Episode Transcript
[00:00:08] Speaker A: Hi, everyone. Welcome back to another episode of the Lifestyle accountant show. I have producer Eleanor with me again today. Hi, Ellen, how you doing?
[00:00:16] Speaker B: Hi, Meryl. I'm great.
[00:00:17] Speaker A: And I think a happy birthday is.
[00:00:20] Speaker B: In order for last week. I did send you a message on the day, but I haven't actually spoken to you, probably since then. Happy birthday.
[00:00:27] Speaker A: Thank you. The big 40. I'm not too sure how I feel about it.
[00:00:31] Speaker B: Wow. Well, look, you don't look any different. I can't see any more wrinkles. You haven't suddenly sprouted a lot of gray hair. So how do you feel? How do you feel about the big 40?
[00:00:41] Speaker A: Well, actually, when I hit 37, that's when I started thinking, okay, I've gone from mid thirty s to late 30s, approaching 40. So that was when I started to think about becoming middle aged.
I don't love the idea. I've always felt like I was on the up and up. So improving, learning more at business, getting fitter. And then I realized at some point in life, you start the decline. And I don't know if I'm quite there yet, but it just made me aware of that concept, which was a little hard to wrestle with because I'd always just assumed that you get smarter, you get fitter, you improve at things. But I don't think that's true. At some point, you turn the corner.
[00:01:20] Speaker B: It's not quite just an exponential race to 100 years old, is it? Unfortunately.
[00:01:27] Speaker A: So how did you do?
[00:01:28] Speaker B: What did you do to celebrate?
[00:01:30] Speaker A: Well, usually I work on my birthday, but this is a big one. So I thought I'd take the day off. And my four year old said to me, oh, are we going out for dinner for your birthday? And she loves going out for dinner, but we've stopped doing that because my two year old throws food everywhere and it's just a disaster. So we haven't been out for dinner.
[00:01:51] Speaker B: Take a newspaper to cover the floor with.
[00:01:54] Speaker A: So we've stopped. And I had to explain, no, it's just me and mama that's going out for dinner.
The way she'd said it, as a family dinner, it kind of. Oh, okay. Sorry.
So we did go out for a family brunch instead. And that was lovely. And one of my favorite things is exercise. So I managed to get a spin class in in the morning and then a lunchtime surf that was actually fantastic. Surf was pumping, and it'd been good for quite a while. Often when it's good, everyone knows and it's busy. And this time it wasn't. Busy. And it was. Just turned it on. Birthday surf. It was awesome.
[00:02:30] Speaker B: Oh, very nice. And also, you didn't quite take the full day off because we were definitely sending a bunch of work related messages for what, maybe like an hour on your birthday. So you almost succeeded in not working at all. For you, I think that's pretty good, right?
[00:02:45] Speaker A: That's true. After brunch, I was too full to serve, so I went and sat at a different cafe and messaged you and got a little bit of work done while I waited for my food to digest. And, yeah, we got a babysitter for the evening and went out for dinner, which was lovely as well. And not something we do that often.
[00:03:04] Speaker B: So you got a nice date night in for your birthday. That's pretty good.
[00:03:07] Speaker A: Yeah.
[00:03:08] Speaker B: And then so what else happened for your birthday week?
You went away. Well, not that that was for leisure purposes. I believe that was for business.
[00:03:17] Speaker A: Well, no, it was actually only for leisure. We took the kids to Melbourne to meet their baby cousin. My brothers had his and his wife had their second child, so we thought it was a good chance for them to meet their little baby cousin as well as spend time with their other little cousin. So we did a trip to Melbourne for a long weekend.
[00:03:37] Speaker B: Oh, so good. I think just because you did so much business travel last year, I was just like, oh, she's off to Melbourne. It must be something. Conference. Something's on, so. Oh, that's good that it was actually a nice family trip.
[00:03:48] Speaker A: Yeah. And it's always lovely having that family time. There's definitely some things I do differently.
[00:03:53] Speaker B: Did anything go? Were there any funny stories?
[00:03:56] Speaker A: She loves public transport. Any form of transport? Trains, trams, ferries, buses. And so I thought, oh, well, let's play to that. She loves it. We won't hire a car.
[00:04:07] Speaker C: Normally.
[00:04:08] Speaker A: We would always hire a car. And just straight from the airport, off we go. And so I had the great idea that we traveled to the airport. We'd do the plane travel right across my two year old's nap time, so she didn't sleep. Then we would get the bus from the airport to the city, then we'd get a train, then we'd walk all of this with a porticott and all of the kids gear in tow, carrying all of that.
[00:04:35] Speaker B: Is it like one of the big porticots or like one of the little super tiny ones?
[00:04:39] Speaker A: It's a portable one, but it's still quite heavy.
[00:04:42] Speaker B: Yeah, because some of them are quite huge, even for a porticon.
[00:04:46] Speaker A: So we were hauling all of that from the bus to the train. And then I'd miscalculated and it was actually a bigger walk. The train didn't leave from the central Melbourne station. We actually had to walk somewhere else. And then it started touring with rain, so we abandoned that plan and got a taxi to the apartment.
[00:05:09] Speaker B: Well, hey, Beth, it sounds like you tried really hard, though, and it was a good goal, even if it didn't quite go.
Sounds like it definitely didn't go. Hate.
[00:05:20] Speaker A: So I think we might wait until we're not carrying all the baby gear, the porticot, the pram, the nappies, all the equipment. Then we might give public transport another go.
[00:05:30] Speaker B: Yeah. How did your four year old, did she enjoy the process still or did she kind of crack it along the way?
[00:05:37] Speaker A: No, she loved it. She did get sick of walking. So then you have to make everything a game to. Oh, what's up there? Let's get to that. Race you there.
[00:05:46] Speaker B: I believe there's a bluey episode of this nature from every.
[00:05:50] Speaker A: Yeah. But she did love it.
We did. For the rest of the trip. We also didn't have a car, so we were getting around by tram and train. Then we were staying somewhere pretty central. So she did love that.
[00:06:02] Speaker B: Oh, good. Oh, well, I'm glad. So overall, sounds like it was a great time. And how was it meeting your new little baby nephew? How big is he now?
[00:06:11] Speaker A: He's just a couple of months old. Yeah, super cute. And it was so nice having newborn cuddles and my older daughter just loves little babies. So she was going over and he was smiling and. Yeah, it was fantastic.
[00:06:25] Speaker B: Oh, that's so exciting.
[00:06:27] Speaker A: I must say, I find going on trips, I do miss the healthy routine of home. We basically ate our every meal for four days.
Little exercise. I did sneak in a tennis match with my brother about 09:00 p.m. Once the kids were all asleep.
[00:06:45] Speaker B: And wouldn't that be 09:00 p.m. At daylight savings time as well? So that's really what it's even like later again, isn't it?
[00:06:52] Speaker A: Other way. So it was early 08:00 p.m. For me.
[00:06:55] Speaker B: Yeah, this long. And oh, my goodness, the frustration. It still kills me. Of the daylight savings Queensland, New South Wales, Victoria. Bloody difference. Can't wait for it, then. Wish we had it here.
[00:07:04] Speaker A: Okay.
[00:07:04] Speaker B: Slightly earlier regardless, that's me going on daylight savings rant.
[00:07:10] Speaker A: It's actually pretty awesome because it was light until so late, so it's fine for the kids to stay up later, just to be out and about, doing things in the evening. Which I really enjoyed. I actually missed that. I'm originally from Melbourne and I do miss that.
[00:07:25] Speaker B: Decks are beautiful down there, aren't I?
[00:07:27] Speaker C: Do.
[00:07:28] Speaker A: I do wish that we had it.
[00:07:29] Speaker B: Up here as well. And then I also love the people that are really against daylight savings coming to Queensland. They're like, but the cows are going to have to wake up earlier and they just don't really quite understand how the whole thing works. Says me, who still can't get the difference right.
[00:07:46] Speaker A: How are things with you?
[00:07:47] Speaker B: Yeah, things are good. My son, it's his third week in daycare, and I tell you what, the joy of having an uninterrupted block of time to achieve things.
I've never enjoyed going to work so much, I think in my entire life. It's just. Look, don't get me wrong, love my son very much. He's amazing. He's adorable. But after this long, it's just so good to actually feel like an independent human being. And I am sure you can agree I'm getting significantly more done.
So that's an added upside.
[00:08:23] Speaker A: I think having chunks of uninterrupted time is completely different to pockets here or there where you can really get your head into something and focus.
[00:08:34] Speaker B: Definitely. And even then, when the pockets are interrupted every 3 seconds by a squawking baby, et cetera.
So who do we have on the show today?
[00:08:46] Speaker A: So I had a fantastic chat with Rachel Fish, who is based out of Canada, and she's got a really interesting story. There were so many different things we could have talked about, but I decided for this episode to focus on her story in acquiring a niche CPA firm. And she's not actually a CPA herself, so they had to change the licensing of the firm for her to acquire it. She's an accountant, but not a CPA. And really interesting story around that acquisition process, how the opportunity came up, why she thought it was a great opportunity to go into the real estate niche at that time, and how she'd been thinking of different ideas. And then once she bought the firm, some of the things she did to transform it from a tech perspective, a team perspective, and then ultimately, how in a pretty quick period of time, she was able to exit. I shouldn't say exit, she still owns the business, but she has a team and a business partner running that business day to day. And she's taken on a pretty amazing general manager role with Dex, which is a full time role.
[00:09:55] Speaker B: So she's been able to exit her time requirement. Yeah, the dream, which is incredibly hard.
[00:10:02] Speaker A: To do, and I think particularly hard if you've acquired a firm and have been involved in making changes, getting to know clients, to be able to then smoothly transition that back off to other people. It's very impressive. Fantastic.
[00:10:19] Speaker B: Well, let's have a listen to your chat with Rachel.
[00:10:25] Speaker D: And now a word from our sponsors. This podcast is brought to you by team up, helping you to recruit top Filipino accountants without the ongoing monthly fees. They can source accountants with experience working at us or australian firms who are familiar with tools like Xero, QBO and Dext. They can also recruit specialist roles like bookkeeping team leaders who have leadership experience.
[00:10:49] Speaker A: And australian tax specialists.
[00:10:51] Speaker D: I recently came on board as an investor and advisor to team up and I love their ethical approach to the offshoring industry where they look after both the accounting firm and the Filipino accountants. Make sure to check out the team up newsletter for more content on building top tier accounting teams in the Philippines. That's at hiateamup.com hireteamup.com.
[00:11:18] Speaker A: Rachel, welcome to the podcast. Great to be chatting with you.
[00:11:21] Speaker C: Thank you. Good to be chatting with you as well.
[00:11:23] Speaker A: I've known of you online and through Twitter and various online forums for many years, but it's the first time we've chatted. But I'm sure many of our audience will have heard of you already. But do you want to give just a quick overview of who you are and what you've been involved in in the accounting industry?
[00:11:42] Speaker C: Sure. Well, first of all, I think that's kind of the beauty of the accounting industry is that how completely borderless social media is and how you can run in the same circles with people for a decade or more without ever meeting. But no, it's been great to be in some of the groups together that we have. So a little bit about me. I am an accounting and technology geek, and basically many of my roles, especially over the last decade plus some since cloud accounting, has been a thing. I've either been in the accounting practice side, but really focused on tech enablement of practices, or on the technology side working with accountant channels and accountant experts and things like that as well. So yeah, it's been a mishmash of a couple of those over the last 1213 years.
[00:12:40] Speaker A: And so I know that one of the firms you're involved in more recently is realty tax. And I think there's a really interesting story there where rather than starting that from scratch, you came in and through an acquisition process. So I'd love to talk through that story. So can you talk about where were you, at that point in your career, were you actively looking for opportunities? How did it all come about?
[00:13:04] Speaker C: Yeah, I mean, I think the interesting thing with much of my career over the last decade or so is that I wasn't often looking for the next thing before it landed in my lap.
So there's a few interesting stories there. But at the time, I was working at mergers and acquisitions for a US accounting firm, and a mutual contact reached out and said, hey, a buddy of mine is selling their firm. Would you mind chatting with them? And this happened all of the time because so many accountants were really interested and still are, of course, with who's buying, who's selling, what kind of firms are selling, of course, what are they selling for all of that kind of thing. And so I'm like, yeah, sure, no problem. But somewhere between that conversation and arranging the phone call and actually talking to these two founders for the first time, I realized kind of who they were and what they did, that they had this very highly specialized niche in real estate agents and brokers, which was a huge and wonderful surprise. Now, when I told some of my accountant friends about this, they're like, why would you ever want to work with real estate agents and brokers? Those are, like, right up there with lawyers as, like, the worst clients. You don't want to have a practice focused on that.
But what they probably didn't know is that in southern Ontario, so in Canada, where I live, in the fall of 2020, there is a big regulation change where all of these self employed agents, so here in Canada, real estate agents are not employees of the brokerage. They're all self employed commission.
So.
But there came to be this regulation that said that they could incorporate very similar to how doctors have professional corporations and lawyers have professional corporations. These real estate agents could have what they refer to as personal corporations. And so there is this big regulation change. And I was looking, I even saved a couple of domain names with something accounting and real estate kind of attached to it, because I do that with domain names, a domain name collector, I guess. And so just to see, like, there's an opportunity here, I'm not sure what it is. And so I was actually working at Sage then when the regulation came through, and then over the course of a couple of years, ended up kind of working out a full cloud workflow for brokerages, which was kind of unheard of at the time because they're very paper heavy. They're like what accountants were 1015 years ago is kind of where real estate brokerages are right now. And so I ended up kind of working up that workflow. So by the time we had this conversation, two years plus, however much later, one of the first questions I asked was, why don't you work with brokerages? And he says, well, we like working in the cloud, and you really can't with brokerages. And like, well, actually, over the last couple of years, this is what I pieced together, and it does the entire workflow, contract management, commission management, the whole bit. And they're like, oh, my gosh, I had no idea. I haven't even heard of some of those tools that you mentioned. And so I think pretty quickly they thought that I would be somebody who could take what they had built over a couple of years. So this was actually in the, I guess it was the spring summer of 2022. So it was not quite two years later that they had wanted to sell, which to me goes back to, why would you want to sell a firm that's less than two years old? But we can talk about that later.
Although I wasn't looking to buy, I was at a spot where I was looking for a change. And so it kind of felt like this was the right time to go back into my own practice again. I had previously my own practice between 2011 and 2016. This was now fast forward to 2022. Maybe I want to go back into the firm life again. And if this really is the opportunity that I think it is, it's either I build it from scratch and whoever buys this firm is going to be my biggest competitor, or I buy them.
And so the first option is definitely cheaper, but I ended up going with the second option.
[00:17:52] Speaker A: And so how did the conversations move from. You had that initial call. You've been thinking about opportunities in this space. How did it go from those initial conversations to sign contract, transfer of money? What did that process look like and how long did that take?
[00:18:11] Speaker C: So I'm trying to think when that original conversation was, it was somewhere between, I think it was like, May 30. It was like, right near the end of May. I think we closed on September 5 or 6th, which is a really weird, close date, but it actually had to do with the firm only being two years old. So in Canada, we've got the lifetime capital gains exemption tax. So basically, if it's more than two years, I could buy all of the shares within the corporation. And then the price that I pay for it, they actually get tax free. So that was nice for both of them that if we just held off just a little bit until a really weird date, that they wouldn't have to pay tax on that. So that's what ended up happening. There were, of course, conversations around because I wasn't actually considering buying a firm, I was considering making a change, but I didn't know what that looked like and I was willing to build it from scratch again. Although I've felt older, maybe a little wiser, but definitely older since the first time I built. And so I'm trying to think of some of the conversations that we had.
We had a bit of a wrench in it at one point because they had let the bookkeeping manager go, and rightfully so. There was action that they needed to take, but it certainly threw a wrench into, well, wait a minute. Part of this whole thing was me buying a ready to go team and it's not quite as ready to go anymore because now I have to backfill this person.
So that was one wrench. Another was that I very strongly felt that it was overpriced, as many are.
But I mean, you just couldn't see something going for that price. It ended up being about 1.7, which is much higher than it should have been.
With my work at that us accounting firm doing mergers and acquisitions, we were really seeing like a 0.8 to a 1.1, maybe 1.2, which still kind of stands true to this day in terms of what people are looking for, for pricing. But it had some things that I couldn't quantify in terms of revenue. So for example, it had a Facebook group that has 3000 members in it. It is a niche. So not only was there a different kind of interest in them or in the niche, but they would have got their money. So it's like somebody is going to pay this amount again. Either it's me and I get a couple of years head start on building this firm, or it's somebody else and they're going to turn into my competitor. Because I really do think that there's an opportunity at this level.
I did take it on. I did do self financing, whether it know, borrowing from, oh gosh, like anybody would give me money.
Well, in Canada we've got the business Development bank of Canada, BDC, and so they were definitely the biggest contributor in the lending, but there was some other personal lending as well. But then that really put the pressure on to make sure that we could not, I was going to say, fix what needed to be fixed. It's not that it was broken, it's just that I knew what the opportunity was and it wasn't living up to its opportunity. So we needed to do some things to get that on the right enough track to make that level of lending worth it. Right. So, yeah, there were definitely some things that we had to go getting into it. Other conversations that we were having was kind of around the pricing, the demand. Who are they having conversations with?
What is their plan? What's their vision for this thing?
They also had many relationships with real estate brokerages where they would go in and do education sessions about once a month. And so again, there's these non revenue related activities that the firm was doing that made it a really interesting buy. I'd say target, but I wasn't targeting anything.
[00:22:33] Speaker A: And so why were they selling? Because it sounds like it was a pretty new business for them, too. And they've built these relationships. They've got some good things going on within the real estate space.
[00:22:43] Speaker C: Well, I have a personal guess on that.
That's certainly some of the questions that you ask, right? Like, if this is such a great opportunity, why are you selling this short into it? And this was not either of their first kick at the can of running a firm, but this is the first one with them together.
I think it may not have been the most ideal partnership, and that's always really challenging to be in a situation where you may not necessarily have the most ideal partner.
The work got done. It's not that they needed to be buddy budy, they didn't. But I think that they didn't have enough of each other's weaknesses as strengths.
And then another thing that I noticed was being in the cloud space for as long as I have.
There's a difference between being cloud minded and being desktop minded in the cloud.
And I'm trying to figure out, how can I explain this? So, for example, they were paperless. They're completely paperless. They had a remote team, but for example, they did all of their engagements in word.
So there was no data feeding in or data feeding out or a trigger happening when something got signed right through docusign or through one of those other esignature type tools.
There wasn't a connection or a flow to it. And so same thing with the actual work. Is all of their files were stored on Dropbox, again, paperless? Yes. But were those files actually connected? Or how did they get in there? And it was like, you're going to email it to me and then I'm going to click upload and I'm going to upload it into Dropbox, not you, email it to me. And because I use carbon, it's going to be there already in the documents tab, which I have synced back to onedrive or whatever. And so it's already where I need it to be. And so I think that there was a lot of opportunity, a lot of scale missed, at least with this break in those flows, because they didn't have the experience that I did, coming in and saying, no, I'm not doing all these steps. I'm making the data talk to each other, I'm integrating these systems, I'm putting systems in place so that we've all got a single source of truth, like all of that kind of stuff.
And that's where I think it made a big difference, me coming in.
[00:25:34] Speaker A: I want to jump into that in a moment about some of the changes you made once you took over. But there's a couple more questions around that deal process. So what did the firm look like in terms of team members when you made the acquisition? And then there's a related question around whether the two co founders stayed on afterwards and what that looked like.
[00:25:55] Speaker C: Yeah, for sure. So it was the two founders, both of which were CPAs. So I knew that one of my biggest challenges is that I'm not a CPA, and I'm taking over a firm that is CPA. So, from a legal perspective, and from the purchase perspective, we actually had to deregister it as a CPA owned firm or as a CPA registered firm so that I could buy it, because as a non CPA, I couldn't buy shares of a CPA firm.
[00:26:20] Speaker A: Right.
[00:26:21] Speaker C: So that couldn't happen. So there were some things that we needed to do there. There was a tax associate who did stay.
There was a bookkeeping manager who, as I mentioned, did get let go throughout the process. So I knew we needed to add somebody there.
They had a bookkeeper out of India who also stayed, and then they had a couple of people working contract on specific clients. So those contracts ended just because I wanted to make sure that it was the right help that we needed and not necessarily that being tied to somebody else.
That's what we ended up doing.
Since then, one of the first things I had to do, of course, was to hire a tax manager, because, again, I'm not a CPA. I'm not a tax preparer. And so Melanie Schroeder came on board middle of October. So this was about six weeks after we closed.
And she had her own bookkeeping business, actually, and she had an administrator that was helping. And so the plan at the time was that she had some contractors. She was hoping that they would be able to take over the clients so that she could fully focus on realty tax. And unfortunately, that didn't ever come to be. And so she was like working all day for realty tax and then having to work at night for her own clients, which is not sustainable. So what we ended up doing was we ended up kind of absorbing those clients into realty tax. And because I had no money, because I had just bought this firm, what we did do is we gave her some equity for the purchase of that book of business.
And so she's now my business partner. Not 50 50, but she's definitely a key part of why realty tax is successful. She did have an administrator with her, and so she came on board in January of 2023 and has been a fantastic addition to the team as well.
It's tax season time, so we've got a couple of co op students as well as a part time client success specialist who's helping us just keep tabs on all of the requests that are coming in. And where's my taxes, emails and those kinds of things as well. So making sure that she had all the help she needed before I took on another huge adventure was really critical for us.
[00:28:56] Speaker A: And so are there any lessons out of that deal process? I think acquisition is really a hot topic at the moment. In the accounting space, people are interested in selling, but also I'm talking to a lot of people who are interested in buying for the first time, so they're interested in learning about trying to vet deals. How much do you pay? How do you structure the deal? What are their common mistakes? So is there anything you have to share around that for someone that might be trying to make their first acquisition?
[00:29:26] Speaker C: Yeah.
Anytime you ask a question to an accountant, the answer is always, it depends.
So what does a deal look like? It depends, but honestly, there are so many variables in the buyer, in the seller, in where you both are kind of professionally in, at what stage with your firm, in the client mix, in the team mix, in the kinds of tools that you use to operate your firm, that there is no such thing as an easy acquisition. It is all going to be hard work. It is all going to take like a full time person just to work out the details of integration and what that looks like.
So, yeah, it's a pretty exciting space to be in. It's very energizing, but it also feels.
How is it described? It's like dating and getting engaged and getting married. And then if it goes well, you stay married. And if it doesn't go well, you get a divorce, but all within a very short amount of time. So the emotional roller coaster is off the chain. And I thought this was just a female thing because I'm like, okay, check me on this. This is really emotionally crazy, right?
And so I was talking to some guy friends who were going through a similar process with buying and selling and so on. And, yeah, it's like you're on a roller coaster and you're just like holding on for dear life, waiting for this deal to get done and waiting for everything to get signed. And then you hit a roadblock and the car flies down the hill of the roller coaster, and then it cranks back up the clickety clickety as it goes back up the roller coaster because you've got another hill to climb, another challenge in your way that you weren't expecting.
Yeah, it's a lot.
So just having kind of the mental and emotional fortitude to go through something like that. There are certainly some things that you can look at in terms of if it's going to be easier than another one. And I think it has much more to do with the values of the buyer and the seller and what they want for their firm than it does any other variable. Because if your values aren't aligned, there may not be any kind of. You may not be able to draft a deal that you're both going to agree with if you're not kind of each getting what you want out of the deal. So, yeah, definitely something that's kind of a little harder to find. Right. Somebody's purpose or somebody's value system, but definitely worth having those conversations. Remember, you have to be engaged and marry them.
[00:32:32] Speaker B: Right.
[00:32:32] Speaker C: So who are you willing to go on that ride with?
[00:32:35] Speaker A: Well, let's get into the transition part now. So you've talked a little bit about bringing on Melanie Schroeder. There was some, I suppose, optimization. So systems optimization to get the back end of the firm running smoothly. What were some of the other things you did in those 1st 60 days once you were handed the keys to the business?
[00:32:58] Speaker C: Well, actually, I didn't even wait until I got the keys, which is probably really terrible advice for anybody else, but they were very kind in helping me with getting moved over to carbon. So they had been using. Oh, gosh, they had been using Asana, which nice tool. I like Kanban views as much as anybody, but it was almost too flexible. And it didn't really feel like, as I was saying, kind of that source of truth as something a little more robust. I also knew that we wanted to grow. So what could we put in place that would not only get us up and in good shape for that tax season, but also would continue to scale with us. And so, yeah, we ended up with carbon. So I think, again, if we close September 5, it was early August, maybe even late July, when they were helping me, because they also had a whole bunch of different places where their client data was.
So there was no single complete record of client data.
So even just helping me with those master spreadsheets that carbon gives you so that you can do an implementation or so that you can incorporate all your data, they were the ones that were primarily going through and picking all the data.
And then once we did the upload into carbon, making sure they got into their client groupings that we needed to. So they were a massive help. I would not expect that. That's not usual for that kind of thing, especially for owners that, you know, are going to exit, which we hadn't talked about yet. But I knew that they both wanted to be out by Christmas.
One of the reasons that they had given for getting out of the business was that because this wasn't their first rodeo, but they were burnt out. And I think that goes a lot to the accounting profession as a whole and how burnt out everybody is. And the one guy who, I mean, I could probably be his mom was like, not really. He's mid 30s, so it would be very young and inappropriate for me to be their mom, but it was like, if I have to go through another tax season, I'm not sure I'm going to make it.
He's like, I've been through twelve. I'm like, twelve? That's like nothing.
Come on, get yourself a little more hutspa or something. I'm not sure.
But anyway, yeah, that was kind of the reason. So I knew that that was one of their big reasons or conditions. They wanted to be out before Christmas. And one of the things that I did know from some of the other firms that were looking at them is that they wanted them to come on and then stay for another two years through the transition. And I was like, no, get out of here.
So I knew we had kind of this shortened, truncated time to kind of get all the information out from them that I needed or get it all into a system somewhere. But yeah, they were more than willing to help with that, the client information and getting carbon set up. So yeah, it worked out really well.
[00:36:28] Speaker A: I know you're a techie kind of accountant, so what's the core tech stack you've mentioned carbon. I'm going to assume Dexter is in there somewhere. What are some of the other.
[00:36:39] Speaker C: Yes, Dexter's definitely in there. Yeah, absolutely.
And then, of course, I was looking at practice insights to say, okay, but how many clients are actually using their dext?
They were using QBO. 100% of their clients were on QBO.
That was another thing that we had changed. We moved off about 75% of them to zero, which also then meant that those clients that we put onto zero automatically got a hob doc. And I think some of that was just, it wasn't what I thought going in that it would be. But as we got to know the real estate agent Persona a lot better and what they actually needed, not just what we were delivering to them or what they had been sold, I think that was a massive challenge, is when I didn't sell any of these clients, but I'm now owner of the firm, and I'm now accountable to deliver what had been sold to them. That was a much bigger challenge than I had expected. But again, the founders had left, and so they didn't have that continued relationship with them.
[00:37:56] Speaker A: Why was that a challenge? Was it that the scope was different to what you would have liked to have sold to the client, or they'd oversold, like underpriced? What was the main challenge around that?
[00:38:07] Speaker C: Yes, all of those things back in 2020, when I'm looking at this regulation come in and I'm looking at all of these accountants who are advertising their services, and come and we'll help you get your corporate books done. And all of that stuff, it was all about getting them on a monthly payment, making sure that we were taking care of all of their tax remittances and everything like that. Fast forward. And I'm looking at these agreements, we're doing too much work for too little money, paying for too expensive tech on something that the clients actually needed less of and not more. And so it was about January, February of 2023, and it was like a middle of the night aha. Moment where I kind of woke up in the middle of the night going, oh, my gosh, why is everybody, the team aren't happy, the clients aren't happy.
What's going on here? And the way that we had been approaching it was maybe we need to show that we're delivering more value. And maybe we had started kind of playing with sift analytics a little bit. So what does that look like? And kind of piecing that together. And it was in those very early, middle of the night moments when I realized that we actually needed to simplify, not try to add value, because if they're already paying a price, I'm not adding value to add more revenue. They're locked into that contract for an additional year. So that's not a thing. But how can I at least help them feel like they've got a better handle on things? Now, one of the biggest things with small businesses is that they did not go into business to become an accountant or a bookkeeper.
[00:39:56] Speaker A: Right.
[00:39:56] Speaker C: They went in because they really loved what they did. And so what I started doing is I was looking at what kind of education does a real estate agent get? Where do they have the conversations about their tax requirements? How does that all go? What is the foundation of knowledge that I should expect here? And how can we better serve them knowing that? And I think that that's really a conversation that can only really happen within a niche environment. Because you're not saying, okay, for these five clients over here, I have to do all this digging into who they are culturally and professionally and all that stuff. Well, I could kind of look at my entire client base on a bit of a whole and do that. Well, what I realized was that the real estate agent program in Ontario is a four month program in a college where they do not have even one conversation around taxes. Not one. There is no education on business or financial anything principles.
And yet, if you are successful through the program, you are now self employed. Like, that's part of how it works in Ontario, right. Is that if you are a real estate agent, you are a commissioned individual, and you are now self employed. And like it or not, you actually are running a one person business. And I don't feel like that was ever really explained well at all. And so what I realized was that here we had all of these people who are amazing at what they do, and great negotiators and great in the hospitality business almost, right. Very much people pleasers in many cases, who had never had the education that I think there was some assumption, there was some base level knowledge that was assumed that actually was never there, and that if we simplified and scaled back on the services that we were delivering, they'd actually be happier with it because it was closer to their level of understanding.
[00:41:58] Speaker A: And so how did you scale it back? Did that involve dropping the price for those clients, too?
[00:42:04] Speaker C: No, because they were already overserved and underpriced.
[00:42:09] Speaker A: Right.
[00:42:12] Speaker C: There was no room for us to lower the price. But this is actually when we took clients. So, first of all, I canceled any dext where the client hadn't been using it. And yes, my colleagues now at Dext know that I was responsible for some contract, for some agreement contraction, and then we also took off people that hadn't been using it in a while, or it seemed a real struggle to use it and actually put them on Hubdoc, we completely reframed the situation because I think that we needed a physical change of the technology in order to really get them to understand kind of the scale back and how things were going to work now. So, first of all, they were sold on bank feeds with Quickbooks online.
I don't know if you've ever talked to anybody in Canada or even North America about bank feeds and Quickbooks online. Bank feeds are terrible. It's a bank thing. It's not a QuickBooks thing. It's any technology trying to connect with bank feeds, especially in Canada, are horrible. They break all the time. We then don't get the statements, we don't get the feeds. But they were sold on the promise that the technology works all the time, and so it wasn't. So anytime we had to tell them, okay, you need to go in and reconnect your bank feed so that we can do stuff. It would piss us off because we couldn't have access to what we needed. It would piss them off because they thought that it would never break. So we needed to realign that bit.
And then also, even with them publishing to dext, again, the expectation was that we would then go and look at every single transaction in dext, and we would push through that transaction to quickbooks.
Except that agent spending is all over the place.
It was more challenging to set up supplier rules because they were always buying at different places.
I feel like some agents never went to the same place twice, so trying to set up supplier rules was almost impossible. So we completely changed the expectations there. We switched them all on to zero so that there was a physical change that was happening with their technology. We reset the expectations on bank statements. We're going to put in your information. If it works, great. But just in case it doesn't, we've got Hubdoc over here. And so what we'd like you to do is we'd like you to upload your statements on a monthly basis. We'll send you out reminders from carbon to just remind you to upload those statements so that if the feed ever does break, we've got that as a backup. Right. Meanwhile, it always broke, and we always relied on the statement anyway. But we reset that expectation with the client. That the technology didn't always work. We had to have a built in backup plan. And then the other expectation was just that the way that we framed Hubdoc was, this is your electronic filing cabinet. Upload whatever you'd like in there. If it's something that we need to see, go ahead and upload. You know, starting with your vehicle lease contracts and all of these other things, just use Hubdoc to get us the information that we need. If we're going through your bank feed and we don't know what something is for, Hubdoc is going to be the first place that we look. But if that's still not clear, then, of course, zero has the uncoded statement lines report, which is way more efficient than anything that we were able to accomplish in Quickbooks without using another tool. And so, again, it gained us some efficiencies on that end as well. So by kind of reframing it, by giving them a physical change of what was happening then what I was concerned with is that if we just changed the rules on how they used Quickbooks, it would be a lot more difficult to enforce those rules or enforce the new boundaries or the new expectations if the tool that they were using was the same. So, yeah, we took a bunch of clients off of QuickBooks, off of dext. Sorry, dext. And put them onto zero plus subdoc.
[00:46:24] Speaker A: And how did that go? What was the response like from clients?
[00:46:28] Speaker C: In many cases, they didn't care because the only reason they went into Quickbooks was to reset their bank feeds.
That was the only time they went in, because, again, agents, it's not like collaborative accounting, where you've got your client working in the books and you're working in the books and they're doing invoicing, because real estate agents don't have invoicing. So, honestly, the only time that they were in Quickbooks was to reset the bank feeds. So that kind of eliminated that. I think that you had asked about the other pieces of our tech stack. So, of course, we brought in go proposal. At first, I really wanted it to work, but because of the multi entity nature of the work that we do, even with the multi entity function, it just didn't give us exactly what we needed. So we did end up switching over to ignition, which, of course, has a nice carbon integration there. What else do we do? Before we used ignition, we had some billing automations through chargeover. Again, a fantastic tool that let us do that. The billing was all done in Quickbooks, but it wouldn't do things like dunning where if the payment didn't go through, it would retry.
Chargeover also gave us things like the 30 day expiry date notice, so we could be more proactive in getting that information, that kind of stuff. So it was really helpful.
[00:47:54] Speaker A: You've done the acquisition, you've been through the transition. There's been a bit of staff changes, you've implemented some new technology, you've made some changes for clients. I know somewhere along the way you've joined dext in an amazing role. Could you talk through that thought process?
And I'm not sure when you started thinking about that, how that opportunity came up, but maybe you could talk through that kind of transition and what you needed to do to get the business ready for you to step into a different role.
[00:48:25] Speaker C: I mean, this is where it's like, all kudos to the network and build up your network globally and nurture it.
So once upon a time, when I was at Sage, there's a guy named Sabi Gill who worked there, and he was the UK leader for Sage. I was in a completely different part of the business. I was accountant leader for the canadian market, and we actually didn't have very much to do with each other, but I guess we liked each other's LinkedIn posts, or we never even met in person, but then we just kept in touch, and he seemed to be a really nice, engaging leader. I know he was very well liked within the.
So, you know, I saw his move over to dexed and celebrated when they had different wins. Like, I was one of the first dext users way back in the day when it was receipt bank in Canada, back in 2013, 2014. So I had been using it in some capacity over the last many years. So it was really cool to see him there and kind of see the effect of some of the changes that he was doing.
And so he's like, yeah, we should catch up. Which we did every quarter or twice a year or something like that, so that wasn't too out of the blue.
And then he put in LinkedIn messaging. It was like, so would you ever come back to a technology company?
And I'm like, oh, that's interesting. We were already going to catch up, but I'm one to say that I never say never, or at least have the conversation. And if that's not something that's up my alley, then maybe I know somebody or maybe we can kind of talk through options or whatever. Happy to help wherever I can.
Yeah. And so, you know, time went by and here I am. I must admit, I never expected. When Sabby and I were kind of talking about what it was that he needed or why he was reaching out, that it was this role, general manager for North America for Dext, I thought, like, community manager, know something that I've kind of proven that I'm pretty good at. And in this case, it felt kind of out of left field. I was speechless for just a second, and then it was, okay, what do we have to do?
Let's talk this through.
And as I mentioned before, we were recording, I wasn't totally sure it would work out.
It kind of felt like too big to actually work out, or I'm sure one of these days they're going to realize that I'm not actually the right person for this job and that kind of thing.
And no, the conversations continued.
And then February 13 was my first day at Dext.
[00:51:25] Speaker A: Congratulations. And that's an amazing story of your networking and staying in touch, adding value. And that's not the first story you've told on this podcast of an opportunity popping up because of that. So what did that mean for the business? Because you've obviously put a lot of money into acquiring this business. So what was that decision making process of deciding to, I guess, what's your role in the business now? And how did you weigh up the pros and cons of going full time trying to grow that business compared to this other opportunity?
[00:52:04] Speaker C: Yeah.
The good thing is, first of all, I think just in you mentioning the bit about network and all of that stuff, the opportunities that came at those times could not have happened if I hadn't have done something already, right? Talking to these two guys who built realty tax wouldn't mean a thing to me if two years prior, I didn't see this change in regulation as an opportunity and start kind of exploring some things around that. Right. This thing with Dex would never have happened if Sabi and I hadn't kept in touch. Or when I see the company get wins, just sending out a quick congratulations. That's super exciting. It's really great to see Dex have energy again, those kinds of things.
So they didn't fall in my lap, and I don't think that that's how it works. Some work was required to be ready for when the opportunity came. And so what was interesting is that on the firm side, Melanie and I had already been talking about the growth strategy and structure in such a way that we would be out of the day to day and out of client work. So all we had to do, we didn't have to make the plan from scratch. We just had to accelerate it a little bit. And accelerating the plan a little bit was far easier than trying to figure out, oh, what the heck, or else I would have said, no, there's absolutely no way that I can leave my firm. It's not at all ready. I have to be client facing for the next ten years. Like, all of those things, right? And it was already in the plans that we were going to be growing at such a rate, or we have additional growth goals and strategies that would require us to be out of the day to day. So it was meant to be at around the same time. So in this case, we accelerated the plan so that I could kind of be out of the day to day. First. We're currently in tax season in Canada right now, and the US follows very similar tax season deadlines as well. So as soon as tax season is over, so starting, like end of spring, early summer, she's going to be starting to look for a full time tax manager to basically replace herself to run the tax team so that she can step fully into the COO role. And that is the plan that we always had. We're just going to go about it a little bit differently because of this new opportunity. But I felt that it was significant enough that I couldn't pass it up. I was also really clear that I would not be getting rid of my firm. So if you want me, I'm going to remain an accounting firm owner while I'm doing this job, which actually is also a really exciting opportunity while I'm working at Dex, because I'm the only GM who not only has accounting knowledge and has worked in software and accountant channel, but is also a practicing. Like, I have a firm myself actively. So it's pretty exciting all the way around, actually.
[00:55:19] Speaker A: I can see how that's a great opportunity for Dex, too, because you can be a firm owner once upon a time, but things move really fast. So if you owned a firm five years ago, there's some of the same challenges, but there's different challenges, particularly around the technology side of things. So I can see that by default, if you're still somewhat involved in the firm or some conversations every now and then, it's a great way to keep your finger on the pulse. So what does your role look like with the firm now?
[00:55:49] Speaker C: Yeah, it's still CEO. So the head of strategy and vision, and we do still have some aggressive growth goals. We didn't actually change our strategy again because not doing client facing work was part of the strategy. Our strategy for the firm actually isn't changing. So I'm still going to be ahead of the vision and strategy. We've had some really phenomenal opportunities come our way within the last very short amount of time, even the last few weeks to month, which is just going to accelerate. But then that's where your network can come, and I've got a really interesting role. I'm not quite sure what it looks like. Can you come on the adventure with me and see if we can figure out something that works?
I do still spend probably a few hours a week at the end of the day going through my realty tax emails, making sure the right thing got put to the right people, just in case anything did only come to me otherwise. We were already starting to get clients into adding client care at Realtytax ca, our client care specialist, so that things that I was dealing with wasn't in a silo. We also got somebody, an extremely incredible professional bookkeeper who I've known for many years, and she had come off of a sale where she had sold a firm that she was a partner in. This is actually the second time I believe she had that kind of sell activity, but she wasn't quite sure what she wanted to do yet. So I'm like, can I borrow you? Can you be the Rachel at realty tax? Just through tax know, no long commitment, no big thing, but just we need help.
And so we figured know the amount of hours that would work for her and kind of offboarded those tricky clients that can be really challenging to offboard to a standard bookkeeper.
And so she's got the level of expertise for some of those funky situations and is managing that super well.
[00:58:05] Speaker A: So I've got a question for you. I'm really intrigued about this. So when you did the acquisition, there was some client retraining because you were getting them onto a new tech stack. There was some resetting of expectations. But it sounds like your strategy was always to be out of the client, facing work and the client relationships and have a team doing that. So how involved were you personally in those conversations and with those clients?
Because I imagine if you got super involved and they loved you, then it's harder to remove yourself. So how did you navigate that coming in and then coming back out piece?
[00:58:41] Speaker C: Yeah, no, great question. So first of all, I was doing all the sales and onboarding, so anybody that came on, they really did feel like they had a relationship with.
That was definitely a challenge. I didn't maybe realize how much only I had been doing until I tried to pass the clients off to Tracy Lampron is her name, amazing human being.
And I realized that there were some that were just a little too tricky. I'll just hold off on this until we can get the bookkeeper with some more capacity. And then I just kept. You know, there were clients that had only ever talked to me, even though we had been serving them for over a. So. So getting those kind of smooth. I can't help you, but Tracy's available, or let's get on a call so that we can talk. Know what this looks like going forward, because there were some of those.
I think we did have a bunch of churn anyway, because a couple of things. So, first of all, last year was an extremely slow year and a messy market for canadian real estate here.
And so people's income just wasn't what they were. So people were leaving because they didn't feel like they could afford our fees, and they were on existing contracts, and I couldn't lower the prices anymore. And then we also had those clients that they were here because of a founder, and that founder isn't here anymore, so they're going to take the opportunity to look for another accountant. I don't think there's anybody that has left that I've been really upset about, because, again, going back to those original contracts, I did feel they were overserved and undercharged, and so we were resetting what the ICP, what that ideal client profile looked like anyway.
And then another piece of it was this insistence on them having monthly bookkeeping. And I know that MRR is like the golden number, but we had clients who literally did not need it, and so they did not see the value in paying a monthly fee when all we did is a write up at the end of the year for their books and did their tax return, and they did not see the value of annual. So instead of me fighting with you to prove to you that I'm providing you value, you know what? We're just going to back you up to an annual tax engagement, and that's totally fine. And we built in that capacity, that adjustment from MRR to ARR, because they are very happy annual tax clients, but they were really struggling with the value proposition of a monthly. And at the price that they were paying, I couldn't justify it anymore anyway.
And then for the clients that we have been taking on, we've been much more selective on the type of clients that we've been bringing on. So actually, we have fewer clients, but more revenue, which is usually the way you want it to go.
And then we've also started to see that growth in the brokerage space, which I think is where our value proposition can really explode and scale extremely well, because now we are looking at kind of that digital transformation of a whole brokerage who has dozens or hundreds of agents working through their.
[01:02:04] Speaker A: Yeah, well, Rachel, we're almost at time, but what an incredible story of acquisition transformation and then removing yourself from the business so quickly. I think that is such an awesome story.
[01:02:17] Speaker C: Thank you so much.
[01:02:19] Speaker A: Are there any final comments that you wanted to make? The audience is all accounting and bookkeeping firm owners or those that want to. So you've got a wealth of knowledge across firm ownership and also on the tech side of things. If you had to share one piece of advice for someone that's trying to run their firm and enjoy life at the same time, what would your piece of advice be?
[01:02:41] Speaker C: I just lean into your community. Lean into your neighborhood. I think that my community, my network, they've been the solution to so many issues I didn't even know I had in some cases. But I think one of the things that came out of this is a friend of mine and I, and he had been trying to sell or to buy other firms and had been having challenges, and I had had several experiences. Is that even the help with who are these firms that are buying and selling? Or how are these conversations having? It was really kind of, again, in a bit of an echo chamber. And so what we've done, surprise. I didn't actually tell you about this ahead of time. We've created Amalgamate Co. So it's Amalgam, the letter eight co. To start to create a place to have those conversations where you can start to see who's buying and who's selling, not just from a transaction and a client mix level, but at a values and community type level.
I think that the transaction space around cloud bookkeeping, I think it needs to be shaken up a little bit. And so we launched that, and there will be other news coming out about it really soon. This is actually the first time I'm mentioning it, to start to get news out to, we think it could be done better, and we think that there is value that it can bring to this whole transaction experience. And so we just want to help out any way we can. And other than that, I'm on LinkedIn, so if anybody does have any questions, issues, anything like that, reach out. Let's have a chat.
[01:04:30] Speaker B: Amazing.
[01:04:31] Speaker A: And we'll link up both the amalgamate website and also your LinkedIn profile link in the comments so that people can connect with you and also learn more about that. Thanks so much for coming on, Rachel.
[01:04:42] Speaker C: Absolutely. My pleasure, Meryl. Thank you so much for having me.
[01:04:48] Speaker A: I had a great time talking with Rachel today, and there were two themes that stood out to me from the episode, and one was about Rachel's ability to network. So it seemed like she had a career where she leaped from from having a firm to having a role in tech and then back. A lot of these opportunities, they came to her and they came about from her network through staying in touch with different people that she'd worked with throughout her career, touching base, checking in and generally being visible through creating content on LinkedIn and Twitter, going along to the events as well as staying in touch with people. And we actually have an episode of the Lifestyle accountant show that is all about networking from the perspective of different.
[01:05:35] Speaker B: Accountants, which we will link to in.
[01:05:38] Speaker A: The show notes my other takeaway was Rachel sharing her insights around acquisitions in the accounting space and things to watch out for and how important values alignment is. There's lots of other things to consider. There's due diligence, there's a lot of things to get in place for an acquisition, but the fundamental is around values alignment between the acquirer and the seller, and that was something that Matthew may talked about in his episode on acquisitions as well and related to values. Rachel was talking about what motivated the sellers, and she had a pretty good understanding of where they were at. They were only a couple of years into this business, but they were feeling burnt out. They did not want to go through another tax season, and so her offer was attractive to them because there wasn't a long earn out period. She wasn't expecting them to work for two years.
She was allowing them to finish up before the next tax season. And so to me that was a clever way to understand what the seller wants and structure a deal which gives them what they want. There are links in the show notes to get in touch with Rachel awesome.
[01:06:48] Speaker B: And as always, if you have enjoyed this episode, please head over to forward slash lifestyle accountant to give us a review or a rating. It really means a lot to us.
[01:06:59] Speaker A: We'll be back again next week.
Samuel.
