Starting a CPA firm vs. Working at the Big 4 Accounting firms (or any corporate firm)
All right. Well, hey everybody. Rob Satrom here from Feedback Wrench. You know, before I started Feedback Wrench, this digital marketing and video company, and this YouTube channel, I had started what’s called Nuance Financial Tax and Accounting out of Lakeville here and that got birthed out of me coming from the financial planning world and in this video I want to talk to you about if you’re somebody who’s been looking at the big four accounting firms, you know, KPMG, Deloitte, Price Waterhouse, Cooper, or Cooper whatever, Ernst and Young, and if you’re thinking about getting your CPA and going to work for one of these firms, I want to convince you that maybe that’s a good idea for you, maybe you’re hardwired to do that and go be an employee, but what I’ve been noticing is there are too few people that understand the need that small businesses have, A, and B, how much financial momentum you can build by building a small practice in your towns.
Most CPA Firms Are Unprofitable… But I know the Way to MAJOR profits
So, typically speaking, most small CPAs are very unsuccessful. If you were to poke into their world, and I mean this nicely, they have built a firm based on getting tax returns. The whole idea is that they say come to us and we’re going to be like H & R Block and we’ll do your tax returns, and then when you start talking to them, I’ve talked to dozens and dozens of CPAs and I’m consulting with many of them and I built Nuance Financial Tax and Accounting, just so you know, in two years, we built that into almost a little over a half million dollar of residual income coming in, in actual monthly payments. So this wasn’t something that we had to have a thousand tax returns. We had about a hundred clients that we were doing this for.
So, to give you a taste, you start doing some math, our little shop was pretty profitable one year in and it has since grown based upon these principles that I’m going to teach you. If you’re thinking about the big four, do your research, you’re going to find out you’re going to make between maybe 50 and 70 thousand, depending on what you end up doing when you get in there. There’s opportunity to move up, obviously you get your CPA, you got through that grueling process, you know, I never got my CPA, I have my series seven, series 66 life and health when I was in the financial planning world, but what you’re going to find is that you’ll have to get your CPA and then depending on what articles you read, it’s like, you know, over the next 10 years as you move up the ranks, you should increase between $10,000-20,000 or even more, maybe if you were a leader and a manager.
But, it’s all about getting your pedigree so that you can move up and then you have to execute and climb the ladder. And that means appeasing many different layers of bureaucratic managers, right? Now, there’s great advantages working for some of the big fours. My very good friend and partner who built our NuanceFinancial.com with, his name was Nick [Meester 00:02:42] and he was at CBIZ, which is not a big four, but it’s a big 10 firm and he had been climbing that ladder and basically I’m going to tell you if you build an outsourced accounting firm, and this could be just you, yourself, or maybe a couple other people, I want to tell you that you with about 10 to 20 clients can make as much money, with far less effort, than most of the senior CPAs that are working at these big four firms. And I am not lying at all.
Not only that, I’m going to show you that if you can just basically learn how to do the most practical things and then get in a position to be able to sign off on a tax return, that’s the only thing you need. You do not need to be a CPA in order to make stupid amounts of money by building what I call an outsourced accounting firm. It’s an outsourced accountant for small businesses. Now, first off, watch the rest of the videos that I have on here. I’m going to start puking this content out because I know that it’s helpful and every time I meet a new CPA in my digital marketing and SCO world, every time I meet these guys, you poke into their business and it’s like, oh, man. This is brutal. And even the sides at Nuance Financial that were uglier, it was because we got away from these basic principles.
There’s Way More Money in Business Ownership – Major Raises and Cash Flow
So, here’s what I’m going to tell you. You can make way more money, but it’s going to require a couple different things that you won’t have to do at KPMG or any of the big four, Deloitte and Ernst and Young, and whatnot, but here’s the foundations of it. First of all, you’re not going to do individual tax returns. The only individual tax returns you’re going to do are going to be associated with your core focus and your core focus is small businesses. Your goal in this business is to go out and find people that make 1099 income, people that own their own business and you’re going to serve as an outsourced accountant and here’s what that means. You’re going to be their bookkeeper, and have their accounting system, you’re going to run their payroll for them, you’re going to provide proactive tax planning around the three tax planning principles, and you’re just going to help guide them with financial advise and making life simple.
Here’s the three things you’re going to provide. You’re going to help them mitigate their taxes, and I’ll dive into that. Watch our other videos about the three pillars of tax mitigation from a CPAs standpoint, or an accountant, or just a tax professionals standpoint. The second thing you’re going to do is you’re going to save them time by serving as an outsourced employee, basically, rather than them hiring Patty Part-timer to some in at $20 an hour, one day a week to do the bookkeeping and run the payroll, you’re going to handle that for them. You just do the math on if they’re going to pay somebody for eight hours, they’re going to pay them $20 an hour, which is nothing, that’s $640 a month right there.
And where I’m going to bring you to is that I’m telling you, if you commit to this, you can approach small business that aren’t even massive and you can provide amazing services for anywhere between $500 and $2,500 a month, but really the sweet spot is at this $750-$1,500 a month, where you’re not so expensive that a small business can’t hire you, and you’re cheap enough so that you’re a good alternative for them hiring Patty Part-timer to do some of this stuff in an okay fashion.
But, the first thing is, mitigate taxes. The second thing is, save them time by being there outsourced payroll, accountant, and bookkeeper. You’re going to do that for them on an ongoing basis. And then the last thing is you’re going to keep them compliant, and what that means is you’re going to make sure that all their paperwork gets filed in terms of payroll, making sure all the unemployment taxes get filed, you’re just going to keep them compliant and then the end of that compliance is actually filing your tax returns, whether it’s a schedule C and 1120S, a personal tax return, whatever it is.
But here’s the principle. You are not going to go out and get tax returns. You are not going to go out and do everybody in your neighborhoods for $500, you’re not going to do their taxes at all. That’s a losing game. Do the math on it. How many $500 to $1,500 tax returns do you have to do to make $60,000? Then you start realizing that for each one of those you’re going to have to have prospecting meetings, you’re going to have to get to know them, they’re going to have to come in and have an in person meeting, and you can only work five days a week. The math on building a tax focused tax firm is actually insane. That’s why most CPAs fail, that’s why when you poke into their business you start finding out that they have no money, they often have a line of credit that they’re living on, it’s feast or famine, and then here’s the dirtiest part about it, if you build a tax firm based on your tax returns in that compressed season, you’re going to be doing so many tax returns, you don’t get to do the meaningful thing of digging in and building relationships and adding good, strategic value to your clients by analyzing their financial position and making recommendations.
Check out my other videos to talk about how tax mitigation techniques work. I’m telling you, we’re going to keep doing this. I want you to make a ton of money. If you do the math, I just did some basic stuff here, if you do what I’m saying and you go out and you were to just get
10 clients at $500 a month, right, that’s $60,000 in gross a year.
Now, in my model, there’s one choice where I’m not sure if you do it or not, whether you actually do their payroll for them, or not. You obviously have some costs inside of that, but here’s a couple other things you need to know, you don’t need your CPA. It’s helpful to have a CPA, it’s helpful to have some good, ongoing training. This is probably something if you’re right out of school and you don’t know how to do this, it might be difficult, but it’s not impossible.
Your primary thing is to be a bookkeeper. By you making sure that the accounting is done properly, you’re going to keep them compliant, you’re going to be in position to provide good coaching around the three areas, which is basically help them manage their S corp payroll and distribution, help them manage their employee versus employer contributions in the 401K, simple IRAs, things like that, and then the last thing is that they can get involved in real estate, you can help them with cost segregation, investing in real estate, getting passive income and help them pursue tax advantaged wealth. Meanwhile, you can help them do the Dave Ramsey thing, stay out of debt, make them financially wise, help them understand when to write things off, that’s just the basic tax advise, when do you write this off? And what’s an actual write-off? But you can help coach them on all these bonus depreciation opportunities that are out there too.
You’ll mitigate their taxes, those are the three areas and I’m telling you, you add that kind of value, you’re going to be worth it and here’s how I know; I did it. I went out and I hit the pavement, and here’s the one thing that you’ll have to do that most CPAs are terrified of, you need to prospect and you need to get meetings, you need to run a meeting, and you need to not run away from price. You cannot be afraid to ask for $500 a month. And I want to give you a little courage here.
There’s a couple different approaches. You don’t want to position yourself as somebody who can just save a business a ton of money by hiring you for $500 a month, but occasionally it happens, even if you’re charging $750 a month because they end up paying for their payroll service from ADP or Paychex, or something in that line and usually they’re paying $150, $250, $300 a month for their payroll. Even if there’s only one or two them. You could be a real estate agent and because that ADP gal or guy got to them, they’re paying $180 a month just for the payroll service. And then they’re paying for QuickBooks. That’s $60 a month. And then they have to do the bookkeeping and accounting, then they have a tax guy that they pay, you start adding up all of the different costs that they have, you might be a great solution.
Now, how do you do that, right? You need to get set up with either ADP wholesale, or Zero has some programs, Paychex has some programs, build a relationship so that you can get wholesale payroll. Or, just price yourself and say you’re going to have to pay for payroll and I’m $500 a month instead of $600. You can figure this out, but I’m telling you, you’re worth probably $900 to $2,200 a month, depending on what you’re going to do. Because you’re a better option that a 40 hour work week employee for these people and certainly better than Patty Part-timer at 20 hours a month. You’re worth this, okay? So, depending on how you end up lining that payroll thing up, maybe you find it wholesale and you just make a commission as you sell it for ADP or maybe you get the full wholesale and you handle all the messing around, that can be good, too. So, you’re paying very low prices for it, and then you can scale up big time and it saves you money.
You’ll also want to get set up with one of the cloud based accounting systems. The core of what you’re going to do is do the accounting for them. Don’t let their books get ugly. You’re going to do two things, make their life easy, make them compliant, that’s the second, you’re going to do three things, and the other thing you’re going to do is you’re going to make yourself the most knowledgeable person about their business possible. I’m telling you, this is the way to do it.
Folks, if you’re thinking about Ernst and Young, PWC, if you’re looking at Deloitte, or any of these guys, consider hitting the ground, prospecting, going to the B & I meetings, looking at the real estate agents, finding the small construction companies around you and offering them to be their outsourced accountant, they will say ‘yes’ and here’s a couple ways that I know. I know that they’re paying higher fees for people that do less work for them. I know that they’re paying more when they do an hourly person. They almost always have a bookkeeper that comes in for a couple hours a week, you’re a better value than that. You’re much more skilled that than, right? Be confident. Get some confidence, go prospect, you’re goal is to get a meeting once you get connect meeting, that could be at a coffee shop, at their place, or at your place, you’re just going to connect with them, find out if they like the idea of what you’re doing, if they like the idea of what you’re doing, you’re going to ask for tax returns, you’re going to figure out what they do for payroll, you’re going to look at their P & L and find out if you can do your three things; mitigate taxes, make their life easy, and keep them compliant.
So, you’re going to help them be wise, right? You’re not going to chase the tax game. Get meetings, do an analysis, come back and present hey, I tell you what, here’s what I’m thinking, you’re going to be like our typical client where I think you’re going to be in this $500-$1,200 a month, where I see this is you’ve got six employees, we’re going to do this for $1,000 a month, so for that $12,000 you’re going to get your tax returns done, you’re going to get proactive tax finding throughout the year, I’m going to help you understand how to mitigate your taxes, you’re going to get payroll, that bill goes away, you’re going to have the accounting system. We’re going to do your accounting for you and for $12,000 a year you’re not going to have to hire somebody one day a week to do this, which ends up being $640 a month besides any other cost.
So, you do that, you’re going to have success. I want to inspire you to do this. You got to hit the pavement. If you need more ideas about how to prospect and sell, hit me up. You’re looking for people with 1099 income, you want to lead with the S corp, that’s another great thing, are you an S corp yet? No, let me show you because if you become an S corp, you’re going to need a payroll system, you’re going to have more bureaucracy and you can make your own business by converting people on saving some taxes. Saving a ton in an S corp, so, if you need more advice on that, give us a shout. Otherwise, I’m Rob Satrom, hopefully this helps you pursue entrepreneurship. Guys, forget the big four.