martin bissett: private equity shakes up u.k. firms

martin bissett argues professionals must think like the business owners they are.

the disruptors
with liz farr for 卡塔尔世界杯常规比赛时间

to win the staffing wars, you must develop a talent pipeline, globe-trotting practice advisor martin bissett tells liz farr in this exclusive interview.

the firms winning in recruiting and retention are using a portfolio approach to nurture prospects who might be ready to join the firm at some point in the future, a world-renowned sales and marketing consultant, a long-time contributor at 卡塔尔世界杯常规比赛时间, and, most recently, the co-host of the uk-based accounting influencers podcast.

more videos and podcasts: brannon poe: the status quo must go | private equity vs. the cpa firm partnership | the fintech flood: accounting will never be the same | the disruptors: re-inventing accounting with tyler anderson |  the disruptors: how to scale with new padgett coo amanda aguillard | eat that frog: asking for a prospect meeting | growing revenue through client service | lease accounting is about to get very real | google ads for new tax season clients | exclusive: eisner ceo charly weinstein explains the private equity deal  | flash briefing: a “call to arms” after private equity deal | four ways to beat the staffing shortage, with pasha malik

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more take-aways and transcript from martin bissett:

• a growing trend in the uk is the “commercialization” of the profession, where private equity firms invest in accounting firms, especially at the mid-tier level. with a change in governance to boards and a ceo/coo/cfo/cmo structure, firms are changing from accounting practices into accounting businesses.

• a desired result of commercialization is that clients will be better served: more financially literate, fewer insolvencies, and more economic prosperity for all, developing young professionals into commercially minded people who create value rather than provide services.

• what’s never been in place at most firms is discipline around business development, marketing, and selling, which we have labeled as ‘soft skills.’ if accountants don’t have skills in selling and marketing, how can we expect our clients to regard us as trusted advisors who will help them generate more sales?

• if you want to win clients of a higher caliber, you need to communicate why they are better off with you than where they are now because they will have to break a loyalty barrier to leave their current accountant.

• most accountants have never been taught, coached, or trained to run a commercial enterprise. likewise, most clients have no experience with firms that offer any kind of value proposition. then the deciding factors are how close they are, how much they are, and do you get on with them.

• when you are providing a commoditized service, price is your enemy. providing the additional value that justifies higher prices has not been part of the training or the education for accountants and is therefore not known.

• when you chase deadlines for a living and hire people to chase deadlines, that doesn’t allow for innovation or value creation. instead, be willing to think about whether what you are doing is what you want to do. at what level of pain is it better to tolerate the discomfort of change so you can create something better?

transcript

liz: we have a lot to cover, so let’s dive in. now, accounting talent has been scarce for years. i know that’s true in the us, sure that’s been true in the uk because i hear that this is an international problem, not just a us-specific problem. covid made it much worse. what ideas do you have on how to make things better and what, if anything, have you seen firms do successfully?

martin: if we take the second answer first, in terms of what have we seen the firms do successfully, what we’ve seen is them having more than one approach to recruitment. many firms that you speak to will say, “we can’t find the right people.” they’ll say, “it’s easy to find people, but not easy to find the right people.” then you ask them what they’ve tried, and they’ve tried nothing that would ever attract the right people. they use the same recruitment techniques. “we put an advert on this or we spoke to our team to recommend somebody.” or, whatever it is that you’re doing is what they did previously.

a portfolio approach to recruitment is what i see successful firms doing, who not only attract but retain top talent. in 2021, with the technical comprehension that young professionals have got, if we’re trying to attract a young professional and we ask them to come to a position that puts them in a cube farm, ask them to account for their time in six-minute increments, has no clear career paths, and is a life of chasing deadlines, and you only get vanilla boring people apply, i wonder where the process went wrong?

we have to understand, and i have this little phrase, that i’m thinking about trademarking this, called, the commercialization of the profession. that’s what’s happening over here in the uk, and i think to an extent, in the us as well, where private equity firms are putting money into accounting firms, removing the partners from the management of it, and putting in a ceo, a cfo, and a cmo. we’re actually having somebody responsible for marketing, somebody who’s responsible for sales. my goodness, somebody who’s responsible for pricing.

in a non-commercial setup, where we just look after some clients in exchange for some money because of some time that we used to make them compliant by law, that’s a pretty vanilla offering. what i see firms doing who are successful, although there’s not many of them, is taking the portfolio approach, and saying, “okay, we’re going to go out on social, but we’re also going to have an open house, but we’re also going to have a look at outsourcing, but we’re also going to look at offshoring, with all the difference between outsourcing and offshoring. we’re going to have six or seven different ways, and we’re going to build relationships with people, so if they say no to us today but we’d love to have them in the firm, let’s check in with them a year from now. how are they a year from now. do they want to come and join us a year from now? no? how about two? how about three?”

as i’ve always taught, liz, to have a pipeline of prospects so you know where your money is coming from, whether you’re replacing clients that you’ve lost or growing. then, similarly, i ask firms to have a pipeline of prospects, where they cultivate relationships with these people, rather than bring them in for an interview, say yes, no, and put them back out the door again.

that’s the second part of the question, having a portfolio approach, many different approaches to recruitment, something attractive for them to see beyond a, “here’s a job and here’s your pay.” [snores] that’s not going to get top talents in. they want opportunity, they want innovation, they want promotional developments, they want a career path, so give them those things. that’s the second part of the question, which i’ve spent so long answering, i forgot the first part of the question.

liz: the first part was, what are your ideas on how to make things better? i think you’ve covered a lot that.

martin: accidentally, i did. the thing i would throw in is change the training. that’s the way the problem starts. the problem starts by who we recruit, what we train them in, what we tell them their career in accountancy is going to be like, and what their experience is in firms. at no point in that process that we see a lot of commerciality. we see a lot of technical ability, being able to get to accounts to trial balance or to get tax return exact, or whatever it happens to be, and meet the deadline, but we don’t see commercial ingenuity or innovation taught. then we complain that people aren’t knocking on the door saying, “how do i progress in this firm?”

my idea is to change the training, to improve the training to reflect 21st century business, but to be far more commercial and far less predicated upon deadlines and government legislation.

liz: yes, i agree with you completely that the training in college courses is years behind what is really happening. [crosstalk]

martin: it’s not going to change anytime soon because the training bodies, the legislative bodies earn their money from doing that, so they’re not going to change it. it’s not in their interest to change it.

liz: yes, even with the aicpa’s new initiative, i think it’s a step in the right direction, but it’s only a step and so much more needs to be done.

martin: we have it here. our aicpa equivalent is the icaew, which is the institute of chartered accountants of england and wales. they’ve just announced a brand new initiative. i don’t know if it’s called rise or– i think it’s called rise. this is to invest in people from low socioeconomic backgrounds. to bring a different demographic into the profession. now, theoretically, that’s to be applauded. that’s fantastic. in reality, when will we see that wash through the system? we’re years away from it. years and years and years away from it. in the meantime, it stays…

liz: i’m a bit dubious about just bringing underrepresented groups into the profession without changing the profession as a whole because then, while we do bring in people with different upbringings, we may only be attracting those who, with that different upbringing, already fit into the mold of a traditional accounting firm, so–

martin: i would hope the idea would be to break the mold of the traditional accounting firm. there’s a lot of conversations about diversity, and rightly so. until opportunities become equal to everyone, we’re going to have conversations about diversity, so that’s correct. what i do think also happens is we get diversity higher up the priority list than meritocracy. from the client’s point of view, that’s the client to the accounting firm, they want the best. why would they assign it to anybody who wasn’t going to look after them well and the best? we’ve got to make sure that whoever comes in, from any background, has got to be good. for me, if you’re good enough, none of the rest of it matters.

liz: i agree with you completely. now, let’s move on to the next question. until recently, the business model for accounting firms hadn’t really changed very much. you bill for time, you slot yourself into this org chart that has the standard job titles. then if you stick around long enough, then maybe you make the partner, and maybe you get the big payoff at the end, but we are beginning to see firms move away from the billable hour and to develop different kinds of organizational structures. what are you seeing these days?

martin: liz, over here, we’re having a private equity explosion. the mid-tier, let’s call those £3 to £12 million turnover businesses, so close to $5 million revenue and upwards, which i think is low or middle tier in the us. they are attracting private equity money, for a number of reasons. sometimes to the corporate’s finance opportunities that exist within the client base, and sometimes, to simply merge into a larger group. lots of consolidation, lots of private equity, and most importantly, this phrase of mine, the commercialization of the profession, is the commercial boards running the firm. the firm becomes an accounting business, rather than accounting practice.

the key difference being that an accounting practice are people all engaged in the practice of a profession called accountancy, and sell their time for money and chase deadlines all day, whereas an accounting business is a commercial structure designed to be an empire. designed to build, and grow, and diversify, and be leveraged, and scalable.

that’s what i see, i see now an acceleration that’s been in the last three years. three years? yes, about three years that some of us having this conversation, that we’ve seen this build and build and build and build and build. now you’ve got venture capital houses who own accounting firms, and the crm of the accounting firm is usually is also owned by that house, and the general ledger software is also owned by that house, and the finance function is also owned by that house. it’s a one-stop-shop play.

i think what we’re going to see is a lot more consolidation. i think we’re going to see a lot of small firms spin out and be creative when they don’t like the corporate culture that they’re sold into, because that’s always a byproduct of m&a activity. i think we’re going to see what might be today’s top 100 consolidating today into tomorrows top 60. they all merged into a smaller number of firms, and marketing become far more important to those firms because they’re run like businesses these days, not some practitioners all under one roof with a common name.

liz: i’ve heard of a few firms that are trying to merge the two models. the ownership is still through a partnership structure, but they have designated one partner as the ceo and another as a cfo, so i think that that might be moving to the right direction.

martin: i think far more llcs and plcs now, far more into those types of models. i think merger is not the same as acquisition. acquisition, although lumped in together, acquisition suggests that there’s a culture and there’s a way of working and operating way of working that comes in as standard to no matter how you did things before, this is how you’re doing things now, because we just bought you and therefore, we own you. i think that’s happening, but i hope what this all leads to, is there’s two things. i hope it leads to the clients, which everyone seems to forget about, being much more financially literate, thanks to the support they get from accounting firms. therefore, far fewer insolvencies, far more economic prosperity at large.

i hope it leads to a far greater development of young professionals into– i hate to use the word entrepreneurial because that’s not quite right, but commercially-minded people, who can create value rather than carry out some services. pricing experts have long since argued, it’s unethical to use the billable hour because the client wants the problem solved quickly and we have to bill as much time as possible. there’s an immediate conflict of interest there. that’s why the pricing argument– … value pricing exists because they would argue that billable hour pricing is unethical, but that is the model, it remains the model. i welcome this commercialization because it benefits the clients ultimately, and that’s the standpoint whose mindset i usually come from.

liz: an auditor that i work with quite a bit by the name of al anderson phrases that as business-mindedness. he says that there are two prongs of it. first, you have to be literate about the businesses of your clients and be on the lookout for ways to help them improve their businesses. then, you also have to look at the business of your firm and run that as a successful enterprise. think carefully about the clients that you work with, about the people that you bring in, about the technology that you use. think about all of it from a almost cold-hearted business perspective, that is looking for a return, that is looking out for the best for all.

martin: i very much agree with that last point. i’m not sure i would go with cold-hearted so much. i think i would go with non-apathetic because one thing throughout all these years that i’ve been in the profession, liz, is that firms have always told me how absolutely maxed out they are, totally busy. i have yet to be inside a firm where any member staff is dashing to get from one place to another. nobody is rushing, nobody, and yet, we’re maxed out. how does that work?

i come from a sales background. in a sales environment, maxed out, means you haven’t had breakfast for three days. maxed out means you aren’t sleeping, maxed out means you have six deadlines to hit today, otherwise, you don’t get paid. that is not the same definition as what a managing partner says to me when they say, “oh, maxed out.” i’m not making light or fun of that, i’m saying, there’s a very different perception. it is very difficult for an organization that lives off gross recurring fees to understand what it feels like on a client’s perspective to have to hunt and kill every month just to make payroll. i don’t think they can get into that mindset. until they do, there is a lack of empathy that exists between accountants and clients.

on that basis, if you’re going to be a firm’s, a client’s advisor, and most clients will want their firm to double up and be their advisors, rather than accountants, rather than compliance accountants, or tax accountants. then you have to, as your friend says, have to understand the business.

during covid, i got a lot of feedback from firms who said, “we’re so much closer to our clients now. we know what they do, we know what their motivations are. it’s so wonderful.” i thought to myself, by dint of that you’re saying, that prior to covid, had covid not have happened, you wouldn’t have known what your clients did, and you wouldn’t have had a clue what their motivations were. it takes a global pandemic to wake you up.”

liz: i worked at a firm that had this beautifully framed mission statement in the break room that said this, “we’re a holistic provider of financial services.” that was beautiful, beautiful, but nothing of that was really implemented into our processes.

martin: of course, no. it’s a tick box exercise, liz. i love alan weiss on this, alan weiss says, “people don’t believe what they read on the walls, but rather what they see in the halls.” that, for me, sums it up perfectly.

liz: yes, because a holistic provider of financial services would interview every new client about, “what are your goals? what do you want to do? who’s your attorney? oh, you don’t have one? we can recommend some. who’s your financial adviser? oh, you don’t have one, we can recommend some. what is it you are doing? what is your long-term plan? are you going to run this business for 20 years? or are you going to build something up and sell in five years?” not a bit of that was part of the culture.

martin: of course, not. of course, not.

liz: no.

martin: i have no idea about this firm and who we’re talking about, i don’t know who they are. my wild guess would be a consultant came in and said, “why don’t you have a mission statement?” so they got one, and that’s that one done, [chuckles] but absolutely no cultural transference, as a result of that.

liz: no, no, there was nothing, no changes.

martin: it’s not in the dna of the leadership. we can’t expect it to be. it’s not the training. it’s not the experience of the people who lead the firm. we can’t expect that to happen. it’s not ingrained.

liz: no, no, we didn’t have any policies, any procedures, anything that we were supposed to do. there was no leadership showing us how to do this.

martin: that’s a mission statement, so what happens when they have become a holistic provider financial services, now what? what’s the mission now?

liz: that’s a good question.

martin: [chuckles] these things are often again, just lip service, i’m afraid. it was ever … that’s not new. it was ever like this.

liz: yes, that’s very true. now, what about growth? how do firms grow? are there different strategies that a solo practice would use versus a multi-partner practice or a multi-owner practice?

martin: i think the methods are the same, liz, i think the scale is different. again, let’s speak in generalities rather than specifics. in generalities, referral is still the way that firms grow. if it doesn’t drop on their lap, they don’t generally find it. then we say, “okay, so we can’t say that accountants is one big banner that we can talk about in general, so we have to say, “okay, what do proactive firms do that’s different to what general firms do?”

proactive firms have a multifaceted approach to grow, but not with ingredients that we haven’t already heard of. some will use networking, some will use lead-generation techniques, some kind, be it the old-style telemarketing or the new style digital marketing, some will go for inbound. there’s lots of ways. some will go for acquisition as well, of course, and buying up little banks of fees and bolting it onto their own.

there are lots of different ways that firms grow, there are not many different ways to there have ever been of how firms grow, but what’s never in place is the discipline on business development. business development and marketing, we give the collective term, soft skills. suggesting soft, not as important as the hard skills, which produced the bread and butter. soft skills. second class citizens then, they’re in soft skills land. they’re not paying a lot of attention to again, in general, before the viewers complain, in general, i’m sure there’s some firms that buck this trend, but in general, they don’t, so referrals.

imagine you market yourself as an advisor, let’s say, you and i had a firm, it was foreign business, llc or llp. “we’re advisors to smes. we want to help you get to where you want to be, woo,” and that kind of garbage. then, a switched on client says, “great, how do you grow your own firm proactively, given that you want to help me grow mine?” we go, “well, referrals.” they say, “great, okay, so referrals, what else?” “we got nothing else.”

who would take an advisor seriously who isn’t even in control of the growth of their own organization? that’s where accountants are. going way back to the mid-’90s when this craze came in, both in the us and the uk, and all of a sudden we weren’t calling ourselves accountants anymore, but accountants and business advisors. or if we want to be really different, business advisors and accountants. it was yet again, another piece of lip service. there was no behavioral change or behavioral improvements, or process change or process improvements that happened in general. it was just something else to say, because we’re just talking about the some old stuff otherwise.

for me, the firms that grow, they find a way to rid themselves of their grade d clients, whether that’s selling or sacking, they find a way of doing it. that increases their capacity, their average fee, and their profitability, their gross margins immediately by doing that. that’s an improvement by shedding. then they use a pipeline. they have a marketing strategy that people actually understand and can articulate to each other.

they know the difference between strategy and tactics, and there’s not too many firms that you qualify under that banner. they’re on the lookout for good fits for their firm from a human point of view and a client point of view, whether it’s somebody else’s client or not. they have targets to hit, just like a sales department would have. if they want to grow by 25%, they’ve actually got a plan as to how they’re going to grow about 25%. not just go, “well, we lose 5% of our clients each year and we gained 5% in referrals, so that’s net zero. okay, let’s go with that.” they have a pricing strategy. all these things have worked out.

how do firms grow? that’s how they grow. is it any different from a solo than it is from the top 100? in terms of the methods and what resources are put into them, sure, but in terms of the basic principles, no, it’s exactly the same. if you want to win clients that are of a higher level in your current average fee, then you have to communicate why they’re better off with you than where they are now because they’re going to have to break a loyalty barrier to leave their current accountant to come to you, so you better put a compelling value proposition together, and then people just will be going, “what’s the value proposition?” we start really at a very low level, but ultimately, liz, they’ve got to want to.

liz: yes, and it’s the got to want to, that is the key.

martin: yes, and most of them don’t want to.

liz: no, no, they’re quite happy with the– [crosstalk]

martin: quite happy as they are.

liz: they’re making enough money as it is.

martin: yes, it’s good. that’s the phrase. that should be … on all these firms, “here we are at foreign business, it’s good enough. it’s okay as it. we do what everyone else does.” those should be our straplines because for many firms, unfortunately, that reflects their true modus operandi.

liz: yes. that’s about all there is to it, which is quite unfortunate.

martin: again, i have mourned this in previous years, i’m not sure that i mourn it now because i’ve come to realize that i can’t expect something different. the firms are led by people who were never ever coached, trained, or prepared to run commercial enterprises.

liz: no.

martin: we can’t be surprised when they don’t want commercial enterprises.

liz: no. what’s the surprise in that? [crosstalk] yes, it’s not part of our experience.

martin: no, and therefore, we can’t criticize firms for doing that, unless, they claim to want something more and have done nothing about it, then they’re worthy of criticism. a firm that’s just merrily going along, doesn’t know any different and doesn’t particularly want anything different. this is what they got in their careers to do. they’re busy doing it. let’s leave them be.

liz: yes, there are enough rotten clients who will be quite happy with a mediocre firm. there really are.

martin: there’ll be enough clients, liz, who are not educated enough to know what the difference is. mediocre will be the standard, will be absolutely fine because we don’t know any different. i speak as a client for the accounting firm. i pay an accounting firm to support me and to advise me. unless i have a comparison, unless i’ve ever worked with anybody else, i don’t know that what i’m getting right now is superb or awful. i have no way of knowing, i have no benchmark, and most clients have no benchmark.

liz: no, no, no. maybe they worked with somebody else, but most likely, it’s pretty much the same.

martin: yes, it’s probably going to be down on price. that’s probably going to be the differentiating factor. when there’s nothing in value, in service level, in value to go on, then it’s, how close are they, how much are they, and do i get on with them? those are generally the criteria of the decision-maker for the client. there’s not a lot else to differentiate upon.

liz: no, no. it’s not until accountants learn that they actually need to provide the value, if they are going to be valuable.

martin: then there’s a whole debate as to whether they need to or not, because if their aspiration is no more than to maintain the status quo, then they don’t even need to, because they’re not going to die out. these have been warnings that compliance is dead for 90 years. i first came across it in the chicago technical institute in 1931. i think it was an address given to the chicago institute. “we’ve been proclaiming the death of compliance for 90, for nearly a century now. oh, look, it’s still here and it’s still plentiful, and the government still finds ways to keep accountants busy.”

liz: it’s very true. very true.

martin: business as usual.

liz: why worry?

martin: yes, why worry?

liz: now, you already touched a bit on sales and marketing and skills that have not been taught to accountants, what other skills do accountants need to be successful now and in the future?

martin: i would make a differentiation straightaway on they need to have sales and marketing skills. i wouldn’t claim that they need to have sales and marketing skills, i would claim that they need to have a comprehension of sales and marketing, so that they can hire people to carry out those functions, and so they know the difference between garbage sales and great sales when they see it. otherwise, a salesperson or a marketeer can sell any old thing and they have to accept because they don’t know any different.

i would ask cpas, accountants, or anybody, bookkeepers, enrolled agents, anybody who’s listening to this, “did bissett just say we have to become sales and marketing people?” no, he didn’t. he said that you have to understand the functions of sales and marketing within your practice so that you can get someone deliver it for you and you can tell them what it is you want and how they’re going to go about it, but you don’t do it yourself. that’s the important distinction.

what other skills beyond that? there is only really one answer now, liz, as we record this at this particular point in time, and it is to practice technology, because that is the subject that sweeps all agendas and all conferences, whether we’re talking about app stacks and the legitimacy of app stacks, whether we’re talking about workflow, whether we’re talking about the implementation of a crm that’s practice-wide. those are the conversations that dominate communities, conferences, and any gathering of professionals these days.

practice technology is evolving rapidly comparative to the past. there are enormous amounts of money being poured into the improvement of the technology. from a fear-based mindset, that makes the accountant redundant. from an abundance-based mindset, that frees up the accountant, depending on how you look at it. nevertheless, there is no question now, the proof is there, the evidence is there, that the goalposts have moved, things have changed, and ultimately, software is doing what we used to get paid for. we see that on general ledger software alone, the general ledger software will produce a tax return now. that didn’t use to happen.

i think practice technology would be the major thing. of course, for a 55-year-old white guy, who’s been a partner 10 years or longer, if you’re listening to this, is it you who’s going to be the practice management expert? no, no, no, it’s not you, no, no, no, but it is your 35-year-old or your 25-year-old in your firm. that’s the technology experts. that’s somebody who’d grown up with technology, who understands technology, it’s native, it’s second nature to them. they’re the people who need to understand what’s going on in general ledger software, in tax software, in analytic software, in forecasting software, in payroll software, and so on it goes. that’s the skill set that i think is the major top priority for firms right now across the board.

liz: what do you think about empathy and communication skills? because once the technology takes care of what we have always done, what is left for us to do?

martin: anyone who has had sales training would know that empathy is the core, especially when you’re in the business of professional services, to understand the business owner’s mindset, to understand their goals, to understand their fears, to understand their frustrations, to understand their pain points and the relief for those pain points. this is all sales 101. it’s all under there.

communication, i don’t side with everybody on that one quite the same way because yes, i see plenty of evidence to show poor communication within an accounting firm. i’ve seen it. i wrote a book about it a few years ago, but i think the poor communicators are transitioning out of the profession, they’re retiring. i think those used to using the communication tools of today are the ones becoming new partners, so i’m not sure communication is going to be as big an issue as it used to be. for me, i think that was the partners who had earned their stripes, and so, “well, when i was your age, i just knew what to do.” no, you didn’t, but that’s the narrative that you’re going to give to the poor young person who doesn’t understand what you’re looking for from them.

i think that’s going to go away. i think that communication has greatly improved for millennials, downwards. i couldn’t imagine a 55-year-old texting somebody 13 times a day about something, whereas, it’s the norm. an absolute norm to do that now. we text somebody when they’re in the next room to us, rather than go and open the door. that has changed. i think communication will take care of itself, especially as the tools improve to do so.

leadership, that depends on what model we get, what comes out of this because yes, leadership potentially is going to be a huge skill if we’re developing people to become leaders.

if they are robots on behalf of a large fintech, [chuckles] no leadership required. i wouldn’t put those on top of the list. i think if you get the practice technology right, communication comes as a standard with that. i think if you’re trying to be commercially-minded, leadership will evolve there as well. i think we’re going to have less of a generational issue going forward than we’ve had previously.

liz: you could be right there, and i do think you’re onto something with technology being a big issue because most accountants i talk to who, when i ask them what’s the biggest problem facing accounting, most of them say talent, but there are a few, a very few who do say technology and how frightening it is that most accounting firms are so far behind in the technology know-how curve.

martin: the reason you’re getting that feedback is because mostly, what partners hear are client’s saying, “where’s my work?” so they think it’s a talent issue. when clients start saying more than anything, “do you use quickbooks, or do you use total tax, or do you use xero, or do you use sage?” they’ll start telling that practice, tech’s the big issue, because they based their opinions based on what’s going on in their firm at any given time. right now, capacity is an issue because they sell their services far too low, therefore, don’t have enough profitability to reinvest, therefore, have a problem getting work out the door to the correct standard. as such, they’ll tell you that talent’s the problem. wait till the client says, “i don’t care about your people anymore, i want your tech to work,” all of a sudden, they’ll start telling that tech’s the issue.

liz: right. that’s a good insight that really what the clients want is outcomes.

martin: the client wants outcomes, and what the client wants is the be-all and end-all of everything, because without the client, we don’t have a business.

liz: oh, the client? why would we care?

martin: yes, why would we care about a client? we–

liz: i guess, they’re down there.

martin: they’re clients. those clients, they’re an eight-hour inconvenience in the middle of our day, aren’t they? i know … clients,” but that’s it, you don’t–  … taught us that in the ’70s, industrial man, without the customer, there is no business. what the client wants is the be all and end all.

liz: many firms just don’t even bother to find out what it is that the client wants.

martin: because the work lands on their lap, liz, so there’s no need to.

liz: speaking of what clients should do and shouldn’t do, what do you think clients should stop doing immediately?

martin: what do i think clients should do–? [crosstalk]

liz: oh, accountants. what should accountants stop doing immediately?

martin: if i had a magic wand and three wishes from a genie nearby, i would get rid of low self-esteem overnight. i would get rid of accountants not thinking they’re worth two and a half grand because they never charged two and a half grand for something, or think they’re not worth 25,000 because they never charged 25,000 for something and recognize the profound impact of their work on a business owner’s domestic life, how it changes, how it relieves the pressure, how it improves marital relations, how the kids are much happier because mom and dad, or mom and mom, or dad and dad, or mom, or dad, or whatever situation they’ve got at home, are much happier as a result.

because what an accountant does in reality is it improves the life of the clients, personally and professionally, sometimes imperceptibly and sometimes very tangibly, but those are the outcomes. if i’m not worried about money, my mood is different to when i’m worried about money. if i’m not worried about money, my sleep happens and my general health is a lot better than when i’m worried about money. when i understand a profit and loss statement or a balance sheet and i’m in control of my future of my business, i feel a lot better than when i’m not in control of the future of my business.

unfortunately, that advice, that support doesn’t get through to the business owner because the accountant needs to charge for it and they look at that figure that says 5,000 that they’ve just calculated and go, “they’ll never pay it.” the client didn’t say they’d never pay it, they’ve already disabled themselves and handicapped themselves before they’ve ever got anywhere near the client. therefore, that’s what they should stop doing immediately, they should stop sabotaging their own profitability. they should stop sabotaging their own prosperity, and they should stop sabotaging their own usefulness in the market, all because they’re scared of rejection.

liz: that’s a good point, but what if the client or the customer doesn’t see what the accountant has actually provided has any value?

martin: then, there are only two possible outcomes, liz, either the client is stupid and therefore, we don’t want them, or the client has not been educated by the accountant, so it’s the accountant’s fault. if it is that the client cannot be brought to an understanding of value, the client is too stupid to be brought to an understanding of value, and that’s not our client. let’s settle the competition with that garbage. let’s put them over there.

the more pipeline we’ve got, the more options we’ve got, the more potential clients we’ve got, the more we can say no to idiots. if the client isn’t an idiot, if the client is a very smart organization that can fully understand value, it’s up to us to communicate and justify that value and validate that value to the client. that’s an education job on behalf of the accountant but, either way, the outcome’s the same.

liz: yes, and i’m not sure that it’s entirely education, i think that it also requires providing some kind of value, giving the client something. [crosstalk]

martin: you have to communicate to the client. you have to communicate the value to the clients, so the client needs to be educated to understand that, otherwise, they can’t make a judgment call to whether it’s valuable or not. [crosstalk] if you you say, “we’ve got forecasting and it’s valuable,” well, that doesn’t mean anything to me, but if you say, “martin, the future of your business hinges upon you hitting numbers next year that are fairly aggressive. we need take a sit down together and take a look at how that’s going to happen. via our forecasting service, we’ve got a crystal ball for your business, where we look into the future, say, 9, 12 months from now and look at where we need to be. then we work backwards to see what needs to happen this month and make that happen. we put a plan in place, and hold your hand to make sure that goes ahead.” now, they understand value.

liz: in that situation, the accountant actually has provided value, but what if the accountant, all that the accountant has provided to the client is a set of audited financials or tax return, and that is the extent?

martin: i fully accept that. much more difficult in that case. when you’re providing a commoditized service, then price is your enemy, because you have a benchmark in the market. it’s not intangible, it’s not open to perception, it is something that you buy everywhere, so you have the exact same problem as somebody who sells hair gel. they have 4,000 other hair gel products on the market, why is theirs any better? it’s not. it might got a nicer package, but ultimately, it sticks to your head just like the other gels do. if you are in the business of providing nothing but compliance, then don’t be surprised when you have pricing issues and clients who don’t understand value.

liz: that really is the key. i think that providing value is something that far too many accountants have overlooked. they do not understand that they can do more than just do the tax return and the audited financials, and then move on to the next client. [crosstalk] they can use their brain.

martin: they can use their brain, which is extremely well geared for these particular situations, but it wasn’t part of the training, it wasn’t part of the upbringing, it’s not therefore known.

liz: no, it is not. we’ve talked about the things that clients ought to be doing, but why is it they aren’t? what is blocking accountants from changing?

martin: themselves? when you chase deadlines for a living and you hire people to chase deadlines for a living, that doesn’t allow for innovation, that doesn’t allow for out-of-the-box thinking, that doesn’t allow for new value creation, that doesn’t allow for educating the marketplace, that doesn’t allow for storytelling, so it’s the nature of work. you are a doer, and a doer never gets past a certain point because a doer can only go that way, more bums on seats, more capacity to produce more work at low prices. that’s all you can do. you have to go that way. you can’t go that way. as long as you’re a deadline-chaser, that’s going to be your future. the question is how much work can you pile on to keep yourself going?

what they aren’t doing is saying, “is this really what we want? i know it’s what we do, i know it’s what we thought we were going to do, but is it what we want?” there’s got to come a time when it hurts. for most accountants, they make a good living, it doesn’t hurt, so they’ll do 70-hour weeks and put up with it, because you still get on the golf course, and you still get that nice vacation, you still drive the nice car to a nice home. again, there’s not enough pain. they’re not feeling the pain. if we remove the recurring fees, liz, imagine that. all of a sudden, everything changes.

liz: yes, absolutely. i was at digital cpa and talked to a relatively young firm owner. he was only 46, but from his state, he looked at least 10 years older. i asked him, “what do you want from your firm?” he told me that he was just absolutely flat out miserable. he built a great firm, he was providing a good living for his team, but he just hated it. he wanted to get out, but he did not know what to do because he didn’t want to let down the people who were depending on him for their living.

martin: you hear this all the time, “i am miserable.” doing anything about it? “no.” again, that status quo is your future. this is the thing, you can’t just go and constantly complain. what’s that old joke saying? “the beatings will continue until the morale improves.” it’s like, “today was really miserable. i think i’ll come back tomorrow and be miserable again. i can’t possibly let anybody down, so i must sacrifice my happiness to make sure no one is like that.” that’s crazy type of thinking. if you think about it, “i’m going to make myself more and more miserable, less and less able to be capable, less and less interested in helping you in order to not let you down.”

newsflash, guys, these people will go elsewhere. if you let them down, they’ll find somewhere else because there’s a lot of compliance providers and they will be okay. it’s an excuse to keep you in the mousetrap. if you truly were miserable, you would do something about it. say, “i’m miserable, but i can’t possibly change.” “okay, i’ll kidnap your children. how about now? okay, i’ll set your house on fire. how about now? we’re changing now? no? really? okay, i’ll invade your country. how about now?” it’s just simply the level of which they’ll break. what they’re saying is, “i’m miserable but i couldn’t possibly let the clients down.” it’s an excuse. it’s an excuse for the pain of doing this is less than the pain of changing and going into the unknown.

liz: absolutely.

martin: i’ll stay where i am. i’ll stay exactly where i am. it’s an old, old mindset that perpetuates, i’m afraid.

liz: that was why i had to get out of public accounting. i looked at the people around me and the people above me, and i thought about doing that the rest of my life, and it was like this long, dark tunnel with no exit. it was, “i have to get out of this,” and so–

martin: a career in accountancy, the long, dark tunnel with no exits. what a great way to describe it.

liz: i found an exit. now i get to talk to people like you and write about accounting, and i get to have a lot more fun.

martin: i can only apologize that you have to talk to people like me, liz, but you got out because you wanted to, you got to want to. you did want to, so you did. the people you’re describing don’t want to yet or maybe don’t want to ever, but they do like having a complain in the meantime.

liz: they do like to complain.

martin: it’s therapy.

liz: for the work ethic?

martin: yes. [chuckles]

liz: now, in the us, client accounting services, client advisory services, that’s a big thing right now. what do you think will be the next big thing in accounting?

martin: oh, liz, if i knew things like that, i’d be retired by now. i always worry about futurists who can’t see things coming. i thought, “what your future is there.” i have no idea what the next big thing is going to be, and i don’t pretend to know what the next big thing is going to be. what’s 24 years in accountancy has taught me, is that things don’t change very quickly at all.

faster now, but still, will you be able to build your client next year for what you build your client for this year? yes. how about the year after? probably. the next big thing, you could predict any number of things. i could predict the sweeping of automated compliance across the board. i could predict the private equity conquering and wiping out the mid-tier. i could predict all kinds of things, liz, but the bottom line is, i don’t know. if i did know, i would be selling that advice to some very powerful people at this moment in time.

i think what always holds true and never changes is that the future for an accounting firm is always to offer the client better and more valuable support than you have done previously. speaking on behalf of the clients, we’re never going to get tired having a better level of support from the accounting profession. we’re not going to stop paying for that. quite the opposite, we’ll increase our premiums for that. for me, that’s the perennial future. what will the next trend be? don’t know. could be anything, probably technology-based.

liz: i think that that’s probably a good place to wrap up our conversation. thanks so much for your time, martin. it’s just been a pleasure getting to reconnect with you after several years of not seeing you.

martin: liz, it’s been fantastic. thank you.

 

posted on april 8, 2022