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Roger Harris: Hello everyone. Welcome to another federal updates podcast. This is Roger Harris. And Annie is not here today. She will be back on our next one. But I'm very fortunate to have a friend and colleague from pageant join me today. Um, we're going to talk about we both, uh, just finished kind of, I'll call it [00:00:30] a summer tour. We traveled all around from Orlando to San Diego and all parts in between attending IRS conferences, association conferences. It gave us a chance to interact with a lot of practitioners and hear their their fears, their joys, their happiness and their questions. And it was it was very enlightening, but also very tiring. And, uh, Amanda Aguilar, who was at pageant with me as a CEO, is joining me today. Amanda, are [00:01:00] you over the traveling yet?

Amanda Aguillard: I mean, if I didn't see the inside of a hotel ballroom for a little bit, that would be that would be just fine with me.

Roger Harris: Yeah, airplanes and ballrooms and hotels. And I had a hard time keeping up with somebody said, what's your room number? And I'm trying to think I have so many. I can't remember which one it is. I think I gave them like two hotels ago. But Amanda, we wanted to bring Amanda on today. First of all, you've never been on a podcast before, have you?

Amanda Aguillard: Uh, it's been a while. If I've. I'm maybe a long [00:01:30] time ago, but, um, you and you and Annie do a great job, so I stay out of the way.

Roger Harris: Well, welcome. Welcome to this one. Thank you for for stepping in for, for Annie today. But Amanda spoke at all the conferences. Um, I think most of you have heard of moderate a panel, but I don't have the speaking engagement like she did. So we're going to talk a little bit about what we learned going to these conferences, what we heard. And then I'm going to ask Amanda to kind of help us. You know, she did a presentation. I think it was pretty much the same presentation [00:02:00] that all of them wanted to know. You had Jeff, who's our CEO, helping you at some, but the content was the same at all of them, right?

Amanda Aguillard: Right.

Roger Harris: Yeah. Okay. So we're going to talk a little bit about what she covered because it was very well received. The audience liked it, a lot of questions. And, um, it's not a, it's not a webinar. We can't cover everything in a podcast like we do in a, in a thing, but we thought it would be helpful to because I'm sure the listeners are having the same issues that that the attendees were having. So we're going to talk a little bit about that. But before [00:02:30] we get into that, Amanda, introduce yourself to everybody. Tell them about you, about your background and what you do with pageant, what you did before, and then we'll get into the actual content.

Amanda Aguillard: Sure. So so I'm an accountant, I'm a CPA, and I've been in the industry for, um, gosh, almost 30 years now. I started my career at Deloitte in the tax side, um, and then became a corporate controller for a little bit and then took a break. A mom break had had [00:03:00] a couple kids stopped working for a little bit. Um, and then when they were seven and eight, decided I was going to go back into the accounting profession. I always loved accounting. Like since I was a kid, I loved accounting. Um, but I didn't want to go back into the structure of like a big four job or a corporate controllership. So I sort of started, started an accounting practice from scratch. It was really just doing some contract work, um, out of a guest bedroom and it turned into an accounting firm. And [00:03:30] that was back in 2013 when cloud software was just coming to the market for the accounting industry. And I really loved accounting software. Um, and so it kind of went deep on that and ended up building a training company as well to help folks learn accountants and bookkeepers, how to, how to use cloud software. Um, and so I did that for a while. And then, um, you know, eventually landed at pageant. Our. Our CEO, Jeff Phillips, has been a friend of mine for a long time and, and he asked me to come up and help [00:04:00] our pageant firms with the same struggles I had as a starting my own practice. So I've been able to do that for the last five years. And I absolutely love it.

Roger Harris: Yeah. And you still have your firm.

Amanda Aguillard: I do still have my firm. It's a small firm. Um, and I have staff that run it mostly for me. So I don't spend a lot of time in the day to day. But I will tell you, there are, there are days where I get in and I'm like, I want to do this bank rec. I want to figure this thing out. And so that's fun to stay, to stay in the details of it a little bit.

Roger Harris: Yeah. And I forgot to mention, [00:04:30] in addition to all the travel that we did together, you went to Zero Con because Amanda has been she mentioned her, uh, liking of accounting software. You've been, you've been with zero for almost from the beginning, I guess.

Amanda Aguillard: Yeah. I picked zero, um, as my accounting software in 2013 and have never looked back. So.

Roger Harris: And you actually wrote a book, right?

Amanda Aguillard: I did write a book. It was my COVID project. Yeah. Um, so, you know, everybody else was learning sourdough. I was [00:05:00] writing a book on accounting software.

Roger Harris: So when you hear people say she wrote the book on something, it's it's a true statement. She actually did.

Amanda Aguillard: That is true.

Roger Harris: Okay. Let's get into, you know, again, we traveled around, um, you know, there was thousands of people at the different conferences and we talked to them at booths and hallways and sessions. Um, Amanda, what did, what did you hear that they were struggling with as a general rule to lead into [00:05:30] what your session is all about? Because I think you must have known before we got there because your session fit right into it. But what was kind of some of the common pain points that people in our industry are dealing with?

Amanda Aguillard: I mean, you know, it's the same. It's the same thing. We hear it at when we talk to folks who are thinking about joining Paget, we hear it at these conferences. We hear it. Um, you know, all across the country, owners are tapped out. They are at capacity [00:06:00] and they don't they know that their firms are, uh, are chaos. It feels yucky. Um, they know things need to change, but they're, they're, it's overwhelming and they don't know where to start. So, um, that's the gist. I mean, we're going to spend the rest of the hour talking about where we think is the right place to start.

Roger Harris: Yeah. Because again, not something that we hadn't heard before. Uh, and Amanda and Jeff in some instances put together a one hour, I guess it was one [00:06:30] hour to all of them, uh, with some Q and A in different times on something that, that we call right sizing. So explain to everybody what, what we mean by that. And then let's get into the details of kind of how, what you shared with the attendees.

Amanda Aguillard: Yeah. So, so we call it right sizing. Um, but it's, it, it is really for folks who just, again, don't like the idea of doing another tax season, the same as [00:07:00] the last one is just almost unbearable. Um, because they know that something has to change and they're not sure what to do first and they're not sure how to get started. Or maybe they know what needs to change, but not how to, to, to change it. So what we talk about is we've, we've got to build the firm's structure, that, that mechanism, get that lined up before anything else can be thrown into the mix. So making sure that we're [00:07:30] not trying to scale a bad business model. So what we're not going to talk about is marketing and leads and growing. And I think that's a mistake that a lot of firms make is they, they think, oh, if I only had better new clients, my firm would be better. But the, the issue is that they, they just don't have the structure to sell to and service new clients. So when we talk about rightsizing, we, we say that rightsizing is doing the right work for the right clients [00:08:00] at the right price with the right staff. It's a framework. It's a mindset shift. It's getting all of the underlying buying under lying wiring correct. So getting this machine working correctly. So, um, taking each of those, each of those pieces, right? Work means our firms are not doing everything that anyone asks them to do. So they're deciding on the products that they are selling and thinking about the services as a [00:08:30] product.

Amanda Aguillard: What is, what is a service product that they can do well and make margin selling, um, as a repeatable product. So not something that a client comes in and says, I want you to do this one weird thing. We aren't spending time figuring out how to do the one weird thing for this client, and the next weird thing for the next. It is like, here is our book of services. And it might be two things. It could be, you know, bookkeeping and entity tax returns, or it could be six things, [00:09:00] but it's not a different dozen things every single year. So doing the right work is knowing what we do well and doing that right clients means we're going to work with people we like who treat ourselves well, staff well, who we trust and who can pay our fees. We are going to charge the right price. So we're charging market rate for for our services. That's the right price. And then the right staff means we're using talent, whether that's employees contract labor offshore [00:09:30] labor as a resource to serve that work. And we're putting people in the right seats. And that's that. We could do a whole nother podcast on that because I think the, the, the org structure of firms has changed dramatically and will change dramatically in the next three years. But making sure that people, the right people, are in the right seats. And, you know, that's the biggest overhead cost of firms. So we've got to get get staffing, right. So we look at those, um, those four pieces.

Roger Harris: Yeah. [00:10:00] And I think a lot of them, you know, when we start our firms, we make a lot of mistakes and we do pretty much anything that we have to do because we got bills to pay. And the problem is not that that was wrong, it's that we never transitioned beyond that, like doing everything for every client in the beginning. Heck yeah. I need, you know, I got to make a mortgage payment. So you need me to do this. I'll do it. But as our firms develop and get a little age behind them, we need to specialize and focus on what we're [00:10:30] good at. And I think that's I think that's what you meant by, you know, I mean, almost carving out a niche and it can be as broad or as wide as your expertise and you can service and make money doing it.

Amanda Aguillard: And it can be it can be just knowing your heart knows it doesn't have to be, oh, I'm only going to work in this silo. But you can say, okay, what I know I'm not doing is nonprofits. I know that I am not doing construction because it gets it gets tempting when those clients [00:11:00] come in the door, right.

Roger Harris: And they're willing to pay you to do.

Amanda Aguillard: And they're willing to pay you, but it ends up being a distraction and not the basis of a good business model.

Roger Harris: And I'm going to jump in and do something I know Jeff did there. I think one of the things that that this session you did and what Jeff did talks about, it's it's making yourself step back from being the worker, the tax preparer, the accountant, whatever it is, and being the CEO of a firm. And the kind of things you just talked about are decisions that [00:11:30] a CEO makes. What's our product mix? What's our staff look like? That's our pricing. But as the worker bees in the firm, we just get engulfed in the day to day work and never step back and look at the bigger picture, which really determines whether doing all that work is going to make us any money.

Amanda Aguillard: And it's a dangerous place to be. As the owner of a firm, the entire product delivery system, um, it creates, it's very, uh, tenuous [00:12:00] because if you're the only person delivering product or you not if you're the only person, but if you're most of your time is in the delivery phase of ownership, the company can't get bigger. You know, there's a finite amount of time that you have. And so we talk a lot about like, you have got to put this CEO hat on and start looking at your firm. Like you would look at a client's business, like detached to some degree. Um, looking at it as a business model. And I know a lot of folks will [00:12:30] say, well, I don't have time for that. And I hear you. Um, but you have to make time for it. I mean, Jeff tells a story, his business accounting fly Five when he started, it was really struggling. And so he hired a coach who told him, you have got to spend the first hour of every day working on your business. Mhm. Um, and it changed dramatically changed his business. And I think that's, it's, it's probably less about the, that time, it's more about the mindset of pulling yourself up out of the, the delivery of returns or accounting work [00:13:00] and saying, okay, this is a business that, you know, has some expenses and some sales and like, how do we, how do we get this running better?

Roger Harris: Yeah. Because, I mean, again, somebody's got to be the CEO. Uh, or there's not one, which is even worse. And, and again, it's just, it's hard to do, particularly during the busy season when there's so much work coming in. So it has to be disciplined and settled and scheduled and step back and look at it. Because if you just get caught up in doing tax returns, nobody [00:13:30] looks at the type of return, the type of client, the fee you charge, uh, you're going to put in a lot of hours. And at the end of the day, you're not going to be satisfied with the results. So where, you know, and again, I'm just going to ask her to kind of talk about how do you start? Where, where do you start? I mean, this, it sounds easy to say, these are the four things you got to deal with, but where do you start and what's how do you put structure around it? And again, we could spend hours on this. We're not going to be able to get into everything. But where do you think if someone said, where do you start? Where [00:14:00] would you tell them?

Amanda Aguillard: Well, I think you, you know, you've got to be realistic about what has just happened in busy season. Um, you know, we I'm going to give an example about how this ends up, how we end up with something that is not profitable. Um, and the reason I give a specific example is because we've done this for 5 or 6 times and I've seen so many heads in the audience nod.

Roger Harris: Nod.

Amanda Aguillard: Right. Yeah. People say, oh gosh, this is me. So, um, and [00:14:30] this happened. It has happened to me too when I was doing tax returns. But you, you, you know, let's take an example of a business client that comes in for a return and you say, okay, I'm going to charge you $1,000 for what seems to be a very simple business return, which is probably a little bit. Sounds good. A reasonable fee for figures, right? I mean.

Roger Harris: Sounds.

Amanda Aguillard: Good. Sounds good. And so there, you know, they deliver to you a trial balance or a backup file for their accounting software. And you open it and, [00:15:00] you know, you've got you look at the trial balance and there's undeposited funds, there's clearing accounts that aren't clear, you know, um, there's, there's balance is the wrong direction and you know it. So when they tell you that the return that the accounting is done, what they really mean is like I took every bank line and put a code to it. Um, but, but no one with any expertise has looked at this. So, so you end up with a, a bunch of accounting [00:15:30] work to be done. Um, and you start looking at payroll. And I mean, this has happened to me. You look at payroll and you're like, oh, you did not take payroll when you should have or you did take.

Roger Harris: All those money out, but you didn't call it payroll. Yeah. Right.

Amanda Aguillard: Yeah. So you got to go create w-2s back W-2s or, um, or, you know, there's, there's draws and, you know, retirement issues. Like you guys know that just that clients think they do a good job and they, they, they don't. [00:16:00] So anyway, so you end up fixing this, but you probably spend, do a year's worth of accounting in February or March to get the tax return done. And so what ends up happening is, you know, maybe, maybe you spend a couple hours actually getting a trial balance into, um, the software, but you've already spent ten hours on it or more trying to get the accounting, the accounting work cleaned up. And so your, your $1,000 fee, you know, is now probably a $300 tax return after [00:16:30] you, after you equate with the the hours spent on the tax return part of it are and you've done, you know, nearly free accounting and payroll. And so if you were to if you were to split those out and think about the value of the services you provided, you provided a years worth of accounting or bookkeeping work, you did a year's worth of payroll, you did a tax return fee. You're probably looking, if you split that all out to 7 or $8000 worth of work that you have now only charged $1,000 for. But I will tell you that the [00:17:00] real tragedy is not necessarily just the dollars that are left on the table. It is the stress that you have put on your you and your staff in recreating these records in the busiest time of the year. Um, and you're straining your time, you're straining your energy at this high pressure point in the season. Um, and that is, that is the, the, the tragedy of it honestly is that you are stretched at the worst [00:17:30] part of the season and depleting.

Roger Harris: Yeah, you have one asset that's critically important. That's your time, and you've just spent it doing things that you're not being paid for and clients, you know, to their defense, they didn't know what to do. You know, QuickBooks made them all think they were accountants, but they're not. And we should anticipate that and make sure we price properly because and we're going to get into the where pricing will touch everything in our firm at some point. But for right now, to your example, you gave away valuable time at [00:18:00] the most important time of the year, thinking it was just to do a tax return, and you did all the things Amanda talked about. And when you finish the tax return, you felt good because you got $1,000 for doing the tax return. You've got everything else you did before you ever got to do the tax return.

Amanda Aguillard: Yeah. And we wonder why we get to April 15th and we're just exhausted. Yeah yeah.

Roger Harris: Yeah. And that's why you hear people working 80 and 90 hours a week. Um, and not being paid for it. You know, if you want to do that, at least get paid for it. I guess that's so. What [00:18:30] else? So I guess you're saying start by analyzing what the work really is and price accordingly. Or turn it away.

Amanda Aguillard: Well, I think the first step is like to have a reality check of like, did you do this last year? Did this happen to you last year? Um, uh, go through your client list like, did, did you, how many of these tax returns you thought were well priced, really had other services buried inside of them?

Roger Harris: Yeah, because the [00:19:00] QuickBooks example is I can't imagine doesn't happen to all of us. A lot of times, you know, they don't want to pay us during the year to do it because they think they can do it. And then they want to give it to us and act like I did all the work here. Here's, here's my QuickBooks. And, you know, we don't recognize that going into tax season. So it's either charge the right amount and maybe take that as an opportunity to convert them into some reoccurring revenue, some subscription work. [00:19:30] That's a nice term that we hear a lot in terms of letting you clean that stuff up during the year and not wait till tax season.

Amanda Aguillard: Yeah. Well, and, and not only are we ending up underpaid, overworked, we're missing this big opportunity that in the industry is just sort of under the umbrella of advisory, right? Where it's, it's really [00:20:00] a proactive business relationship with our clients. We don't have time or capacity for that because we are, you know, again, clearing, clearing accounts, um, making, doing low level work and, and not building in the capacity our clients want a, a shoulder to shoulder relationship where they're getting advice about the business. Um, we're, you know, I assume everybody listening to this, this podcast is an [00:20:30] accountant or a bookkeeper, someone with some business knowledge with a number of clients. You have got a better idea of what a business should be looking like than your client does, because you've got a different perspective. But we, but we fail to communicate that we have that ability. And it's generally because we don't feel like we have the capacity to do it well. So we might have the knowledge to do it, but we don't feel like often we have the capacity to do it well. So we leave it off the table. [00:21:00] And, um, and the truth is that's the stuff that pays better and that's the stuff that our clients want. So how do we get to having space for conversations about clients business.

Roger Harris: For exactly what the clients will always tell you in any survey, what they want from their accountant is someone who can advise them and look forward, not just compile the history of of that year or that quarter or that month. And again, if we don't have the time to do what the clients want, then they're going to be price [00:21:30] resistant. They're going to be less to refer because they're not getting what they want. And so it ripples through the whole practice.

Amanda Aguillard: Well, I think even more than the clients identifying it, I think we just like sort of self eliminate, right. Like we're just like, we, we, we aren't going to offer that because we can't do it consistently and well because we're tired, we're worn out. We've worn our staff out. You know, we need to see our children all these things. So, um, so, but we can talk about you want to talk about how to fix [00:22:00] it.

Roger Harris: I was going to say, so how do we fix all this? We, I think we have just described half of our listeners or more than half of our listeners the problem.

Amanda Aguillard: So yeah.

Roger Harris: What do they do about it? How do they go about fixing it?

Amanda Aguillard: Well, I'll tell you the first thing we do at Padgett, and we do this with any firm that has raised their hand within the system and said, hey, I feel like I'm stuck. Um, and we do it absolutely. With every new firm that joins Padgett, We make them download a list of their clients and the services they provide and the fees they charge. And this is a client census. So we give [00:22:30] them a template for this and have them go through and look at every client relationship. Um, because it's one thing to look at your financials at the end of the year and say, okay, these are the dollars that came in, but those dollars are made up of, you know, dozens or hundreds of individual client engagements. And so you've got to get down to this micro level of examining them. So we make them, uh, create this list client census and go through every single line and say, okay, [00:23:00] um, do you remember years back there was a, there was a Japanese organizing expert named Marie Kondo. This is a tiny little book that was very popular. This was probably ten years ago or so. And her whole philosophy was, if you have items in your home that don't spark joy, they they don't belong in your home. That's how we should feel about our clients. So if you go through a client, every client, um, and you get like a gut feeling that they're, you know, not a great client, we're going to have to address that. Like that can't just stay in our [00:23:30] homes forever. So we're going to, we're going to grade our clients a through F. Um, a is are usually easy. These are clients that, um, you know, pay on time or ahead of time. They pay a good fee. They're kind to our staff. They're really considerate. They follow our rules about delivering work, you know, in our portals or however we've decided we want to get work from.

Roger Harris: Our clients is they follow it.

Amanda Aguillard: Whatever our system is, they follow it. They don't argue about it. Those are A's. Those are easy. The F's are also very easy to [00:24:00] spot. They show up very late. Um, they, you know, they show up late, but they still want their returns on time. They, uh, piecemeal information to us. They don't use our systems. They, um, probably make, you know, passive aggressive comments when they're paying the bill about like, oh, you know, what are you driving these days or whatever? Um, those are F's. We do not want those. And and those are pretty easy to, to eliminate. And they feel really good when we eliminate them. But the B's, [00:24:30] the C's and the D's are a little bit tougher. So, you know, when you're looking at clients, if they're not an A, can they be an A? Can you retrain them? Can you help walk them through how to use our portals? Or can you price them to where they need to be and um, move, move them up in the grading. And if you can, that's great. But if you can't, that's the space that you're going to have that's going to, um, going to give us the capacity [00:25:00] for other better services or clients. Um, and then once we, once we grade our, our clients, let's look at the A's, because those A's are going to be an indication of what we want more of. You know, it could be an industry, it could be a certain stage of business that that these clients are in. What are we really good at? Like we're good at something. If these are a clients because they're paying us well and we're happy about about them, how do we go get more of those? Um, so like identifying that pattern and then, um, then that gives us a profile of what we're going to try [00:25:30] and go get more of eventually.

Roger Harris: How do you respond to people who say, well, you're telling me to get rid of these clients and I know you have an answer to this. So I'm not really asking this. Um, you know, because price can be a big part of it. And you're talking about more than just price. You know, they've got to follow your system. They've got to treat your employees well, they've got to do all those things. But, but each one of them represents revenue that's coming into the firm. And if we start getting rid of bad clients, how are we going to keep paying the bills?

Amanda Aguillard: Well, [00:26:00] I'll tell you what's happening around Paget. Yeah. As you know. Yeah. Um, there is a lot of fear and we hear this from the greater population of accountants and bookkeepers. There is greater fear. I can't raise my prices or I can't get my prices up to market because then all my clients will leave and I'll have no money. But the reality is, number one, we're not doing this all in one chunk. We're not going to take 400, 500 clients and reprice them all at once. So it is a process. The second thing is, is what really happens [00:26:30] generally, um, is your revenue is going to go up, um, and probably with less work because there is a shortage of qualified accounting professionals in the small business industry. I mean, they're just, there are, there are clients everyone's looking for, for accounting help because there aren't as many of us as there used to be. So in general, we're going to have end up with probably a couple clients that say no. And when I say a couple, I mean in the surveys [00:27:00] we've done with our firms, it's usually less than 10% of our clients reject a pricing increase and move on somewhere else. And I will say a lot of times they come back, yeah, we've heard that a bunch. But anyway, like, let's say 10% of them leave. Well, that's okay because if you're 20% under price or 30% under priced, you're going to make up that plus some. Um, and that's just what, what happens? The worst case scenario is that your revenue, top line revenue stays the same, but [00:27:30] you've gotten rid of a bunch of junky needy clients and you've got a ton of extra capacity. So that gives you the choice. Okay. Do number one, I can, I can go backfill that with better work, meaning I can do this advisory, have these advisory level conversations with my clients. I could go pick more a clients up off the street that look like the ones that I like working with. Or you can say, I'm going to spend more time with my family.

Roger Harris: Um, yeah, that's not a good thing.

Amanda Aguillard: Take care of myself, [00:28:00] which I've probably maybe neglected over the year or, um, or I'm going to spend time in working on the framework and the strategy behind my business, this thing, this accounting firm going concern. That is a business. I have now time to think about what my next moves are, because I'm not just, you know, at the office till midnight cranking out returns.

Roger Harris: Yeah. I mean, it's really almost a math problem. I mean, you realize if you have enough clients and you go through this exercise, the amount of clients that you might lose, [00:28:30] which will be less than you think you'll lose, but the ones you might lose are going to the revenue you lose from them is going to be more than offset by the people who stay and pay the the correct fee. And, and we're not saying here, just raise everybody $5. That's not you know, we're talking about making a serious look at each client and pricing them to market and to what they need to do. But unfortunately, and we heard [00:29:00] this from you and others at the sessions, price alone won't run off bad clients. Sometimes you just have to say go. Yeah, there isn't a price at which I can make money, but I think that's a realization that, um, if we're doing quality work, people are willing to pay us for it. And in many instances, they know they're getting a deal and they're not going to be as objecting to what you're doing as you think they are. And I, and I talk about this because I heard you say it, take the emotion out of pricing. [00:29:30] It's not this isn't because emotional. Just get in the way of doing what's right.

Amanda Aguillard: Yeah, we we hear all the objections. I mean, there are 160 firms or so within our network. So we hear a lot of, um, fear, you know, we hear a lot of fear. Uh, but, but the, the truth is, and this comes, I think this comes from a place of our, of firm owners in general, not just Paget, but every everywhere who, who have come to this profession [00:30:00] because they, they are skilled at something that is really helpful to business owners and they want to do good for People. And so they take on this martyrdom of. This is a thing that's very hard for most of the population. It's easier for me. I will, in essence, subsidize it because Joe is really good at making donuts and he loves making donuts. And I'm, I can do tax returns for him. So I'm just going to not charge him enough because he's so good [00:30:30] at making donuts and that's what he wants to do, or my church or whatever. I mean, there's a lot of, a lot of, um, examples. And the thing is that those exceptions, like if you, if you say, I've got, you know, my church or my grandma or, you know, these, these exceptions where do not want to charge market value of, of a return or for accounting work. It's fine to have exceptions, but those have to be deliberate exceptions.

Amanda Aguillard: And like low pricing is not a pro [00:31:00] bono work is not a pricing strategy. So those have to be deliberate exceptions. And it could be, you know, we've heard a lot of this. They have been with me. This client has been with me since I opened the doors. Um, you know, I, I, they were the first ones in. I cannot lose them. I have to serve them and that's fine. But I will tell you that that is become sort of a virus sometimes in firms where you get numb to it and you're like, well, I'm [00:31:30] only charging Joe $300 for a tax return. And so internally you're like, that's how much I charge. But if if I can tell everybody listening, one thing that I hope they get from this that is really important is it is not your burden to carry the bad business model of a, of a client, um, that, that client needs to figure out how to run a business where they can afford to [00:32:00] pay market rate for accounting and tax services. And if not, it's probably not a great business. Um, but that's, that is not your, that is not your cross to bear. And I think, I think we do that sort of without even thinking about it sometimes. So.

Roger Harris: No, I agree. And the other one that I love when people say, well, I can't raise this one, but this much because they'll talk to this client over here and I go, do they even know each other? No. I mean, why do you think that people, when they get together talk about [00:32:30] their accounting fees and, uh, even if they do, there's different work. Every business, you may be talking to two people in the donut making business that are completely different in size and employees and how they deliver things. So it doesn't automatically equate. But I love how people say, well, if I charge them this, I can't charge them more. Well, yes you can. So take the emotion out of pricing should be based, and I know you'll talk about it on the value of the service and, [00:33:00] and what it's worth and what market value is. And two businesses that both make donuts don't get the same fee just because they both make donuts.

Amanda Aguillard: Yeah. So one thing we get our firms to do, and we do this for our firms, um, is to price objectively. So what is the price of this product. So a 1040 with these schedules should be about this much, you know, accounting work with this many transactions and this method of accounting and [00:33:30] inventory and whatever job costing should be about this much. So we, we, we give our folks a template to do it. But I would encourage anybody listening to, to do the same for themselves, um, step back and say not what is Joe's tax return cost, but what does a, you know. 1120 S what is the market value of that? And I'll tell you candidly, easy way to look is to go to Intuit's prices. There they are public. Um, and they're charging 18 or $1900 for entity tax returns. So that's a good starting point for you guys to look [00:34:00] at. But but building objective pricing. So not about people and specific clients, but like, what is the product worth? And complexity is the first part of that. So, so, um, if a, if a, if a, and a book of accounting work has, let's say job costing, okay, that's going to be more expensive clearly than just a professional services firm. Um, the second would be the risk. So what is your exposure on this engagement? You should get paid more if it's a riskier um deal. [00:34:30]

Amanda Aguillard: So if it's, if it's an industry that's highly regulated or if you think they're going to need extra documentation, that's something that you've got to price for. And the third is value. Um, and I know there's been so much talk about value pricing over the last decade or so in the industry, but to me, that's like, what is the impact of this work on the client's business? What would it cost them to bring that expertise in-house? So I mentioned I've been a CPA [00:35:00] for almost 30 years. You've done it for a couple of years. Yeah, just a few. Uh, so like, we should be getting paid for what? We know what's in our head. It's not about the hours it takes us to do something. It's about the 30 years that I've spent learning about tax and accounting and technology. I should get paid for that. So what is the value of what I'm bringing? Uh, you know, you could have entity returns that look the same, but it's a one might be $100,000 company and one might be $100 million company or [00:35:30] those valued the same, even if the numbers go in the same boxes. No. So we should be charging more for the higher value.

Roger Harris: And that's why being able to have time to meet and consult with people adds value to the product, as well as creating just overall value to them is that sometimes if we don't have time, they don't. We never get a chance to explain to them what we did and what they could do to help them make their business better, and why we're worth what we're charging. Because if it just comes down [00:36:00] to two people's tax returns, they're going to go to a taxpayer, they're going to look the same. They're not going to appreciate what went into us making that return one that's about you know, what I tell people is everybody can put the numbers on the form. We want to have an influence on what the numbers are, and we have to have time to do that. And if all we're doing is keying in numbers, we're not going to have time to do what real adds the value to our product. How are they going to know if they're getting close [00:36:30] to getting it right? I mean, is there any way to know, you know what the market. I think you make a good point. In addition into it. There's associations. Everybody has these schedules out there. How do I know when I'm pushing the limit if that's the right term.

Amanda Aguillard: Yeah it's it's tough. And we um you know, it's hard in different cost of living markets to get it exactly right. But what I would say is if you, if you look at your financials, hopefully everybody else out there is doing their financials for their firms. Yeah. Cobbler's children [00:37:00] have no shoes kind of thing. Um, if you're looking at your financials, your you should be taking as the owner home somewhere between 30 and 40% of your top line revenue as your comp. Okay. That's a very, very generalized estimate. Um, but it's.

Roger Harris: Okay to do more.

Amanda Aguillard: It's okay to have more. And we have some firms in the pageant, um, network that are, that are doing a little bit more, but um, generally you are taking a higher percentage on smaller [00:37:30] firms than you are on bigger firms, but you should be taking somewhere between 30 and 40% of that as owner owner's comp. And I will tell you every time we've thrown that out to the audience in these, um, sessions, we've had people say, oh my gosh, I'm not, I'm not taking that much home. That's usually a pricing problem, honestly. Um, it's either a pricing problem or a labor problem. So if you're, if you're not taking home that much, you've got to sit down and, um, and look at it. And again, you know, we as [00:38:00] owners, sometimes we have this martyrdom complex where we think, okay, well, I don't need to make that much. I, you know, I have other money or I, I'm, you know, don't my spouse works or whatever. I don't need to take that much home. Um, but again, that's, it's not about you. It's not about the owner. It's really about like, what are we, what are we carrying? Um, emotionally and what are we, what burden are we laying on our staff? And what are we leaving to our families as a, as an investment? Um, if we are not here anymore and [00:38:30] for owners who are not well priced, that's a hard firm to sell later on. Um, and so even, you know, even if you think, okay, well, I don't care if I get paid accurately or appropriately. You're, you're building something of value that should exist beyond you. It's really hard to keep that value if the prices are or are low. And we've seen this with with firms, you know, that our firms buy around the country. It's like if they're if they're not priced right, that's, that's [00:39:00] a really tough firm to sell.

Roger Harris: Yeah. And, and you keep talking about employees, which I think are critical in pricing, I think has a lot to do with. We hear a lot either I can't find or I can't afford them. And my opinion is that pricing plays a big part in that. One of the reasons you can't find him is because you're not going to pay him enough, and they're not going to apply to your job. But if we need quality people, it should mean that we're charging the fair the fees that allow us [00:39:30] to hire high quality people. And I think sometimes we're not able to hire because we're underpriced and don't have the funds to pay people that we need. Is that am I off base here or does that make sense?

Amanda Aguillard: Oh, totally. So your highest, um, bucket of expenses is going to be around labor. And that should also be probably a third of what your top line revenues are. So if if that's skewed, if, um, if your labor cost is more than about 33, 35% of your top line revenue, [00:40:00] you have, you have either an inefficient, um, staff or you've got a pricing problem. Um, you know, so, so staffing, there's no unemployment in accounting. No, I mean, there's no unemployment in accounting. You know, if you, if anybody who wants a job in accounting can, can likely find one. Um, and that makes it really hard for firm owners who are trying to backfill staff. Now there's now sort of alternative talent channels, um, contractors, offshoring technology maybe [00:40:30] to some extent. Um, but yeah, if you, if you have the work for a full time employee, but you think you can't afford them, that is a pricing problem, right? Because they're gonna, they're the reason they're expecting that salary is because they can get paid that salary somewhere. Um, and if it's not with you, it's because you don't have the revenue coming in. Um, and that's a pricing problem.

Roger Harris: Now you have a misalignment between what you need and what you can afford. I need this quality person, [00:41:00] but I can't afford that quality person. And that means you've got to charge more. If you have that need, that, that need is a sign that you need high quality people. And the other thing that I've heard, and I, you know, it's amazing what you learn when somebody just finally points it out to you. Remote hiring has to become a bigger part of what we do. You know, it's harder and harder to find people in my location that want to come to my office every day and do my work. But when you start hiring remotely, the excuse that, well, and people in my area don't [00:41:30] pay that well when you're hiring remotely, you're competing with people all over the country. And so your salary has to be fair for what the market says that job is worth because they're not living in your hometown. And if you have to go outside of your hometown to hire these people, you have to be competitive with what the market is. I mean, I'm in Athens, Georgia, but we might be competing with the Atlanta market for people because they're remote. So I can't use the excuse that will. People in Athens can't pay that well. The person I look for [00:42:00] or need isn't in Athens, Georgia, and I'm going to have to pay them based on where they are. So I think the key thing is that pricing is a big problem in hiring problems.

Amanda Aguillard: I think it's the biggest problem. I mean, there are people out there looking for work. Yeah, there are people out there looking for its pricing and it's also flexibility around remote work. I think you're right on that.

Roger Harris: Yeah. We're just going to have to be more I mean, it used to be that and we hear this all the time, oh, I hire from my community college and all those things are still valid. I mean, we're not saying [00:42:30] that. Don't look to your community college. Don't, you know, don't look locally, but open up your search to find the right people. But that's going to mean you're probably going to have to pay more. And that means you're going to probably have to charge more. And those are all good things. There's nothing there's nothing wrong with that. Paying two inefficient people probably cost you more than paying one good person. But okay, so pricing. We've gone through the four of these things. What else? I'm trying to think of what else we heard consistently. [00:43:00] I mean, obviously working too many hours, and I've always thought that some of that is you just got to have rules, you know, don't let clients call you at all hours of the night. And, uh, there's a funny story, you know, who tells this that talks about, you know, your dentist doesn't work weekends and so you can't call them, but, you know, we'll work anytime for anybody, for anything. You know, we have to have rules about how we structure our firm. That's part of being CEO. And that's also going to make it easier to hire people if you [00:43:30] have good working conditions.

Amanda Aguillard: Yeah.

Roger Harris: What else did you hear? I know we got some stories we can talk about some of our offices. I think I think maybe tell the story because I thought that's great in terms of kind of what she's done, what you've talked about, and the fear, but where where she ended up, I think that's, that's a great story.

Amanda Aguillard: Several years ago, she was similar to what we were talking about. Like she's she was frustrated. She was overwhelmed. Um, her staff was overwhelmed. [00:44:00] So she first thing she did was to get rid of. She was just like ripping the Band-Aid off and got rid of underpriced ten 40s. I don't remember what her threshold was, but she's like, we're just not doing this. And if they don't have a connection to accounting work, we're not just doing individual tax returns. That's just not what we want to do. And then for the ones that she kept, she just implemented market price increases. Um, and, and required them to, um, that they were going to do their accounting to so that they [00:44:30] could have quarterly conversations. So by getting rid of the, um, I call them like the, the 15 minute tax returns, it's the ones that people say, well, it only takes 15 minutes, which is not true. No tax return only takes 15 minutes. But getting rid of those low, low margin ten 40s, you know, it's not that much revenue because they're probably underpriced anyway. But it's so much energy and capacity that you get back. By doing that. She was able to have corporate clients with these quarterly meetings with these clients. [00:45:00]

Amanda Aguillard: Um, instead of only giving them a tax return, you know, she can proactively, uh, talk with them about what's going on in their business and what their tax liability is looking like for the next year because she's doing the accounting work and, and, um, able to, to have like real time information. And so what happened was her top line jumped, um, she became more profitable, her staff are happier. Um, so now she's got, instead of having a bunch of high [00:45:30] volume returns, low margin, she's got good quality clients and now her recurring revenue is about two thirds. I think, of what her firm revenue is, which we know owners who have better recurring revenue just are happier. They're happier for owners. There's no there's not the stress of the tax season having the cash flow the whole year. And, you know, it's just recurring. You can get systems, you can put technology in, you can train staff to do the same thing every month. So we know recurring revenue [00:46:00] is better revenue. And she was able to, to bump that up to about two thirds of her total revenue.

Roger Harris: And that didn't happen in a month. I mean, that took some time. I think you referenced that earlier. This is not you come in on Monday, and by Friday all the problems have been solved. I mean, this is starting a process and sticking with it. And it's well worth it at the end. But don't don't get nervous and think you got to do it all in a week.

Amanda Aguillard: Yeah. No, I mean it is a process. But you got to start.

Roger Harris: Um [00:46:30] yeah.

Amanda Aguillard: So you know, we're, we're airing this in the end of September and it is not too late to fix next tax season, but you ain't got a lot of time. You know, like, you gotta decide, uh, in the next couple of weeks, the thing, the one, maybe two things that are going to have the most impact on your next tax season, uh, and start and be ready to like hit the ground running, um, in, in October. And that I would say is pricing. Like if, if there's one thing [00:47:00] you're going to do, you can do to fix your firm, make your firm better for next year, it's getting pricing, right. Um, depending on how you communicate that to clients. I mean, that means you're, I mean, some of this is tough, right? Like you have to have these conversations that feel kind of icky sometimes, but you know, there's plenty of language out there. We give our firms templates on how to communicate pricing increases, but there's, you know, you can use AI tools to do this. Draft a communication that says, I have given this serious thought. It [00:47:30] is important to the going concern of my, my firm. Um, we are going going to have to increase your fees to this amount and get them out there. And then just like let it rip.

Roger Harris: And they feed them in getting those letters from every other company they're dealing with. I mean, I don't think a week goes by that you don't get some notice an email or a letter about some product or service that you have that is going up and, um, that doesn't make them any happier. But that's just the world [00:48:00] we live in today. And I think you'll be surprised how many people don't say anything. They just accept it. You know.

Amanda Aguillard: We've done surveys for our firms and it's something like 80% of the clients, 75 to 80% of clients accept pricing increases without even having a conversation about it. Um, another, um, 15% or so ask questions, but still accept. So we know, you know, we know that, um, that clients, clients want to stay with you. They want to stay with the same [00:48:30] professional, they don't want to go looking for another one. But you know what this is ultimately, this is a business relationship, right? So it has to work for both ends. People on both ends. If if you look at at what you're charging and it's not enough and you say, hey, I've got to start charging X number of dollars, whether that's a little bit more or a lot more, you got to do that for the going concern of your business. And if the client can't afford it or they're probably not offended, honestly, they're probably not going to be offended, personally offended. It's just whether it fits in their business model. [00:49:00] And if it doesn't, that's okay. We can still be friends, but we're just not going to do business together. It's not, it's not a, um, you know, it's not a personal relationship. It's a, it is a business relationship.

Roger Harris: And there may be a firm that's a better fit for someone that, that wants, you know, to pay less and get less service and those sorts of things. And that's fine. But that's not my firm. That's not who I am. I'm not going to drop down to selling or offering [00:49:30] my product at that price. They need to go find. It's like I always tell people there's God knows how many kinds of automobiles out there from Lamborghinis to I don't want to insult anybody, but I'll use Hyundai as the bottom end and that's fine. There's. People buy at all levels. What I can't do is sell Lamborghinis for the price of a Hyundai.

Amanda Aguillard: Correct.

Roger Harris: You know, that's the only model that doesn't work. I can sell Hyundais all day and make money. I can sell Lamborghinis all day, but [00:50:00] I have to be consistent in everything that I do and not not charge like I'm a Hyundai dealer when I'm selling Lamborghinis. And sometimes, and I think that's emotion you mentioned, you know, we like them. We've known them. They were our first client, you know, oh gosh. You know, their business is struggling. Well, so is mine. You know, you know, I've got to make sure I can do what's right for me and my employee. You know, I have a responsibility not just to my clients, but to my employees, and they'll pay it. That's the biggest [00:50:30] thing that I think is frustrating when you go to these sessions and you talk to people about pricing is we've seen it, they'll pay the fair fee for the work that they're getting from you. And if everybody says you're too expensive, you really need to take a look at yourself because I'm not sure you're providing the services that they want. Because as you mentioned, I've done this for a few years. No one ever complained about price increases when their service level was what they [00:51:00] wanted from someone.

Amanda Aguillard: I mean, I just don't think it happens very often that somebody throws out a price increase that's unreasonable and they're not willing to serve it. It's it's all unanimously that the opposite. We're doing more service than we're charging for.

Roger Harris: Yeah. And the only the last thing I would say sometimes these clients are so far out of whack. I mean, $100, that should be a thousand. Um, that's a challenge to go from 100 to 1000. That's also a sign that you haven't raised fees consistently [00:51:30] in your business.

Amanda Aguillard: Yeah, but so what? I mean, you know, meaning if they leave, you're losing $100, right? Right. Right. And you're gaining back.

Roger Harris: A lot of time if it should be a thousand.

Amanda Aguillard: Right.

Roger Harris: And you. But that's why it's important that you do this every year. So you don't let these gaps get wider than what they were worth. I mean, if you don't, if you're if you're not looking at fees every year and you do it every 4 or 5 years, it's going to be harder.

Amanda Aguillard: Yeah. Because yeah, that is something we hear from our firms all the [00:52:00] time who have done this strategically is that they wish they would have made the bigger increases earlier. Um, so they're, they're scared. Right? Like that's fine. Firms are scarce. They want to tip toe into it and say, okay, I'm going to only increase this like $20 and I'm only increases like $50. That's way harder than just saying, look, you're $100 firm return is really a $600 return. So that's what I'm charging you. And if that doesn't work out, we can go separate ways. That's much easier than having to [00:52:30] like, you know, death by a thousand cuts every year going up a tiny, tiny bit, just rip the band aid off and do it and see where you land. Yeah, we've a lot of our firms have said that.

Roger Harris: Yeah.

Amanda Aguillard: They wish they would have done bigger.

Roger Harris: Yeah. And just get it over with. The other thing I've realized is you're going to have the same fight over $50 is five. So let's have it over 50, you know.

Amanda Aguillard: Right.

Roger Harris: Right. If you're going to fight me over five and then you'll fight me the same over 50. So I'm going for 50 because I don't have to win as many fights. You know, it's just just you [00:53:00] got to fix pricing before you can really expect much in your business to change significantly. Uh, you can't solve it with more technology or more staff because that's just coming out of your pocket. And we talked to a guy the other day, it's got more software than we even know what they are in one firm and still got problems.

Amanda Aguillard: Yeah, yeah, that's we can have a whole nother podcast on.

Roger Harris: Yeah, yeah.

Amanda Aguillard: Picking technology and how it doesn't solve [00:53:30] all of your problems.

Roger Harris: No pricing will solve a whole lot more problems than technology will. First of all, you can afford the best technology, then whatever the right technology is. All right. We got a couple more minutes. Any anything that you would say that we want to talk to our audience about or you learned over the summer other than just I will say this traveling is hard, but we did have some nice meals.

Amanda Aguillard: We did, we did. I think I went six for six on fish at [00:54:00] steakhouses over the course of the summer. Um, no. You know what? We're joking. I mean, travel it can it can be grueling. And we we did that this summer, but man, it sure was nice to talk to firm owners. Um, I, I just love getting out there and talking to firm owners because a lot of times they just want to talk to somebody, you know, a lot of firm owners are sort of isolated. Um, they're in their silos of running their business and, and it's [00:54:30] just nice to, to have somebody come up and say, gosh, you know, the thing that you said, this thing that you said really resonated with me. And I know that that's something I can fix. Um, it's, it's just nice to be out there and talking to firm owners. So all joking aside, I, I enjoyed the summer. I enjoyed our grand tour of, um, you know, municipalities across the US with the IRS, um, and ATP and, um, and, you know, I would, I would do it again, I would do it again to get out there [00:55:00] and talk to firm owners.

Roger Harris: Yeah. It's good to talk to you. It is rewarding. And I want to thank a lot of I had a lot of people come up to me and all these things that listen to the podcast and it's, it's nice to hear that, that when you're doing things like this, people are listening and, but it's just good to talk to other people in the industry and realize that we have a lot in common. Um, and sometimes we can help each other by talking about what we do differently. And. But, uh, yeah, I'd do it again. I mean, it's give me give me another week to get a little.

Amanda Aguillard: Better. [00:55:30]

Roger Harris: Catch up with sleep. Um, but it's great to talk to people like that. And for those of you that went to these conferences and came by and said something to us, uh, thank you. Uh, appreciate it. Yeah.

Amanda Aguillard: Well, I think we have a resource available to the audience.

Roger Harris: Oh, that's right, we do. Yeah, yeah. Go ahead. Explain to what we have.

Amanda Aguillard: Well, we've got, um, a write up called the Rightsizing Playbook that goes through these four phases we talked about. And you can get that by visiting, visiting the pageant website, which is pageant franchise.com/rightsizing. [00:56:00] Um, so there's that. And, uh, and a related worksheet that will be available in the show notes. If you didn't catch the, the URL. Um, but you know, it'll, it'll, it's there. So go grab it and maybe give it a shot fix, make one big change, one big change to your firm now for, for February uh, and 2027, you will be much happier.

Roger Harris: And then come by and see us at some of these conferences next summer and tell us how much better you're doing. [00:56:30] Uh, and that'll make us feel good. Well, Amanda, thank you. It's always a pleasure to hang around with you. And we need to get you back on your podcast because I think you're right. We could have covered a lot of other topics and maybe we'll do that. But thank you for, for joining us today. And thanks, everybody for listening to the podcast and referring people to us and saying hello to us. And, uh, and you'll be back, uh, next time. And, uh, we've got some great things lined up over the next few months with some guest speakers, [00:57:00] but they won't be better than Amanda. So, uh, thanks, Amanda, and thank you for listening. And we'll see you soon on another Federal Tax Update podcast.