chase birky: overcoming paralysis by analysis

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transformation talks
with bill penczak
center for accounting transformation

entrepreneurs in the accounting profession are rare, according to chase birky, president and ceo of dark horse cpas. and he should know.

he had to take an uncomfortable step outside of his own comfort zone to become one.

more: secret to success? a growth and abundance mindset | o.d. lanier: stepping into advisory | from tax to transformation | early adopters gain an edge in audit | why the future is in risk advisory | four strategies for a future ready firm
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after starting out in audit at a big 4 right out of college, he decided it was no longer what he wanted to do.

“i started an audit specifically, you know, not really having a great idea of what audit truly was, you know, because you take the courses in your undergrad, and you know, you have a section of it on the cpa exam,” birky explained. “but what that material is versus what the job is, you know, are two very different things.”

that motivated birky to begin a partnership in a firm that specialized in tax and client accounting services (though he added it probably was not called cas then).

unfortunately, that didn’t work the way he hoped, either.

however, as birky reminds us, necessity is the mother of invention.

“i think a lot of accountants are creatures of habit,” birky explained. “so if they’re comfortable, you know, they’re less likely to make those moves, because, you know, they know what’s at stake if it doesn’t work out.”

“and paralysis by analysis, i think, is something we’re all plagued with, as well,” he added.

birky decided to go out on his own but ran into typical start-up issues.

“i was spending a lot of time and energy and breaking my back to build a practice up to what it was at that point. and i knew i wasn’t alone in that regard,” he said.

that led to the development of dark horse. birky said he asked himself, “what could we do that would be just totally different, out-of-the-box that would allow folks to do what i’m doing in a much easier way, a much more sophisticated way?”

he continued, “what could we do that would actually move the needle for them in a major way, because you’ve got all these small micro firms out there that are recreating a wheel that, you know, has already been created in one form or another amongst tens of thousands of firms, but they’re spending a lot of time and energy and effort building things that already exist.”

the dark horse principal accelerator program, he said, was designed so that “folks at the manager, senior manager level at a traditional firm could build a six-figure book from scratch in a couple of months.” the reason, he said, is because the traditional accounting firm structure, to him, too closely resembles a pyramid scheme.

“all of the folks that are actually doing the work, earning the money… that money’s flowing up to the top and only 2% of the people who enter public accounting (make it to the top),” he explained.

birky said dark horse was designed specifically for those who question the traditional model and want to make things happen for themselves. however, he hopes others don’t wait for the impetus it took for him to make the move.

birky said, “i don’t know if i’d be on the path i’m currently on unless i wasn’t in situations that i was trying to actively escape.”

more takeaways from chase birky

many of those in the next generation of cpas are seeking a better career path and have been leaving the industry for some interesting reasons.
technology has enabled firms like dark horse to work smarter in a highly competitive labor market.
want to set your personal and business strategy in a meaningful way? write your own obituary. begin with the end in mind. the real end.

about chase birky

chase birky is a co-founder of dark horse cpas and currently serves as its president & ceo. when asked why he got into accounting, he thought for a moment and then responded, “i graduated college during the great recession, and it was pretty clear that my options were either waiting tables at chili’s or working for a big 4. needless to say, i chose the latter.” he eventually left the big 4 to build a firm that specialized in serving small businesses and individuals that the big guys too often overlooked.

dark horse was born from chase’s and co-founder max fritz’s beliefs that small businesses, entrepreneurs and intrapreneurs are often dark horses amongst their larger, more well-known competitors. they also believe that the right guidance can help propel those horses to unexpected heights. chase added, “especially during these uncertain times, small businesses need a trusted advisor to navigate the highly fluid and often confusing business climate brought about by covid-19. small businesses, now more than ever, need a dark horse cpa.”

transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)

bill penczak 00:02
hello, my name is bill penczak, and welcome to this edition of transformation talks. i am the chief transformation officer for the center for accounting transformation. and in these talks, we interview folks who are a part of the cpa industry in the accounting industry who are experiencing or in the throes of some sort of transformation. as we all know, the industry has been changing a lot in the past five or 10 years through either technology advancements, or just the mindset of people looking for a better way. and today, we’re, we’re lucky to have chase birky with us today, he is the founder of an organization called dark horse. so let him tell the story about that a little bit. and i think it’s a really good example of a path forward for those professionals in the industry who want to do things in a different way. and chase is one of the early adopters of all that, why don’t you tell us about the origin story and how you get started in this and we’ll go from there.

chase birky 01:02
sounds good, well, appreciate, had the opportunity to speak with you, bill, this is something i’ve been looking forward to hear. so, you know, essentially, i started my career, like many cpas, at the big four, i started an audit specifically, you know, not really having a great idea of what audit truly was, you know, because you take the courses in your undergrad, and you know, you have a section of it on the cpa exam, but what that material is versus what the job is, you know, are two very different things. but i graduated college at a time where you just had to get a job, right, because i had friends that graduated the year before me that were trying to get, you know, jobs at chili’s, you know, or just anywhere, they could earn a paycheck, so they don’t have to move back in with their parents, and we’re struggling even at that. so you know, getting a job offer my senior year, i was like, great, let’s, let’s do it. and so, pretty quickly into my tenure, at deloitte, i just realized, you know, audit, as a, you know, discipline was not really resonating with me, it wasn’t really something that i felt like, my interests and my skill set aligned well with, you know, and then being with a big international firm, you know, it was kind of its own thing, and it’s great for certain folks, for me, it just was like, you know, kind of on multiple levels, i knew this was not going to be, you know, the balance of my career. so, very quickly, you know, into that experience, realize, okay, let’s think about what the next steps are, you know, get my two years, get my license, and then be ready for the next step. because i didn’t want to get stuck. you know, and so, i had a chance encounter with someone i knew from college, who was starting up a firm that was going to be focused on tax services, and client accounting services, even though probably wasn’t called that at the time. you know, and that was really more where my interest was. and so, you know, the idea of being able to do that in an entrepreneurial way, really, you know, seemed exciting to me. so, you know, conversations over the next year prior to my departure, and ultimately went into partnership with that gentleman, and, you know, like, a lot of partnerships out there, they don’t always work out. and, you know, those that, you know, don’t dissolve, you know, a lot of them, i would say probably leave a lot on the table as to what they could be, you know, if the partners were more aligned, from, you know, a core value standpoint, as well as a strategic standpoint, all that, you know, but a lot of them just exist until, you know, they get to a breaking point. so, you know, over the course of a couple of years, learned a lot, you know, in the tax field, you know, because that was new to me, at least from a practice standpoint, at that point, so i was really just absorbing myself and as much as i possibly could on the tax side, you know, and trying to translate my audit skills into actually being able to be on the preparation side, because, you know, it’s one thing to critique a dish of food at a restaurant, it’s another thing to prepare it and you don’t always appreciate that until you’re on the actual preparation side. so, come about 2015 you know, the irreconcilable differences that, you know, just became too apparent to ignore any longer, you know, got me just to leave without really a set plan of what i was going to do. and at that point, all i was really concerned about is, you know, servicing a small book of clients and you know, just paying bills, and, you know, kind of just seeing where things went, you know, i’d like to say that i had a, you know, the vision for dark horse and what it would become at that point. but, you know, that was a few years down the road before that would really formulate into something that was, you know, more representative of what it is today. so, anyways, you know, in that process, i really, you know, discovered that i had some abilities i didn’t think i had in terms of being able to bring in business, you know, service it, you know, kind of run all facets of the business, you know, so that was really transformational for me, probably more personally than even professionally, just realizing, you know, my potential and also realizing i could be the author of my own story, you know, and i could, you know, chart a path through life that wasn’t subject to, you know, the control or opinions of others. so,

bill penczak 05:57
do you think that quality is rare in public accounting, the ability to, to come to that conclusion, because you did that pretty quickly, in your, in your career, that you could, that you did have the capacity and the ability to develop business, start a company, do the work and manage people and all that was that was do you think that’s a rare trait in public accounting?

chase birky 06:22
you know, it’s something that i had to discover and myself, because, you know, an undergrad studies, the entrepreneurship courses, honestly, scared me. yeah, i was like, i don’t know anything about marketing, you know, advertising any of these other disciplines, like, i’m an accountant or an accountant in training, right. and so, i didn’t even recognize that i had any of those proclivities in myself, you know, so when it comes to the profession as a whole, i really think it’s a matter of comfort, you know, because if you have a certain level of comfort, you know, you’re going to be less likely to make a huge jump, you know, whether that comfort is and, you know, something you could depend on, you know, in terms of work, salary, whatever, it’s just, you know, i think a lot of accounts are creatures of habit. so if they’re comfortable, you know, they’re less likely to make those those moves, because, you know, they know what’s at stake, if it doesn’t work out. and paralysis by analysis, i think is something we’re all plagued with, as well. and

bill penczak 07:24
then the other the other dynamic, i think, that plays out in firms, especially big firms is that you’re so focused on your deliverables and your billable hours and all of that, that you don’t have time to breathe and think about things and like, what else could there be, and if you’re at a big firm like deloitte, like your ad, everything is very prescriptive of what you’re going to do, and you’re going to spend x amount of time doing why, and then you may get the level you’re gonna get to a certain level and have the opportunity to go do something else. but it’s very measured, and it was a big organization, it has to be that way. i think in the mall, more dynamic firms are smaller firms that have the ability to be more nimble, but maybe not the experience to be able to do that. and so people are people stay in their lanes. and, you know, you’re i think you’re right there, there is a certain risk aversion to the type of people that go into public accounting. so i think you’re somewhat of a unicorn in a good way.

chase birky 08:20
yeah. and, you know, like i said, i don’t know if, you know, i’d be on the path that i’m currently on, unless i wasn’t in situations that i was trying to actively escape, you know, not to say that it was totally terrible, it just was not good for me. right, in both environments. you know, and so, i think necessity is, you know, i think there’s a saying out there, that necessity is the, you know, kind of seed of all productivity, or it’s something along those lines, you know, and that rang true for me, and it really, you know, push my back up against the wall is like, okay, i’ve got to perform, you know, in order to pay these bills and, you know, not foreclose on a mortgage and all that it’s like, you know, when you’re put in that situation, you know, you’re forced to discover things about yourself that, you know, just might not come to the surface, otherwise,

bill penczak 09:09
it’s awful, grown-up stuff, right?

chase birky 09:11
yes. and i was also fortunate, you know, to, you know, not have some of the encumbrances that a lot of folks have, you know, with young families and those sorts of things where it’s like, it’s not just about you, and or your spouse, if you’re married, you know, but it’s about the family, you know, because that’s another thing too. it’s like, you know, someone who’s out of managers, senior manager level, the traditional firm, while they might have those entrepreneurial, you know, aspirations want to go start their own firm, that’s kind of like, okay, well, how much time energy and money, you know, am i going to be putting into this at the expense of my family, you know, chasing this dream? and, you know, i really think that that gets in the way of a lot of folks and really something we, you know, solve for in our accelerator program to make it so there is way to do that, you know, where you’re not putting everything on the line.

bill penczak 10:04
so the traditional path could have been for you back against the wall, i’m just gonna go out hang a shingle, or or worse yet, maybe you’ve just joined another firm and go do something like in a normal course. so what was the pivot point that said, maybe there’s a different way to skin this cat? yeah, so

chase birky 10:26
probably ended 2018. you know, getting close to the three year mark, of, you know, what was originally a sole proprietorship that had become dark horse, at that point, i started to realize that, you know, i was spending a lot of time and energy and breaking my back to build a practice up to what it was at that point. and i knew i wasn’t alone. in that regard. you know, i see a lot of, you know, a lot of conversations with folks and reading things online, you know, that a lot of folks just struggle with that, it’s, you know, it’s one thing to get from zero to one, it’s hard, and then going beyond that is probably even harder. and so, the idea of, you know, what could we do, that would be just totally different out of the box, you know, that would allow folks, you know, to do what i’m doing in a much easier way, a much more sophisticated way, you know, that would actually move the needle for them in a major way, because you’ve got all these, you know, small micro firms out there that are recreating a wheel that, you know, has already been created in one form or another, you know, amongst, you know, 10s of 1000s of firms, but they’re spending a lot of time and energy and effort, building things that already exist. and

bill penczak 11:47
it’s really frightening if you look at look at the concentration of the firm. so you go look at the ipa top 500. now 500 firms, and the 500 firm is comparatively to other industries, it’s pretty small, right? and then beyond that, you’ve got, like you say, all those micro firms that are, there’s, there are 10s of 1000s of them. and, you know, i would suggest that they’re all reinventing the same wheel every day, and facing the same stuff every day. and they’re maybe not leveraging technology the way that they should and have no succession planning and all that. so, so the the market. so what i love working, what i love about the industries, i get to work with really smart people. and and what is frustrating, though, i think a lot of times when people have told me this and people within within firms is that getting so stuck and doing things the same way is just going to be a stranglehold. and over time, younger people more progressive people are going to start thinking, is that all there is? or is there another way of doing things? so kind of fast forward? let’s talk about the dark horse model, if you will, and how that works right now. and then we’ll kind of maybe unpack some of those some of those attributes.

chase birky 13:00
yeah, definitely. so really where we started was with what we call our accelerator program. and that was designed so that folks at the manager, senior manager level at a traditional firm could, you know, build a six figure book from scratch and a couple of months. so what that involves is us paying them a salary, you know, so that they can pay their bills while they’re building. you know, we’re training them on all of our technology, our sales process, you know, equipping them for success, you know, in those first two weeks, and then we have really a marketing engine, if you will, that is creating inbound inquiries or website phone calls. a couple other avenues. and so, you know, once they’ve been trained on kind of how our process works, you know, then we have them feel those inquiries, set up calls, you know, create proposals, send out engagement letters, do the work, so on and so forth. so it’s drinking out of the firehose, in a lot of ways, because you’re kind of being exposed to all aspects of the business, you know, in building a book very quickly. but it’s designed to be about six to 12 months, so it’s not, you know, something you’re going to be doing for years to get to a certain point. and so once they get to 150,000, in recurring revenue, they’ve got the ability to be a principal of the firm, at which point there’s buy in, and they get some shares and all that. so, you know, on the accelerator side, really what we’ve said is okay, you know, a lot of what people are spending their time on is building the website, building a brand, you know, trying to get some nucleus of clients in whatever way they can figure out, you know, trying to figure out which pieces of technology are going to support them, you know, and it’s like, you ended up throwing all this stuff against the wall, and then you realize, okay, some of this works, but a lot of it needs to be reconstructed. you know, but it’s really difficult to have that level of foresight. you you know, until you have a scale where it’s like, this clearly doesn’t work, or you understand your processes or define them, such that you realize, well, this piece of technology actually isn’t the right one, because it doesn’t solve for x, y, or z, or there’s overlap or whatever there is, you know, and you mentioned bill to about, you know, kind of the, the momentum, you know, that can keep someone in a job where ultimately might not be where they want to be. but, you know, they’re so busy, and they’ve got so many demands of their time, and so much stress that it’s like, okay, i’ll think about this after you know, april 15, or october 15, or whatever it is, then they get to that point, and then they’re like, i need a vacation. and then they’re really just trying to spend their time recuperating. and then before they know it, they’re back into, you know, the ramp up for the next busy season. and it’s, you know, the cycle of okay, the things that could, you know, in that case, get them into a different, you know, career opportunity, or, in the case of a firm owner, you know, to be able to transform their processes and avoid a lot of, you know, the seeds of that burnout, you know, that got them to that point, just now, get the attention and the thought that, you know, is needed for it, because they’re just trying to survive in a lot of ways.

bill penczak 16:21
i think that holds true for a lot of different things, even like on a firm level, talking about long term strategy. so for the firm’s that are interested in transforming themselves and think about, okay, where do we want to be in two years or three years from now? and then what what do we need to do in the next 12 to 18 months to make that start happening. and, you know, i would argue like now ish this time of the year, this is the towards the end of august is probably the way in the time to start thinking about that. but then you got people on vacation, and then you got tax deadlines coming up next month. and it just, it’s, i’ve heard, i’ve heard tax folks can about their clients and say, you know, this, this one client, closely held business wants to, once you figure out their exit plan, and they’re always on a three year plan, and they’ve been on on a three year plan for the past 10 years, like, we’re gonna do it someday, and then it never quite happens. so i think dream being purposeful about it. but what i like about your model is that it’s over and over exaggerating way simplifying it, but it’s like a plug and play, the issues that you face that firms face, whether it’s from a technology standpoint, from a process standpoint, or all of the back office type things like like marketing, and bd and managing referral sources and all that, you know, you don’t have to recreate recreate the wheel. and if it’s out of your league to begin with, it makes it even more daunting. and if you can plug and play, if you will, that makes so much better. i’m going to read something that i really found interesting off of your website, that that i think captures what we’re talking about so perfectly. and i will put the link to this in the final version of this video, but the brand is part of your brand story. and it says what hasn’t been disrupted in the century old accounting for accounting firm partnership model. you know, the model a few head honchos at the top call the shots and hold the staff hostage during tax season, we felt that it was high time for the power to be given back to the people. so we created a business model to crush the conventional power structures that profited from the blood, sweat, and tears of those who actually do the work. so that was a little bit of workers of the world unite, i get that. but it really does capture a lot of the sidebar conversations that i’ve heard from up and coming people about why am i busting my tail for all of this, and i’m not really learning anything, and there’s others that are profiting from it. and you know, eventually, the smart people who stick stick with it may get on the partner track and make it that brass ring. but it sounds like your model is a way for them to fast track that if they’ve got the moxie to be able to pull that off, pull it off.

chase birky 19:02
absolutely. i mean, you know, some people would take issue with this, but i think that in a lot of ways, a traditional partnership model resembles a pyramid scheme, where, you know, all of the folks that are actually doing the work earning money that money’s flowing up, you know, to the top and only 2% of people who enter public accounting make partner so, you know, in a lot of ways it has the structure, you know, of that pyramid, you know, and that has been able to exist for as long as it has, because the value proposition is, you know, whatever years of experience you get at this firm is going to set you up for the next thing, you know, which is probably not going to be within the firm. right? and so people have been willing to trade their time, you know, to have that jumping off point, you know, into whatever else they’re going to do next. but as everyone knows, at this point, that pipeline of talent is turning that period. i’m on its head. and you know, the idea that there’s gonna always be this fresh crop of, you know, undergrads that are, you know, high capacity, high intelligence and will grind it out for some period of time just doesn’t exist to the extent that it did. and it’s questionable, what that’s going to look like over the next, you know, 510 20 years

bill penczak 20:20
more kids are going into finance than into accounting. and, you know, i’ve written about this before the term, you get smart people doing stupid work. smart, i mean, it’s become, i took a couple of accounting classes in college wasn’t my major. and i know how hard it is, and you get really smart people who do well at it. and then the smartest people get their cpas. and then you get them. so you hire them out of some great school, and you put them in go and go do cash reconciliation at some mindless stuff. and they’re probably thinking, what have i gotten myself into? and so, yeah, there’s a certain amount of that, that has to come with everybody in every, every every situation, but things like technology that can take some of the drudgery out of that, and talk about what you’re doing kind of unpacking a little bit about some of the technologies that you all have put in place that help facilitate doing things smarter.

chase birky 21:23
right. so taking a step back, you know, just to kind of touch on some of the points you brought up. i think a lot of, you know, kind of the systemic issues in public accounting are just related to alignment, you know, people being aligned in incentives, and the why, and what we’re here to do, you know, there when there’s not alignment in a meaningful way, you know, you’re just gonna have short term relationships, you know, and i think a big part of that alignment previously was, you know, folks knowing, okay, they’re going to be providing the, you know, the guidance and the training and the work that’s going to allow me to make that next step. right. so now that that is less the equation, the alignment issues, i think, are a lot more in focus. so, you know, the other thing too, is that, you know, your average partnership, you’ve got partners that are doing client service, right. so when you’re doing client service, you are trading that time for what you could be doing to build your firm to develop your people to develop your technology, you know, it’s something that i think has been a expectation that partners will have some percentage of their time allocated to client service. what’s different about dark horse is that, you know, our leadership team, you know, primarily, in my case entirely spends my time, you know, building the firm building the infrastructure, developing the people, you know, i don’t do any client service. and that’s intentional, because, you know, when you’re in that part of the business, yes, there’s great learnings and things that, you know, allow for strategic decisions to be based in reality. but a lot of times, what ends up happening is your time gets stolen from that, and then these bigger strategic initiatives and things that could really move the firm forward, as you mentioned, you know, just later often ends up being never, you know, because they aren’t able to fully allocate, you know, the time and resources to make those things happen. so, for us, you know, just because i have the time doesn’t mean, i’m capable or qualified of developing technology, right. that’s not what i was trained to do. it’s, you know, something, i have some proclivities and just, you know, out of an interest standpoint, but we recognize once we got to a certain point that we needed, you know, a vp of technology that would really own that part of the business, and someone who comes from, you know, a software engineering and database management standpoint, someone who just understands that part of the business in a way that we could never understand. you know, so, really, for us, our technology journey has been about, you know, we started with a bunch of ad hoc stuff that worked to some extent and didn’t work, maybe to a larger extent. and then, you know, the light bulb moment for us was okay, we can’t just be chasing, you know, the sexiest technology out there. you know, we’ve got to really get clear on what our workflow process looks like, you know, how, you know, this works from end to end, you know, or at least how it currently works, how we want it to work, and then build a technology stack around that. because if you’re just putting technology out there and trying to, you know, figure out a way to maneuver into util lysing it a lot of times adoptions low and it just crashes. right? so, you know, for us, it was really about, okay, let’s map all of our processes between tax kaz, you know, and all the underlying projects underneath that, and how is, you know, our technology currently supporting that, how his data flowing from app to app, could that be automated, is this app, the right app for this part of the process, you know, it really just getting strategic about, you know, architecting, our technology and not just, you know, throwing stuff up against the wall. so, you know, that level of focus is just, i mean, you can only do at a certain scale, you know, because if you’re just, you know, a couple person firm, you don’t have the money, in a lot of cases, to hire the right people to be able to do those sorts of things. so, you know, it’s something we can do at scale, because we’ve got the ability to get scale.

bill penczak 25:55
whereas the single shingle does not have scale.

chase birky 26:00
right. and for us, you know, kind of the paradigm that we operate under, which is kind of a 180, from everyone else is, our client, as a firm, or at least as a leadership team, is our cpa, you know, we’re here to serve them, they’re here to serve clients, you know, so if we can support them, client service is going to happen organically, because they, you know, a resource, the correct way to start with, whereas your traditional model is multiple layers of management to review work and to identify deficiencies, we’re trying to eliminate those deficiencies and start with with a better platform.

bill penczak 26:37
so so, you know, i’ve heard firms talk about, you know, we want to use technology, so we can free up our people to do higher value work for our clients. and i wish i had a nickel for every time i’ve heard that. because i think it’s great in theory, but also in practice. and so how, how have you been able to train your cpas that are part of the group to figure that out? so rather than just doing the twin i consider, like the transactional piece of it, i’m going to do a return for you, i’m going to do your, your, you know, your calves report every month? and how do you teach inspire? those we’re talking about before kind of the typical cpa personality, that that to be more consultative? because i haven’t seen very many firms do a great job of that the complaint on the compliance side, you know, not not on the consulting side, per se, but on the on the compliance side.

chase birky 27:39
yeah. so i mean, i think this kind of goes back to, you know, some of the things we’re talking about earlier, you know, in order to actually provide advisory level services, you have to free yourself up from the blocking and tackling, right, because the more that you’re in the weeds, the less likely you’re going to be to, you know, be above the trees, right. because switching those hats, the context switching that that requires it, i mean, most humans just aren’t set up to, you know, seamlessly transition between both mindsets. so, you know, for us, it’s a matter of, okay, this technology is going to be largely focused on compliance, you know, not on ai, machine learning and stuff to help you on the advisory side, you know, because a lot of that still rests on the human, you know, for being able to identify, you know, strategies and, you know, building the rapport to actually be able to execute on those strategies and drive results, you know, so our technology, you know, is more about, let’s free your time and your brain up to be able to focus on those things. and as time goes on, you know, we’re gonna have more technology that leverages, you know, the strategy and the advisory side of things, you know, but i think a lot of the technology that’s out there right now is, you know, an oversell, under deliver sort of deal, you know, it’ll be advertised to do x, but really, what it does is a lot less than that. like,

bill penczak 29:12
some of the platforms i’ve seen on the cas side, were, you know, the promises will do a management report for you every month, you know, we’ll take the information that comes out of quickbooks, and do a report. it’s like a standard report, and it’s like your name here. and,

chase birky 29:27
and it depends on good data anyways, i mean, if you don’t have really good data to be able to parse it into a management report, i mean, what are we doing here?

bill penczak 29:37
so there’s the old the old adage about, there’s a big difference between information and insight. and the insight part is like, so what do i do with it? how does this make my life better? and that’s, that’s hard. again, if you get it if you’re if you grow up in the weeds, it is hard to get that that tree top view.

chase birky 29:53
right. and so, you know, from our standpoint, you know, we are a human centric brand in in terms of, you know, what we’re putting out to clients, you know, because clients don’t really, for the most part care about the technology that goes into the work product, they just care about the timeliness, the quality, you know, and how it’s moving the needle for them, you know, and that, at this point in time, you know, that real value driver comes from humans, that are leveraging technology to support them, it doesn’t come straight from technology. you know, and so for us, you know, we’re growing into a technology company as time goes on, you know, but that’s not something that is an external, you know, focus in terms of clients, utilizing technology outside of basic, you know, cloud computing things we need for collaboration. you know, it’s really about, you know, the technology to support your cpa, so that they can provide you with a higher level of service at a competitive price.

bill penczak 30:57
what’s your big, hairy, audacious goal for dark horse?

chase birky 31:01
my bhag is to go public. we want to do that in the next five to 10 years, you know, we’re in an infancy stage in a certain way. i mean, the firm has been around for seven years now. but we didn’t pivot this firm into what the business currently is, until about three years ago, you know, we went from a staff of about four people to 65. now, you know, it’s one of those things where we’ve clearly clearly identified a product market fit that, you know, is showing itself in the numbers. and from my standpoint, the more important thing is that, you know, dark horse exists to really disrupt public accounting in a positive way, you know, and change people’s lives, you know, our cpas, and our clients lives for the better. and if we only do that for a small group of people, how does that really move the needle, you know, in the more macro picture, and so, for us, it’s about, you know, because we truly believe in what we’re what we’re doing, we want to scale it to scalar impact, you know, and, you know, whenever we add a cpa merge into practice, you know, we’re adding levels of experience and expertise, that really benefits everyone, you know, because one of the big things about being a dark horse cpas, that you’re not alone, right, we’ve got a really collaborative environment, where people are actively helping other, you know, their peers, get through client questions and situations, and, you know, just all the myriad of just one off things that one person couldn’t possibly know, even half of, you know, but the more folks, we have the have the right mindset of contributing, first consuming second, you know, there’s just so much knowledge and up leveling that happens that, you know, really allows people to continue to grow in their practice.

bill penczak 32:57
so, in amongst the smaller firms, you know, the to number 200, all the way down, you know, the blend of, of service lines is primarily tax, some audit, and then, you know, cass continues to be the fastest growing new service line, have you given any thought about adding audit services as part of the mix? or is the risk piece of it, and the complexity of it just too much?

chase birky 33:27
i’m smiling, if not chuckling a little bit to myself with that question. because of my background in audit, it’s something you can’t help yourself. well, maybe just the opposite i, i really, that’s not an area, a service line we want to get into, you know, sure, the insurance is a lot, and it’s a lot of work to make sure that it’s done. right. and the quality is there. and, you know, you going through all the peer review processes and all of that. but more than anything, you know, it’s about how do we add value to a client’s personal or business financial situation? you know, and audit is a need for a number of businesses out there. but for me, it’s just about how does that drive value, and we just only want to be partnering with clients to drive value. we also don’t want to have the complications of conflicts of interest. you know, going public, you know, we’re not going to do that with an audit practice. there’s a number of strategic reasons why that’s well,

bill penczak 34:37
and i think the business reason is, my view is, if you look at the i did a piece of research for a client that is a cpa, a medium-sized cpa firm, and we’re benchmarking them against a peer group. and if you look at the margin, overall operating margin of the firms that were predominantly or exclusively tax and cas the margin was, you know, dozens of points, if not 20 point percent percentage points above what it was for the for the audit. there’s an old old fight that i’ve heard before not a fistfight. but are the odd audit people arguing with the tax people? and the tax people say, you know, a lot of people say, why are we messing with all these little $1,500 1040? intensity by returns? it’s like, why are we wasting all our time? my clients are 50,000 $60,000 engagements. and the tax person said, this is kind of a composite story, then think about the taxpayers and said, you know, well, what’s, what’s your, how many? how much right off? do you have on yours on your $50,000? engagement? so look into their beers, i don’t know, 1012 grand? and i okay, what’s your margin on that, and then the, the, that usually set shuts down the audit people pretty quickly, because it’s the margin, because there’s a lot more moving parts, and the scheduling piece of it is a pain in the neck and all that, that’s where they lose their shirts. so from a business standpoint, the overall contribution margin is a heck of a lot better on the tax side, and even more so on the cash side, as you well know, than on the audit side. so it’s, it’s, it’s, i think that’s a good business model. and i was just curious, more than anything, it was trying to suggest your business model.

chase birky 36:19
yeah, and the other thing, too, is that, you know, you got to look at kind of your, your clientele, you know, kind of your ideal client that, you know, you’re trying to attract, and, you know, we originally named ourselves dark horse cpa, because our client was the dark horse, small business, you know, that was, you know, competing against their larger, more known competitors. you know, so there’s not the biggest need for audit services at companies at that level. you know, and while we certainly will be moving up market as time goes on, you know, it’s one of those things where it’s really just about, you know, what are we here to do, you know, as opposed to being, you know, the costco or the amazon of the world and sell everything, it’s kind of like, well, let’s just be more than in and out and you know, just be really good at what we do, you know, and provide a ton of value, because ultimately, that’s what’s going to drive growth.

bill penczak 37:17
yeah, knowing what your value statement is staying in your lane and doing it really, really well, rather than trying to be all things to all people in, you know, the middle market, or the lower middle market is a great place to be, if you look at the wealth of individuals in the united states, a lot of it resides in that, that those locally owned, or closely held businesses. so that’s like, that’s never gonna go away. and you know, everyone’s beating their heads against the wall, bigger firms and midsize firms about going after public companies, whatever else or even the big, big companies, but there’s a whole lot of the, the smaller companies need the help that i think that you’re trying to train your people to be able to provide. think that’s more reward probably more rewarding for the right kind of people, rather than i’m just going to do a return and, you know, hopefully, put them on their way on on the 17th of 16th of april,

chase birky 38:12
right? i mean, 100%, it’s really about being able to see the fruits of your labor, you know, and the larger the organization is, the less you’re going to see that, right? because you’re going to be dealing with someone who doesn’t have ownership over the business or any meaningful desire, you know, beyond just maybe their performance bonuses or whatever, it’s when you’re dealing with a small business owner, and you’re tangibly helping them, you know, there’s just a lot more fulfillment. and

bill penczak 38:43
it’s because, because it’s real money, yes. because it’s because it’s somebody’s real money, not just a corporation throw money. and there’s, that is that is a more fun space, challenging space to work in, because you can be a creative to whatever they’re trying to do. and in most cases, you’re doing it

chase birky 38:59
right. and the other thing too, is that’s just a chronically underserved market, you know, there’s just a bunch of one off shops, you know, they’ll service those businesses, to some extent, a lot of bad service that we’ve, you know, steen, and, you know, kind of inherited via some of our clients. and then the bigger firms that just don’t have a service model that’s set up to really serve them, you know, the fees are too high, the attention is too low, because it’s going towards their, you know, higher paying clients. so it’s a chronically underserved market. so it’s even that much more rewarding, because, you know, what else is out there? a lot of it is not great, you know, so we’re able to really just, you know, provide a level of value that, you know, is goes beyond expectations

bill penczak 39:44
with the average net promoter score, if y’all are familiar with that, that, that concept for for companies like amazon or google or starbucks is like in the 70s, the average net promoter score for banks and for cable companies with people love to hate, they’re like in the low 20s. and the average a couple years ago for cpa firms was like 24. and so and so the service level has a lot to be desired that data kind of shows. and then also going back to those smaller firms. it’s also a demographic issue, i think, because you’ve got older people in their 60s or late 50s, or whatever, wanting to smell in the barn and wanting to get out of dodge and have no succession plan. we got one of my firms from clients bought three partner firm a couple years ago. and i was talking to them afterwards it a couple years after it said, what will you have done? had you not sold to this other firm? oh, probably just shut it down. and so like, all the clients would have gone kaput. and and so there’s a whole demography shift of, you know, what’s happening at the younger end of having the few people are coming in, maybe we’re thinking differently. and at the other end of the spectrum, the baby boomers are trying to get out of dodge and don’t know quite how to do it. so i think i think demography is working in your favor. so what what, as we wrap up here, what are some of the words of advice for backup way up about transformation for maybe that individual? so rather, rather than a firm, i think your journey and the value proposition is really for that, that right minded, professional that wants to do things a little bit differently? what are some pieces of advice you would give to them about how to start asking the right questions about what they want to be when they grow up?

chase birky 41:35
yeah. so an exercise that i did, maybe two years ago, which i thought was super powerful, is to write your obituary. i know that that sounds morbid, but, you know, writing your obituary, i

bill penczak 41:54
just had a birthday a couple of weeks ago, and i rewrote mine. so that’s funny, i just got goosebumps, because i’ve done that.

chase birky 42:00
yeah. i mean, it’s powerful, right? you know, you’re writing what you want to be said about your life story, your impact on the world, and, you know, those you love, you know, and when you start with that end in mind, then you get a lot of clarity in terms of what needs to happen to make that be a true, you know, statement about your life. you know, and so it’s kind of the idea of starting with the end in mind. and when you do that, i think a lot of things are going to gain clarity in terms of, you know, why something doesn’t work for you and isn’t supporting that vision, you know, and what needs to happen next, in order to, you know, start to build that, you know, because i think a lot of people if they wrote their obituary as it would stand if they died today, you know, they wouldn’t really love what they had to write, you know, but if you can write something that’s aspirational, you know, that you can grow into, you know, that, to me, that just provides a ton of clarity on kind of what’s next.

bill penczak 43:00
i wrote mine like 10 years ago, and i said, i’ve ever revisited it. and at the time, when i wrote it, we were still living in houston. and when i did my obituary, i said, he died on the olympic peninsula of washington state. and that’s where i live right now. so. so that’s at least one of the boxes, i had to check. but it is it’s freaks people out like you did that. i’ve also figured out which music i want to play at my funeral.

chase birky 43:25
but what’s on the top of that list, so…

bill penczak 43:28
just breezed by either the willie nelson version, or the pearl jam version. and then the crescendo, and then there’s george harrison song, well, things must pass. and then the last one at the very end, is, you can’t always get what you want by the rolling stones. but at the end, where the choir comes in, in the real version, i’m going to have a real choir sing the last part of it. ice. yeah, love it. and i’ve shared that with my wife, and it’s in the file, and she’ll probably do it. so if people think that’s freaky, and like, why would you want to do that? like, because, you know, what’s the end in mind? and being purposeful you can start right now and you got to get to that step by step.

chase birky 44:09

right? if you don’t have a destination targeted, you’re not going to like the destination you end up at.

bill penczak 44:15
to quote, george harrison, if you don’t know where you’re going, any road will take you there. is that from the dark horse album, maybe? tie that kind of put a bone on that made from the dark horse album from george harrison. okay. yeah. that’s your new your new theme song. yeah. well, this has been great. i really appreciate your time chase. will put your website in the in the final version of this. i’ll put a link to that. that quote about from your brand story. i think that was great. and, again, great insights. i love your energy and love the idea that you have. and you know, good luck. best of luck to you in the future.

chase birky 44:52
awesome. really appreciate it, bill, great conversation.