:47:00] about the deal as well.

Marcus Dillon: So, you know, as far as like my commitment, and even if you're buying a firm that's not located down the street, uh, really figuring out like what your travel schedule look like, um, that's where you and I have talked. Like, you know, obviously we went to Saint Louis at the end of January and it was great weather, by the way. Like it had snowed the week before in, in Texas in fulsher. And, um, by the time we got to Saint Louis, it was like high 40s, low 50s. [00:47:30] Snow was on the ground, but I think Saint Louis was trying to ease us in a little bit, if you will. So, um, but yeah, the just how much and what does it look like? I'm able to, um, you know, get on a flight early morning, be in Saint Louis by lunch. I can stay one night and then fly home and be in my own bed the very next day. So, you know, I think those are some of the things to kind of think through. Um, how often do I need to go? Like, that's you and I [00:48:00] kind of figuring that out. I don't know that you have to go as often given now your role on the team, but definitely mine is like from a client standpoint, like making sure that those 1 or 2 really high Higher relationships and then the referral sources have a connection, you know, at least initially as well. So as far as other team members, I think this is the other thing to keep in mind.

Marcus Dillon: Like when we did this last in 2016, it was all hands on deck, like all team members [00:48:30] were brought into the acquisition. Right. And so what we told the team when we even shared we were looking at acquisition in 2025 back in our retreat is we're not going to bring in. We're not going to disrupt what's working within DBA, right? So we're going to supplement the team that's coming over with a new hire, which we're doing, and then the leadership team, for the most part, me, Amy Angel, you, Leslie, not so much. Um, [00:49:00] are we're the ones that are really, you know, figuring this out over the assimilation process. So what we've told team, you know, is, like, there could be an opportunity to serve one of these Saint Louis clients or a client that comes out of that market? But initially, we're just asking that you continue to serve the clients that you have in your care really well and, you know, just giving them peace, that even though there may be like these new team members and new client opportunities, that it's not impacting them. Um, because, you [00:49:30] know, there's apprehension there. We have a couple of team members that were that are still on the DBA team that remember that last, um, merger or acquisition, if you will, and they're like, why are we going to do that again? That was awful. Like I'm just like, yeah. So but given given them, you know, assurances that they don't have to be involved.

Rachel Dillon: All right. So we talked a lot about the deal and where to find opportunities, even what our transition looks like. Um, once the dotted [00:50:00] line has been signed, we talked about due diligence. And then the third part of really this time period has been Discernment. And so we have been praying a lot together, um, about this deal and really specifically praying for God to open doors where that lead to where he wants us to go, that lead down his path, [00:50:30] and to close doors that would bring any kind of harm or distraction from the path he has chosen for us. And so that's been, um, something that's been happening multiple times a day, right? But for sure, together every night. So what have you been doing on your own? Are there any prayers or time? How have you been trying to discern this on your own? [00:51:00]

Marcus Dillon: Yeah, I mean, we don't have all the answers, right? And even a plan for our life, like every time we think we've got it figured out, there's a curveball thrown. So yeah, it's a lot of pressure. It's meeting with people that I know are probably closer to God than I am as well, and just seeking guidance from multiple sources. So, you know, I'm in a group, a c 12 group, which is kind of like a Vistage or an EO for Christian business owners. Um, so it's taking, you know, it to that [00:51:30] group and asking them and, you know, answering questions, seeing what they have out of these other Christian business owners. And then the chair of that group, Andrew, who kind of mentors me a little bit as well, um, you know, just talking through things with him, praying about it there and everybody, you know, they they view it from a different lens because they don't have to live through it. Right? So they're like, yeah, you should totally do that. It makes sense on paper. It makes sense so many different ways. But, you know, I think whenever you're able to do it, um, [00:52:00] you know, as you just have to do it with care. So the other guidance that I saw, which necessarily wasn't like prayerful discernment. I met with other M&A professionals, um, about this deal, and I kind of explained, like, hey, where we're at today, what we're going to, what we would be looking at, where we're going if this does close and does this make sense, like, is this confusing to you? Like, is there any [00:52:30] questions that you would ask of me or try to talk me out of it? Like where where does pain potentially exist? What does this look like? So I had some of those conversations with people I actually, you know, highly trust that lead firms through M&A on a daily basis.

Marcus Dillon: Our attorney you know as well like just guidance there to say like you've structured this in a really good way for both parties. You've de-risked DBA quite a bit and yourself, you [00:53:00] can't ask for a better structure. And so I think hearing that over and over again, it Combats some of the, you know, doubts that you have in your mind. So maybe that's another D that you could add in discernment and doubts. But yeah, now it's now it's just the uncertainty of a deal leading up to it finalizing that is what that's where the pressure is. I think for me and a lot of my friends. And [00:53:30] I think you too, once the decision has been made and you can just start to execute, you know what to do. So it's just you just got to go execute. You got to go do the work and the the emotions, the, um, different pieces of the deal. Hopefully you can set aside just to make sure that everybody's cared for and that, you know, there's no turning back now. You know, it's you've stepped off.

Rachel Dillon: Yeah. I think for me it was just in [00:54:00] private prayer and just asking for first pure motives, and then not to make any decisions out of fear or out of greed, right? Like those are the two things which just goes along with pure motives and that God would really bring to mind the questions that needed to be asked, and to give words to the [00:54:30] objections that needed to be shared, or the hesitations that needed to be shared in a way that everyone could hear it and evaluate it and then move forward at peace. And then, of course, the last one for just peace and everything that's happening, whether it's a yes or whether it's a no, that there would just be a sense of peace that comes with that. So I think, um, I think that's a lot we've shared a lot about what that deal is. And, um, I know [00:55:00] we'll be able to give updates as we go along, but we are excited. And it wasn't a decision made lightly, as we've just shared over the last almost hours.

Marcus Dillon: So no, it's good. And I think it was something that was openly discussed, planned for, um, you know, like you said, the right doors were open, the right doors were closed. And just, you know, we're being faithful to walk into the door that was open. So that's kind of where we're at. Um, we'll make sure to [00:55:30] update everybody along the way. But, um, that's all we know for now. So we just got to go do it.

Rachel Dillon: All right, well, thanks for sharing and I'll see you on the next one.

Rachel Dillon: Thanks for listening to this episode. If you enjoyed the conversation and want to learn more, be sure to visit collective Wcpa. You can schedule a meeting directly with me, Rachel by clicking on the Contact Us page. Be sure to subscribe, like, and share so you don't miss any future episodes. We look forward to connecting [00:56:00] with you soon!