Are you an accountant who got into the profession for all the right reasons? Only to find yourself snared in a model that promotes OVERWORK, UNDERPAY, and clients conditioned to GRIPE about their bills?
Then the Accountant Success Formula™ maybe for YOU.
Watch the Podcast to know more.
#BKOT 19: BUILD A KICKASS OFFSHORE TEAM
ACCOUNTANT SUCCESS FORMULA: FREEING TODAY'S ACCOUNTANT FROM AN OPPRESSIVE BUSINESS MODEL
Hosted by: Chris Rivera, Director Client relations, Entigrity Offshore Staffing
Guest: Erik Solbakken, CPA, CA, Creator of the Accountant Success Formula
Chris: Hello everybody it's good to see everyone. It's been a short little absence but we are now kicking off #BKOT, how to build a kick ass offshore team episode 19. We've talked about quite a bit of things here acquiring clients, practice management, how to be a true business advisor, blockchain remote working. Today I have a special guest Erik Solbakken from eriksolbakkencpa.com and we're going to be diving into something that's very unique and I have been with Erik before and loved the story and I had to get them on here so excited to introduce him, for 26 years as a CPA he's an author, business advisor and creator of the account success formula so Erik thank you so much for joining today, please tell us tell us about yourself and why we're here today and let's get rolling.
Erik: Oh this is gonna be fun Chris I am looking forward to this. The account success formula, so it's I have had other podcasts so they're like okay, so give us a story and I said well it all began in a twinkle in my dad's eye back in 1969 and then they're like no it's just like 20 minutes go back go quicker go here fast and fast forward, so I'll go let's move into the greatest era of all was the 1980s when the hair you know long hair and heavy metal was cool I still think it is, to this day I am still playing a heavy metal band but I remember the day that I decided to become a CPA.
It was 1988 I was sitting in school trying to decide what I wanted to do once I graduated and I thought well I am good at math, I kind of like a solid I wanted something kind of solid and I thought I'll become a professional accountant and so from there started the ball rolling and which you know some people say I probably have a bit of a split personality you play in a heavy metal band and you're a professional account something doesn't so there's left brain right brain, kind of going back and forth against each other but so let's kind of fast forward I did the traditional route I went to university then I started articling I bought into the whole suit and tie and billable hour and get and I worked in the first practice for 18 years and so it was the traditional building by the hour doing as many tax returns as possible he who put does the most you know overtime wins and then that practice my partnership I became a partner in that practice and it collapsed and then once it collapsed I kind of had the slap in the face it was like the wake-up call and I went what have I been doing because I look back on all the years, the 18 years of my life I'd put into that and how many overtime hours and missing you know weekends with family members missing especially in the spring.
Never mind like what's happening this year with this extended tax season from hell for every CPA being October 15th, you know I am I am wishing everyone well to get through that one but when I realized that I had done that I was like okay I got to do something different so when I started up my new practice I thought I am going to do things completely differently and I thought this has to change we're smarter we're professional accountants we do a long time in school we study hard we have to stay on top of tax changes all the time we should be having a better lifestyle especially when you're doing tax returns for people who have way less education making way more money and having way more time off.
I was like that's like rubbing salt in a wound, you're working until midnight on October 15th doing a tax return for a donkey that makes millions and doesn't hardly work and you're just going no I would beat you and so what happened was is I kind of went on what my wife calls a manic run, I started studying thought leaders and people in the business space and the accounting space and thought I got to find a better model so I tested and tried I actually became like an entrepreneur, I tested and tried a whole bunch of different models inside my accounting practice to make something fit because I thought I deserve to make more money, I deserve to work with clients who appreciate me, and I deserve to have some free time and so what happened was is over those eight years I found a formula now that I call it that worked and I never worked a single hour of overtime for those eight years my staff never worked a single hour of overtime.
And what happened was at the end of it I sold my accounting practice for a multiple on billings, like a multiple not like a one-to-one not even a pennies to one like it was multiple of on my billings and easily sold it walked away, then I had a bunch of accountants saying how did you do that Erik like how did first of all how did you work with no overtime second of all how did you make so much money and how did you exit so easily and so I started working with them one-on-one a couple friends then it was some more people asking and so I started to formalize the process and then what I realized is that this was something that could free more than just a handful of my friends or myself I was like not only could I do it I could teach it to others and others can do it as well so what I did is I formalized the process it's called the accountant success formula. I wrote a book on it here's one here and I'll later on in the podcast I'll give everybody a link to where they can get a free copy of this because this for me was like this is this is the path like this is what I did that gave me that freedom so I want to be able to give all your listeners a copy of this and we'll share the link.
Chris: Appreciated, Thank you.
Erik: I have got an online course that I do I do one-on-one coaching I have something called a partner program and what's happening is that these accountants are what they're claiming their freedom back, so they're not working crazy over time hours clients are paying them incredibly well like incredibly well I can go into some stories that make your head spin and they're getting free time, like free time and so they're not working crazy hours and I know it sounds it kind of like the problem Chris is that and I know I am talking like crazy.
Chris: It sounds too good to be true.
Erik: Here's the problem is that when I start sharing this kind of thing it sounds like a infomercial like it sounds like make more money have great clients, have free time like every advisor out there is is touting the same thing, how to get 10000 clients in the next 30 days which is a bunch of bullshit like it's not true it's not true. I don't know if Facebook is going to blank me out now but for swearing but here it's not true okay because I am a CPA, I have done this I have updated my model, my accounting practice and this is what I realized is that the traditional business model that accountants work under is flawed.
The reason why accountants don't make the great money and don't have all those we call it the infomercial trappings is because we're working under a flawed business model. and it wasn't until that I went through this entire process of losing my first practice building my own then teaching other accountants and then formalizing it that I realized this is the problem.
Accountants can make more money and they can have free time and more freedom in their lives if they work in an updated model. So my account success formula program takes them shows them how to go from a traditional model which you know billing by the hour and cranking out as many tax returns as possible to this updated model it's a step-by-step procedure that I did myself that other accountants have done and that it gives them back their freedom and so that's the none of it but here's the fun thing or not the fun thing but when I talked to you about this before I said, why is the traditional business model flawed and I feel I truly believe that the traditional business model is flawed? because it keeps accountants from having those freedoms it's oppressive it robs us of our freedom and it conditions us into believing three lies and if there's CPA's listening to this they will if you work in public practice you'll understand these three lies they'll resonate with you
- Our worth is equal to how many hours we work. That's the thing you work more hours you're worth more that's how I build more is because I put more hours in.
- Clients, my clients are naturally price sensitive to my services right.
- Tax time just has to suck.
It's an accepted norm it's just like accountants believe that this is just the way it is they look around and see their other their other accountants, their other colleagues their partners whatever they're all working the same so it becomes this because we come like sheeple we're just following the herd because we're thinking this is just the way it has to be and so when you look at it there's actually, there's a brainwashing that's happened for accountants. It's like this is just the way it is this is the way it's always been this is the way we move forward but that's part of our training from the profession so really what we have here is a profession and a traditional model that brainwashes us into not moving forward and that's my as you can see I am a little bit passionate about this is that once you that's the problem and you see that here's a model that works and can give you those freedoms I give you the steps to get there then the world opens up for you.
Chris: Right, I love the fact that for one that is the personal story to me that always resonates further, experience goes so much further you could be certified in this certification in that qualified in this degree that and so on and so on but what's your experience out of all these certifications. I have no experience and you have the certifications and the experience and to me the experience completely outweighs that because you are in the day-to-day business you're in the operations, you're realizing, wait a second Why is this the norm? Why is this a mindset? and sometimes it just could be slow to move through like becoming virtual or trying to onboard your clients properly, I mean there's just many differences it seems like hurdles but essentially they're not but Why do you think that this change hasn't happened yet? I mean you're spear heading in it's amazing to see and it's needed it's refreshing but why isn't this been going on yet like what's it gonna take to just get this business model change and so when new CPAs are coming in they are you know starting with this idea of you know a service paper value-based model what needs to be done?
Erik: Well everybody has opinions everybody has a crystal ball, this isn't for me. Here's my experience, for me I had to go through the pain of losing my first accounting practice that partnership that I was in I did it for 18 years of gruelling billable hours grinding that out I had to hit a rock bottom like I had to basically pain is your friend and so what I found is that for the accountants that I work with it was when I start telling them about the problem with the traditional model and the fact that the way that we work with our clients makes them price sensitive, and that the way we present our services makes them price sensitive, the type of services we provide them is price sensitive and also the way that we build them makes them price sensitive they start going yeah I am sick and tired of that and then I show them the new model and they go I am sick and tired of the pain and suffering that I have been going through I wanted to go to something new so it's like, if you're talking to an accountant who's comfortable and they're going oh no I am comfortable everything's fine well, they're not going to change and the real problem here is that accountants have become used to suffering at such a high level that they don't change, they just think it's normal so when you look at the way accountants work especially you ask anybody on the street any business owner and you say you know your CPA do they work hard and they're like oh man don't try and call them during tax season, that person that girl whatever that guy they were crazy hours everybody knows it everybody knows, so it becomes a social norm that accountants just have to suffer and so it's like there's a difference between acute pain and chronic pain.
Accountants have become used to chronic pain, it's constant chronic pain. For me I had chronic pain for 18 years but I didn't know it but the one thing that woke me up is when I went crash and I lost that partnership that was acute pain so that's like kind of like I call it the wake-up call it was almost like someone slapped me across the face and I went what am I doing like, what this is ridiculous, I am smarter than this why are we suffering so much and so for me again the reason why I give out a free copy of my book and for most accounts like by the way, this isn't like war and peace, this isn't an encyclopaedia, this isn't the tax act, because accountants don't want to read a lot this is a simple call it a two hour read but it's packed with valuable information that gives them that stepping stone that's why I give it away for free is because I want as many accountants as possible to know that there is a possible way like my the top part of this the book says have you ever asked yourself does it always have to be this way.
And many accountants never ask themselves that question because they just assume that it has to be this way and the reason why I know that is because I did it for 18 years like I didn't even question it. I thought I was succeeding I thought I started, I got a job now I am articling now I finally go through the courses I finally get my professional designation, Yes now I am going to become manager, Yes now I am going to become partner, Yes I am winning, I'm winning like it's like you know it's you're not winning you're losing right but you don't even know it.
Chris: Yeah, it's we want to avoid that point I mean that's why it's the free book that you're doing is just awesome and it just gives them some insight because we don't want everyone to hit that point where they have to realize it should just become the new norm, that's what I was trying to figure out how do we just get that I mean we need to make this mainstream and your idea and your story needs to be the accepted norm. So for now at times too clients that I work with pandemic has been opportunistic in ways for the accounting community as far as hitting the gas pedal on many different functions of their firm and having to just do it right now, so now the with the acceptance of remote working which was you know remote working to go on for 30 years but at the same time this industry was just you know ignoring it. So now do you think that they're more accepting to change and they're more willing to hear people out. Are you getting that type of feedback or people are just understanding that they are not accepting it and they're more understanding that there are all opportunities or what is the feedback you're getting and that you're getting and seeing?
Erik: Yeah! it's interesting I there's kind of like we'll call it marketing or your marketing trying to get your message out to people and one is you're trying to you're trying to bash and get people to believe in the way you think as opposed to going out there and saying, here's what I have this is what it does for you, if you're interested come see me so it's like this it's attraction rather than promotion. And there's one thing that as much as I get excited and I get all jacked up and accounts are like man you're you can sell this stuff Erik. It's like I am trying not to sell it I am trying not to promote this I am trying to just attract the right accountants that say yes I am sick and tired of suffering, I am sick and tired of the pain, and yes I deserve more and in this model that I have created you will make more money have better clients and have free time. Your clients will love the model and so those people come to me so what I am finding to answer your question because there's always I always come around to answering a question. What am I seeing is that eventually accountants are starting to get sick and tired of working like dogs. They're sick and tired.
So but the accounts get sick and it's for those accountants that get sick and tired of working crazy hours but so what I am seeing is like a swelling of especially in this tax season like the it's called the extended tax season from hell so that third lie that I talked about that accountants just accept that tax time has to suck. They're starting to they're starting to go okay no this is too much so what's happened is the chronic pain of tax season for some many accountants has now become acute pain, because now it's gone over the edge and now it's become acute and now it's incredibly painful and especially tied in with clients that are super price sensitive because of the pandemic and all the financial and stability that's going on.
so for accountants to go and do a whole bunch of work for the client and then try and get paid for after the fact which is a horrible way to work. I have this saying it's stop chasing the money, just stop chasing the money soon as you can agree on a price of the client ahead of time and I show them exactly how to set that up the clients will pay gladly pay you more money to know how much they're going to pay ahead of time smooth out cash flow over 12 months and have access to you don't have to chase them for the money so then the pain goes away like all the accounts were actually on my model did not miss a beat during this pandemic clients didn't wait to bring their tax returns in because they were paying monthly anyway so it didn't matter to them.
Erik: And so they brought it in because they are like I have already paid it so it's not like people holding back their taxes going well I am gonna wait until October 15th and then I'll give it to my accountant, so now the accountant's got this this period of from January all the way to October 15th, not October 15th so let's go November 15th oh let's say the client doesn't pay you until December 15th so you're not making your money until December 15th. All my accounting firm clients they've had their money coming in the whole time and the clients bring this stuff in right.
Chris: That's exactly what I am noticing is that, firms are the owners, partners they're the ones that haven't moved virtual or had are really flexible with their clients, there's no more flexibility and essentially they're willing to lose clients in order to make their lives better and so that's what I have noticed too I just noticed that they just want to not go into tax season thinking it's going to be distressful like it always is they're wanting their clients to pay to save money but they're going to have to follow the same or this type of procedure now and retraining them and then onboarding new clients in their new specific way I mean it's just very important, it all boils down to the client and it's hard to I hate saying you know you want to fire your client per se but at the same time it's more important to have quality clients than it is to have quantity clients. I think the industry has always been about quantity hours more and more. What does it get you in the long run so everything you're saying is spot on. So you're assisting with your online course, your book and everything does it tie into any type of staffing for the firm or is this just focused on the owner and the partner or how does that tie in because you got to have the right staff in place?
Erik: Yeah so and I am glad for that and I kind of wanted to tie back to one other point too every time I get on a podcast as much as I love telling accountants how amazing this program is and how amazing the model is and all the rest of that stuff I always like to make sure that I give some value on the call and to say here's some critical things that you can think about today right. I have got a bunch of free pdfs on my website eriksolbakkencpa.com or just go to accountantsuccessformula.com you can find that but I want to talk about kind of some a critical thing in your practice just so that they've got some key takeaways here and then I want to definitely come back and talk about the staffing side.
So when you look at a business model the business model is made up of a revenue model and an expense model and we know simple math goes if you can move your revenue model up and your expense model down you have higher net profit makes accountants salivate everywhere right it's balanced.
Chris: Balanced, yeah! It's true.
Erik: So you've got so the key here is what is the profit driver, what is the economic driver in your accounting practice and the economic driver in an accounting practice is price per client. Let's go back to this price per client drives revenue model up not only that if you think about it you have a revenue model that goes up if you have price per client goes up, you are working with less clients so therefore you're working less therefore you have clients and if they're paying you more here's the interesting thing is when clients pay you more they value you more, and not only if they value you more, you're actually ended up doing less crappy work. So all of those freedoms come into play.
So let's talk about the revenue model:
A revenue model we have to move the pricing up so how do you move pricing up what are the three keys to pricing and this is what I want your listeners to be able to walk away with.
- Client conversations,
- Billing model.
So let's go through those quickly, positioning is where what services are you providing your clients, where what kind of services you provide them will have an effect on whether they are price sensitive or not price sensitive and there's this great thing called the value curve. Rick Payne allowed me to share it with everybody in my book and it's also on my website and your readers can go and get a copy of the value curve it's incredibly powerful when you look at it, but basically shows that anything if you're doing bookkeeping and personal taxes we all know that's got the most price sensitivity. What has the highest, what has the most upward pressure on pricer has clients wanting to pay you more is when you move up this value curve they've got all I have got all the different things that you provide along the curve but let's just go to the top end of the curve, top end of the curve is that quarterback that CFO or that number one trusted advisor role which is what professional accountants were trained to do.
Erik: How do you get that if you can position yourself as that with your clients they're willing to pay you a higher price. So that's I'll stop there on the positioning side but it's kind of it makes sense right and especially when you look at the curve there's a bunch of other detail in there that will enlighten that but let's just talk about that first if you can position yourself as your client's number one trusted advisor they're going to pay you more than if you're just doing their bookkeeping or just following their personal taxes once a year.
Second part is client conversation when you have a conversation when accountants have conversation with their clients remember that first lie that we talked about that their worth is equal to how many hours they work.
So this is how accountants normally talk to their clients are like well I'll have to do this and this and we do this and this and we do this and this and this and this and this and they allow this there's a huge laundry list of all the things that the accountant will do for the client thinking that the more that they can stack on there and the more time they can stack on increases the price, but the client doesn't care about that they care about the transformation, they care about what it's going to do for them, so the client conversation needs to move away from the stuff you do to what they get and that's a very subtle shift but it's a very powerful shift because once I go hey talk to the client by the way when you want to get to here with your business you want to be able to retire here this is what your pain points are I will take away all that stuff and get you there. The client's like great, they don't care that I am going to file their 10 they're 11 40 they're C-corp, their t4 their t5 like whatever the Canadian versions of it and the US, they don't care they care about the information so there's the second part once you can figure out have the proper client conversation they'll pay you more.
The third is the billing model, the billing model if you bill your clients by the hour you are creating price sensitive clients. let's go back into the client conversation I am sitting there, Hello Mr. Jones how are you, you'd like to work with us well this is what I am going to do for you I am going to do this and this is going to take this many hours and this is really difficult and blah blah blah Mr. Jones looks at me with my wild eyes and goes how much is this going to cost me.
Mr. Jones now looking at all the stuff he's not worried about the transformation because I haven't taken away the pain and then I say oh well you know we charge you by our standard billable hour rates and blah blah blah and then the first thing that goes through Mr.Jones's mind is I hope this doesn't take him very long. Instantly you've created a price-sensitive client because now he's only going to be happy if you've charged him less, he's not going to be happy.
Erik: They can call you if you have the conversation and show them that you're going to take away some pain or add some more pleasure to life get them to what they want the transformation they're looking for instead of the stuff and if you can agree to the price ahead of time with the model that I have in the account success formula which is you agree to price ahead of time, they have smoothed out cash flow they can call you whenever they want, right and they could cancel at any time they those three things they will pay you a higher amount. So now your revenue model you could have these clients not only are they paying you more, they're valuing you more, and you're gonna end up having more free time.
Chris: Spot on. I appreciate those three points.
Erik: So there's the revenue model, now let's come back to Chris's question, when you have the revenue model right and you crank the revenue model up and now you have a price per client at a point where the clients are talking to you more often and by the way I never even got into special projects or change orders if the client's talking to you more often you have option opportunities for more projects and there's a whole I could talk about that for hours, but this revenue model, now once you've punched your revenue model up and you've got the right number of clients at the right price point now you've got your expense model and so revenue model expense model equals your net income right, again accountants they're all excited so there's my net income if you can move your expense model down it then creates an even bigger net income , I am just doing it differently between the two points right so you can if you're here and here you're not making any money here you're losing money here you're making more money and then here you're making great money so the one thing that I love and about why I was so excited to talk to you Chris and about offshore staffing right, is it's your offshore staff is that we can move that pricing model down and so the revenue model goes up the pricing model comes down and I see this there's a beautiful orchestrated music that happens here once we get those two going in the right direction so I am going I am pushing it this way with the accountant success formula model you're bringing it this way where the offshore staffing makes me want to weep it's beautiful.
Chris: Oh my god !
Erik: But it's simple math dude like it's just a simple math.
Chris: It is the way you're explaining it, it just seems like this should be the norm honestly and it's very refreshing to hear you're very passionate about it, any final thoughts before we go?
Erik: Yeah final thoughts is this, if you're an accountant like again what you put in there if you're an account that got into the industry into the profession for all the right reasons but you're finding yourself caught in this, know that there is a way out okay there is a way out you can, like again I talk about the account successful and living the path to freedom I am very passionate about this, I see too many accountants suffering and it's not fair because we went to school for way too long and we don't deserve it and so this model freeze accountant so like really that's my parting words on this is that you're not alone. Accountants everywhere believe the same thing like 99% of the accountants believe that this is just the way it has to be. They believe their worth is equal to how many hours they work, that their clients are naturally price sensitive to their services and that tax time just has to suck you're not alone.
Erik: So yeah you don't have to again this is me not trying to be promotional this is saying if you're sick and tired of this there is a way out, and that's why you know I have offered the free book there's free information on my website from there's I even have a master class that people can go to like if it's a video master class it's accountantsuccessformula.com/asfmasterclass so that's ASF masterclass you can go there it's a free masterclass gives you more information and then if you decide you want to do it like I said there's these three models that I have for accountants they can either do it themselves with the online program we can work one-on-one or I have a partner program for those accountants who want their freedom back.
Chris: Beautiful! Erik thank you a pleasure meeting with you the other day for one I can't say more enough and then today thank you so much I mean we do this together last minute but it was very important to get this message out there because yeah the tax season is approaching this is literally the third in a row between the changes the first year, this ongoing chaos this year. So the accounting community needs help and you offer help to where you know how to get it done because you went into this excited you were like holy cow what the hell am I doing so now you fixed it and you can offer the service and solution out there and that's what the accounting community needs. So thank you so much for taking time to join me. I see you joining us again soon because we have a lot more to talk about.
Chris: But for now all right for the audience thank you for taking some time out taking a little break they're finishing up this deadline, we'll be back within with the new material that we're working on in the next week or so and so happy Thursday, happy tax day I know everyone's going on vacation next couple weeks please take the time enjoy it. Stay safe visit family but just please be safe and we will speak soon Erik again thank you so much take care for now.
Entigrity™ is a trusted offshore staffing partner to over 500+ accountants, CPAs and tax firms across the US and Canada. Our flexible and transparent hiring model gives helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation or any other task for 75% less cost. As a firm 'run by accountants, for the accountants', Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management, still you are left with least to worry about compliance, payroll taxes, overheads or any other benefits.