Hey 👋 - Brandon here.

Happy Saturday to 1,535 growth-minded accountants.

Here’s one growth tip for you and your firm.

Today’s issue takes less than 10 minutes to read.

I spoke with a firm owner recently (we’ll call him Jim) about how his tax season went.

Jim runs a $2.5M firm and his tax preparation revenue makes up around $1.7M of that.

He has been deploying the tactics I talk about in this newsletter and on LinkedIn:

• Get rid of hourly billing, move to fixed/value

• Scope & price upfront

• Measure employee performance on revenue production

But Jim is bummed.

His tax season didn’t go as planned because his team underproduced. This required Jim to work 80+ hour weeks during March and April to deliver returns timely.

I asked Jim what he thought went wrong.

He listed off workflow and technology changes he could make. Talked a bit about automation and AI. He mentioned upskilling his team via hosting internal trainings.

While I listened, I realized there was a bigger issue at play.

Jim has people problems.

Unfortunately, I see firm owners make this mistake every year. In an effort to smooth out tax season, they commit to setting clearer expectations, implement better organizers, use Calendly to schedule delivery dates, extend everyone, etc. etc.

But here’s what these firms are missing:

Great people can produce in a bad process and bad people always stink

Solving for process, technology, and upskilling is important.

But they only marginally improve your ability to execute and fulfill work.

You can have the cleanest process, be the best ever at setting client expectations, use the greatest tech, hold trainings for your team once a week…

But if you have bad people, you will underperform.

On the other hand, great people can execute in any environment.

How do I know?

Because of you.

If you read this newsletter, and others, and are trying to improve and grow, you’re one of the “greats.” My guess is you can crush in pretty much any situation, regardless of adversity.

Great people have the ability to just figure it out.

We don’t need another checklist, or chat bot, or CPE.

We just need the space to execute and guidance on priorities.

If we related this to the 80/20 rule, your people are the 80, everything else is the 20.

Is your compensation good?

Jim’s problem is rooted in the fact that he’s underpaying for the role desired.

To be clear, he is NOT underpaying his people (more on that in a minute) but he is underpaying for the expectations he has for each role.

Here’s what I mean:

Jim wants a tax manager to review returns, send them to clients, and advise clients on tax issues.

Jim is currently paying two tax managers $93-$100k base with a $10k bonus at year-end.

The problem?

A great tax manager who will execute well and truly remove you from the day-to-day of tax season easily costs $140k+ in total comp.

Jim wants the $140k resource but is only paying $110k for the position.

Here’s the kicker:

Jim is totally willing to pay up for the right resource - after all it’s only an additional ~$30k in costs to buy back an incredible amount of time and sanity.

He just didn’t realize how much better a great performer is compared to a mediocre one.

By the way, you are insane if you are taking guesses at what market comp is. You can get reliable and live comp data from B4Transparency. Get on a call with Dom today. (Not affiliated, just think it’s a great product).

Do you hire people who undervalue themselves?

Here’s a scenario:

You post a job ad for a $140k tax manager and you get several good candidates.

One wants $145k, one wants $140k, and the other says “well I’m currently being paid $115k so if I could get $120k that would be great.”

Admit it: we’ve all hired the $120k person thinking we got a great deal.

But did we?

The job ad clearly shows the role pays $140k. Why would someone be willing to take $120k?

In my experience, when people undervalue themselves, there’s something wrong.

And whatever is “wrong” typically shows up within 6-12 months.

I no longer hire people who are willing to take less than what I want to pay for the role. This goes for vendors too.

You always pay in time or money.

My time (and sanity) is way more valuable than any dollar I can spend.

Are you comfortable with a margin hit?

Paying for great people costs money in the short run.

It will hurt your cash flow and make your margin appear worse.

But do you really need the extra cash?

What if you figured out you could comfortably live on a 10% margin and that gave you a few hundred $k to hire great people?

You could be out of the fray within 6-12 months with this approach.

But in my experience, accounting firm owners are terrified of low margins.

They’d rather clear 40-50% net and work 80 hours a week than clear 20% and never touch a tax return again.

It makes zero sense to me.

I launched my firm in 2016 and have committed to engineering a firm where myself and my leadership team focus on building the platform, not performing the work.

If you compared my firm to others where the partners do a ton of work, you’d see my 25% net margins and think I’m crazy.

But we’re on track to hit $12.5M in revenue this year and likely $16M next year.

It is expensive to grow fast.

We pre-staff our teams based on sales data, before we ever make the sale, so that we can sell into open capacity rather than scramble to hire capacity after a new sale is made.

These excess costs can be reduced in the future if/when growth slows.

Don’t be scared to pay for great people - you are closer than you think to getting out of the fray.

That's all for this Saturday. See you next week.

Whenever you're ready, here's how I can help you.

→ Work with me 1:1 to grow your firm (now accepting waitlist coaching applications)

See you again next week.

Cheers,

Brandon

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