Episode Transcript
[00:00:08] Speaker A: Hi there and welcome to the podcast. I'm your host, Meryl Johnston. The lifestyle accountant show exists to help today's accounting firm owners build successful firms while also living a healthy, happy life without sacrificing sleep your weekends or time with loved ones. I must say, I'm excited to be back. For the first episode of season three, you can expect ten weekly episodes with season three and possibly a few bonus episodes before a break. And we'll roll into season four. And I must say, after doing the Beanies podcast, which was produced weekly but not in seasons, I do like the seasons that allow a break in between the weekly podcasting cadence. But anyway, it's great to be back and today I'm talking with Alex Oxford from Tax Valet. Alex is the founder and former CEO of Tax Valet and these days he serves as their visionary and community ambassador. Tax Valet is a bootstrapped sales tax services company with no investors or debt, and they've scaled to about 60 employees. Tax Valet is also a sponsor of the podcast, so you'll be hearing more about them from me later on in the show.
[00:01:22] Speaker B: It was like that 15 or 18 employee mark where I started to realize how I was getting in the way personally by wanting to be involved in everything and looking back. I could have done such a better job at empowering my employees and getting out of the way and just letting them know what I was. Really basic stuff, but letting them know what I was hoping for and expecting out of them rather than telling them what to do or how to do know. Communicating the why. I mean, looking back, it sounds so obvious, but when you're there, it's really hard to see any other way because it's like the title of that book, what got you here won't get you there.
[00:02:00] Speaker A: Today we're covering Alex's journey from a product marketing role at a sales tax software company to bootstrapping a sales tax services business, hiring his mum as employee number one, and the pros and cons of that, why putting a six month freeze on taking new clients ultimately helped them to scale. Alex runs us through Tax Valet's. Org chart, and it's not how a typical accounting firm is structured and there's no partners, so I found that interesting. He also talks through their sales process and a method they have to rate clients as easy, medium or hard, which then helps them be allocated to particular team members in onboarding and to be given an onboarding start date. Alex also talks us through his transition out of the CEO role and how he was able to replace himself all that and more coming right up on the Lifestyle accountant show.
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Hey, Alex, welcome to the show.
[00:04:40] Speaker B: Thank you so much for having me.
[00:04:42] Speaker A: So I think some of the listeners may already be aware of you in tax valet, but for those that aren't, could you give a little bit of a description about what tax valet is? What services do you offer? Team size? Where are you based?
[00:04:55] Speaker B: Yeah, sure. So tax valet is an all inclusive sales tax provider. I like to think of us as a productized service and sort of like cyborgs, where we're merging the very best of professional services with technology. Some of the technology we've built, some of the technology we're leveraging from third parties, and we're creating an all inclusive sales tax service for ecommerce and software companies to really handle everything for them. So that's really in contrast with some of these large sales tax software companies. That's really a do it yourself solution. So clients come to us instead because they just want someone to take full responsibility and take everything off their plate from figuring out where the business has Nexus, getting registered, managing the tax settings, dealing with audits, of course, filings and payments and all the other thousand things that come up that the software doesn't handle. We are remote. And when I started the company, I actually started it as being remote in 2018 and 2018 and 2019. I was telling the whole team, someday we're going to have an office and we're just doing this remote thing just to get started because I can't afford to have an office because it was just me. I totally bootstrapped it by myself.
And then Jen actually joined, I think, week number three. And then we just kept growing. And I very quickly realized that that dream was never going to manifest when COVID hit. And then I said, oh, okay, well, I guess we're just going to be remote now. And I'm actually really grateful it ended up that way.
[00:06:32] Speaker A: And what sort of size is the team now?
[00:06:35] Speaker B: Yeah, so right now we're approaching 60 employees. I think when you include the few contractors, which we really don't have that many contractors, but we're at plus or minus like 60, which is just so incredible because we were just talking about how at the end of last year, we ended with 30 employees. And to think, wow, we've really doubled in the past twelve months. And there just relatively hasn't been that much drama or angst with scaling because going from 18 to 30 employees, I felt like was so much more challenging than going from 30 to where we're at now. And then looking at the future, I just feel like we've really got such a great foundation and great systems in place for us to continue growing and doing everything that we're doing.
[00:07:25] Speaker A: Well, I want to come back to that pain point around scaling from 18 to 30 staff. But before we go there, I want to get a little bit of the backstory of why did you decide to start tax ballet?
And then were you actually doing the work yourself in the beginning, or did you immediately hire someone to help with that?
[00:07:46] Speaker B: Yeah, that's a great question. Well, I think all startup origin stories are messy, and I'd like to say that I was just, like, planning this out meticulously and being super intentional, because I do pride myself in putting a lot of intention into everything that I do now. But the beginning of the business was really not that way.
Oh, gosh, it's like memory lane here. So I was running product marketing at a sales tax software company, and I kept seeing the same problems happen over and over again where the software was not actually doing all the sales tax work. It was just like a tool. It was like Quickbooks. Right. And does every account need Quickbooks? Yes. But business owners don't know necessarily how to do financial reporting and they don't want to do the books. They just want to hire someone to do it for them. So I was battling with management. We were acquired and we went from 60 employees to 500 to 2000. And I was really fighting with management at the time. This was at SoBus compliance for us to create this sort of all inclusive software and professional service offering. And I was beating my head against the wall. And at the same time I was going through my own health journey. I'm a brain cancer survivor, thyroid cancer survivor, and I was having my second brain surgery. And at the time I was so frustrated with work and everything that was going on in just corporate life that I was moonlighting for a pet technology startup. And I told them, going into my second brain surgery, look, I can work in corporate or I can moonlight for you, but I can't do both when I'm recovering from brain surgery. So let me help you find a replacement to just do your marketing full time. And Leo, my dear friend, who's also a client now for tax valet, which I love, said, why don't we just hire you? So two weeks after my second brain surgery, I moved out to San Diego. I was director of marketing for this pet technology company. I'd never worked in B to C. And it was a wild and crazy about 14 months. And in those 14 months, that brand crashed and burned miraculously. And we went out of business. And it was almost like watching the Titanic where I was doing all the financial forecasting and I could see like, okay, we've got this cliff, and if we don't raise the money, then we're going to go out of business. And I actually was involved in laying everyone off and dealing with the transition. I was the last one to be let go. I let myself go and then I was out of a job and I was well, damn, like, what do I do now? So I moved back to Colorado and I told my partner at the time, okay, I'm going to try to find a job. But I also know that there's this huge need in the sales tax space because it was literally my job to sit at the center of the sales team, the market team, of the marketing team, and the product team, and to come up with a strategy for what we should do. And no one was listening to me. So I also knew that the Wayfair case was moving through the Supreme Court system and we were going to get a ruling. And if I was lucky and I started my business then, and the ruling ended up in my favor, unfortunately, not in the favor of business owners, then it would just be a really good time to start that business. And luck was on my side. I got a client, I think, on day three of opening my doors. And it was really just from really great connections that I had in the industry previously and the trust that I had built with them. And I guess you could say the rest is history. I started at first with doing everything, but I quickly realized that the attention, the detail, and high levels of focus and concentration are not what I'm great at. And that's probably true for other entrepreneurs and founders. And so Jen joined the team very quickly. I want to say it was like week three, and she had so much trust in me. And that's its own whole wild, crazy story arc, because it's Jennifer Oxford, and Oxford shares the same last name as me. And so some people think she's my wife, she's not my wife, she's actually my mother. And that is like the crazy.
[00:12:02] Speaker A: I've interacted with Jen through being in his interactions with Hexale. That's so funny.
[00:12:09] Speaker B: And that's been its own whole crazy story, which we could do like a whole podcast on is like, what was it like working with your mother? And then especially through the whole arc of Tax Valley being small and it just being her and me, and then now we're really big and she reports to someone who reports to someone who reports to me and just trying to figure out how do we actually create and maintain that mother son relationship, because it's weird and there's just no way around that. But yeah, I would say for the first year, I was doing so much not only the sales and the marketing and all the client calls, but also all of the onboarding and the Nexus reviews and the permit registrations, and laying the foundation for all of the documentation and the processes. I was so focused from the beginning on when we have 50 employees, when we have 100 employees, when we're doing this thousands of times a year, how do we, one, make sure that we're learning everything we can now, but two, try to build things in a way so that it's not like overdone, but there is enough of a framework so that there is some scalability built in. Because I knew how complicated this whole world of sales tax was and that it's really hard to do right once and it's even harder to do right 1000 times.
[00:13:32] Speaker A: So how did you skill up in sales tax? I knew you worked in it, but it sounds like you weren't actually doing sales tax returns. Previously you were on the product marketing side, but I've heard you speak on webinars before about sales tax and you sound like a guru. So tell me about that experience.
[00:13:50] Speaker B: Yeah, well thankfully I had a really rock solid education at Sovas compliance because I was actually in charge of being that sales tax expert and training the sales teams in really being the subject matter expert. So I had to really self educate. But looking back, there was so much about sales tax that I did not appreciate and I did not understand getting into it. And we actually had a little internal party at tax valet when the statute of limitations for audits for those first few years of tax Valley ran up. So there were no potential audits that we could be held liable for something. Because the reality is when we started, we were learning as we were going and actually I didn't appreciate how much we didn't understand. And so that is where really investing in self education and educating the employees and figuring out where are the resources and how do we actually train new employees, because sales tax in the United States, every state's totally different and there's so much going on and the fact of the matter is we cannot, I mean it was the case then and it's the case today. We can't afford to hire someone who has all of the skills and experience that we need in the space. So we've had to create this entire training program specific to individual roles so that we can continue to grow. As for my own education, there's some really great resources out there, but I am really big with the IPT. It's the Institute of Professionals and Taxation. It's the only organized body in the United States that has a designation for qualification for sales tax expertise. And I set out to get my CMI designation, which is almost like, I like to say it's kind of like a CPA, but just for sales tax. And that's it. I got my CMI. I want to say it was a year and a half ago and they require, I want to say it's eight years of direct sales tax experience and everything has to be documented. And that test that I took, I'm not kidding you, I studied for that thing, I want to say at least 20 hours a week for six to nine months. And that test, it was I believe 6 hours long.
It's all written, I didn't stop writing for the entire 6 hours. I think I got up once to literally run to the bathroom and run back. I finished the whole exam. I don't know how much I wrote and I think there were like two minutes left and I was like, oh my God, I don't even have time to proofread or look at anything. You finish that you have like a 30 minutes break and then you go and give an hour and a half oral exam where they're just like throwing all these crazy cases at you. So I have a lot of respect for anyone who holds a CMI. So if you ever see the CMI after someone's name, you can really rest assured that they know what they're talking about. When it comes to sales tax, I know way too much about telecommunications and oil and gas and hotels and all this stuff that I pray that I will never actually need to work within that area of sales tax because it's all so specialized.
[00:17:07] Speaker A: Yeah, that makes sense. Wow, that sounds complicated. So I'm interested in that journey from starting off with your mom. And so it sounds like she had some kind of sales tax or accounting background. And then who were your next hires? Were they also sales tax experts or was you starting to.
[00:17:27] Speaker B: I'm noticing myself laughing because I know that my team's going to be listening to this and it's going to be funny because I know everyone who's been involved with Tax Valley from the beginning. We all have our own different angles, right? And so I just want to acknowledge that this is the Alex Oxford edition. This is not necessarily like, who knows what the truth actually is, but okay. So I refer to my mother as Jen because I don't like just calling her know when we're talking about work. And that was like a whole weird thing that we both had to get used to. But she was living in Phoenix and then I was living in Colorado still and I would fly down there every single month so that we could just spend like a week working intensely together in one of her spare bedrooms. And it got to the point where we really needed help with a lot of this heavy lifting, but just a lot of paperwork. And it wasn't super complicated, but there was a lot going on and we just needed warm bodies to help us because, oh my God, we have all this work to do and I just way oversold us and we didn't have the resources and we knew how to do it, kind of.
And so I was like, who can we hire? And Jen was like, well, my neighbor Melody. Melody was a bookkeeper at the time, and she was available for some contract like, well, why don't I introduce you to Melody? Let me introduce you to Tara. And Tara was the front desk admin assistant for a startup that my mom was working at when I was a kid. And I remember Tara from when I was growing up. And so we brought them into this little ten foot by ten foot bedroom that we turned into an office that we were all working out of. And it's just so funny looking back, because Tara on her first day said to me, Alex, there's something you need to know. I'm like, what's? And because she had owned a couple businesses herself, she says, I hate sales tax. I really hate sales tax. So the fact that I'm here, it's just because I love your mother.
And Melody. I mean, Melody was great from the beginning, but it really was us just all coming together and saying, how do we make this work? And we didn't have role differentiation. Everyone was just kind of doing everything except I was not doing the returns. There had been a couple of times in Tax Valley's early history when I was pulled into doing the returns. And then very quickly the team realized that is a very bad idea for all sorts of reasons. I can't be trusted with that. I can be trusted with the strategy. I can be trusted with making complex decisions and advising clients. But when it comes to here, do this return that can take 3 hours and click through everything. It's very easy for me to just make a little typo and add a zero. And we have had to amend many of the returns from the early days that I did. I'm really not selling tax valet right now. I'm really not. Let me rest assured to anyone listening, the systems and processes that tax valet has today are extremely robust. There we go. Disclaimer.
[00:20:44] Speaker A: And now a word from our sponsor, tax valet. Are you worn out by the complexities of sales tax? Or maybe just tired of constantly picking up the pieces when software messes up? It's time to embrace a better way with tax valet. Tax Valet's sales Tax Compliance suite handles everything for you, from data prep and filings to managing audits, all for one simple, easy to understand monthly fee. Tax valet is looking to form meaningful relationships with accountants who truly care about their clients'experience and want to partner for the long haul. We've been recommending our beaningers clients chat to tax valet about their sales tax requirements for years. If you're interested, check out Taxvalet.com. That's Taxvalet.com and check out their partner program. Remember, with tax Valet, it's not just about making sales tax easier, it's about making your life easier.
Well, I mean, we're going to cover that later as well, because in our previous conversations, you've talked me through some of the systems that you have and things like capacity planning. So we'll come back to that. But I'm still really interested in how you built out the team because I think it's so hard to know as a new business owner. Well, who's the next person? Should I hire? Should I be hiring a junior person? Should I be hiring a senior person and then let them build the team? And also trying to decide between operations people who aren't generating revenue versus the accountants or the sales tax preparers that work with clients and generate revenue. And I think it's a challenge that many firm owners have. So I'm interested in how you went through that from the early days to getting to the 15 staff and what you did. But also, if you do anything differently, if you were to do it again.
[00:22:35] Speaker B: Yeah, from the beginning, we have actually never hired someone for a role at tax LA that was not going to be working directly on client work. And so all of the management positions that we have now, everyone was promoted from within. And that's something I'm actually quite proud of, is that we've never hired someone externally. And so the first key hire that I made at Tax Valley, and I just want to be clear, everyone that was part of Tax Valley from the beginning, which we have pretty much everyone from those early days, like Tara.
Tara's still there? Yeah, she does new client onboarding. Melody was running a pod for our sales tax accountants, and now she's moved over into managing all of our clients audits and sort of these higher, more complex issues. Yeah, that original team is still here, but it got to the point where it was clear we needed someone who could oversee all of the management of all of the clients filings. And so I want to say this was 2019, so we'd only been in business, like a year and a half, and I was looking for a diamond in the rough. And that's actually what we're constantly doing at Tax Valley with our hiring, is we're looking for diamonds that are just covered in a little bit of dirt and they just need to be shined up. And I knew that I found someone amazing the first time I met Christine, Christine Pope. And so for those who don't know, Christine is now the CEO of Tax LA?
Oh, I'm just noticing just how much tenderness and sweetness I have over my relationship with her because she came in and at the time she was just.
But I say just a sales tax accountant. But all of our sales tax accountants at tax LA are just really remarkable and incredible. But I didn't hire her on knowing that she was going to be the CEO or that she was going to be one of the people that I trust the most in my entire life, really just brought her on to help coordinate all of these sales tax filings, and she just had this appetite for learning and growing.
Crushing it, I guess you could say. I mean, that's one of our core values, is crushing it.
[00:24:59] Speaker A: And you mentioned a little earlier you're actively looking for diamonds in the rough. So where do you go and find these diamonds in the rough?
[00:25:06] Speaker B: Well, I would say at this point they're finding us, which I'm so grateful for. And Laura May, who is our people and cultural operations manager, has just been so excellent for I want to spend over a year at this point helping us create content for recruiting. And we've got all these recruiting videos and we have a wonderful referral program. I think it's something like, don't slap me, Laura, if I'm wrong, but I want to say it's like 60 or 70% of the hires that we make at tax valet are coming from a referral from an existing employee because we think that great minds think alike and so we'd love to hire someone if they had previous work experience with them.
[00:25:51] Speaker A: Yeah, we actually put a bit of effort into that at Bean Ninjas, too, both the referral program so other team members are reminded to refer. But also marketing is not just about attracting clients, it's about trying to attract team members that have alignment as well. I was talking with a friend who's in recruiting last week, and she was saying that's all well and good if you've got great social media talking about how good the company is, but you actually need to have a great company culture and market rate salaries, and there's a whole lot of other things you need as the foundation on top of having the great hiring. And it sounds like you've got that in place as well.
[00:26:32] Speaker B: Well, and it's such a tricky thing, too, because it's like, where do you start? Right? Because we certainly weren't paying a market rate salary from the beginning, but we could provide a lot of flexibility over work schedule and we could focus on all of these nontangible benefits and working for a small company has its benefits as well in terms of the projects that you can work on. And so we really leveraged all of those intangibles and brought those to the focus. And then, yeah, as we've come to grow and the employees are like, oh, this business is growing, maybe I should be getting a market weight rage salary. We've also been having those conversations around, well, do we have the different job levels? And what does it mean to go from a sales tax accountant one to a number two to a number three? And are we creating these levels because they're meaningful for the business and are actually showing career growth, or are we just creating the levels to create the perception of career growth? And how do we match these job titles to an actual salary where there is data? Because, as I'm sure you like, all of the roles that we're creating, they don't necessarily map onto something that we have industry data for. And if you're using talent that's not based in the United States, which we're an international team, and we very much consider everyone at tax Valet to be a core, core part of our company, just because they're in the Philippines doesn't mean that they're any less of a tax valet than anyone else. And at this point, we are actually Filipino dominant. We're Filipino heavy. It used to be that we had more Americans than Filipinos. Now at this point, we have more Filipinos than Americans.
[00:28:07] Speaker A: The same with us at vintages. Yeah, it didn't start that way. And I had to laugh about market rate salaries, too, because in the beginning, we couldn't do that either. And it was all, well, what else can you make attractive about the business? Why would someone want to come and work there if it's a bootstrap startup?
I remember thinking about that a lot in the early days. Well, how can we make this a great place to work when we don't have the budget of the bigger firms?
So I wanted to now circle back to you mentioned that the growing pains were really, I think it was from that 15 or 18 employees to 30, Mark. And could you talk a little bit about that and what were the challenges and how you solved them?
[00:28:52] Speaker B: Yeah, I would say that growing from 15 to 30 employees was looking back over the past six years, the hardest part of scaling, because we've basically doubled to about 60 plus or minus over the past year. And from 30 to 60, it was really not too hard. But the one to seven and then the seven to 15, and then the 15 to 30, each of those are completely and totally different jumps. See, the thing about getting to 15 employees is that as a founder, as an entrepreneur, you can be involved in everything. You can know what's happening, you can know every single client, you can know every single employee and what they're working on that week, and you can just have your fingers and everything. But in order to get to 30, systems and processes are going to begin breaking down.
Because if you don't have the foundation for once, when this is not just one person but an entire team, how is that team going to work? And if you don't have the documentation in place, and if you don't have the flowcharts and you don't have the charts for how you intend for all of this to grow and scale in the future, then it's all just going to come crashing down. And so I want to say it was like that 15 or 18 employee mark where I started to realize how I was getting in the way personally, by wanting to be involved in everything. And looking back, I could have done such a better job at empowering my employees and getting out of the way and just letting them know what I was. Really basic stuff, but letting them know what I was hoping for and expecting out of them rather than telling them what to do or how to do it. Communicating the why. I mean, looking back, it sounds so obvious, but when you're There, it's really hard to see any other way because it's like the title of that book, what got you here won't get you there. And that's so much the case. And so when we were at that, about 18 employees and we started to grow and we started to bump up against 20, we started to just see, oh, all of these systems, or rather the lack thereof, this is not actually going to work out. And so we had to quickly put in a whole freeze. In terms of client growth, I want to say it was like six months where we didn't take on any client at all because we were not comfortable adding any client into our systems that we felt like they were not going to get a stellar eleven out of ten experience. And we used that time to say, what are the foundational systems that we need to make sure that we're building? And a lot of this has to do with the documentation, the process, the training, the employee training and recruiting and onboarding systems. I mean, just thinking through what's everything that you're going to need? And a lot of it has to do with people, especially if you're in professional services. It's the people who are running everything, and it's those relationships that they're forming with the clients and how they're navigating the work. And so we just kind of had a whole freeze in terms of new clients so that we could focus on building these systems. And then we began growing again, and then we started hiring again. And because we slowed down, I am so grateful that we slowed down, because if we did not, then it would have blown up in our face. And in our world, something blowing up is really bad because one mistake can cost hundreds of thousands of dollars. Like our industry, sales tax is just fraught with risk, and it's something that I think a lot of clients take for granted. As soon as you're handing the keys for the Lamborghini to the valet man pun, because tax valet, they are responsible for every leaf that blows in the wind and potentially scratches your car. And we want to be really sure that we're doing everything perfectly.
[00:33:17] Speaker A: And what does the organizational chart or team structure look like now? Because you mentioned there's different levels and there's an international team, so some in the Philippines, some in other places. How do you kind of structure that?
[00:33:29] Speaker B: Yeah, so we have, like, I would say, two major departments where we have our implementation department, and then we have our ongoing accounting department, ongoing sales tax filing department. So within the implementation, we have our new client onboarding team, and then we also have the sales and marketing team, which I know it sounds kind of funny to have the sales and marketing team as part of implementation, but everything that we're doing on the sales and marketing side, we're doing in lockstep with onboarding, which is its own whole, entirely separate conversation. New client onboarding is who's doing all of that analysis and coming up with the plan for everything that we need to implement, everything we need to fix, everything we need to clean up. And they're really creating the strategy and advising the clients on what needs to happen and why. And then we also have the permits team as part of the implementation team, and they're going and opening and closing sales tax permits, which there's a whole lot of paperwork that needs to be done. And at this point, we have, I want to say, five full time people that are just doing sales tax permits, opening and closing. And then we also have the client tax specialist team, which does a lot of the same work as the new client onboarding, but for existing clients. So you can kind of think of it as almost like an advisory department, and then the job rules that are needed in order to implement the advisory. Right. And then we have these sales tax accountants, which are their own department, which have different pods, and each pod has six sales tax accountants. And then it's, I want to say, six sales tax accounting managers. So six pod leads create what we refer to as a glacier. And so for those that don't know, tax valets, mascot is a penguin. And so we like to have these penguin and Antarctica motifs everywhere we can because we're silly.
And so one glacier, there will be, what is that, about 35 employees? And so we're actually building out and working on creating our second glacier. And so there's questions that we haven't resolved yet. Well, do we just create a second glacier and then build onto it, or do we split the first glacier into two? And there's pros and cons to each.
So Christine oversees. Christine used to be in charge of all of the ongoing client operations.
Now she's the CEO. And so she has Alyssa, who's the director of implementation. Also early on from Tax La, one of the first hires, she reports to her. Laura May, who runs people and culture operations, reports to her. And then Stephanie, who runs the sales tax accounting operations, reports to her as well. And then I, in a roundabout way, report to her. But then she also reports to me. It's confusing. I'm trying to figure that part out because I'm both, like, working in the business and I'm a visionary.
It's a little weird.
[00:36:32] Speaker A: I want to dig into that in a moment. But I know you've talked about your really robust onboarding process, and I think that goes hand in hand with your sales process. So I'd love to hear, first of all, who you hire as salespeople. So are they accountants? Are they salespeople? And then how your sales team works really closely with your onboarding team and capacity, planning to decide what work to take on and how you get it scheduled.
[00:37:00] Speaker B: Yeah, it's such a great question, and I just want to preface my response with saying that your unique business and what's going on with your business is going to be very different than what happened to tax valet. Right. And so I think that one of the things we're just really good at tax valet, is seeing reality clearly and responding to it and addressing it. And for us, we got ourselves into hot water, not one, not two, not three, like a dozen times. And it was just the same thing happening consistently over and over again, which was at the time, I was the only sales representative. Right. And then I would go out and sell all this business and then we had this new client onboarding team, which at first we didn't even have just like a team doing onboarding. It was just like everyone doing everything. Then we were like, whoa. For sales tax, success is really built into the setup and making sure that we are going through everything, figuring out all the issues and everything that needs to be cleaned up. And so we recognize, hey, there's a process here that needs to happen. And we actually have a Hall of Fame or shame, maybe at Tax Valet, where we have a digital museum. One of the things in our digital museum is our original onboarding checklist, which had like 20 things, right. Our current onboarding checklist has like 350 things.
Absolutely insane. So we would have, like, one or two people just doing new client onboarding. I would sell way too much. They would be onboarding, I think at one point, and this is when we realized enough is enough, we have to change the process. We had, like 25 clients that were in onboarding, and half of them were in onboarding for over six months. And we were like, this is absolutely ridiculous. Clients are not moving through. It's creating all of these other issues. So then we began this process of saying, okay, let's limit the number of clients that we can take on each month. And so then we began coordinating very closely between the sales teams and the onboarding team to know how many clients should we plan on starting. And that got us into trouble. We went through so many different iterations for like, okay, well, we'll take so many clients per month, and then we would be booked out six months into the future. But then what happens if you need to reschedule things? And so we've had to do a lot of learning and say, like, okay, well, we're only going to make spots available with the new client onboarding team for the next month and a half. So that way we have flexibility. And instead of considering all spots for new clients as being the same, we actually have a process on the sales side where the client's evaluating us, but we're also evaluating them to understand the complexity of what's going on there, because every client basically gets a rating and we distill it down into easy, medium, or hard. And the thing is, easy is still not easy, but it's a whole lot easier than some of these hard clients. And I want to say there's like six or seven key criteria that the new client onboarding team has selected that we need to sniff out on the sales side. And then based on that, based on the information that we're collecting from them. We meet with the new client onboarding team once a week to say, here's everyone that we're talking to on the sales side. Here's what's going on with them. Based on all the information that we have. Do you agree, new client onboarding team, that this is a medium difficulty client? And then we align on the difficulty, and then based on that, we can align on when it makes sense to be able to schedule them based on the resources that we have internally. Because some new client onboarding specialists are going to be able to onboard only easy clients because it's their first year and some can do an easy, medium or hard client. And so if we only have hard clients coming through, we have to do negotiation and figure out, like, well, what does this mean? Does that mean instead of two easy clients and one hard client, we can only take on that one hard client for the month for this employee? And so it's a whole lot of air traffic controlling, and that is what makes tax valet's entire sales process, onboarding process, forecasting process incredibly amazing, but also incredibly complicated and honestly, a little slow at times because some clients are like, I want to get going right now, and we just can't.
I've said a lot, but I think.
[00:41:37] Speaker A: It'S better to do it that way than the mistake I see a lot of firms make is say, yes, it kind of sounds like what you were doing at the beginning, sell, sell the jobs and then try and clean it up afterwards where there's not enough capacity in the team, and then things take a long time, maybe some deadlines get messed. So I can see the benefit in having that robust onboarding process and that communication between the sales team and the onboarding team to decide whether to take the job or not. I am curious with the ratings, is that related to price? Because I can imagine if it's a hard client, but they only want to pay a medium price, then that's not a very great client to have.
[00:42:14] Speaker B: Well, you know, it's funny. The answer is no. The answer actually is no. And this is something that we've been talking about and we've been looking at for quite a while, and we're actually still collecting information.
The thing is that difficulty actually doesn't really scale with how much revenue we make.
If they're a hard client, it doesn't necessarily mean that they are going to be paying us more, though we certainly could. But the thing is, it's really challenging to sit down with a business that's doing one and a half million dollars a year and saying, yeah, you're going to need to pay like four times as much as everyone else because your setup is extremely complex and it just gets exceptionally complicated to market that and say, well, we've got this sort of heuristic and we will assign a difficulty based on witchcraft and then that will determine how much you pay. Because we really pride ourselves on having this simple, all inclusive pricing to where everyone's going to be paying the same amount. We do have tiers based on the company's revenue, but what we're doing on the back end, because we're so meticulous with our time tracking and we know how much time the entire team is spending on every single client, every quarter we have a report where we can see.
So once a quarter, because we are keeping track of all of this information, how much time is being spent on every single client, we're able to look at a report to figure out how profitable we are, how profitable we are by client, how profitable each of our sales tax accountants are, how profitable our teams are, and then we'll identify the most profitable clients for the quarter and the least profitable clients for the quarter and figure out, is there something going on with this client that we need to change? So for the really low profitability clients, where they have really low labor efficiency ratio, we're saying, is there some aspect of this work that we can automate, that we should automate? Is there some expectation that we need to set with the client?
Or is it just that their set up and we'll only do this if it's been like six or nine months and we've tried everything where the client is just priced wrong because they have some really unique set up. And I want to say that probably happens like two or 3% of the time. It's really rare. But we do that tracking so that we know how profitable a client is. And so that way if someone comes back to us and says, oh, I want a discount, I'm having some really hard financial times, which we have a whole process for everything at tax, a process, we have them fill out a form and we ask them, have you been contributing to any charities, for example? That stuff's important to us. What sort of discount request are you looking for? Are you planning on paying it back? Are you just asking because you're asking, or do you expect this financial difficulty to go away at some point in the future? And then we'll review on our end as a leadership team, are they a good client to work with? Have they asked for a discount before.
Do we want to maintain them? Are we going to be able to maintain profitability on this client if we were to extend it to them? So everything that we're doing at taxpayer, I would say we have intention built into it. And anywhere where we do not have intention, we are just clear with ourselves we don't have this figured out yet and we're just making this up. And we will at some point in the future be intentional so that we can measure it and make sure that we're actually being successful.
[00:45:55] Speaker A: And now a word from our sponsor, Liveflow. I first heard of Liveflow through a friend of mine, Nicole McKenzie, who is on episode seven of this podcast. She said something like, if you're copying and pasting QuickBooks online data into Google Sheets or Excel, you must check out LiveFlow. Here are some of the ways you can use it. Automating the month end close process, eliminating manual consolidation. Set it up in ten minutes and you're good to go. Or utilize one of Liveflow's over 100 financial models. They're completely plug and play. After you bring in the live QBO data, you can use that data to input into their financial models and templates that are already pre built. Need to make an update in QBO? No problem. Simply click Refresh and all the updated data will refresh in sheets. No more copying and pasting you. So I wanted to finish off by asking about your transition from out of the CEO role, and then we'll do a few rapid fire questions, just questions that listeners have submitted. So I think that moving out of the CEO role is so interesting and so it can be so hard to do. A lot of business owners end up trapped in that they've built a business. They like it. Sometimes they don't, but they just can't find a path to remove themselves from the day to day. So I'd love to hear what that transition was like for you.
[00:47:23] Speaker B: Yeah, I wish it was a really clear, easy, simple path, but it was really a challenge, really just looking at everything that I was doing in the business and really grappling with the fact that I really enjoyed doing a lot of these things. But a lot of it came to the head with my own medical stuff coming up and knowing that I had a cancer recurrence that I had to deal with. I was planning on going back to grad school and that was a big factor. And then I ended up starting grad school and then stopping grad school. But that kind of forced me with planning on going and having surgery again. And then planning to go to grad school, I just told myself and the entire team, I'm not going to be available to be the CEO two years from now. And so it was a two year process, and me and my team got together and said, what are all the things that we need to do if I'm no longer the CEO? And it's funny because this is unfortunately a new concept. We actually have been doing this sort of risk mitigation planning for years. And one of the risks that we unfortunately have identified is like, what happens if Alex's brain cancer comes? Like, what do we do in the event that all of a sudden it goes from grade two to grade four?
I am not willing to risk the livelihoods of everyone who's involved in this business because I wasn't responsible and figured out a way to make sure that the business can operate without me. And so for me, it's so much more than like, oh, I just want to be able to go on vacation, not have to worry about the business. It's like, no. The less I'm involved in the day to day because the business has its own legs, the more secure everyone's future is with the company. And unfortunately, as a cancer patient, which I'm sure there's listeners here who are in a similar, like, we have to consider that stuff. And I was forced, and I forced myself.
What does Napoleon Hill say? Burn the boat and storm the island. I burned the boat.
[00:49:47] Speaker A: You make a great point there. It's not just about creating more time for traveling. It's actually a risk mitigation strategy, not having key knowledge in just one person's head in the business. So I can see that benefit as well. Do you have any thoughts on how to structure CEO compensation? I think that can be a tricky one of how do you get alignment and how do you get a leader of the business to act like a business owner when, if they're getting a salary? Sometimes there's a disconnect between that alignment as you, the founder CEO and the hired CEO.
[00:50:27] Speaker B: Yeah, there's so many opinions on this, and we could talk for a whole nother hour about it. I will share a few things. If they don't already have the ownership mentality, your compensation plan for a CEO is not going to change that. That's the first thing I'll say. Second thing I'll say is Phantom Equity is magic. And if you don't have a phantom equity plan in your business, for at least your leadership team, you should consider it. And the third thing I'll say is there's a really great book called Scaling Up Compensation by Vern Harnish, and everyone with more than ten employees should read it. Or if you're planning on having more than ten employees, should read scaling up compensation. Really great practical tools in that book.
[00:51:09] Speaker A: Amazing. I know scaling up, it's in the bookcase behind me, but I have not heard of the compensation one, so I'm going to note that down. All right, well, we're getting close to time, but I've got just a couple of questions that other people submitted.
So one was, how did you get comfortable with your team members giving advice to clients on what could be a high risk area?
[00:51:33] Speaker B: That is such a good question, especially for the industry that I'm in. And it took a really long time for me to trust Alyssa, and it took a really long time for Alyssa to trust her team. But I could boil it down to a few things. We standardized the processes for giving advice, and we are very careful in what we communicate in terms of black and white. So on our Nexus analyses, for example, we don't just have a report that says you have Nexus or you don't. It is definitely more likely than not. Less likely than not unlikely. No Nexus. And so creating these practices so that you can standardize giving advice that is in the gray. So that's one thing I'll do. Second thing I'll do is really scoping out your service agreement and also making sure that you have a really rock solid insurance policy around this and looking at all aspects of your business when it comes to insurance. But if you're giving advice, understanding who's covered, how much you're covered, what would happen in the event that you gave improper advice? And it wasn't until I had that insurance policy that is the number one most important insurance policy I have as a business owner is around giving improper advice, and it is a continuous, ongoing conversation. And we are constantly double and triple checking the advice that we are giving to make sure that it was accurate. And if for some reason it wasn't, that we're giving them the right advice now.
[00:53:08] Speaker A: Amazing. Well, we're bang on time. It's been so great chatting with you, Alex. Did you have any parting words, anything that you wanted to say to wrap up? And then maybe you could let our listeners know where to find you, particularly if they're accountants who might want some help with sales tax for their clients.
[00:53:26] Speaker B: Yeah.
So website is thetaxvelet.com, but I just wanted to share just this tenderness that's coming up. With me just reflecting on everything that we've done over the past six years, all the people who've been involved, everything that we've been able to accomplish. And I'm just so proud of this team and I'm grateful that the work that we've done has been recognized. So thanks for having me on.
[00:54:06] Speaker A: I had a great time chatting with Alex from tax Valet, and it was interesting to hear him use the term productized service. If you've listened to bonus episode one where I talk about the origin story of beanages and how we launched that business in seven days, you'll know that I was inspired by the productized service business model as well. Here are a few parts of today's conversation that stood out to me. Alex started tax valet because he kept hearing about a problem when he was working at a sales tax software company. Customers wanted someone to take care of the process end to end, but the software companies didn't want to do that, and that's where he saw an opportunity to create tax valet. I love stories like that. I think sometimes with startups we can go out and have a solution that we want to create and then try and find the problem. And Alex very clearly had an understanding of customer pain points and then went and built a solution to that. I also loved hearing about how Alex structures his team. He doesn't have sales tax partners who are providing high level advice with an expensive alley rate. Instead, he's broken the process of delivering sales tax advice and filing returns into a whole lot of different parts and has different team members taking care of things like sales, the onboarding process. He's got five people doing sales tax registration, opening and closing, and so I thought it was a really interesting way of approaching an element of what would usually sit in an accounting firm. We didn't have a chance to cover Alex's life outside of work today, but from what I know of Alex, he's also a great example of the lifestyle part of the lifestyle accountant. He's built an incredible company while managing complex health issues, and I know he still finds plenty of time to travel and have adventures.
