small firm attacks the big issues with novel strategies.
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with steven sacks
the new fundamentals: thriving in disruption
the accounting profession is “stuck in a rut,” says james n. lopiccolo, founder and managing member of capocore professional advisors, in lake orion, mich.
he says cpas can’t see “the challenges that are coming by from other non-cpa firms.”
more: effective networking is an art | business development activities shouldn’t be a chore | cpa’s best role: leveraging knowledge, not just process | avoid last-minute deal making | five common negotiating mistakes | the myths of performance management | business is about relationships | reaching for authenticity in client service |
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lopiccolo’s answer is offering service agreements, instead of billing by the hour. risky? sometimes. but clients love it.
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in more than 31 years of public accounting, lopiccolo has worked in business advisory, tax, and accounting for a multitude of industries including contracting, manufacturing, medical, professional service companies, and real estate. he serves on the michigan cpa association executive committee and the finance committee, and he is a two-time chair of the aicpa small firm practitioners task force.
11 key takeaways:
- cpas should employ a minimum level of service agreement with clients because it will help to manage expectations as well as professional fees.
- a proactive approach by cpas is what clients desire.
- clients want their cpa to be a partner in their success.
- cpas are much too fixated on getting as much money as possible from clients rather than providing real value in each client interaction.
- make sure the client onboarding process is consistent from one client to the next.
- advisory services are practically the same with slight modifications for each client.
- there is a trust factor in identifying and hiring the right staff in order to provide a level of comfort for providing each client with advice.
- it is necessary to have confidence in your staff and let them know they have the opportunity to sink or swim.
- there will be more competition for client accounting services, so advisory services should be the leading service cpas provide.
- cpas need to leverage the cpa “brand.”
- in the next five years, new businesses will arise, but at the same time, there will be greater competition from non-cpas.
transcript
steven sacks
i’m steven sacks, owner of solutions to results, a consulting firm that helps cpa practices and organizations in the areas of communication, culture, education, and training. today, our guest is jamie lopiccolo. jamie is the founding and managing member of the cpa firm capocore professional advisors in lake orion, mich. he leads the firm’s advisory practice providing a proactive approach to the firm’s business and individual clients. he has leveraged the use of technology and cloud computing to stay competitive and relevant in the changing business environment. welcome, jamie.
jamie lopiccolo
welcome. thank you. good to be here.
steven sacks
well, you understand that the marketplace is being impacted by globalization, technology, and of course, more demanding clients. but you feel there’s a broad swath of practitioners who somehow are not taking notice of these changes. in other words, you think that the profession is stuck in a rut. so why do you believe this to be true?
jamie lopiccolo
well, i think that the cpa firms are just there, especially in the small to medium-sized market. i believe that they’re, they’re stuck in this rut of not wanting to look at it around them and see the challenges that are coming by from other non-cpa firms offering services in. we’re just feeling comfortable with the services that we get to offer them. and we’re not really doing anything to look out our back window to see what’s coming after us. but also not looking forward to saying, okay, how can i deliver these services in a different way, more efficient way, a better way? and i think that what’s happening is the firms are just, they’re kind of happy with the status quo.
steven sacks
do you find that there’s a certain demographic of people that fall into that bucket of being happy with what they’re currently doing?
jamie lopiccolo
i mean, i think the obvious answer to that is, is i think that you can always argue that the older professionals are or older professionals are going to be the ones who are just not going to make the changes. they don’t want to learn the technology and technology is scary. however, i have seen in some of the other firms that i’ve talked to, and even former partnerships that i’ve been in, where the younger partners are still resistant to making some changes, because it’s an unknown. it’s, they don’t want to they just don’t want to upset the applecart for some reason. and it means that it’s learning something brand new, and in so i think that that, well, i could argue that it is, you know, the probably the over 60 crowd not to put an age on it, but you know, the one thing that we have an issue with is that i think that a lot more people are staying longer in the profession, and they’re just happy doing with what they’re doing. and so that’s bringing the rest of the profession down. and the other side of it too is, you know, as you talk to the aicpa we don’t have as many people coming into the profession. so now what’s happening is, is we’re still but those services are still in demand by clients and businesses. they’re just now being delivered by possibly non-cpas. and so that that rut is just us not realizing that we’re not taking advantage of these services and we’re allowing somebody else to come in and play in our space.
steven sacks
what are some of the types of services that you think that cpas are being superseded by non-cpas?
jamie lopiccolo
i think that there’s, well obviously there’s a growing — in my opinion — there’s a growing for bookkeeping solutions, okay, which typically we can you know, whether that should be truly a cpa’s profession or not, but there’s the bookkeeper, there’s the tax. i mean the tax preparation is constantly being attacked by the h&r blocks and the turbo taxes and all of that to mean, it pretty soon you’re going to be able to take a picture of your w -2s and your tax returns gonna be filed for you. so, those are things that are coming down the pipe, i believe that that there are non-cpa firms out of other countries that are looking to provide delivery. i don’t think, i think naturally you can’t be proactive because you’re just happy to kind of moving on to the next project. you’re not taking the time to look at your client’s needs. we’re developing systems to make sure you’re going out there and talking to your clients more frequent basis. and you’re also the other side of this too, is everybody’s still always consistent about how much billable do i need to be. and chasing this quote-unquote billable hour, we’re being proactive requires you to put investment into your client. and being willing to accept the fact that i may not maximize my efficiency or my utilization rate with this particular client. but dammit, i was proactive with them. and i say, and we did something else, or whatever versus being reactive because of reactive triggers at the billable hour. client all of a sudden calls you up and says, i need this, well, boom: you set the clock, and you’re going. but proactive means, hey, i’m going to go out and i’m going to meet with you. and oh, by the way, i’m not going to charge you for this meeting, or i’m going to incorporate this meeting within my overall level of services that we’re going to offer you for the annual. and that way, and if the meeting goes for hours, it goes for hours, if it’s 15 minutes it’s 15 minutes. but it’s that other touchpoint that the clients love. they just love the fact that you’re out there talking to them about their business, and oh, by the way, they’re not going to get a bill for it, it’s
steven sacks
probably one of the ways that you were able to, to get new clients, like for instance, you know if someone hears that you have spoken to a fellow client of theirs, and they have a different cpa, and they say my cpa doesn’t do that. and then, you know, they may give you a call, based on your client’s recommendation. has that happened before?
jamie lopiccolo
oh, yeah, yeah, we’ve, we, you know, we picked up a recent client the other day that had that exact same comment, that, you know, my cpa and this is in the area, it’s, it’s more of a regional firm. they’re just doing the tax return, and that’s it. i’ve had other clients that are just, we’re starving for advisory service, we’re starving for our accountant to talk to us about things, and not just do a tax return for us. help us be a better business and understand our business and what it means. so this year, especially, i had done in my firm, i had done a lot of work with one of the local small business associations in michigan, and explaining the ppp and doing a lot of ppp, work is a lot of other cpas firm. but that also positioned me to be — i positioned that in a way where i was an advisor. and i didn’t, and people just took to that words like my cpas not telling me any of the stuff that you’re telling me about this. and, you know, we held certain webinars for clients and things of that. no charge, it was all about making sure they were getting the information they needed. so it can happen at you know. being proactive can happen in a bunch of different ways. it doesn’t have to be just setting up meetings. it’s host a webinar, especially in the covid era, host a zoom meeting would have a roundtable with your businesses. what’s going on? what’s ailing you? what can we talk about in giving them, you know, the advice that they need, and that just really kind of came to the forefront this year that there was such a demand for that for clients.
steven sacks
how you can turn a disaster into an opportunity.
jamie lopiccolo
oh, and we, i mean, we and we took full advantage of that type. i remember, back in march, when wouldn’t state of michigan had it shut down the order we saw coming down, i reached out to two people. one of them happened to be the, at the time, the president of the michigan association of cpas. and i said, we’ve got to find resources to help our clients, we’ve got to find them now. and because i knew that that’s what was going in. and after that, it just took off as a sense of me being proactive with the ppp, and getting information out to my clients and everything and it just and so there was the biggest i mean, as much as people are going to hate 2020, from a business perspective, it’s probably been one of the best years for me.
steven sacks
right? right. so an example of extracting a positive from a negative.
jamie lopiccolo
you got that right.
steven sacks
so when we’re talking about different opportunities, one of the big things that has come to the forefront is this idea of client accounting services, and which appears to take on the age-old service of bookkeeping, financial preparation, financial statement preparation, write-up. you know, some of the other basic services that cpas have been providing for years. what do you what are your thoughts about this? because haven’t the services been in the cpas’ arsenal for decades?
jamie lopiccolo
oh, absolutely. absolutely. i think that’s just rebrand. you know, it’s just a way to rebrand it into a kind of a cool catch name. and now granted, some of the technologies allowed for that to evolve a little bit. you know, i remember, you know, i’ve been in public accounting now for 31 years, i’ve been since i was 17. and i remember what we started doing a write-up, and then you get the transition to quickbooks. and then we went to quickbooks. that we’re right kind of back into that, that providing that write-up service with the advent of quickbooks online. we’re just doing it differently now. so, i think that it’s always been there, it’s just a different way to brand it to make it sound. i mean, i hate to say it makes it sound sexy, makes it sound cool. and, and really is kind of just a different marketing ploy than calling it write-up services. because now it’s so much more than just write-up services. you know, it leads into some of them will call the cas, you know, controllership services or quasi controllers, or controller to go, or it’s not quite the cfo because that’s to me, it’s a different level. but, but that’s where it would be on the par with. is now we’re going to take over all of your books, and now we’re going to have everything for you all under one blanket, in my opinion, is still a commodity-based business, it’s still producing some sort of a byproduct or something along those lines that, that the clients are either feel it’s a necessity, or, but there’s no value there. so the question is, how do we take cas and turn it into a value proposition? and i’m looking at things such as, okay, if we’re going to do the accounting, it’s now part, what type of outputs can i give to management, that leads into this being more proactive, so where our firm is looking into the use of dashboards, for example, and providing, you know, dashboard as just without doing any extra, you know, fees or anything like that, but providing them with some sort of a dashboard service, that they can see and monitor their business in a different way that we’ve helped set up. but that we’re also at our meetings with our clients, we’re talking to them about that. so now all of a sudden, we’ve elevated the cas to a value-added service versus just here’s your financial statements and talk to you later. it’s now being more real-time. and it’s now i can see if something’s happening in the dashboard, that i need to be calling the client and talking to them about that it’s no different. the funny thing is, if you think of this, this is no different than what financial advisors are doing right now. which is they’ll monitor a client’s portfolio, and if they’re seeing something that there are some exceptions, they’re on the phone with the client saying, hey, i think we need to do this, or we need to make these changes. and that’s really what i’m thinking that you know, we’ve got to move more towards that model a bit.
steven sacks
you know, it’s interesting, and it leads to another question i have that talks about value-added advisory services or consulting services, your firm uses professional advisors in its title. i understand the name capacore professional advisors, uses the acronym cpa. that’s what it stands for. in using professional advisors, in your name, what message are you sending to your current and future clients?
jamie lopiccolo
yeah, so that, that, by the way, that process took about four months to come up with the name of the acronym and things of that nature. but, what it’s trying to tell our clients is that we are going to be the cpas still in there. so we are still a cpa firm. but we are in we’re starting to use this as i talked to new prospects, we are an advisory first firm. and that really means for us that means educating and communicating with our clients on the value of what their business is and how they can get the value out of their business. i don’t want to think when people hear advisory, i don’t want them to think that we’re providing consulting services, it’s really in my mind that the advisory is providing value-added to the existing client services and getting out of here’s the commodity and just delivering a commodity. now we’re going to deliver the commodity because that’s always going to be in our staple, always going to be a staple for us. but how do we provide a better value to our clients? and that’s we’re doing that through the advisory side of it, which again, is education, and collaboration, and communication with our clients.
steven sacks
so do you think it’s more important to push the fact that we are business advisors who are cpas or cpas who are business advisors?
jamie lopiccolo
that’s an interesting question, right? i think that i would rather personally because i am very proud of the fact that i am a cpa. i’ve always been proud of that it. you know, it’s something that i wanted to do since i was in ninth grade. so, i think from a philosophical point of view, i would rather it be known that we’re cpas that are advisors than the other way around, because i want to lead still with the fact that, that’s what i worked hard for that degree. and i think that that’s the driving force and i think that the cpa branding, it’s still very, very well known in the business community. we are one of the most trusted advisors. the aicpa’s done those, those survey results and so forth, and we’re still ranked at the very top. so i think that we would be, we would be not true to our brand if we didn’t lead with the cpa first.
steven sacks
how do you how do you measure success in your firm? what are some of the specific metrics?
jamie lopiccolo
so, the funny thing is, is when i would talk to clients about or talk to other peers about, you know, not measuring time and things of that nature. they go they asked, well, how do you know you’re successful? and my joke was always we got money in the bank, we’re doing a good job, right? so there are always financial and non-financial metrics. we look for from a non-financial metric, i look at the quality of referrals we’re getting, the type of clients we’re picking up as a sense of, are they falling more into this? are they buying into this value-added services that we want to do in this advisory-level services that we want to provide them, versus just the compliance pieces. i always look at the type of growth we’re having. so, you know, how many new 1040s did we pick up? how many business clients did we pick up and things like that. and then i from a, from a financial metric, i really will look at revenue per client, just to see where that’s going. and i want to see a certain growth every year, as we start to, as we start to bring out better clients that are going to start bringing up our average revenue per client.
steven sacks
so, in order to reach specific metrics, part of a strategic plan, what’s your approach to, let’s say, firing clients.
jamie lopiccolo
we’re just now starting that process of starting to look at getting rid of clients. i mean, we all have those clients that are, as i’m working with clients, if i’m not seeing that they’re seeing the value, or they’re taking advantage of their particular price point in relation to the demand and where they’re at, we’ll have that conversation of possibly they need to move on because i’m not going to be held captive to somebody that’s, that’s at the low end of the price spectrum. and i think all firms struggle with that, because a lot of our clients are friends. but, you know, as we’re, i think the first step we’re taking this year, is to start to quantify better the type of clients we want to take on. so as individuals come on if they don’t want a certain level; we’re starting to establish this concept of a minimum level of service. this is the minimum level of service we’re going to do. and by the way, the price for that is this. and if you don’t want that, then then we’re not the firm for you. so, i think the first step is to really kind of define that minimum level of service and make sure we’re true to that, as we bring on new clients this year, and then start identifying, you know, we’ll start the process next year, as we go through this to identify those clients that are not at that minimum level, and can they get there? or are they not going to get there? and if they’re not, then we need to start to figure out what their exit strategy is.
steven sacks
you’ve gotten any pushback from potential clients about the minimum level of service?
jamie lopiccolo
no, they love it. i mean, i hate to say it. they love it. they love the fact, when i tell them, you know, the minimum level of service, and it’s not a it’s not a hard concept. but the minimum level of services is we’re going to at what we’ll call the compliance piece of things is, the minimum level of services is we’re going to prepare your tax return, we’re going to do your individual tax return, we’re going to do some some basic accounting for you. we’re going to meet with you four times a year. and we’re going to provide you with a little bit of strategic planning during those meetings. we’re going to provide you with tax planning in november, december and and halfway through the year. and we could cover a bunch of other things in there. but that’s the bulk of it. they’re like, that’s all i want. i’m not getting that from my current cpa, because again, they’re they’re thinking that that, you know, some sometimes the cpas are thinking: well, yeah, i do want to meet with that client, but i don’t want to have to create a billable event to do that. well, it’s always a billable event, if you if you roll it in, it is saying this is the minimum level of service. and oh, by the way, this is what it’s going to cost you on a monthly basis. so there’s no — the clients have got a budget, and they know exactly what they’re going to be charged for. and if we, and i always tell him that, you know, obviously, if during our meetings, there’s something that comes out of that, that it may require a change order. and i will tell you before we do that, that there’s a change order there. and then we’re going to be you know, new clients we talk about as they come on, there’s an advisory level of services that we go through that helps them understand their business. are you the right choice of entity? or how are you are you affectively taking money out of the business the right way? are you documenting your transactions the right way and things of that nature. and so we’re starting to implement that. that those, those advisory level services, what we call the advisory level services, are starting to become more required. right now we’re kind of giving it to clients as optional, that you don’t need it to work with us. but as we start to get more comfortable with the delivery of those services and start to get, we’re going to start making those where it’s just required for us. you’re going to go through, you know, probably this this large size engagement for the first year, because we want to get a better understanding of your business.
steven sacks
was sort of a sketchy year. any at anecdotes about picking up a client, any examples of that?
jamie lopiccolo
well, i had a, i had a client that i met with last week. and i participated in the practice advisory with one of the major software companies, tech software companies. and i actually got a call from one of the people that i worked with at that company, and said, my husband wants to talk with you, because i think you would be a better fit for my husband, because of the advisory services you have to offer, and we’re not getting that from the firm. we’re not getting it from the firm that he’s with now. so, i mean, that wasn’t even coming from a client, it was just coming from the fact that, that i was being active enough in with the software, and, and using this program that they’re like, and it you know, that they we’re local, in the same area, or whatever. and they said, we’d like to talk with you. so, you know, and then again, going back to the ppp stuff, we’re just, you know, showing people that, that i care, and that, you know, this is what we do on a daily basis.
steven sacks
what does your firm do in terms of like billing? and do you use value billing?
jamie lopiccolo
everything based upon a hybrid of value billing and almost a fixed fee or menu-based billing. so, i utilize software that is called practice ignition, which allows me to send out proposals to clients, and every service’s got a certain fixed price. so it’s just a menu, choice of, okay, you’re this, this, this, this and this. here’s your proposal, and it’s billed on a monthly or you provide me your credit card, and we bill you on a monthly basis. so it’s really moved to a subscription model, versus a timesheet model. so, when i started my firm over three years ago, that was the primary reason why i did not want timesheets. they’re to me, they’re punitive. and also i tell people, you know, and we go back to this being proactive versus reactive, right? so as i go in this is where again, i think that they’re stuck in ruts is when i talk to people and say, i want to be, you know, under the old billing model, if you say i want to be a, a more proactive cpa with you, every client, i don’t think there’s a client of that is going to go: no, i don’t want that. that’s a horrible idea. they’re all going to go yes, i want you to be proactive, i need somebody that’s going to be a business partner, and really help my business grow. great, how much is that going to cost me? i don’t know, $250 an hour. maybe we can set a time and it’ll square up later, whatever. that right there just kills the buzz. because now they’re now the owner is constantly watching the clock every time you call them to come out and do to, to be proactive. where if i come in and tell them that we’re going to do this minimum level of service, or if you want extra meetings a month, if you want just to have a normal check-in, we’ll adjust the annual fee schedule. and i don’t, you know, it’s so funny, because i think that that’s us as cpas, and this again, is we’re so infatuated with it, we’ve got to get as much money out of the hour as possible. we’re not looking at how are we servicing our clients. and in the fact that i could care less if i’m spending an extra half an hour with that client. because you know what that investment is going to pay off at some point in time. it doesn’t matter that i didn’t capture the time for that. if it means that i projected out that i was going to meet with the client for, or i was going to have meetings for the year of 12 hours, an hour a month. and i get into february. and i’ve already spent all 12 hours because they just had a lot of problems. and they were just trying to get through. it is what it is. i, so, i guessed wrong. but you never know it could balance itself out by the end of the year. it could turn out that that was the best investment i ever made, because now that client referred me four other businesses, because they like the service that i did and they knew the budget going into it.
steven sacks
that makes a lot of sense. so it sounds like there’s probably that type of thing in the minority of firms, let’s say in your geographic market because they’re still fixated on the timesheet approach.
jamie lopiccolo
yep, yep. hate them.
steven sacks
yeah, i think you’ve made that eminently clear. so let me ask you, so you’re doing these things for your clients, and they’re getting a level of comfort working with you. do you also, at any one point monitor the quality of the service; that you’re making sure that you’re optimally serving them, you know, what sort of metrics might you employ?
jamie lopiccolo
so yeah, yes we are. we’re, a lot of it comes back to the underlying systems in place. so, when we do the onboarding, for example, the onboarding is consistent with every single client. delivery of the advisory services, it’s the same program with every single client, some minor modifications here and there. so, it’s really the quality control comes from the systems, and making sure that my staff knows what those systems are, and what the standard i have to make sure we’re delivering, delivering stuff. so, and it’s also making sure that the clients are, are constantly being communicated with, and that, you know, every step of the way, you know, this is what’s going on, we’re doing this, we’re doing this and, and getting out there. and, and really, i’ve handled a lot of that off to my admin team, to do a lot of that stuff. so that way, the clients are getting used to talking to them, and not necessarily always having to talk with me. so, my admin team scheduling the meetings or getting the information that we need, and so a lot of it is just being a little bit of an active participant and not necessarily just being a passer-by.
steven sacks
well, also, the fact that you’re pushing down questions to your staff to answer the clients, means they don’t have to always come to you, which then ends up being reflected in the billing. so what do you do about that? how do you get your younger people to become more seasoned and, and give off the impression to clients that they don’t need jamie, you know, they’re the ones that the client can speak to?
jamie lopiccolo
it’s a, it’s a huge trust issue. in my opinion, it’s being able to, to, to find the right staff and trusting them, that they’ll have it in the end. it may start out with, you know, the staff persons talks to me. and then i have them reach out to the client and coaching them that they can do this, or this is the question you need to ask, or what have you. or sometimes it could be just a matter of, of making, you know, with small firms, the biggest thing i tell the staff is, i hope you can swim because you’re about to be thrown into the deep end, and you’re just going to have to figure it out as you go along. right? and so there’s a lot of truth to that. and so finding the right people, to begin with is always the biggest challenge. but, from our perspective, i’ve been fortunate with the people that i have hired, and i have confidence in them. and day one that okay, you can, you can go ahead and talk to this client, we walk through it. and there may be times on an email that i just say, copy me on the email. and if i need to make a modification to what you respond to, then i’ll do that. or i’ll come back to you and say, you know. so a lot of it is just being able to train, especially being an owner of a small practitioner firm, that you can’t trust your staff, because then at that point, you’re redoing all the work or you’re double-checking everything versus, you know, in the review process, you’re only looking for the big things that maybe, you know, they may not know, because of their inability, or they’re inexperience at that stage, but you’re hoping they can get the basic stuff. but if you can’t trust them, then you’ve got to question whether they should even be, be with the firm or not.
steven sacks
that makes a lot of sense. so to put a ribbon on all this, what are your impressions of the future of the cpa profession going forward, let’s say the next five to 10 years.
jamie lopiccolo
i mean, from my perspective, i think that the future is bright. i think that it’s a, you know, this moving to an advisory first firm, and its value-added proposition is going to be where the direction is going to go. i think that cloud accounting services are always going to be there. i think that we’re going to see more and more challenges to that space from non-cpa firms, and we’ve got to figure out how to fight that off. but i think the best way to do this is to leverage our brand and to leverage the value-add to those services. i think that in five years, you know, tax preparation isn’t going to be what, what, what it is now. cas is going to be, you know, it’s going to be a little bit different. i think that and i think is as you know, we’ve got to figure out — and also we, you know, we’ve got to worry about the pipeline coming in. and i think they as a small practitioner and somebody that that’s involved in the industry, i think that’s my biggest concern right now. is, are we doing the right steps as a profession to make sure we’re getting people in, in the industry after us, because there’s going to be a lot of people in the next five years that are just going to — either practices that are going to die out, because they can’t find anybody, so there’s going to be a lot of new business to find, or that business is going to be sucked up by somebody else — a non-cpa or what have you. because again, you know, if we really think about our profession, what do we have a license to do? the only license we have is an audit. is, that’s the only thing that the cpa protects us for. that’s our monopoly is an audit. and we’ve built the brand about doing all of these other things. but there’s people that are coming in, and there’s not people that are going into the cpa industry. so now you’re going to have non-cpas that still want to challenge us, and what makes them any different than us? so, i think that we’ve got to really do a lot to protect our brand.
steven sacks
well said. well said. well, jamie, i appreciate you spending time with us today to talk about from your perspective as a smaller firm, but a more outward-looking and proactive firm in terms of how you operate. maybe it’ll serve as a model for those who are — will be viewing this webcast. a lot to think about. so, i appreciate you sharing with us your, your expertise today. and i hope we can do this again.
jamie lopiccolo
i would love to. thank you very much for your time, steve. this was great. i enjoyed it very much so much.