Practice Success Podcast

Advisory Services Unlocked with Jasen Stine

• Canopy • Season 3 • Episode 6

Share episode

Jasen Stine joins us with his knowledge as an experienced tax and accounting professional of over 25 years. We discuss the shift towards advisory services in accounting firms, the impact of private equity and venture capital, and the challenges of succession planning.

KC Brothers:

Welcome to another episode of the Canopy Practice Success Podcast. I am Casey Brothers, your host, and I'm here today with Jason Stein. Hi, Jason. Hi, Casey. How are you today?

Jason Stine:

I'm great. It's a beautiful day in Washington State today.

KC Brothers:

I do love the Pacific Northwest.

Jason Stine:

Mm hmm.

KC Brothers:

Um, Jason, give us a little introduction of yourself.

Jason Stine:

Sure, yeah. So, Jason Stein, I've been in the tax and accounting profession for over 25 years. Largely working with a big company. You probably have all heard of named into it. I was their education external facing, you know, industry education leader for probably about the last 10 years. I was there left into it about a year ago and became an independent consultant. So now I work with firms who are interested in, uh, like, you know, I consult them on a number of different things, but largely people that are interested in moving their firms to advisory services, which is pretty much a fancy word for getting your clients on subscription. Um, I also had my own firm for about 12 years. I ran it with a, I was a strategic partner. I had a operating partner that, that largely ran it. Um, we sold that a couple of years ago for roughly two X revenues. And that was because we had. Moved our firm to advisory and subscription services. Um, and people tell me that's really good because most firms can't sell at all, much less, uh, for, for two X revenues. Um, usually it's about one X revenues if there's no subscriptions.

KC Brothers:

Yeah, that's me in a nutshell. That is a really good multiplier, but can't sell? I feel like PEs like VCs are Gobbling up. They're coming

Jason Stine:

in. Yeah But they're I think they're finding that it's not as good of an investment as they thought because they can't get their money back fast

KC Brothers:

Something dry up and just ignore it entirely as opposed to still purchasing it and rebooting it.

Jason Stine:

I mean, venture capital definitely come in. Um, I talked to a couple of people who are, who are more, I don't deal a lot more of the big firms is where you see that. Yeah. Okay. Um, and I've talked to a couple people that do, uh, consulting work for those firms. I don't consult really big firms like that, so I don't, I only know so much about vc, but from what I've heard. You know, they definitely were and they're trying to move because that's there's a whole problem around like the partnership model and these firms and how it's hindering their ability to make, you know, the changes that are needed to be competitive in today's market. Um, but, but I've heard that the VCs are. Like that may fizzle out. It may not, but it may fizzle out because they're not, they're not getting their money back fast enough because these firms are, are not moving in the direction they need to.

KC Brothers:

Okay. So back up just a little bit. Traditionally, uh, an accountant's career path involves storm, some sort of exit. Um, I guess for thinking like the, the partner level, right? Not everybody makes partner, I guess, but those who get to that point, get to an exit. It hasn't always been private equity and venture capital, right? No, no, that's,

Jason Stine:

that's really new.

KC Brothers:

Okay, and here you're saying that they're even still starting to waiver maybe on their commitment to this idea of an investment. So what, what is this, that and maybe other things meaning for? Yeah,

Jason Stine:

I mean, that's, that's a good question and it's, um, there's a lot to that because you know, one, you're not going to see VC most of the majority of, of firms, uh, that you see out there, you know, are, you know, medium, medium sized firms, you know, they're, they're maybe, you know, half a dozen to a dozen employees, they've got a few hundred clients and they're doing great,

Uh,

Jason Stine:

and then you can, in the bigger firms, you know, you've got, you've got the, the bigger issues, you know, everybody's having a talent problem. So, because people don't want to come into the industry and, and by the way, not everybody you mentioned, not everybody makes partner, not most people don't want to get to partner at these, at this point, because what that looks like is long, long hours for many years, a lot of responsibility. And what

KC Brothers:

that looks like or what it's looked like,

Jason Stine:

well, what it's looked like, but, but also without, when you've got this business model where we're focused on compliance work, we're still valid or we're still billing by the hour and still tracking timesheets, that's prohibitive. To moving to an advisory type of model because you're, it's, it's a direct conflict. You don't, if you save time by streamlining and using technology to do that, then you're not making more money. Right. So that's, it's direct conflict. Um, and so these firms could be making a lot more money, but then you've got, you know, the older generation that's got the processes that they've had in there. They're happy with it and the business is thriving and and by the way, they're on the brink of retirement. So it's not going to change everything just right before I retire, especially in the large firms where when they leave, they're just leaving the firm and it's up to the firm to figure things out from there. With these medium and smaller firms, you got to really think about succession planning because, you know, what are you going to do? Are you going to just let your firm, you know, let your firm die on the vine? You're going to work till, you know, it's the end. Are you going to leave it to your kids? Are you going to sell it? You know, and so those are things that those firms are probably thinking about and what, and I don't know, you know, if they know what they need to do.

KC Brothers:

Yeah, 100%. I mean, how many accountants really still need to consider themselves entrepreneurs, depending on, um, you know, their level of ownership and what the firm is and their contribution to the firm, I guess, but, um, someone who's a leader, CEO, founder, partner, um, I have all of the typical issues that people going into general entrepreneurship do. And that's this lack of, um, maybe understanding of how to optimize the firm as a business. Um, and just to what you were saying. Um, okay. So we've got the talent chasm that I like to call this huge gap between the need and the supply. Um, but then you've got all of these. I saw recently that 75%. of, oh my goodness, um, of CTAs in general.

Jason Stine:

Yeah, our baby boomer generation. Our baby boomers. Yeah, that's scary.

KC Brothers:

Yeah, and, and not just baby boomers, but I, maybe around on the higher end, like I'm seeing people as partner at an age that I'm like, Don't you want to be retired? I don't want to be retired. I want to go sit on a beach and read a book. Um, and I, there's, you know, we're all very different in terms of like our, our passion and love of work. And I do find a lot of accountants just love, absolutely love what they do. So I can get why that's also a reason why we're seeing an older retirement age. Um, In this generation, but, um, then you touch on the point of changing and, um, leaving the firm. What are some of the things Actually, pause. I had a question I wanted to ask because we were talking about advisory and getting over that. Can anyone jump into advisory?

Jason Stine:

Yeah. Yeah, definitely. It's a bit of a change for, I call it, you know, turning chess players into cheerleaders. When you're, you know, and if you have, you're going to probably have listeners that they've been running their firm the same way for a lot of years and it's, it's been very focused on compliance work, pumping out tax returns, doing the bookkeeping, doing the reports, uh, and it's not a huge stretch once you're, once you're there and you're, you're doing advisory services and you've got your clients on maintenance plan, subscription services, you're doing tax strategies. Uh, and helping them, you know, navigate, uh, those things and saving them quite a bit of money, you know, you could, you could, uh, deploy tax plans and save clients, you know, 20, 30, 000 or more a year, um, you know, for the, for the business clients, of course, mostly, um, when you look back, it's, it's like, oh, wow, I could have been doing this the whole time, but, but making the ship to get there, or. Is challenging mostly because people are, um, just afraid of, of the unknown.

Yes.

Jason Stine:

And that's, that's normal. That's, you know. Yeah. And there's lots of programs out there that can help people, you know, really, really push them through. And I do that with people too, you know, if they just need somebody to just. Be there to as a coach and a guide and move them along, you know, um, that's a lot of what people need

KC Brothers:

Yeah, and the I guess the reason I asked it can anyone become Make this transition to advisors because of that sentiment that you just ended on is I feel like um Just with anybody really any adults. There's always imposter syndrome, right? Am I capable enough? Do I have enough knowledge? um There are certain things that, that I've seen as I've talked to people, as I've gotten to know accounting firms that I do feel like will set you up better for that sort of a transition. But even without those things, I think anybody could As long as you made the decision and you committed, you could get into advisory tomorrow.

Jason Stine:

Yeah, for the most part. It's, it's just, I, I think it, it takes, it takes people a couple of years if you, if you've got an established Yeah.

KC Brothers:

Unit and Yeah, yeah, yeah, yeah. You

Jason Stine:

know, uh, getting over that first hump of getting your first client on subscription services. A lot of people, a lot of firms that, that are committed to doing this, you know, moving, moving to this, this space. And by the way, that doesn't mean the compliance work goes away, right. But you streamline that stuff and get it so. just as efficient as possible. And you use technology largely to do that. Um, and then, you know, you get your first subscription client under your belt and then, um, and then you, you kind of keep working. It takes a year or two to get there. Now, brand new firms have an advantage because they don't have a legacy business that they have to move to this. They just, they could just start off this way and then, oh, yeah, by the way, we'll do the taxes and the, and the bookkeeping or whatever else, but it's all wrapped up as part of one big package.

KC Brothers:

Yeah, you do make an interesting point there. Brand new firm can start with the pricing model, the packaged approach, right? All of the logistics and operations are going to be easier. But what I think might be easier for an established firm, just so that anybody listening can see like, okay, there is a path for me no matter what type of firm I am. Um, When you've been in business, you know who you like to work with and who you don't like to work with, whether or not you have the gumption to say, client, I'm just not a good fit for you, or you're not a good fit for me, um, and that can take some courage, right? And courage to have the conversation, but also courage in yourself and in your firm to be like. I can make it without them. Um, I think those firms too are well positioned just because they can, if they take the time to slow down, reflect, they can identify who it is that they'd like to work with. And then hopefully that transition into implementing all of those operations that come with a subscription based accounting firm, you're, you're dealing with people that you like to work with and therefore hopefully like to work with you as well and have a relationship there. Like, And you can loop them in, I guess, in a way that you might not be able to loop in all of those clients if you keep all of them during that transition.

Jason Stine:

Casey, you're absolutely hitting the nail on the head. So, and that's actually where I tell people to start, is ideal client.

Yeah.

Jason Stine:

Um, and, and those clients, I, I find that a lot of firms these days, uh, firm owners, they're, they're not so much, they're, they're not as scared to fire clients. Uh, these days as maybe 5, 10 years ago,

yeah,

Jason Stine:

it's getting better because they just have too much work and not enough time. And so, and they're making perfectly, perfectly good money. Um, but you know, the, the, the loss of revenue can be. scary for, for some firms still, but, but identifying your ideal client and, and figuring out the industries that you like to work in the best too. You want to figure out your niches. Generalist, generalist firms are, have a harder time moving to advisory than specialist firms and, and not one industry, like pick, pick a few. There's oftentimes industries that are kind of, you know, retail and restaurants are often, you know, the similar types of industries that. You know, you can specialize in. I know firms that like to specialize in real estate and law firms and doctor's offices and you know, lots of lots of choices out there and don't just pick one because then you make yourself vulnerable. But, but definitely get in your head. You know, this is the perfect like, and you probably have a few of them. They are top 20 percent of your clients already. And they're happy to pay. They don't complain. They're out there and they're probably like wanting more from the, from the firm in terms of advice, but they don't, they don't realize it. They don't know to ask for it. Or they don't know that that's, that's a possibility. And so as a, as an accounting practice, you've got to position yourself to those people and say, Hey, we're going to move you into this new model because you are the right fit for this. And here's how this is going to work going forward. And you tell them what they're going to get from you in terms of value. And then when you spell all that out and you say, we're still going to do your taxes, we're still going to do all the services we're doing, but we're going to meet once a month and we're going to start setting goals and looking at your budget and, you know, looking at more of your business. And I'm going to become more of a coach for you, uh, than just a passive, you know, paper pusher. And, you know, obviously not those words exactly, but they're gonna, they're gonna light up those clients that are those ideal clients are gonna light up. They're gonna want those services. Okay, well, so what does this look like now in terms of payment? Well, instead of having one big bill at the end of the year, we're gonna put you on a monthly subscription. And here's three packages that I put together. One's a bare minimum, one's a, you know, massive amount of, you know, whatever, like, if you had a perfect world in mind, you're, you know, these are all the, and then down the middle is probably the more reasonable, like, all right, we're going to do these things and meet once a month and that, and then, you know, most of them pick that middle package, but you'd actually be surprised at how many of them picked a larger package. Uh, so, you know, be careful with that too. No,

KC Brothers:

I, um, if you don't mind, I might offer some. So, at a previous job, I did some really intensive research with, uh, a research expert, um, to help the company I was working for revamp their pricing and packaging. And there are some things I learned from that, that I think would be really helpful in this process as people start to think about packages and. And, you know, what, what would be valuable? How do I structure these? Um, one of the things I did with research is I took, and I don't think you need to do this as an accounting firm, but I think you can innately discern this concept that I'm about to describe as you look at the things that you offer. Um, but we took the list of, um, main capabilities within our product. And presented it to these survey respondents, um, and bite sized pieces and like 15 at a time and it was random and I'd say, Hey, order these, um, from most impactful, the least impactful. And then they do that a few times. And, and over the course of. Answering that question, all of the capabilities will have popped up a few times, right? The point being that it then enabled me to know what were the most impactful, most desired features. I was then able to then say, Hey, okay, these relate this way. I'm going to package it this way. And what you do is you're able to. strategically put things that you're offering in that next package to pull people up and to pull them up even more to that last package, right? As opposed to just kind of, um, trying to throw spaghetti at the wall and say, I think this is what people would like. Um, you can kind of start with that approach of like examining your services. Now you've. All listeners, I'm assuming, have been doing this for some time and you know, um, when you're in a room with a client and they have that light bulb above their head, or you, you know, their financials and you know where you typically save people money. And so just as you're making those packages, think of, um, The strategies you can employ to draw them where you want them to be I guess is what i'm trying to get at

Jason Stine:

Yeah, I think also You know for firms that are doing tax returns. That's a relatively easy place to start because if if if you go The first thing that you do in the tax space is you go get the technical knowledge So you learn about the tax strategy and there's tons of places where you can go get that information for free Um, you don't have to sit there and read through IRS pubs, um, and go get some, some education on the tax strategies like, you know, Augusta rule and hiring your kids and, and, um, you know, there's, there's a few that there's like 100 or so out there and then you get state specific strategies to that. That's a whole nother world, but even just at the federal level, finding out those, those. Strategies and who, where the right fits are for it. And then you've already doing the tax return. So you just go in and look and see who qualifies for these deductions. And then you put together a plan and then you say, Hey, look, I've identified three major strategies. It's going to save you about 20, 000 a year going forward. Right? Here's my fee.

KC Brothers:

Yeah.

Jason Stine:

For helping you implement these strategies. And I'm telling you people and your, your fee's going to be like, you know, 10, 10 percent of that, you know, something like that. So you, you identify 20, 000 with strategy, you should be, you should be asking for five to 10, 000 in, in helping implement that strategy. Because like I said, and people forget this a lot, when you implement that strategy, now it's saving you a year, every year, every year. So it's not just 20 grand in one year. A hundred grand over the, you know, however much that, that, that goes on. Um,

and that's a good way to dip your toe in the

Jason Stine:

space.

Yeah.

KC Brothers:

Okay. Yeah. The

Jason Stine:

math is not obvious. Spitballing numbers. I'll tell my head.

KC Brothers:

No, I gotcha. I gotcha. But I love, I just, I said that because you point out that again, this it's a little bit of a long game. Not necessarily, but like, but also like reminding your clients about that long term impact.

Yeah.

KC Brothers:

Um, and the thing is like, accountants do, to your point, okay, yeah, maybe brush up on some of these strategies, but you also, especially if you're already a firm that is a niche firm dealing with a certain type of industry or even a certain type of client who knows what it is, right? You have data. On however many clients you have in that industry. So you now know that industry, or you now know, um, what it's, uh, people who are landlords of three to ten properties, right? And you can see trends, or you can, Um, find ways to, you know, use the data in a way that is appropriate to help you see those trends to then say, Hey, you benchmark lower than average for people of this type. Yep. Let's get you up, you know, like that's a huge opportunity.

Jason Stine:

And a lot of the times the software will, has tools to help you identify that stuff. You know, like if you're using QuickBooks, a lot of, a lot of people are, and I'm not plugging QuickBooks, obviously, but, um, I've lived in that world for a long time. And, you know, there were there were features in there that would tell you, you know, like this client spending more in this space than the average or less on that, you know, so, you know, that's part of the role that technology can play is enabling and surfacing those data points. especially if you're doing the books, you know, that's, you've got all their data, you know exactly where they are and you've got enough experience on your own. You don't even really need those tools. You can look at the numbers and you got a pretty good idea.

Yeah.

Jason Stine:

Um, I love that you brought back the, brought the landlord, uh, thing into like, as in that you did it in the context of, of real estate. But I also was thinking about that back when we were talking about. Uh, ideal client because I'm, you know, I have rental properties, having, you know, the, the pricing and everything that you've set up, um, it's very similar to, to being a landlord. Like when you're renting properties, if you've got your rent too low, you're going to attract clients that are budget clients, you know, and they're not going to always take care of your property. The best, they're not going to be the best tenants. And it's just the same thing in this industry, right? You, if your, your rent is priced higher, you're going to attract higher income, higher quality, you know, tenants, obviously not so high that you're out of range of the market, but, um, that's a, that's a big deal. And a lot of people make that mistake when they become landlords. Is they think they're charging too much ram, they try to go cheap and that's not always going to get you the best.

KC Brothers:

Yeah, pricing is a signal, that's for sure. Um, okay, so back to exiting and stuff like that. Because we went into advisory. Um, in terms of like, you know, us being an expert, but there was a, we touched a little bit on just this trend of, of people, um, a lot of CPAs being on the brink of retirement. Um, and I don't know that, you know, if, if their partner, if they've got their own firm that they're going to jump on the conversation we just had, right. About jumping into advisory. Um, but there are a lot of them. Um, can you talk a little bit about. Maybe what they should be considering or maybe even depend where you want to take this conversation given the conversation we've already had What people working with them?

Jason Stine:

That's exactly where my mind was going.

KC Brothers:

Okay

Jason Stine:

So, because I think, I think the, the folks that are on, you know, on the brink of retirement, they're probably not even listening to this podcast. Right. They're, they're doing their thing and that's fine. That's fine. You know, but there's nothing I could say to them, you know, that I, that, that they would find helpful, you know,

KC Brothers:

or that would change their mind overnight that they haven't heard before.

Jason Stine:

Exactly. They're not struggling. They're, they're just doing their thing and then they're, they're going to, you know, retire and they're, they, they're going to decide how, how they want to leave things, but the, everybody else who's left behind though, and, and I find this a lot with, um, people who have like the, their kids are going to take over the firm and they're, you know, the kids are grown adults and they're, you know, they know what's up and they know that they want to do these things. Right. Um, but the, the owner, you know, the, the, the, usually it's a dad, uh, just isn't interested in, in changing processes and implementing new technology and really rethinking those things in big ways. Um, 1, because of everything we've talked about, but also because, you know, I'm a little older and I'm a little more set in my ways. I can't imagine what I'll be like when I'm, you know, 60, 70, I'd be a lot more set in my ways. And it's just a, you know, it's just a human factor. Um, and so they, the kids get frustrated, uh, because they're, they're trying to take over. And so my advice always to them is just be patient. It'll, it'll get there. Um, and start lining up, keep, keep educating yourself on, you know, getting the right technology in place. Still try to have those conversations with, you know, dad or the owner. It's not always, you know. Uh, it's not always just that situation. Um, sometimes, you know, firms will have people that they're cultivating to ultimately take over the firm. Um, but most of them keep

KC Brothers:

on educating yourself. Make sure to stay in the know. Definitely. Yeah. And don't, yeah, don't give

Jason Stine:

up. And, and have your, you know, start lining up your ducks so that when, when you get the green light to go ahead and take over, you can start implementing those changes as quickly as possible. And it starts with the technology and the streamlining workflows and processes. If you've got file cabinets around the office with papers piled on top of them, you're behind the eight ball. Uh, so you, cause you're never going to get to the next step if you can't, if you're so buried in manual processes. Um, and this is also really important for firms that are going to sell because nobody is going to buy a firm where they have to physically go to your location and go through manual files, you know, like paper file. That's just, that is not attractive to anyone who's interested in purchasing a firm. They're purchasing, purchasing your client list and they're purchasing, not your workflows, but the, the clients that are, are, are wanting. Affirm that sits in today's technology because, you know, people who are coming into adulthood now don't know life without a smartphone. They don't even know what that life is.

KC Brothers:

Well, yeah. So Amazon changed the game in so many ways. Um, but people don't think of how Amazon changed the game in regards to maybe how they, um, the, the market that they're playing in. And I say that because what Amazon or apps or all sorts of things have done is changed a consumer's expectations.

Right.

KC Brothers:

And though DoorDash is not an accounting firm's competitor, the experience The experience that their customer gets from Amazon two day delivery, from DoorDash, from any myriad of things, right, of this really, um, simple interface and interaction, um, the fast turnaround, the Clear communication of what's needed from them, you know, all of that They're gonna start applying to and expecting from the firm And whether you're delivering it or not, you may not even know that they're making these comparisons. Right? Yes, they are. And

Jason Stine:

it's not just the clients. It's the employees too. It's probably the employees especially. They don't want to work in an antiquated environment They want to be leveraging the latest technology because they know it's better. That's why it exists.

KC Brothers:

Yes, a hundred percent. Um, well, thanks again, Jason. It was a pleasure talking to you.

Jason Stine:

Oh, it's my, my, uh, honor to be here. Thank you for inviting me on the show.

KC Brothers:

Anytime.