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the disruptors
with liz farr
chase birky wanted “a better way to cpa,” so he and co-founder max fritz created dark horse – the “anti-cpa firm,” which would be “the opposite of what a client would expect of a cpa firm, of what talent expects of a cpa firm.” dark horse democratizes access to the resources, tools, and technology available to larger firms so sole practitioners and small firms have an easier path to the modern cpa firm.
more podcasts and videos: jason blumer & julie shipp: move leaders out of client service | james graham: drop the billable hour and you’ll bill more | karen reyburn: fix your marketing and fix your business | giles pearson: fix the staffing crisis by swapping experience for education | jina etienne: practice fearless inclusion | bill penczak: stop forcing smart people to do stupid work | sandra wiley: staffing problem? check your culture | scott scarano: first, grow people. then firm growth can follow |
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dark horse was born out of the realization that small businesses were underserved by their accountants. many small business owners have “these horror stories about the large firm that deprioritizes them and charges them an arm and a leg, or the one-off practitioner or micro firm that wouldn’t return their emails or phone calls, and never provides advice, just tells them to sign on the dotted line,” birky says.
at the same time, birky found that many small practices that could be a great match for these small businesses lacked the infrastructure that would allow them to focus on serving these clients. instead of creating their own wheel, accelerator members can use the infrastructure and best practices developed by dark horse to build and scale their firms so they can “focus on client service and growing their books and developing their people,” which are the things that build enterprise value. dark horse members have access to the expertise and experiences of a collaborative community for new situations.
dark horse’s accelerator program provides a foundation for accountants to develop their own business book without the uncertainty of “not having any sort of income for some unknown amount of time.” accelerators are paid an annualized salary of $120,000 while building a business book from zero. succession planning is built-in – when a principal is ready to retire, they can sell their business book within dark horse, which also keeps the clients under the same roof.
16 more takeaways from chase birky
- the partnership structure is not the best model for scaling. some problems include decisions by consensus, lack of clear path to partner, opaque compensation and shared staffing pools which result in multiple demands on staff from different bosses.
- leaders of fortune 500 companies do not provide direct services to customers, but leaders of accounting firms tend to focus so much on client service that they’re not paying attention to the more important issues for the firm.
- the talent shortage is a reflection of poor employment experiences as well as barriers to entry.
- modern cpa firms need people with different skill sets such as technology, digital marketing, and industry knowledge, but can’t compete with vc-backed startups for candidates on the basis of salary.
- create alignments across your firm so that the interests of all stakeholders – the firm, the cpas and the clients – are not in conflict. decisions that benefit one stakeholder at the expense of another create short term relationships that result in churn.
- cpas are high integrity, high character and high capacity individuals so they can be treated as adults. they can be trusted to complete the work that needs to be done alongside taking care of responsibilities outside of work.
- accountants have a tendency to overwork, which needs to be addressed before it leads to overwhelm and burnout.
- leaders who have excess capacity can be more strategic and proactive about the practice they’re building and how they’re developing their people.
- too few firms have the ability to articulate their purpose in ways that energize their people.
- create incentive structures that reward outputs, not the billable hours required for the work. tie bonuses to what people produce during a given period.
- invest in technology. today’s technologies can create major efficiencies, although the roi isn’t always tangible.
- without tech, seniors and managers may be limited in the value they can provide, the skills they can develop, and their workplace satisfaction because they are doing tasks that should be automated.
- the skill sets learned through creating automations in a workflow will serve people well into the future. the skills needed for future generations of cpas are very different from those acquired over the last 100 years.
- a firm may be better off with a less sophisticated tech stack and 100% awareness around using it than with a more sophisticated tech stack that’s only partially utilized.
- get your pricing and scoping right as soon as possible. almost everything wrong with a practice starts with bad pricing and bad scoping. correct pricing and scoping is the key to scaling sustainably.
- firms that don’t have humane employment practices tarnish the reputations of all cpa firms. imposing financial penalties on firms that overwork their staff might help eliminate those practices.
more about chase birky
throughout his career in public accounting, chase experienced the positives and negatives of working at the big 4, a small firm, and eventually starting his own firm. these experiences informed the vision and mission of dark horse cpas, which became a first-of-its-kind, platform cpa firm whose primary customer is the accountant. dark horse provides all of the resources and services that a cpa needs to build and scale a practice within a community of like-minded collaborators. birky has positioned dark horse to be at the forefront of the shift away from the traditional partnership model toward a more human-centric, horizontal model that better serves both talent and clients.
transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)
liz farr 00:03
welcome to accounting disrupter conversations. i’m your host, liz farr, from 卡塔尔世界杯常规比赛时间. and in this series, i’m talking to owners of firms who are doing things differently than our fathers and our grandfathers cpa firms. my guest today is chase birky, co founder and ceo of dark horse. welcome to the show, chase.
chase birky 00:30
hey, liz. thanks for having me.
liz farr 00:32
yeah, great. and i’m so pleased that we met in person, where was that? that must have been at engage? yeah, yeah. recently, yeah, i’ve been following your story. and so it was kind of cool to put the actual physical person to the name.
chase birky 00:48
hopefully, i was easy to find with my hat t shirt that i am kind of always wearing.
liz farr 00:55
yeah, that did make it pretty obvious. well, can you tell the listeners a little bit about dark horse, where you’re located, what services you offer? what kinds of clients and kind of how you came to be a little bit about that? yeah,
chase birky 01:13
absolutely. in terms of location, that’s a relatively nebulous concept. we’re remote, and have been remote really since the beginning. although we did work out in my garage, when i first got started in san diego, so southern california is kind of, you know, the genesis of where we started. but we’ve got folks kind of all over the country at this point. we have offices in certain locations. but by and large, you know, we work in, you know, remote capacity, cloud based technology, all that sort of thing. so, in terms of who we work with, we work with small businesses, entrepreneurs, high net with net worth individuals. dark horse, as a name really started out as representing the dark horse small business that was chronically underserved. to be honest, what we found was that a lot of these business owners, you know, had all these horror stories about, you know, the large firm that deprioritize them and charge them an arm and a leg, or the one off practitioner or micro firm that wouldn’t return their emails, phone calls, never provides advice just tells them to sign on the dotted line. and, you know, there’s just a lot of a lot of just underserving that was happening, you know, for that specific type of client. so that was really, you know, kind of the, the genesis of where the dark horse name came from. and since then, it’s evolved to be something a bit different, in terms of representing the dark horse cpa, so the the cpa that does things a little bit differently, a different path, and, you know, maybe more opaque compared to the traditional partnership route, and really is going to embody the spirit of, you know, the cpas that we bring on as accelerators and principals or supporting staff, for those principal teams, as well as our leadership team.
liz farr 03:23
well, i am really fascinated by a lot of what you’ve said in other podcasts about yourself. one thing that stuck out to me is you call yourself the anti cpa firm. what does that mean?
chase birky 03:43
that’s a loaded phrase, intentionally. so really, it reflects the fact that we tried to do something very different, very against the grain as to what is typical, you know, public accounting for the 100 plus years, you know, it’s been a very specific way. so my experience, i started at a big four firm, in audit specifically, and then transition to a small boutique firm, before going out and creating my own firm. so started just as a sole practitioner, and that’s what eventually became dark horse. it started back in 2015. but at the biggest, firm level, you know, the big four level, there were, you know, positives and negatives. i think at the time i was more predisposed to observe the negatives versus the positives. at the small, you know, boutique firm size, there’s a different set of positives and negatives, you know, culture, politics, all those sorts of things, you know, that are controlled by one or two people, you know, can really influence your employment experience in those environment. it’s, and then starting my own firm had its own set of positives and negatives. it was the one that resonated the most for me. so, you know, i sort of had a bit of a dichotomy, you know, in terms of on one side, i was thriving, you know, personally and professionally just felt like i was growing in ways that, you know, i hadn’t previously and maybe didn’t think was possible, you know, so really just self actualizing in a way that was just super empowering. but on the same hand, working so hard and being so tunnel vision to make that happen, that, you know, it had a cost that i wasn’t quite aware of, until, you know, you neglect certain relationships for longer than you should, and the people that love you let you know about it. so, anyways, yeah, i mean, the anti cpa firm, you know, kind of close the loop, there’s really just, you know, we want to be the opposite of what a client would expect of a cpa firm, of what talent expects of a cpa firm, our entire business model is centered around the cpa being the customer and their client being their customer. so we’re in business to serve cpas, so that they can better serve their clients, which is really just a different orientation, right, versus the, you know, client service delivery model that is top down, and then you’re just finding folks that, you know, are as good a fit as possible to deliver those services. so.
liz farr 06:50
yeah, so i see in your website, that it’s more of like a platform, you know, on your website, a better way, cpa, that it’s more of a platform and support service to give sole proprietors are very tiny firms, the support that they need, and i think that’s incredibly valuable, and empowering.
chase birky 07:15
absolutely, i mean, kind of going back to the last part of that story, you know, what i recognized was that, we could create a way that allowed us to leverage and democratize the experience that i had, you know, in terms of self actualization, without maybe some of those sacrifices and costs along the way, i was fortunate to be in a place in life where i had flexibility and a very understanding wife, you know, to be able to spend as much of my time and energy pursuing this. but you know, a lot of folks, you know, that we put into our accelerator program, our managers, senior managers, you know, have young families are about to start young families, and, you know, the idea of going out on their own, and not having any sort of income for some unknown amount of time, you know, all of the time and energy they’re gonna have to put into getting to a place where they can actually start bringing money in the door, you know, is just the grounds for paralysis by analysis. and rightfully so, you know, because it’s, it’s a big risk for a lot of folks, especially at that time in their lives. so, on one side, you know, the accelerator side, you know, we just came to the understanding that we could actually create a much better pathway into, you know, starting a practice that was consistent and had a game plan and really removed a lot of the uncertainty, as well as the financial instability out of the equation. so we pay our accelerators, a salary, that’s, you know, up to $120,000, annualized, so that they can pay their bills, they might be a little less than they’re making in their current job, but it’s enough to you know, keep keep things going in a semi comfortable way and depending on the market you live in, but allows them to not have to worry about that component of it. and then they’re building their book of business from scratch to six figures in anywhere from three to 12 months, typically, depending on kind of what they’re trying to build. so, that’s, that’s really one of the key unlocks for us, you know, on one side of the coin was just creating the infrastructure that allows people to take that leap, and to build a practice the smart way, and to not do something like buying a practice that has a lot of clientele that, you know, either fires you or you fire them, and, you know, trying to absorb, you know, multiple six figures all at once. that’s a lot. so, and then on the other side, you know, there’s 44,000 plus cpa firms out there all creating their own wheel. you know, and some are better than others. but we figured, well, we actually could create a much better wheel than most firms, maybe not better than every firm. but, you know, the vast majority. and if folks were able to use that set of infrastructure that we’ll that we were creating, you know, to build and scale their firm in ways that they didn’t have to maintain it, or add to it or, you know, have their their time occupied by developing it, you know, and could just focus on client service and growing their books and developing their people. that’s time much better spent. because in that circumstance, i mean, you’re not building enterprise value, typically, by creating that wheel, it’s mostly based on that client, less than that recurring revenue, so why not focus more of your time and energy on that?
liz farr 11:00
that sounds like a wonderful plan. and i would imagine that as time goes on, as you iterate, this, we’ll just keeps getting better and better and better. so that’s something that is far beyond the capabilities of a lot of small firms. so just that it’s valuable.
chase birky 11:25
yeah, definitely. i mean, that’s kind of a core principle to, what we’re doing is that we can devote these resources to building, you know, certain aspects of that wheel or the offering, you know, that individually, you might be able to do on your own, but the accumulation of it, whether it’s time, money, or both, is just impossible, right. but we can make it make sense by amortizing that out over, you know, a large and growing group. so, you know, it’s really taking the economies of scale that we can create as a large organization and translating those down to the principal, the cpa level. yeah. yeah,
liz farr 12:07
i think that’s, that’s all fascinating. now, now, your firm has an unusual structure, it’s a very flat structure, with a lot of principles at the top and i see, that there are a few managers and a few staff, but it’s a lot of principals. can you talk about that a little bit?
chase birky 12:29
yeah. so it really looks like a lot of clusters, you know, horizontally, with a relatively small leadership team in comparison to the total number of folks in the organization. you know, so it, really, the vast majority of what’s happening is just at this horizontal level, versus having the typical pyramid shape that your traditional partnership has, and it’s really, you know, about creating just a more lean, and agile and adaptable model, you know, so we give our folks, our principals, a lot of autonomy, you know, to operate as they see fit, whether that’s where they work, how they work, you know, the hours they work, you know, our thing is that as long as they’re happy, your clients are happy, and your people are happy, you know, we trust that, you know, you’ll be an adult about how you get there. so, we really wanted it to be one of the to be lean, but also collaborative. and it’s a bit of a balance, but you know, the community aspect that we get from our folks, you know, because we prioritize it so much is really impactful. you know, because when you’re out on your own, if you encounter a situation that you’ve never experienced before with the client, you know, you what do you do, it’s like, okay, i can research online as much as i can and get to an answer, maybe that i feel kind of okay with, maybe i have someone in my network that i can pull on, but you know, they’re busy too. and, to be honest, cpas a lot of times have very underdeveloped networks, because they’re usually only as big as, you know, the people that they worked with in the past directly.
liz farr 14:25
pretty much. yeah.
chase birky 14:27
whereas with dark horse, you know, they can put that question out on microsoft teams. and, you know, say, hey, i’ve got this particular situation, has anyone dealt with this before? and, you know, the more folks that we have, you know, different experience different expertise, you know, the more likely it is that someone you know, is coming to the equation, not just with an idea or they’ve done this once but maybe, you know, a bit more of expertise and can really guide folks in a meaningful way. so that element is something that is hard to quantify in terms of its impact. but i think if you talk to any of our principals, though, they’ll tell you that, that, that ends up being huge. and it’s not just about subject matter, you know, it’s technology, you know, how do i, you know, do this within qbo, or pro connect or, you know, any of the different apps that we use, right. so, it ends up being, you know, a very collaborative environment that, you know, is a community that’s very, again, horizontally based. and, you know, on the horizon, one of the things i’m really excited about is ai, and how we’re going to be able to leverage, you know, that community brain, if you will, in ways that allow, you know, some of this knowledge to become institutionalized. so, one thing we’re working on is an ai powered review platform so that as more and more people are leaving review notes on tax returns, the ai is gonna get smarter about what it should be suggesting, so that a preparer could get a self review from ai based on kind of that collective, you know, knowledge that’s being poured into it. so we’re at a unique inflection point in technology, as well as where the profession is, writ large to be able to really create unique assets that leverage, you know, the brains that we’re bringing within the firm.
liz farr 16:38
absolutely, i think that that’s the the aspect of collaboration is something that way too many cpas and on, especially my generation feel uncomfortable with, you know, it was acknowledging weakness, or maybe asking for somebody’s secrets. and though there was the result, greater reluctance to share, you know, younger people don’t have quite those hang ups that that many of the older cpas do. yeah. and i admire in your for that.
chase birky 17:30
yeah. and i think it’s, it’s very true that, you know, there’s less of a protective mindset around, well, this is my unique knowledge or unique trade secrets that i can’t let anyone know, and much more propensity that what goes around comes around. but one thing i will say is that, you know, we wanted our structure, you know, as a c corporation, to not be a 1099, franchise sort of relationship, we wanted this to be, you know, a truly one firm sort of approach. you know, so that, it’s not just that, oh, it would be nice, you know, if you helped your, your peers out when they need help, it’s an expectation, you know, and it’s hard to have that level of expectation when you have that arm’s length relationship with folks. you know, but there’s certain things that, you know, folks are just never going to fully want to do, but we know, you should do because we’ve got data points, different practices to look at, you know, and if you have a little bit more level of control, to say, no, this is, this is how we’re doing it. you know, versus being elective, you get far better results from folks. you know, and it’s not just because we want to control or we want, we think this is a better way to do is like, oh, we have data points, like, this is how we need to do it.
liz farr 18:59
i love that. it’s it’s very research based in data based, that it’s not just well, you know, my opinion is x. i liked it this way, because that’s how i came up in accounting doing it. i think that that’s, that’s a very fresh approach.
chase birky 19:23
i can’t stand the saly mindset, you know, this is the way we did it last year, the way we’ve always done it like, that probably means that there’s a better way to do it. and let’s, let’s talk about that. and, you know, that’s a big part of how we operate is involving folks in those conversations, you know, because we’re not going to have all the answers as a leadership team. we’re gonna have some ideas, you know, but we really need to have a good pulse, you know, at the practitioner level to truly understand, you know, what they need you and what solutions are actually going to work when the rubber meets the road? because we’ve, you know, like any company, you know, thought of something we thought was brilliant, and then rolled it out and realized reality dictated otherwise, you know, and you don’t fully appreciate some of those on the ground realities, unless you’re very connected to the folks who are dealing with those most directly.
liz farr 20:32
yes, yes, it’s it’s so easy to put some distance between you and that misery when you’re in the corner office. now, now, you mentioned that you’re a c corp. that’s a little different kind of structure, because most accounting firms are either an s corp or partnership more commonly, how did? how did you come up with that? yeah,
chase birky 21:02
so a big part of it is just what our ambitions are, you know, we want this to be something that is much bigger than it is today. to be honest, i would actually, you know, my bhag is for us to ipo at some point. you know, we would have to do some entity restructuring beyond where we’re currently at. but, you know, we want to operate in, you know, the way that our clients, do you know, that startups do that companies who want to scale do it, i just never felt like the partnership model was conducive to operating well, at scale, i think it can be a vehicle to get to scale, if done right, with the right, partnership agreements, and the right partners in general. you know, so it’s not like, i’m totally gonna poopoo the partnership model, but i think it brings a lot of challenges to the forefront when you’re really trying to operate effectively at scale. and so, the c corp model is, you know, it’s more of a centralized structure in terms of, there’s a ceo, which in this case, is me. you know, and i am far from infallible, but i do believe that there is something really important about having, you know, one person in charge of executing, and, you know, creating collaboratively the vision and the direction of the firm, and, you know, being able to make some of those tough calls, that you wouldn’t get consensus from, you know, among a partnership group. and that kind of goes to where i think there’s some real structural challenges with the partnership models that a lot of them operate, you know, decision by committee, which i just don’t think you get anything innovative, done. we, you know, when it requires consensus, because a lot of things that are innovative, shouldn’t be consensus, because they’re crazy, you know, the model that we went with, was crazy until it wasn’t, if i needed consensus from 20 other people that we should try, you know, a business model that has never happened before in public accounting, i wouldn’t have got that, right. so right. but on the same hand, you can’t be blind to, you know, the experiences and input of others, you have to incorporate that you have to understand the context of your decisions. but, again, i think, you know, that centralized leadership really helps the firm, not just make good decisions, but move quickly, and not have to, you know, take a long time to make a decision that ends up becoming diluted, because of all the input that was needed and all the concessions made.
liz farr 24:04
absolutely, you know, i have to say that the partnership structure in my experience was generally something that acted as an anchor to the past.
chase birky 24:20
absolutely, and i mean, the other thing, too, that happens is, you know, you have these shared staffing, pools and you come in as a staff and you’ve got kind of like office space, you got six different bosses telling you, you forgot to fill out your tps report. so, you know, who, who am i actually accountable to, you know, is not often well defined. and, you know, partners aren’t always realizing exactly what demands they’re putting on. you know, a staff member in relation to their other demands that they’re getting from other partners. and then you know, especially at the small partnership level, something we see time and again, is no clear path to partnership, you know, timing, what it looks like, what you need to do, what your compensation is going to be, even, to be honest, in certain circumstances, when people have been named partner, they don’t know how many things they should know in that position about how their compensation is working beyond maybe just a guaranteed payment amount. and, you know, it’s just, it’s emblematic of either a poorly run, organization, or some level of opacity, intentionally to be able to have things go the way they want, and not be held accountable to a transparent operating model.
liz farr 25:55
i agree there. and i certainly had experiences with that opaque operating model and the multiple bosses wanting things to be done in different ways.
chase birky 26:10
so if you take a step back to i mean, looking at it from 30,000 feet, you know, what fortune 500 company, have you heard of where the c level executives are directly providing services to customers or directly manufacturing the product for customers? none, right. and somehow, we’ve decided we should do that in public accounting, and we should have partners who, you know, act as the leaders of the organization, be so focused on client service, that, you know, they’re not keeping their eye on the ball on more important things for the firm. and i understand where that comes from, you know, especially when it comes to attest, you know, you can’t just be aloof, right. but so much of what we do, as cpas has become not attest work, you know, that doesn’t require quite that level of buy off from the partner. the problem is, most partnerships just haven’t empowered folks and develop them such that they can rely on that work to go out the door. and so there’s multiple levels of review, you know, for qa a lot of time spent a lot of delays, you know, and bottlenecks, reviewer levels, and, you know, passing it back down months after the fact. and, you know, then the preparer is trying to remember what the heck, they were even thinking two months ago, when they were doing this, you know, it’s our mindset is more, so let’s, let’s give folks the tools and the resources and the coaching to get things. right. more so from the beginning, so that there’s less need for, you know, multiple layers review.
liz farr 28:02
exactly. and one person that i do a lot of work with is al anderson, who’s big in the audit area. and his approach to quality is first time, right. right. so that it’s everyone’s responsibility to do it right the first time and not just hope that it gets caught somewhere along the line.
chase birky 28:28
right. i mean, if you’re building a house, you’re, you know, not getting the foundation wrong and building the house and realize, oh, we got to redo the foundation. now you’re getting it right the first time. and yeah, i can’t tell you how much more efficient things become when the emphasis is on quality up front versus deconstructing and reconstructing it after the fact.
liz farr 28:52
yeah. yeah, i want to circle back to something you kind of mentioned about the opacity of compensation. you know, with partnerships, it’s this guaranteed payment, and then whatever the hell shows up on your k1. how does compensation work at dark horse?
chase birky 29:13
yeah, so it happens in real time, or quasi real time. so our principals run their own p&l within the firm, which we are updating on a daily basis. so they can see their p&l on a cash basis, because that’s how we do our compensation because we don’t care if you billed something out. if it’s not collected, it’s nothing until it’s collected. so they’re looking at a cash basis p&l, we run a semi monthly payroll. so they’re able to see this in real time, you know, seeing what their collections are, what their expenses are, as they’re being incurred. and then at the end of that pay period, whatever their net profit is, they’re getting roughly two thirds of in terms of their w two compensation. and so the other third is retained by the house, so to speak, for payroll taxes, benefits, the technology that’s included, overhead, and then a profit margin. but what’s really exciting about, you know, this dynamic of doing things at scale and and translating that down to the cpa level is that we’re able to pay our principals anywhere from low 40s to high 40s, typically, as a percentage of the revenue that they bring in. whereas a traditional partnership, the rule is kind of always been a third, a third, a third, a third partner, cop, a third, talent, and then a third overhead. so that’s exciting, you know, to be able to see that, you know, we’re really elevating folks compensation beyond, you know, what has historically been done by partnerships, which probably operate less efficiently as they should, for the reasons we’ve been talking about. and then we also have firms, you know, that are either sole practitioner, or micro firm. and, you know, what we’ll do when we’re talking to them is we’ll do a trailing 12 p&l analysis to see what they made, you know, in terms of their total take home, in their current operation versus what that would look like, at dark horse. and in those circumstances, a lot of times, it’s somewhere around apples to apples, sometimes it’s, you know, they’re better off immediately with us. other times, they’re not, but it’s not a material variance, usually either way. but what they’re getting, you know, in terms of the resources that they don’t currently have, and how that’s going to impact their ability to grow going forward, you know, they quickly see as a major wealth.
liz farr 31:54
that’s huge. that’s huge. and that kind of segues into my next question, which is about talent. this has been a challenge for accounting firms. for not just the last few years, it’s been really bad. but for the last 20, 25 years, this has been a problem. and it at least with the compensation, that’s really favorable, what are some other things that darkhorse does to make it better for your talent?
chase birky 32:33
yeah, i mean, when we talk about the talent, pipeline, issues, the talent, shortage, talent war, it really is a reflection of poor employment experiences, as well as barriers to entry. so, you know, to your point, we’ve been dealing with this to some extent, for a while, the pandemic just blew the door open on the existing problem, which is salaries that are below what they could make in other lines of work, with less education required to get to those positions and a lot of cases. so you’re saying, okay, well, i’m going to, you know, invest more in my education, whether that’s another year, you know, the opportunity cost of paying for that education versus earning a salary. so, i’m going to be more invested to get to this point of being able to be hired into public accounting, and then i’m on reddit, and i’m reading all of the crap, you know, that people are putting on there. it’s the ledger of these employment experiences. and they’re just making the, you know, analysis, like the payoff isn’t worth, you know, the investment to get there. certainly, there are still a number of folks that are saying, no, it is worth it, but the trend is not going the right way. and that’s largely because salaries have not kept up with inflation have not kept up with other, you know, entry level jobs that college grads can get. so, when you combine that with employment experiences that seem to be more visible, on the negative side, i don’t think it’s any surprise why we are where we are. and so anyways, as far as dark horse goes, it’s important for us to really support the person, the individual. you know, we we extend that in a very palpable way to our accelerators and our principals so that they do the same for their staff. because we really as an organization don’t care how long you work, where you work, how you work, other than within our workflows that, you know, we believe are better. you know, it’s really about outputs versus inputs. it’s really about flexibility versus facetime. you know, it’s creating an empowering experience for everyone within the organization, you know, having a real pulse on where we’re heading, you know, and not just, you know, droning away and not understanding what their work is doing for clients or for the firm’s a whole, you know, being connected to the people who are benefiting from your work being compensated, by the benefit that you’re creating, you know, a big thing for us is alignment. and that’s across all of our stakeholders, of which there’s the cpa, their peers, their clients in the firm as a whole. and so it’s really our mission to make sure that we’ve created a structure where they’re not forced into a decision that’s at the benefit of one of those stakeholders at the expense of another. because those sorts of conflicts just create short term relationships that create churn and, you know, the misery that we’re trying to avoid, you know, not replicate within darkhorse. so you know, i think it really is about providing a place where folks can grow a place that acknowledges here a person outside of your job, and that you have family obligations and things that you have to attend to, and you’re going to be allowed to do that. and you’re still also going to be responsible to get you know, the things done that you need to get done. we’re all adults. and i think one of the beauties of being in this profession is that you can treat people as adults, because you’re dealing with high integrity, high character, high capacity, individuals, in cps.
liz farr 37:07
yeah, what a what a remarkable concept, you know, that these people actually have the integrity, they’re trusting them to do the work that they say they’re going to work to do not. you don’t have to have a whip over them.
chase birky 37:27
if anything, we’re trying to hold them back from, you know, not being a victim of their own devices, meaning, you know, there’s, i think it’s just a natural propensity for folks if left to their own devices to overwork themselves, because of maybe their innate personality and the way they’ve been conditioned, you know, prior to joining dark horse, you know, that people can sabotage themselves and not really realize when and how they’re doing that. so, more often than not, it ends up being, how do we make sure that you are taking on less than you think you should? because the way that that accumulates isn’t always easy to see, when you’re in the thick of it. it’s like, oh, i can do this tax return, you know, in the next couple of weeks, it’s possible to do, of course it is. but when you say yes to enough of those things, and they all kind of hit all at once, you know, then you hit that overwhelm stage. and that’s just the breeding ground of burnout.
liz farr 38:35
absolutely, and when you have excess capacity, then you can use that to, you can make choices about what you do with that you can provide better service to the clients, you can do a little more research in their industry, you can find out more you can do some personal development, you can do some cpe. you can you can read the the news and accounting today or cpa trend lines, you can keep up with what’s going on in the world.
chase birky 39:13
i think there’s an inherent discomfort for a lot of folks in not being 100% utilized, either with client service or, you know, commitments they might have to their team, or their peers, you know, this idea of having some form of unstructured time that they’re not directly accountable to, you know, a client or otherwise, you know, to produce something. i think that’s an uncomfortable place for a lot of cpas to be in because they’ve been used the opposite of that, which is 110 120 130% of what their, you know, ongoing sustainable capacity. he truly is. so. but yeah, to your point, when you have that capacity, you’re able to be a lot more strategic and proactive with the practice you’re building with how you’re developing your people. you know, you have the brain space, you know, to be just intentional with your practice in your life, and not be in a situation where you’re just trying to tread water. and, you know, you’re playing defense, you know, more than offense. so that’s something, again, we we get to see that, you know, from our vantage point with the different principles and practices in our firm, you know, but it’s not always, we can say that, and sometimes it requires people to hit their head against the wall a little bit like, okay, yeah, i see what you’re saying there. because it’s just, it’s just so against natural instincts for a lot of folks to say, i’m not going to schedule myself to 100%.
liz farr 41:01
yes, yes, that that downtime isn’t just taking time away from your business, but it’s really serving yourself and serving your business.
chase birky 41:16
yeah. 100%.
liz farr 41:17
yeah. now, besides the things that we’ve talked about already, what are some of the other things that darkhorse does that you wish more firms would do?
chase birky 41:34
yeah, i mean, alignment is something that comes to mind, again, you know, what, i think ends up rubbing folks wrong, and just creating the wrongs incentive structures, is that focus on inputs in terms of the billable hours, and then not rewarding the outputs, you know, meaning, okay, if i get through this tax return in five hours, and was budgeted for 10, i get rewarded with more work, doesn’t mean less, just means i’m going to have to do more work, which, you know, that gets to the peter gibbons from office space, you know, just trying to do the bare minimum to not, you know, raise any red flags, but not to overburden yourself, which is just a miserable, miserable way to live. you know, so when it comes to what i wish other firms would do is to focus on the outputs more so, than the inputs, and to reward those inputs, not just the recognition, but through compensation. so if you are generating twice the amount of revenue that your peer at the same level is, maybe you should be paid twice what they’re paid. you know, but generally speaking, that’s not how it is, you know, put in those hours you do, what you need to do, a lot of people are type a, and, you know, will do more than they need to do, right. and then whatever bonus happens, after the fact is opaque, it’s discretionary, it’s not directly correlated to what they know, they produced within that period of time. so alignments a huge thing. another thing i’d say is investment in technology. obviously, the big firms spent a lot of money in technology. but a lot of the non top, you know, 400 firms, or even some of those firms, to be honest, just don’t invest in technology to the level they need to, because they have partners that are looking at the coin for more. so, you know, either what they did, you know, when folks are at that level, maybe they don’t understand, you know, some of the technologies that are out there that can really create major efficiencies, and they want to see the roi and it’s not always tangible. but now, where i think that damages the profession is that those firms that are that don’t have the technology that they could or should are making it so the staff seniors and managers are doing things that could be either augmented or automated by technology that are less stimulating as well as you know, grounds for developing their skill sets and adding more value and feeling you know, greater set satisfaction out of their work, because they’re doing so much of the stuff that, you know, could again, be augmented or automated by technology. so it’s really a talent facing concern on my side is that, you know, we want to not only give people the tools and resources via technology that allow them to focus their more their brain space towards the strategy and the advisory part of the work. but we also want them to have skill sets that are going to serve them well, in the future. it’s, you know, if you’re learning how to do you know, a tax return by hand, sure, there’s learning there, but if you don’t have access to tax software, then you know, you’re not building a skill set, you know, that is going to serve you over the next decade, or two or three, you know, and it gets more involved in just, you know, paper based versus digital, it’s, it’s digital, it’s, you know, server versus cloud, it’s, you know, are you utilizing ai in a meaningful way? are you creating automations? in your workflow? you know, do you know how to do that, you know, are you just dependent on someone else, all these things, it’s like, the skill set needed for future generations of cpas, as you know, a much different one that are acquired over the past 100 years. so yeah, i’d say, those two areas come to mind. in terms of areas, i’d like to see firms, investment ones,
liz farr 46:34
those are, those are both good ideas. i had so many experiences with poor technology, or even just poor training in how to use the technology. so we may have had a tool, but nobody really knew how to use it. so you know, at at one firm, the last firm i was at, they didn’t realize that you could import numbers from a trial balance into a business return, they didn’t know that you could do that. and so they were retyping, everything. and they, the people boasted to me about how fast they were typing. and i said, why? why
chase birky 47:26
you’re really good at the wrong skill.
liz farr 47:29
that’s not going to help you provide better insights for this person.
chase birky 47:37
right? yeah, i mean, and that’s a, that’s a big challenge, too, you know, you can develop all of the latest and greatest technology, you know, whether you’re developing that internally or buying it, you know, and customizing and creating the automations. you know, but if no one knows that it’s there, and how to use it, and how it actually is inserted into the workflow. you don’t have anything, right, and you just have something shiny on the shelf that isn’t being utilized. so, i mean, you honestly would be better off to have a less sophisticated technology stack and 100% awareness around when and how to use it, then you would have a much more sophisticated stack that was only partially utilized.
liz farr 48:24
absolutely. and i think these firms must have been wasting money or just happy to give profx a lot of money to maybe. now, as, as you’ve gone on, through this kind of an experiment, you know, i think of what you’re doing is an experiment. are there some things that you stop doing as a firm that made a big difference?
chase birky 49:02
a lot of things. like i was mentioning before, there was just a lot of things we thought were great ideas. and when you actually roll them out and have people start to implement them, you realize they were not great ideas. and so we’ve just been flying the plane while we’re building it, you know, in a, in a real way for about four years now. but, you know, you sort of have to have that level of comfort with, we can’t just wait until everything is fully baked to put it out into the wild. like there’s a point where you’re letting you know, great be the enemy of good. and you’re also assuming that something that’s put out in the wild is static fixed where? no, it’s, that’s just its first iteration, you have to constantly evolve it. right? so it’s that balance of not, you know, putting something out there that is crap and gonna cause a ton of problems, but not, you know, just wasting that time and delaying, you know, the release of things because you’re trying to get it perfect, which is a very delicate balance. but i mean, more. so to your question, i would say, biggest thing that we have stopped doing and is still a continual process, you’re never done with us, you never have this fully figured out, in my opinion is not substantially undercharging our clients. yeah, i think we just really undervalued the services that we’re providing for too long. and i’ve come to the conclusion that just about everything that’s wrong with a practice or firm started with bad pricing, bad scoping. not to say that there’s other things that, you know, contribute to that. but those are, you know, pretty core components, that if you get those two things wrong, you’re gonna have a crappy practice, you’re gonna burn people out, you’re gonna have the toxic issues that you have, with, you know, those lower performing firms. so, i just, i don’t think there’s anything more important as a foundation for practice than getting your pricing and scoping right, as soon as possible. and that’s an area where we can really help guide our folks is that, number one, they have a brand that allows them to feel confident in the prices they’re charging, while they’re growing into, you know, their their own confidence and belief in themselves, because that doesn’t happen overnight. but getting that right from the onset just prevents so many problems, so many downstream problems that result from getting it wrong, that it just its importance can’t be overstated, to be honest. so getting that right is really the key to scaling sustainably. and so that’s been a huge point of emphasis for us.
liz farr 52:41
yeah, i’m right with you on pricing. you know, i understand, on the one hand, accountants want to help everyone. and so they want to make it affordable, so that joe from across the street can afford my services, or my brother in law feels good about using us and doesn’t feel that we’re gouging him because he’s got the family discount after all. but then on the other hand, if you’re not pricing appropriately, that means that you have to do so much more work to get to that income level. and that doesn’t help anybody along the value chain at all, unless you can automate the heck out of everything. and you’re only serving clients that are you know, just like this. so that is pretty standard. but if you’re working with real businesses, they’re not they’re not like that. and so many of the clients that i worked with, would have just delighted in having a little bit of insight about how we can how they could grow their business and make it better. i remember one gentleman had plans to retire that the partners knew about years before, but they didn’t do anything to make sure that he was hitting the milestones that he needed to the income levels and the sustainability and transition planning wasn’t doing any of that it was just this kind of pipe dream. oh, well. joe wants to sell his business for a million dollars. well, that’s a pipe truth. we’ll have to tell him what reality is. and i just thought that was so cold.
chase birky 55:00
totally 100% yeah, succession planning is also another, you know, issue within the within public accounting that is largely unsolved, and just creates some unfortunate situations for folks. and it also, i think, leads to certain folks working in their 70s, even 80s. you know, maybe those folks would have been inclined to do that anyways. but when you don’t have the succession plan in place, and your only option is selling it on the open market, a lot of times folks realize that what they thought they had as an asset is not valued as such by a buyer. right. and, you know, there’s fewer buyers in the market, because the demographics that more consolidated. so, you know, if you’re not selling on the open market, if you don’t have someone internally, which i can tell you from experience, there are very few firms that are less than 10 people that have a legitimate level of talent to be a successor to that firm. we’ve just seen that time and time again, and it’s all lives in the, you know, the, the main owners head, it, it creates a tough situation for those folks, because, you know, they’re not going to get the sort of deal that they were hoping to, and that maybe they were planning on for the retirement, or maybe they decide they’ve got a merge up into a larger, you know, traditional partnership for some number of years before they exit and then come to the unfortunate realization that they act more like middle management and those firms than they do as a business owner previously. and for their staff, it’s usually not a lot of fun either. so yeah, succession is a huge, a huge issue in the industry that, you know, i haven’t seen many great solutions for, which is why we’ve built that into darkhorse, as part of our offering is, you know, once you get to the place of either retirement, or maybe hanging up the spikes, as far as public accounting goes, you can sell that within the firm to another principle, there’s no broker involved. so there’s no 10 ish percent going out the door, you know, the clients have a much better experience, because it stays under the same roof, they can be introduced to the successor in ways that are not abrupt. you know, and they then get to interact with the firm the same way they’ve been used to. so serves all parties. well, in that regard. but again, it’s, you know, when you’re in that area, where you don’t have the successor, and you gotta go to the open market or merge up to get stuff.
liz farr 58:03
absolutely. and now, it’s not just hard for the the owners of the firms, but it’s also can be a challenge for the clients of the firms as well.
chase birky 58:18
i mean, we’ve seen some situations to where folks have had a health major health event, without any sort of succession plan. and then you have a family member stepping in trying to sell, you know, the business in a fire sale sort of way, and the clients are just in limbo. so, yeah, it’s unfortunate to see those situations, but it happens more than more than it should. absolutely.
liz farr 58:50
now, one final question, you know, if there’s anything else you can think, that we haven’t talked about so far, what are some other ideas you have for making the profession better?
chase birky 59:04
i’ve got many ideas, i’ll share. i’ll share a few. you know, one thing, i’m not gonna go into maybe the barriers entry from an educational standpoint, those have been discussed at length and many other platforms. but i will say the barriers really need to be lowered in meaningful ways for folks to come from other industries into public accounting, you know, that have that level of work experience in the workforce, you know, that if they’re looking at transitioning into a cpa firm, you know, it’s like, okay, do i need to be a cpa if i do, how much more education is that going to be? you know, is it worth it? you know, if i don’t, can i even own stock? in the enterprise, right, and california, the business professional code is such that you can’t be an officer in the corporation and a shareholder, unless you’re licensed. so, you know, it’s these sorts of things where it’s like, the modern cpa firm needs a look a lot less like the traditional cpa firm, and you’re going to need, you know, technologists, you’re going to need someone who’s dialed in digital marketing, you’re gonna need these people that come from different industries, and are not going to be cpas. and a lot of times cpa firms, compared comparative to a vc backed startup that has stock and you know, can maybe pay some generous salaries, or, you know, public company that can be even greater salaries is like, okay, we can’t compete on salary. and there’s that barrier, and we can’t incentivize them with equity, it just makes it hard to build a case for those folks to join your firm. so i think that’s, that’s something i’d like to see changed. you know, i think there’s a number of state specific laws kind of extending that point that make it more difficult than it needs to be to operate as a cpa firm. a couple come to mind, but point being, you know, it’s, we have some uniformity. but there’s still just a number of these individual nuances in various states that just burden firms. it’s a restriction, you know, in california, where you’re lucky to be able to get the name, darkhorse cpas, but there are many states that would not have allowed us to have that name, right? it’s like, okay, what are we trying to accomplish here. so, i’d like to see a number of those things that just, you know, place a burden on entrepreneurship, you know, standardized at the minimum. also, i think accountability for cpa firms that don’t live up to a certain standard in their employment experiences, would be game changing, meaning, if you were accountable to ensure that your people were not working 16 hours and risking their life driving home drowsy, you know, those sorts of things. just base level, treating people like human beings, if you were not able to do that as a firm, because you didn’t have the right structure in place to ensure that individual partners were, you know, proliferating into an environment where this happened. and, you know, i think there should be some form of financial penalty associated with that, because it’s those experiences that get put on reddit that hurt everyone, you know, because a lot of cpa firms, for better or worse are viewed as the same as every other firm. so if one firm is doing it, if that’s your experience, at one firm, you just generally think that’s, to some extent, how how it is. and, you know, those allowing firms that carry the cpa firm, you know, licensure to tarnish the name via those employment experiences, i think is something worthy of consideration to, you know, create some penalties, you know, so firms are not spoiling it for the rest of us by, you know, creating that negative perception. i think beyond that. i would say, you know, i think too few firms, to be honest, can even articulate their purpose or their meaning to their people in a way that makes them energized, you know, to go to work every day. and, you know, it becomes, you know, very abstract in terms of what they’re doing versus the purpose and the meaning. and i think, to the extent that firms could focus more on the mission of what we’re doing, and why and here’s what you’re doing contributes to that, especially for a younger generation is critical. i mean, they’re looking for meaning and purpose from their work much more so than previous generations. and from the outside looking in, you just don’t see that in public accounting. so i mean, i think a lot of this rolls up to just creating better employment experiences because if we create better experiences, if we are able to provide higher compensation via better alignment. you know, if we’re able to make accounting, an attractive, you know, place to start your career, then we’re, you know, gonna get more people to say, okay, i will put in that fifth year, or i’ll find a way to cram five years in the four, maybe. but until we fix those issues, you know, we’re gonna have too many people to say, not quite worth it.
liz farr 1:05:29
yeah, pretty much everything that you listed off was why i left public accounting.
chase birky 1:05:37
sorry to hear that.
liz farr 1:05:38
yeah, i mean, you know, and if i had known that there were firms out there that were operating very differently. i might have stayed in public accounting. but you know, as it is, i get to talk to really smart people all the time. so that’s pretty fun.
chase birky 1:06:00
well, that you just made about if you knew other firms are doing things differently, it kind of goes back to what i was saying is like, your experience in one firm gets extrapolated to all public accounting, i think it’s just a natural way that we look at, we look at at least our professional.
liz farr 1:06:17
well, you know, every all three of the firms that i worked at, were pretty much the same. so you know, at one firm, we had this beautifully framed mission statement. but that’s pretty much what it was.
chase birky 1:06:38
it lived on a wall and that was it.
liz farr 1:06:40
exactly, exactly. yeah, it really didn’t penetrate into what we were doing as a firm. so, you know, this, this is been a very eye opening experience for me to talk to all these really smart people like you are doing things differently. do you have any other last words of advice for listeners.
chase birky 1:07:18
really would be just to, you know, be honest with yourself about in your job, whether that’s in public accounting, or otherwise? are you really feeling fulfilled and stimulated by the work? because if you are the hours don’t matter nearly as much, the compensation matters less. but if you can’t say that, yes, you are engaged in your work in the mission, you know, that your work supports, and that you are learning as a result, then you should look at other opportunities.
liz farr 1:07:57
absolutely, absolutely. that’s what i did. but that’s not the path for everyone. now, now, i want to thank you so much chase, for coming on the show and sharing so much of your experience, and your ideas with the listeners. now, if listeners want to connect with you, what is the best way to find you? yeah, i’d
chase birky 1:08:24
say the easiest place to find me is on linkedin. my name is unique enough that i shouldn’t have any other chase birky’s spelled the exact same way out there. so i’m relatively easy to find on linkedin. and that’s where i live most predominantly as far as social media goes. so that’s, that’s where you’ll find me.