I’m just over 2.5 years into buying an accounting firm. The time has flown by and it’s been quite the rollercoaster ride. I ended up buying two more firms within my first 12 months. Revenue went from $1.2M before I bought it to $3.3M in our second year. The team grew from 12 to about 32 people. And we had lots of fire drills and mishaps along the way.
My original goal was to grow to $5M revenue within 5 years. I figured that’d be a big enough firm where we’d have a solid leadership team, it’d be more sustainable, and it’d hopefully create enough profit for other ventures. The original plan was to keep the accounting firm and then try to go buy other types of businesses in a holding company. Maybe a landscaping business, SaaS company, marketing agency, etc.
So I’m about half way into the journey. Would I do it again? Yes. Is that original plan still the same? Yes and no. I’m still laser focused on getting to $5M revenue within 5 years. We’re on pace to hit the goal – 2024 will be year 3 and we’re trending towards $3.4M revenue. But I’m not sure if I’ll stick to the idea of starting to buy businesses in other industries. It’s exhausting to buy and grow one; and we have a lot of momentum in the accounting space. So time will tell if I want to tackle other acquisitions or maybe just invest in other people who will be operators.
This year our revenue will be up a measly 3-4% vs last year. But 2023 had a lot of one time ERC fees and we unfortunately churned some big clients in an acquisition that didn’t go well. So this year’s $3.4M is much better, sticky revenue than last year. And our operations have gotten much stronger so we’re ready to grow to the next phase in 2025-2026. I’ve even passed on a couple good acquisitions that I would’ve pounced on a couple years ago. I’m trying to stay focused and double down on what’s working vs get shiny object syndrome.
All in all it feels like I’m running mile 14 in the marathon. The adrenaline has worn off. I think I can keep this pace but I’m tired. And I’m trying not to poop my pants. But I feel like I can keep striding and hit my goal in the next 18-36 months. Thanks for being along for the ride.
Here’s a few questions from folks on Twitter:
- How are you leading the team and managing the operation ? (Grayson)
- We use EOS to help with operations. We also have an Operations Manager and 5 team leads.
- Net margin after each acquisition? (Roger)
- Around 8-10% net margin the last 2 years.
- What it has been like hiring new support staff but also leaders would be super helpful as we are about to get much larger and will need to start to add a layer of control between me and team. (Connor)
- Creating a Team Lead structure early this year was a big shift that’s worked well. Team Leads are ‘player coaches’ who work on their clients 70-80% of the time and train a pod of 3-5 people. Clear 90 day training plan and KPIs are key as well.
- Biggest lessons moving from coach (outsider) to player (insider)? (Chris)
- Being a business coach before has helped me bring a lot of lessons into running a business. I’m loving seeing the impact from our efforts vs just being an outside consultant.
- Systems and processes you implemented and iterated on? (Josh)
- A lot of tech changes – implemented Canopy for practice management, more remote hires, full time onboarding specialist for new clients. But a lot of the core procedures from the first firm were a great foundation, just needed more modern tech.
- What does 2.5 years of passive income look like? (Mark)
- HA. Mark runs a great CPA firm and knows this industry can be a grind. And yet I still talk to people who think they can buy an accounting firm and have someone else run it – yikes.
- People stuff. The most important part. (David)
- It’s all people stuff. We’re always trying to improve our hiring and training. We’ve missed on a lot of hires and need to keep getting better at developing talent in house.
- Acquiring without a CPA or accounting background? (Rodney)
- This feels like my greatest strength and greatest weakness most days. It forces me to work on growth and improving our business vs getting sucked into the weeds.
- What would you do differently knowing what you know now (Sam)
- Would’ve tried to close the first one two months earlier before busy season. Would’ve fired faster when it’s not working out.
- How do you sell your value to clients? (Geoff)
- So many people are frustrated by lack of responsiveness and service from their accountant. We sell the value of being a one stop shop and proactive.
- How quickly should you implement new technology? How to handle staff that don’t want to use new tech or processes? How to implement price changes? How to introduce yourself to clients and establish a strong relationship after purchase? (Bill)
- Change management is the hardest part – try to get staff buy in with EOS and getting their feedback. Also hiring fresh faces helps because they’re sometimes less resistant to change.
- We raise prices annually in Q4. Too many legacy firms don’t.
- Build a client relationship quickly post close is something I should’ve done faster on two of them.
- Best levers to pull in operations (Rodney)
- Production based pay. And weekly scorecard everyone can see.
- How did you change operations? Did you know what you wanted vs what happened? (Jer)
- Mainly tech upgrades. First acquisition had great team and procedures but not the most modern tech.
- Existing staff retention issues and strategies? (Sanjeev)
- We try to pay well with production pay, allow a flexible schedule and WFH, positive culture, listen to their feedback.
- What did the day one acquisition look like. Did you buy out a portion and spread the buy in over 3/5 years? Did you keep the solo owner on board and have a plan/path for his retirement? If you had to do it again how would you have wanted it structured?(Moshe)
- Bought 100% ownership of each acquisition. Two owners transitioned out over time, the first owner is still part of the team (that was not the original plan).
- What questions do you wish you asked on the first connection call (Joshua)
- Why didn’t any current staff try to buy the firm?
- Your NPS score on the quality of this decision with 2.5 yrs of additional winsdom? Factoring for return, hardship, quality of life & forgone opportunities. (Stolitico)
- 9/10. I’m still working a lot and its very stressful, but it feels like the big opportunity I wanted I’m grateful to own 100% of the upside.
