With Joe Woodard
Joe Woodard joins Randy for Episode 108 to talk about June’s Scaling New Heights conference and automation as the key to helping your business soar. The founder of Woodard, a nationally recognized CPA coaching membership, and co-host of The Woodard Report podcast with Heather Satterly, Joe offers a road map for firms that are looking to automate more of their processes, shares tips for how to get it done in an efficient, scalable way, and relieves tensions around the onslaught of AI solutions with a reminder that the software solutions you already use will probably be integrating artificial intelligence into their functionality anyway—so you don’t have to become an end-all, be-all expert on AI.
Today, our guest is Joe Woodard. Many of you know Joe. Joe is the founder and CEO of Woodard. Surprising, same name. And Woodard and Joe’s personal mission is to transform small businesses through small business advisors and through whether they do this through education, support, connecting professionals. And in addition, a pretty cool conference, which I’m excited to be a part of this year, Scaling New Heights. Joe, welcome to The Unique CPA.
It’s great to be here. Thank you, Randy.
One thing we didn’t talk about pre-broadcast here is how’s your jet lag?
I’m finally recovering, yes. And of course, Randy’s referring to Expensicon, as well as a couple of trips out west. I’ve got another one of those next week. So crazy, crazy May and June every year.
Yep, and Expensicon, I was having FOMO looking at all the tweets and LinkedIn messages. Looked like a good time out there. A lot of people I knew out there. And in fact, I know you were talking to a buddy of mine, Scott Scarano, for a while out there too, and so it looked like a good time.
Yeah, no, we had a really good time and I appreciate Expensify for inviting me. Also provided a keynote there. So I warmed up the chair for George Clooney.
It was really to his discredit that he had to follow me. You know, bless his heart.
Well, I’m sure you set the bar so high that they probably booed Joe off the stage. Joe? George!
No, that was Freudian, and I think you had it in the right order.
That was pretty good. We’re going to leave that in.
Let’s talk a little bit—I mentioned that in the intro, Scaling New Heights Conference, you’ve actually for how many years have you been holding Scaling New Heights?
This is our 15th conference.
Wow, that’s amazing. We are about to hold our first in-person, our third conference. First two were virtual. But so 15, that’s a heck of an accomplishment. This one, which, you know, by the time this is released, you know, will be a few weeks before the conference. But unfortunately, probably too late to get to this one.
30 million people are drivable to St. Louis.
That’s right. Alright. Yeah, we can still get there. And the dates are what? June 24th through the 28th?
Yeah, June 25th through 28th. So as we are recording this a full month away, as your folks are listening to us for the first time, maybe about three weeks away. But hey, it’s still time to get there.
Alright. Good. Registration is not closed when you hear this. Go look it up. It’s going to be a great time. How many people are you expecting?
Be about 15 to 1700 this year.
That’s a pretty big conference. That’s one of the bigger ones out there.
Third largest in attendance in the country for publicly accessible accounting events. Yeah. Accounting technology events.
OK, got it.
Like so that would be, but I would count AICPA engage on that and QuickBooks Connect on that. So QuickBooks Connect being, AICPA being the largest in attendance. QuickBooks Connect being second largest and the best that my notes can see third. If somebody wants to email me and correct me, I would take the correction. I’d say that I’m fourth. I want to be accurate, but the best I can tell, we’re the third largest in terms of our accounting showcase, we are the largest. We have more accounting technology in a single expo than any other show in the country.
That’s awesome. And I actually pre-broadcast here when I was thinking I was figured you were about third. So that’s an amazing feat.
So let’s talk about it in general, because obviously Scaling New Heights is there for a reason.It fits into your mission of education, support, community, all occurring there in one spot. So why don’t you give us a rundown of what you’re looking to accomplish with in general, Scaling New Heights and this year’s Scaling New Heights?
Yeah, and I want to make this something where the listeners stay tuned in. They feel like, hey, this is not just me talking about a conference. I want to transcend the conference and maybe, you know, use it as a launching pad for value here to the listeners.
And the best way I can do that is to talk about our theme. So the conference theme this year, every conference event underneath Scaling New Heights, the name of the show, has its own theme. So Scaling New Heights is not the theme, it is the name of the conference. And this year’s theme is SOAR, S-O-A-R, not S-O-R-E, so S-O-A-R.
And the idea with the SOAR theme is to stay aloft and even maybe scale new heights, get higher in your altitude as a practitioner, as a practice without having to exert so much effort.So we contrast the eagle or the hawk, all these soaring birds, with the pigeon or even the hummingbird, where you have to flap so many times with so much effort to stay aloft.
And unfortunately, and it grieves me, Randy, you may see the same thing. Most accounting firms I run into, if they were to be compared with birds, are more like pigeons flapping to stay aloft than they are like eagles. And so there are some very specific ways, like an eagle does, leveraging thermals and headwinds in order to stay aloft—there’s, the metaphor can continue to what are the thermals that keep an accounting firm aloft and even ascending, without having to flap so much.
And I love the I’m looking at the logo right now. I love that the eagle on there through the soars. That’s pretty cool. So originally Scaling New Heights was climbing the mountain, I assume, was the original theme or how did that come about?
Yeah, we wouldn’t have themes until 2015. For six years, Scaling New Heights was sort of our pervasive theme.
But then we realized that, no, we really need to tell a more specific story every year. So it always relates to the scaling of your practice and the growth and the expansion of your business and your life. So there’s a meta theme Scaling New Heights, and then there’s a sub theme every year like “soar.”
“Soar.” So what are the issues within the or the areas within the profession that we’re looking to address at this or obviously you in general? Because we talked about there’s things you like to to see change, be better, help people be more efficient, work less, be more profitable, be healthier, all those themes. So what are some of the key ones that you want to address?
Yeah. So obviously, the soaring is holistic. So we have to soar as individuals. If you think about, you know, the the Covey Seven Habits, though we’re not teaching that course specifically, that’s that’s sort of the underlying truth behind all personal advancement. We’re independent, happy, healthy, whole people who are in interdependent relationships with other independent, happy, healthy, whole people, who are their own creators and who are you begin with the end of mind and who are proactive. We all know the seven habits here, right?
So the idea is that we’re living out the seven habits, including the sharpening of the soul, you know, which which has the mental and the physical and the spiritual elements in it. If by chance there’s anybody listening to this podcast that’s never read The Seven Habits of Highly Effective People, there’s your call to action right there, but I just assumed all your listeners had had done it. So then if you haven’t, go grab that.
So that will give you an idea of what what we believe, because we bought fully into this cubby philosophy and all the people that sort of connected back to it over the decades. That’s what we mean by personally soaring.
But then professionally soaring or soaring as a practice, which is where I want to focus most of the attention on right now. It comes into several different ways of thermals that keep us aloft without flapping, if you will, include automation. And you’re hearing a lot about this now, especially with ChatGPT. But if it seems like you’re thinking, well, this artificial intelligence thing seems like something I need to do one day when it matures and the target stops moving—I’ve got great news for everybody listening in: Artificial intelligence is a fun topic to talk about. ChatGPT is a fun tool to play with. But you don’t have to go embrace artificial intelligence directly. The software products that you choose are already doing that for you. So there is nothing daunting about it. Just understand that that will be incorporated into all major accounting technology platforms, not just the GLs, but the integrated solutions too. Pick wisely, maybe ask them what their artificial intelligence roadmap looks like when you choose. And then you’re going to have an artificially intelligence empowered practice without having to wrangle the artificial intelligence bull.
Alright. Now, that said, you’ve got to maximize automation if you’re going to soar. Alright. And that could be a whole other podcast topic. But I’ll just very briefly say that everybody thinks bank feeds, of course, that’s the place to start. Maybe you’re thinking accounts payable automation. You know, the bill to Palti, approval max category of routable, it goes on and on. There’s so many people in that space. And then you might think some of you might also know about Hubdoc or Dext or AutoEntry, you know, some of those things that grab paper documents and interpret them and GL code them.
But it goes so much broader than that. And I want I want everybody listening to take a hard look at e-commerce and merchant automation because their direct integrations with GL platforms are really bad. And there’s a category solutions out there that that are taming that whole problem like Book Keep, as well as a product called A2X number two letter X, A2X. Those two are leaders within this industry of taking merchant platforms and e-commerce platforms, automating their entry into QuickBooks.And that will only continue to expand post-covid.
And then don’t forget about 1099s. There’s no reason why we should be dealing with a W9 retrieval manually. A good 1099 app will not only electronically file the 1099s, but it will also retrieve the W9s from the vendors and pester them to death until they’ve submitted them electronically. Track1099, Tax1099 are examples of those.
Now, I can go on and on about this. But the point is, everybody listening in needs to come up with an automation pathway, a strategy, and then you need to vet technologies and deploy that. Now, yes, shameless plug, if we have the nation’s largest accounting technology showcase, you can make your way to St. Louis, of course, and there are 136 exhibitors, all of which focus on some form of practice automation and go explore there. But wherever you go to do that exploration, that’s one way to soar.
Now, there’s another way to soar. Or first, do you have any thoughts on that automation?
Yeah, let’s talk about the automation, because that’s something I’m passionate about. I’m no expert, but passionate about, because I think it’s such—honestly, I’ll say easy. A lot of people aren’t going to think easy. Easy way to make yourself more efficient with what you’re doing, because it frees you up to do you’re not doing data entry anymore, whatever it is. Simple example, you’re not doing data entry now.
Now you free up to do the advisory work, the higher value work. But the thing that I hear and I’m wondering how you address this is, you know, people have the fear of automation, people are well, I don’t have the 50 hours, whatever the time frame is to set this up, even though in the long run they’re going to be so much more efficient. How do you get them to make that first step? And let’s get a little bit automation to get to the next step. So how do you how do you advise them and how do you get them past that, Oh, I don’t have time or expertise to do this.
Yeah. Well, it’s the quandary of I don’t have the capacity to invest in something to get some more capacity. I hear it all the time, right?
Whatever it may be. And this is how we get into the trap of repeating the burdens of the past because we can’t get out. So a couple of things I will say there. One is create an incremental approach and prioritize the technologies you adopt first. The technologies you adopt first should be the ones, depending on your industry, that displays the most amount of data entry. And it’s not the same for everybody. f your practice specializes in e-commerce, you’re going to start with an A2X or a BookKeep. And if your practice specializes in wholesale or distribution, then you’re going to start working with your clients to adopt inventory management solutions that integrate with your GL platform or use import tools like QB Importers. So it all varies.
But based on your clientele, then you’re going to prioritize. However, the global adoption, in my opinion, that should happen first is accounts payable automation. It’s better for internal controls. It gets you out of the middle of the vendor payments piece, except the client even pushes the button, which is great for independence when it comes to that professional risk. Even if you’re doing an audit, of course, the push the button still takes your professional risk out of it since you’re not distributing funds for the vendor, for the client. And then you’re going to displace 100% paper checks while automating all of the payables entry process, too. So payables plus whatever your industry would be, then incremental at that point.
Second thing is the vetting of the technology is more laborious than the adoption these days because the technology has become highly intuitive, highly adoptable. So if you choose poorly, you’re going to end up flapping more than you are soaring. It’s going to increase your flap rate. But if you choose wisely, the adoption curve is surprisingly lower than it used to be.
Now, the second thing, since we’re talking about the capacity trap, I don’t have capacity to do the things that create more capacity. The best advice I can give people, and this is another principle of soaring, so it’s a good segue, is price right. Most of our flapping is done because we have a revenue to production ratio problem. In other words, a gross profit margin ratio problem. And since we’re not measuring gross profit correctly, we’re measuring things like utilization and realization, which are very poor practice measurements. Instead, what we need to be measuring is gross profit margin by portfolio of clients, my client accounting services portfolio. What is it? What is its GPM? My tax portfolio? What is its GPM?
And then you can start managing to why the GPM is lower. And that might take you down to an individual performer or individual client. But the portfolio GPM informs the operational implications rather than working from realization at the production level up to GPM and then ignoring pretty much we just ignore GPM altogether, which is not the way we tell our clients to run their businesses. So when we start running GPM by portfolio and then we start looking at median price points for recurring work or what’s called monthly revenue run rate, MRR. So when we have an average MRR that’s too low, we can start working to get it up. And the fastest way to get that average MRR up is by eliminating the ones that are the clients that are dragging MRR down. And you don’t just fire them. You correct their price and let them fire themselves.
Surprisingly, many will not. It always blows people away how few actually peel off. They might complain, they might cry, then they pay it. And so so what you almost always end up with is a client correction where in that correctable bucket, say that if you take the 30 percent, they need a price correction. 80 percent of those are going to accept the price correction. And 20 percent are going to fall off.
But this is extremely important because you can hurt yourself with this. If you’ve identified some third of your clients or whatever that need a price correction, don’t go to all one third of them at one time, because not only is that not strategic, it’s too risky. So you go to a subset of those and don’t just start with the ones that you hope walk away because you’re going to get this false negative in response to price. Sampling: from the ones you want to go, want to stay, your A.B.
client ratings from the A/B client rating group, do some A’s, do some B’s, but only hit about maybe five percent of that measured response. Adjust your pricing. Maybe you were pricing correctly. Your price correction was too low because maybe too many people said, yes, no problem. Right? So go up a little bit, tweak the price correction, tweak the messaging, hit another five percent, then start going in 10 percent tranches to mitigate risk. And you can do all of this in one quarter, one fiscal quarter. Watch that MRR average begin to jump up in hundreds of dollars to where it gets to where you want it to be, which is no lower than 1,500 a month. And the ideal target is around 2,100 a month.
Now, you can set your own goals, but I’m telling you where the industry marks are, 1,500 is healthy, on average MRR, for client accounting services work.
2100 is above the bar.
Sorry. Can you define MRR again?
Yes. Monthly revenue run rate.
OK.. Alright. Easy enough. And then so in this analysis, I’m just curious when you were saying all this, I’m thinking, do we use this to because you’re looking at portfolio of clients or services or, does this also help us identify maybe a stronger niche we have and maybe that’s an area we just need to concentrate in more?
Because there are a couple of schools of thought on this. One is vision, mission, purpose, passion should should drive you to your niche. OK. And and I am a big vision, mission, purpose person, but I also believe profitability sustains the vision. Right? So you can vision yourself right out of a job. So you have your vision has to intersect the real world.
So what you’re going to find is a certain industry within, you know, as you dissect your portfolio, GPM, you’re going to find certain things are driving MRR average up, and maybe extreme efficiencies you’ve adopted around e-commerce or around lawyers, around whatever the niche in health care, or maybe just your referral sources are referring a higher caliber client within health care, or maybe your local market, if you’re a local firm and these days, I think everybody should be a national practice. But that’s another podcast episode. So let’s say that you’re a local firm or regional firm in Kansas. Well, you might want to specialize on farms or southwest Georgia farming. Right?
So it just comes down to what works for you to create the highest profitability. Profitability being the key word, because if you don’t know how to manage a farm book of business well and you have the wrong kinds of farms, then you’re going to have a very low average MRR.
Yeah. So yes, this will inform niche, Randy. That’s a long way of saying yes.
Oh, I love long winded answer-. So you keep going. That’s no problem. Right now we’re meeting, and I didn’t tell you this ahead of time, but there’s two goals of the show: One, we educate the profession and two, we laugh and we’re doing both. So we’re we’re we’re on target.
And so one of the things that, and I know you said be a completely additional podcast, but I want to expand on this because I agree with you completely that about being a national firm, especially if you’re a niche practice. And one example I use all the time is my good buddy Josh Lance, who deals with craft breweries. And Josh has always been remote, always been a virtual firm. And because his niche is so strong in one industry, he goes not even just nationwide. He goes countrywide. Yeah, not only nationwide, but worldwide. I’ll get the words right. Worldwide with with dealing with craft breweries. So I know you said long podcasts to talk about, but let’s expand on that. Why you think people should be national firms now?
Yeah, no problem. I’m trying to break it down. And it’s because all work is virtual.
Right? And when you’re just providing services, most states don’t require you to have sales tax nexus. Now, you might create a materiality level where you have income tax nexus in a state. But most people listening in are also their own tax preparer, right? They already have all the software. They know how to do multi-state returns. When you’re looking at sort of the administrative cost to benefit, it is so there to deal, even state representation can be automated through the Wolters Kluwer or Corpnet. So it’s easy to operate in multiple states now, and it’s easy to service into those states now, even across multiple time zones. It’s manageable.
People like flex schedules and, you know, depending on how their kids do this or that, they might like coming in at 11 and staying till seven or whatever to service the west coast of your East. And then it’s become increasingly easy to have to recruit talent in multiple states so you can service people within their local time zones. And then you expand your market based truly off of the most profitable niche. Rather than having to be constrained by, “I love e-commerce, but nobody in my local market does it.” Farms don’t work for me, but I live in southwest Georgia, right? So now you can break out of all those paradigms.
We’re not an accounting firm. We used to be. We used to be a bookkeeping practice. But now we’re a hundred percent coach to those who are. However, just to let you know, we practice this model out. We have 25 employees in 15 different states. Sounds like we’re trying to hire in every state in the country. We don’t, but it seems like we’re working that way. And what that’s done for us, Randy, is it’s given us the ability to service all these time zones organically. It has not anyway hurt our productivity because we have tools and tools are plentiful now, like Microsoft Teams or Slack for collaboration, Microsoft Office, Google Drive. Everything needs to be in the cloud anyway. But even servicing, even having employees in 15 states, we just went with a PEO and I don’t have any headaches. No HR compliance at the regulation side anymore. No payroll tax forms to fill out. And what it’s done for me is it’s allowed me, Randy, to recruit the best possible talent rather than the best possible talent who’s willing to move.
And the cost that I pay for a PEO is a lot cheaper than the moving packages that I would create for people to move to Georgia and the office space and all that stuff.
It’s just it’s the model of the future.
Yeah, it’s we’re at the exact same boat as you. It’s you know, we have people, I don’t even know how many states at this point, but it’s at least 15. And we service the entire country, which really, I mean, you do, too, because your your members or your people attend your conference are from all over. So, yeah, I think that’s great advice.
Alright. So we went down a couple of paths there, a couple of tangents, which tends to happen on the show. But let’s go back to the whole overall theme of soaring. And so what’s the next area you think that we should concentrate on?
Well, once price is corrected, once you’ve created extreme efficiencies through automation, make sure your processes are standardized and democratized. You see, a lot of people forget about the latter one. So standardization and democratization.
And the same thing applies here as applies with technologies: crawl, walk, run. When I was providing a keynote at Expensicon, I said that standardizing a practice across CAS alone, but if you have tax as well and audit, it’s like writing War and Peace while you’re living out the War and Peace story, while as soon as you’re done writing War and Peace, you have to go back and rewrite it every single time something changes, because, you know, so that’s the reason nobody does it. It’s it’s utterly daunting.
And it’s a task that’s never done. So let me take a lot of that burden off the listeners here by saying that you write standardization at levels of depth. And the first level of depth is very big blocks. Right? So if you have client A and you’re doing client accounting services work on this client, you might have 10 steps, that where the person doing the work has to understand how to perform underneath these broad stroke steps and everything’s still living in that person’s brain. So, you know, but the sequencing is still really important because it may vary from client to client. Like the first sequence might be import e-commerce from bookkeep.com. So import e-commerce from Bookkeep because that’s typically your first step in an e-commerce client, right? And the next step would be reconcile payables, receivable schedules and paying and approve any or have client approved bills, whatever it might be.
Broad strokes: There might be 10 things an entire bookkeeping cycle. And then when you do that across your entire book and you get sequencing right, then you can tell your folks, hey, let’s create the next level down. So in the e-commerce side of things, there may be a particular sequence you’ve learned is best, like start with the merchants and then go to the shopping platforms or vice versa. So just put those steps in. Shopify to then, you know, pay PayPal, right? Walmart. And then go to the merchant account or accounts they use in the proper sequence that works best there. Now, that didn’t take long. That was just 10 more steps. And maybe you don’t even do it for the other ones, right?
And then over the course of 12 bookkeeping cycles or 12 client accounting services cycles, you’re going to end up with something that is built out at the third level down, which is more of a step by step, how to use Bookkeep within Stripe or use bookkeep within Walmart. And then you’ve got it done in a year and you’re doing it organically. It’s like people—it’s like the difference between writing War and Peace or writing a novel of any kind. Let’s just say, I think everybody I heard a joke once that everybody in the world is going to write a novel one day. So this novel that everybody wants to write or whatever is in their head, that probably you’re never going to write. I’m sorry, but you’re not. I have one in my head, too. And I’m not, I actually have started. I’m not done with it. So I’m right there. But you’re not going to write it. You’re not going to be Tolstoy. You’re not going to write War and Peace. But the question is, even though you’re probably never going to see yourself writing a novel, could you see yourself writing a journal? Could you see yourself over the next year writing one page in a journal every day? And even if that doesn’t mean you’re going to do it, can you see yourself doing that? Become realistic and acceptable, palatable.
And if the answer is yes, then that’s what standardization is. It’s your people doing the work, journaling what they do slowly and incrementally thickening it up as they go over time, so the journal gets thicker and thicker and more and more mature. So standardization is how you soar.
Alright. And that’s I love that advice from the because that’s it. Like we talked with technology, people just get overwhelmed. And oh, this is just not even doable. I can’t see the end. I can’t even see how I can get to the end. And that incremental start, add on, addition, growth over time, I think is just is just awesome. Then what’s the democracy? Say the word again.
So people write their processes down in a system that cannot be democratized through the entire team. It might be a shared Google share, might be a shared Excel file online. It might be some sort of a workflow solution that holds basic tasks. You know, people try to use Microsoft Planner and things like that. You’ve got to get something that’s designed for the industry, because only then can you assign it to the right people or people per process, plural. Only then can you manage the capacity measurements, the outputs that fit for our industry. Deadlines for deadline management, client ticket management, document collaboration: It’s got to be designed for us. I mean, you wouldn’t go into a medical practice and say, manage all of your patients in this generic project management solution, right? You would buy something within the industry.
So the ones that some examples of ones that exist with our industry that are really good are Canopy at GetCanopy.com, Mango, and you’d have to just google Mango practice management. I don’t have their website memorized. Karbon with a K, K-A-R-B-O-N, Karbon with a K, Aero, spelled A-E-R-O. Those are all fantastic practice management tools. Now, Aero is more of a workflow solution, but it will democratize workflow. Canopy, Karbon, and Mango are full practice management solutions that include billing modules and payment and client acceptance modules, signature modules and things like that. That’s how you democratize.
Alright. And so then taking that back to the technology we talked about in the AI adoption and integration. I know Canopy and Karbon for sure have already integrated AI into their software. Have Mango and Aero as well, do you know?
Mango is imminent if they haven’t already done it. I don’t know where Aero is at on the roadmap there. But to give you an example of how powerful that is, because you mentioned the Canopy piece and the Karbon piece. So I’ll kind of unpack the Canopy one a little bit: Canopy scrapes email. And so it then also, after it scrapes all the email out of the inboxes collectively across the entire firm, it also knows if the email is a client email because you have a client listed Canopy or if it’s a non-client email. And so it takes all the emails just related to clients and puts them into a client email queue. That’s number one, right? Which is my email to reply to, but only replying to my clients. Right there probably blew a lot of people’s minds.
But it gets better because now the management can see all of the emails, right? Whereas the inbox tends to be a black box in a normal world. Now it’s collaborative. And if that person’s gone on vacation or they’re out sick or something like that, or they quit, right? I can very easily send somebody else into that inbox and they can manage that inbox queue, which I know Google will do and Microsoft will do with shared inboxes too. But this is organic and it’s designed to be worked right within the system.
But now with artificial intelligence, Canopy even gives you a suggested reply, leveraging ChatGPT. So, and that suggested reply is getting more and more and more accurate because chat GPT is literally getting smarter and smarter and smarter, but it’ll get you 90% of the way there at least. If not, you just, I mean, it could even be just where you scan it and be like, brilliant, send, right? And think about how fast you can get through your inbox with replies, maybe not actionable items you have to task out, but with the replies, getting that inbox cleaned out now is just so easy.
Oh, it’s amazing. It’s—email is my nemesis and anything I can do to, in fact, I’m, we’re probably just about to hire a probably virtual executive assistant for me just because— which I probably should have had a while—probably mainly just to go through my email. Cause I just can’t keep up. And honestly, it’s just, I don’t want to.
Yeah. You don’t want to. So that, by the way, what you just said is brilliant. If you’re, if you’re an owner of a business here and you’re of a certain size business, not only should you have an executive assistant, they don’t have to be local. Mine lives in Los Angeles. She’s up every day at five o’clock to keep up with me. That was what she signed up for. And she’s fantastic, right? But not only should you have that, but I want you to really catch what Randy said: You need to have a personal email address and you need to have a business email address, even though you’re the owner of the company, or you need to have your executive assistant, just know everything about you. Those are your two choices, but they need to be in your inbox and they need to be managing your email and curating that into tasks. And they need to have authority to make certain replies to you. They need to be able to do all of those things on your behalf to be a fully empowered EA.
And that’s what I plan. My problem is I think I have eight email addresses, so I’ve got to decide which email addresses they’re going to help with. But yeah, it’s…
Well, aggregating those is something that Google and Microsoft will do too. So that’s a technological answer to it. You just create aliases.
Yeah, there you go. Alright. So we got into that next step then of the processes. What would be another area that we should concentrate on?
Okay. So I’m going to answer your question by starting with a story. I love stories.
If a picture’s worth a thousand words, a story’s worth a thousand pictures. Therefore it’s a million words in 60 seconds. So, so, so here’s…
You blew my mind, man!
It’s a million words in 60 seconds. So when I was traveling in the Middle East, they have a saying there that is their version of our Western saying, “If you give a person an inch, they’ll take a mile” That’s what we say.
But in their saying that it’s so much more colorful and appropriate to the point I want to make. They say, “If you let the camel’s nose in the tent, you get the camel in the tent.”
Now, where am I going with this? Scope creep. We can’t soar if we don’t manage scope, whether you prefer the inch, take a mile or the camel in the tent. I think some people listening in right now, not only have a camel in the tent, they’ve got a camel in their lap.
Or maybe five camels sitting on them simultaneously. And then they’re wondering, how can I not soar?
There’s also this fascinating video and it’s so discoverable out there. If you search “eagle tries to grab goat” on YouTube, just search that, “eagle tries to grab goat.” You’re going to see this video of one of these golden eagles, which have a wingspan of something crazy, like ten feet, trying to grab a goat. And they can get kids, baby goats, but they have to, this one made the mistake of trying to grab a full on goat, a mountain goat. And it couldn’t, it couldn’t quite lift it, but it didn’t let go, and the goats running down the hill and the goat gets away. So happy ending freaked out by those things. The goat does not die. The eagle does not die. Nobody dies, but I would love for your listeners to go watch it because that’s more appropriate to the theme. You can’t soar if you’re holding on to things that are too heavy. And that’s scope creep. So I’ve got lots of mental images here with animals.
Now to manage scope creep, you need to have this phrase teed up, and it needs to be on a sticky note pad, or it needs to be in the background of your needs to be your screen saver or something, but it needs to be ready. And it needs to be a snippet in your CRM, whatever. And the phrase goes like this: “I would love to help with that outside the scope of our current engagement, but happy to set up a meeting to discuss pricing.”
I’m going to say it again, ‘cause it is so powerful: “I would love to help with that. It’s outside the scope of our current engagement, but I’m happy to set a meeting to discuss pricing.” Now two things are going to happen at that moment. One is the client is going to figure out it’s not all that important after all. Or they’re going to set the meeting to discuss pricing in either way you win. Because not only does profitability sustain vision, but profitability sustains capacity. Right? You can always hire the executive assistant now. You can always hire the additional producers now,
once you have the gross profit margin, the operating capital to do it, you can invest in infrastructure. You can hire a business development person to actually deploy the automation. You can start digging your way out of this capacity well.,Aand the two aspects are correct pricing and sustain scope. And at the end of the day, protecting scope is protecting price point, right? Is protecting gross profit margin.
Yep. That’s, and so that right there is one of the biggest things that we as a profession, I think don’t do well because we think our mindset is, well, we have the answers. It’s really easy for me to do. I’m just going to talk to them and boom, now I got them in the right direction. And then we don’t realize, or we don’t even think about the fact that I just gave this advice away for free. And this just took my time and my effort. And it keeps me from doing these other things that’s going to help my profitability. So I love that.
It’s like piranha, right? They just, you think, well, that was a small nip. What’s the matter, right?
But our client tells like a school of piranha and they’ll take a limb before you know it.
And so I guess I’m just going to go with the animal metaphors.
Well, that’s nice because it is, I mean, I use the example all the time, and a very simple one, but you’re doing the tax return and you’re looking at W2 and somebody, you know, it’s making 200,000, they put $5,000 in their 401(k) and you tell them you could put 27,000 or whatever the number is. And you just gave away this advice, which is fine, but you don’t value it. You don’t just realize that you just save them, you know, $6,000 on next year’s tax return and that there’s a value to that.
And that’s very simple. I know, but I just, it’s the more of the mindset of let’s start valuing our services, our knowledge and not just give it away because it’s what we do.
And I know we’ve been on this a minute, but I want to, I want to comment on something you just said, cause it was brilliant what you just said, but somebody listening in might think, well, am I going to then withhold the knowledge? I mean, at what point do I have a fiduciary responsibility to act in the benefit of the client? So the way you reconcile that responsibility with what Randy said, what you need to do, is through subscription pricing. Rather than doing a tax return preparation engagement, which then you can’t possibly know how you’re going to be able to help the client with wealth generation, do a tax subscription that includes a tax preparation, but it also includes throughout the year, tax analysis, as well as planning. Those are not the same thing. So tax analysis and planning, credit strategy, research and development credits, but also just whatever credits are available in your local area, and all that research—grant research can be part of that. That’s a little bit outside the scope of tax, but the point is, infuse all of those pieces in it, as well as all those issues and notice handling. Maybe you stop with the scope at if I have to represent you know, but if you just get a notice from a jurisdiction, I’ll deal with that too, as part of the subscription, no additional fees.
And instead of charging $7,000 for a tax return, you might charge $12,000 a year, $1,000 a month for the subscription. And you got a lot of $5,000 worth of work there that you can do, and you almost never burn it all up. And remember, you’re managing based off of a portfolio. So across your entire tax portfolio, the idea is not any one client that might have had some weird thing with 15 notices. And you’re like, “Oh my gosh, I took a bath on that client.” Well, that’s not the thing to think about. It’s in my portfolio of tax under a subscription model, did I maintain a 66% gross profit margin? And if I did, taking a bath on one or two clients is just part of the model, right? Because I’m going to have surplus gains to compensate that on the clients that have the peace of mind of knowing I’ll deal with their notices, but didn’t have any that year, right?
So now I know that was also a lot to unpack, but it’s a way of being able to always charge for the wealth generating knowledge within the context of a subscription portfolio and never have to worry about over delivery or under delivery.
I agree. And the reason I love what you just said, too, is rather than being the reporter, okay, it’s, you know, it’s March and I can report what happened last year. And now you’re the advisor, you’re the planner, you’re, you’re coming up with. And honestly, you can stretch out the seasonality of what we do as tax preparers, if that’s what we are, because I already know the answer come December 31st, because I’ve been in front of this client for the last four quarters talking about what’s going on. And, you know, if I need to do an extension, it’s just pushing a button because we already planned everything throughout the year. And now I can, instead of two and a half, three and a half months to get my work done. And I know not everybody loves extension, but I do. Instead of two and a half, three and a half months, I can extend my tax season out longer and not burn myself out during that short period of time.
Absolutely. Now, if you’re doing the client accounting services work, that’s even more true, but also I heard some great advice. A member of my team suggested this, Heather Satterly, she said, financially incentivize people to extend their returns or to give you the freedom to do so. So underneath the subscription model, if they sign a box that says at your discretion, you can extend my return as it benefits me or you, then your subscription plan is a lower price, if they check that box, as opposed to if they don’t, they get a little bit of a discount, just a little bit of one, but that’s okay. And then that discount pays for itself so many times over by spreading your work throughout the year.
Alright. So all this stuff that we’ve talked about has just been amazing so far. I could go another hour. I think we’re going to need to start wrapping it up. So why don’t you give us a, if we missed anything, how can we find out more? What’s other ways to soar or give us a little wrap on what we talked about?
Well, obviously the best way they can get a comprehensive answer to that question is to come to Scaling New Heights. Again, you know, an unashamed plug, but…
Yeah, there are 121 unique breakout sessions to choose from, 135 exhibitors on the show floor to deal with the automation technology and over a thousand of the leading advisors in the country, including some top 100 firms, highly innovative bookkeeping practices and tax practices all on the ground for tax and CAS and practice advancement training. So yes, what I can only cover so much of in 45 minutes, four days and 121 breakouts to choose from. That’s the full meal.
There’ll be, there’ll be a lot. I am looking at it. This is actually going to be my first Scaling New Heights. I am very excited about it. I’m looking forward, I’m going to be there from Sunday till Thursday. So I’m going to get a, hopefully a full exposure to it. And believe me, it is the caliber of speakers that I’ve seen already are amazing. I’m looking forward to attending sessions. And as my own plug, I will be speaking there on basically mental health, ways we can avoid burnout, how we can be more efficient, just all the things, a lot of the things we talked about today.
So Joe, before we wrap up and I didn’t call you George there. It actually was Joe, even though we went backwards, Joe, as we—
Yeah, I’ll go by George Clooney.
Well, there’s a resemblance. I mean, I looked and I thought—
Yeah, people mistake me all the time on the street.
Yeah, it’s obvious. It is very obvious. So a couple of final questions that we talk about and you are all over the place. You are constantly educating the profession. I love it. But when you are not doing that, what are your outside of work passions? What do you enjoy doing?
Yeah. So I am a science fiction buff, unashamedly Star Trek fan, Star Trek nerd, but also, you know, the classic sci fi novels. And now a lot of those are manifesting and into TV shows and movies like Foundation and Dune. So, yeah, I tend to watch those to kind of chill or read them both. And then I’m also a metaverse dweller. I live a little bit in the metaverse. I play paintball there. I exercise there. So I spend time on my Oculus and then I have a wonderful wife and beautiful daughter. And I love hanging out with them, too. But that wasn’t necessarily in priority order.
Alright. Maybe family first. You were saving best for last.
I was saving best for last. Exactly.
Alright. And we will put Scaling New Heights in the show notes. But if people want to find out more about that or you, where would they look?
Yeah. So ScalingNewHeights.com will take you straight to the show. My last name, dot com— Woodard.com will take you to my home page.
Alright. Well, Joe, this is, I’ve had a lot of fun. I love hearing your knowledge and being educated by you. So thank you for being here on the show today.
It’s great to be here, Randy. Thank you.
About the Guest
An author, consultant, business coach, and national speaker, Joe Woodard has trained over 125,000 accounting and business professionals in areas of practice development, changing technology trends, strategic consulting, and how to maximize the use of accounting software in their practices.
His vision, to “transform small businesses through small business advisors,” has been the heart of his work since founding Woodard nearly a decade and a half ago, to provide education, community, and coaching offerings through onsite training events, virtual training events, and intensive, coach-led practice advancement courses. Every year since 2014, Joe has been recognized by Accounting Today as one of the Top 100 Influential People within the accounting profession. Joe co-hosts The Woodard Report podcast with Heather Satterley.
Meet the Host
Randy Crabtree, CPA
Randy Crabtree, co-founder and partner of Tri-Merit Specialty Tax Professionals, is a widely followed author, lecturer and podcast host for the accounting profession.
Since 2019, he has hosted the bi-weekly “The Unique CPA,” podcast, which ranks among the world’s 5% most popular programs (Source: Listen Score). You can find articles from Randy in Accounting Today’s Voices column, the AICPA Tax Adviser (Tax-saving opportunities for the housing and construction industries) and he is a regular presenter at conferences and virtual training events hosted by CPAmerica, Prime Global, Leading Edge Alliance (LEA), Allinial Global and several state CPA societies. Crabtree also provides continuing professional education to top 100 CPA firms across the country.
Schaumberg, Illinois-based Tri-Merit is a niche professional services firm that specializes in helping CPAs and their clients benefit from R&D tax credits, cost segregation, the energy efficient commercial buildings deduction (179D), the energy efficient home credit (45L) and the employee retention credit (ERC).
Prior to joining Tri-Merit, Crabtree was managing partner of a CPA firm in the greater Chicago area. He has more than 30 years of public accounting and tax consulting experience in a wide variety of industries, and has worked closely with top executives to help them optimize their tax planning strategies.