Starting a business is an act of love and courage. Enjoying a task soon becomes a business. You might start working out of the home or buy a small store front. The previous hobby now commands more of your precious time. A business is about more than making money. Small business owners love the work they do and get paid to do it. Awesome! Then reality sets in.
When I was a sophomore in high school I fell in love with the stock market crash of 1929. The teacher said economists don’t know what really caused the crash. The Smoot-Hawley Tariff was probably the trigger but many other events also played a role. I could not let it go. Every book in the school and public library in my small town was in my paw, devoured for any tidbit of information on why things went so wrong in 1929. I never found a definitive answer, but I did learn a lot about economics.
And the stock market. From that point on I wanted to be a stockbroker. When I was in college I took a business class, accounting, and macro and micro economics. Though I never earned a degree I learned a lot that has helped me in my career. It gave me a start on where and what to study to get good at finance.
Years later I saw an H&R Block tax course and took it. I was already preparing returns on the side and was ready to make the leap into a full-time seasonal business. I enjoyed preparing taxes and research. Tax Prep & Services was born. Later I would incorporate as Tax Prep & Accounting Services (TPAS). The name was intentionally generic. Schroder’s Tax Service or some other machination with my name was out. The day I started my business I already had an exit plan. There was a chance I would take that early retirement thing folks talk so much about, cutting short a practice I so enjoyed. The generic name made it easier to merge the company with another. In the back of my mind I was think General Motors, General Mills, and General Electric. I actually toyed with General Tax, but decided that would send the wrong message.
The business started as a tax practice, evolved into an accounting practice, and now is evolving into a personal finance communications company. By 2005 my office prepared north of 2,000 tax returns annually. It drove me insane! I spent my entire day managing people and the company. I prepared fewer tax returns than anyone else in the office, save the front desk staff. What I loved doing I was no longer doing! I had people for that. I was no longer happy.
That is when I decided to transform the company into an accounting firm. I added payroll and bookkeeping to the mix of services offered. We had few than 10 clients in this area and increased to over 100 in six months. At the same time I reduced head count in the preparation department. Unprofitable tax returns were gone and clients who required too much of my time was out. There is only one me and I have limited hours each day.
Fast forward to the last few years. TPAS was down to a comfortable size. I wanted to expand because I have a sickness. This time I had to be smarter. For several years I have had an online portal where you can prepare your own tax return using commercial grade tax software, the same software used in my office. This, I felt, was a vast improvement from other online programs. The issue was marketing. I could not figure out how to get it done.
Then it dawned on me I could offer the program to personal finance bloggers. If I shared revenue it would be a great way to promote that line of my business. The plan was in place until I met my first personal finance blogger, Pete, from Mr. Money Mustache. In less than thirty seconds my plan was in the ash heap. He was not interested in the DIY tax program, but wanted me to do his taxes. He was gracious, giving my brainchild a favorable mention.
Too Much Growth
There was no doubt such a visible client would bring a deluge of new clients, more clients than a small office can handle. I was happy with 700 clients and a handful of employees. I did not have to work much as my team did most of the work and I could prepare taxes for a few months of the year to my heart’s content. That is history now.
Giving up my practice was a consideration. If it was only about money it would have been an easy call. TPAS, presented to potential buyers with the new stream of clients, was worth a cool seven figures. Not bad for a country boy. But it isn’t “only” about money. If it were I would never have met Pete because I would have cashed a check a long time ago.
The problem persisted. Readers of MMM wanted me to write a blog. I do write on some shitty blogger blogs and content farms, but it had been a few years since I focused my writing so heavy on finance. The Wealthy Accountant url was already owned by TPAS for 18 months. Now was the time for it to see the light of day. And still more people want to be clients.
I learned to say no a lot this year. A lot of people I could help were left to suffer because there was no room at the inn.
Automate Your Personal Life
Simplifying life with automation is easier than ever. Most spending can go on a credit card where they pay you a bit back and the credit card payment can also be on autopilot. A few minutes setting up the automation frees many hours over the years and saves on postage costs.
Amazon and other online retailers allow you to automate regular purchases. Coffee in the office never runs out; Amazon sends a new package on a regular basis so I don’t have to waste time reordering and Amazon gives me an additional discount for doing so.
Automating the Business
I had a choice: leave a lot of clients on the table (I have been) or find a way to manage the influx of new clients. I chose the latter. The stream of clients has slowed over the summer, but I am under no illusion tax season will be a quite time for me to relax.
This summer I have worked harder than any time of my life. As long as I can see the light at the end of the tunnel I was willing to do it. Bringing in thousands of new tax clients was possible if I engaged some of the grey matter between the ears. Enter: outsourcing.
Finding enough qualified employees is hard. Training employees on a different way to run an accounting office did not work. Time to get serious. Over the summer I worked on several outsourcing projects. I found several businesses I could train to handle my work flow. My employee count is actually lower (!) because a few employees left for greener pastures. I think they will regret not applying themselves later. The workload will drop, revenue will increase, and payroll for the staff I have will rise significantly.
I inked the first of several outsourcing agreements this last week. All payroll clients in the office will be outsourced to this firm. I worked hard training them on my program. The best part is I got paid to turn my payroll over. The next best part is the clients are still working with my office and me to get the best tax deals. I now have more time to work with more clients and serve them better.
The best use of my time is to work with each client to get them setup and then turn the work over. Business management time is limited so outsourcing is a massive advantage. Most bookkeeping will be outsourced by the end of the year to local firms, once again trained by me. By working with a group of twenty payroll clerks and bookkeepers I leverage my time. I accomplish more in less time. Everybody wins. Profitability is up! Stress is down!!
Even some tax returns will be outsourced to firms I can personally train. This will be the hard part. I refuse to use outsourcing outside the country. My clients would have to give permission and I am uncomfortable sending personal information to a non-US source.
There are two massive benefits to me as a business owner. One, I get paid a very nice amount of money to technically sell this portion of my business. In reality I still have the clients. New payroll clients will also generate revenue for TPAS. Since I don’t have economies of scale in payroll, the sale/outsourcing of the payroll accounts brought in over 20 years of profits in that department all in one day and the partner company can do it cheaper, faster, and better. Two, I work less and get paid more. When a new client comes in, we handle tax setups and consultations. Then the payroll service pays me to get the payroll portion of the account. The client is served better with a dedicated staff and I keep my sanity
The same strategies apply to the bookkeeping and tax preparation end of the business. The best news is I stay in business doing what I love, get to talk with clients all day long about saving them money, and can serve thousands of people more than my small office could ever do on its own.
The hardest part for a small business owner is letting go of the reins. The business thrived due to hard work and an attention to detail. Business owners have a hard time trusting someone else will step in and do the job right. That is the number one reason a small business stays small. Your favorite accountant is guilty as changed. Nobody can do the job as good as me. Well, now I will leave thousands of clients in the dirt if I don’t step up my game. I found a solution which requires I let go. I trained these people. If I am so darn good then they should thrive too. What I have found is they do a better job and faster. When you get spread too thin it hurts quality. Time for the Wealthy Accountant to man up.
Instead of managing a dozen employees, I will manage workflow. A regular review of work performed by other firms will ensure quality. The client will be served better than ever! And that is why they emailed me for help.
It took a while to find an analogy to help me let go. Then I had it. Warren Buffett runs one of the largest companies on the planet with 24 people at the corporate office, plus himself. Berkshire Hathaway has over 300,000 additional employees. To me this means Buffett finds good people to run his companies and goes out and finds new businesses to buy. I am no Warren Buffett. Still, I can channel his talent and apply it. And so I am.
Even Non-clients Benefit
Never satisfied with mediocre, I am expanding these services to you, my dear readers, even if you are not a TPAS client. The final plans are in place. Once I am certain the outsourcing firm can handle the payroll properly with the additional influx of clients I will share the links in a future post. (I will also update this post to include the links.) All small business owners reading about the advantages of an LLC treated as an S-corp will now be able to hire the same outsourcing firms I use. Some of these firms are huge. I trained the people inside these firms necessary to get the job done right and maximize tax advantages.
Bookkeeping will be a bit slower setting up and you are already able to prepare your taxes online with TPAS. The number of clients served in 2017 should increase somewhere around 500%. By focusing my time on training outsourcing companies to get the work done rather than individual employees, I can focus on helping new clients get on the right track and set the process in motion so their personal finance plan is automatic.
Few accounting firms provide such a level of automation to their clients. My unique situation gave me an either/or choice. I choose or. (As in, I can either sell the business and retire (the real retire), or I can step up my game.)
What I am building is usable by other tax offices, too. The outsourcing strategies and resources I am developing are something anyone can use. Before the end of the year I will provide links to the contact person for payroll outsourcing. This person has a fully developed team well aware of the strategies I use with my clients to maximize tax savings. When it comes to LLCs treated as S-corps, I will tell you what you want to get paid to optimize taxes. My team of partner companies will understand what I am doing and execute with laser precision.
I am so excited! A summer of hard work is coming together. My expanded team allows me to help a massive number of people and businesses. One small tax office building, TPAS, will provide the tax/accounting/payroll services of a massive accounting firm at prices lower than any major firm charges. Bigger, better, faster.
Outsourcing is about focusing on tasks. The jack-of-all-trades never provides premium work. I tried it. It doesn’t work. I am a tax office. That is how I started; it is how I will end. All the other related services will still be available through TPAS. My outsourcing partners will keep work flowing smoothly as I work with larger and larger groups of people.
The results are already bearing fruit. In the last few weeks as payroll is slowly moving to the outsourcing company I have used the extra time to add 32 new clients. This would never have been possible without the new automated system. I have an excited group of businesses eager to serve the people I bring in. Keep your eyes open for more updates.
If you contacted me in the past, I am working through the list. When things came in too fast I had to skip large chunks of emails just to stay somewhat current. I will keep working back until I get to the people who emailed me months ago or even during tax season. Soon I will have staff helping me manage my email flow, sometimes over 300 per day. It takes a good plan to handle that volume. I finally have the first pieces in place to get the job done.
Business is like that. Your plans can change often and rapidly. Where you start is not where you end. My tax office is different than anything I imagined even a few short years ago. Business is exciting and addicting. The world changes and I am part of that change. I am inspired and humbled all at the same time. The accounting/tax industry needs radical changes to serve our communities. If I end up a leader in that transformation it will be the greatest thrill of my life. The accounting industry is uniquely positioned to transform our society from one that focuses on spending and long working hours into a society freed from the mundane tasks, freed to reach for the stars and dream dreams never dreamed before.