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The Two Metrics That Can Double Your Accounting Firm’s Value in One Year, According to a Top Broker

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What if you could double your accounting firm’s value in a single year? Brannon Poe, a broker who’s handled over 500 firm sales, says it’s possible with the right strategic changes. 

In a recent podcast interview, Poe revealed that firms of any size can transform to maximize value and position themselves as attractive acquisitions by understanding what buyers want. The secret, he says, lies in mastering two key metrics.

We’ll unpack Poe’s road-tested insights on the levers of firm value and see how one traditional practice achieved a staggering valuation increase with clever strategic shifts. Whether you aim to sell soon or build a more valuable business, Poe’s wisdom will show you the way.

The Two Metrics That Move the Valuation Needle

Want to supercharge your accounting firm’s value? Brannon Poe says zeroing in on two key metrics can have an outsized impact.

1. Cash Flow to Owner  

“I always tell people, I’ve got two metrics. If you focus on these two metrics alone, you will increase the value of your firm,” Poe explains. “Cash flow to owner is probably number one.”

Your bullseye? For firms under $1.5 million in revenue, pushing cash flow to 50% or more of revenue. To calculate it, add your profit, owner compensation, and owner perks. For example, if your firm earns $1 million in revenue and your cash flow is $500,000, you’re right on target. The higher your cash flow margin, the more attractive your firm looks to buyers.

2. Owner Hours

“Owner hours is the other thing,” says Poe. “If you want the owner hours to be lower, lower is better – at least under 2000. But I have seen very well-systematized virtual firms get into the 500 mark for an owner. So you’re creating a real business at that point.” 

Minimizing owner hours reduces key-person risk and makes your firm more transferable. Buyers hesitate to acquire firms dependent on grueling owner hours, but a firm that runs smoothly with minimal owner involvement garners premium offers. 

Poe notes that adopting subscription pricing can drive progress on both fronts. Steady, recurring revenue and systematized work help boost margins while trimming owner hours. 

By lasering in on lifting cash flow and reducing owner involvement, firms of any size can transform into highly valuable, transferable assets. Next, we’ll see how one traditional firm put these principles into action to stunning effect.

From Surviving to Thriving: A Case Study in Strategic Transformation

The story of one husband-wife firm perfectly illustrates how powerful Brannon Poe’s value-boosting principles can be – even for small, traditional practices. 

Starting Point: A Traditional Firm in Need of Change

When the owners first approached Poe, they ran a classic mom-and-pop shop generating $1.2 million in annual revenue. Feeling overworked, underpaid, and unsure if they could keep going, they turned to Poe for help.

The Transformation Game Plan

Working with Poe, the owners implemented three key changes:

  1. Fired unprofitable clients: To free up much-needed capacity, the firm shed about 100 clients that drained time and resources but delivered minimal profits. 
  2. Raised prices: As Poe puts it, “If you don’t like your practice, keep increasing the prices until you like your practice.”
  3. Embraced subscription pricing: Transitioning clients, especially bookkeeping customers, to a recurring subscription model provided a steady, profitable revenue base.
  4. Launched advisory services: The firm created packaged advisory offerings and bundled them into subscription plans, enabling premium pricing.

Stunning Results in Just One Year  

The transformation was dramatic and swift. In just 12 months, the firm:

  • Increased annual revenue to $1.6-1.7 million
  • Expanded margins as new recurring revenue flowed to the bottom line  
  • Reduced owner hours while increasing employee pay
  • Landed an all-cash deal at their full $2 million asking price

The Power of Strategic Transformation

This firm’s journey embodies the incredible potential of Poe’s approach. By lasering in on profitability, recurring revenue, and owner efficiency, they morphed from a floundering traditional practice into a high-value strategic asset – in just one year. 

The Roadmap to a Firm That Works for You

This story powerfully illustrates that transforming your firm doesn’t have to take decades. With relentless focus on the right drivers, even tiny traditional practices can utterly rewrite their futures in under a year.

The key is strategically designing your transformation around buyers’ wants: powerhouse profitability with minimized owner dependence. Adopting the recurring revenue model, shedding margin-draining clients, and productizing premium advisory services are shortcuts for getting there faster.

Poe envisions a future where firm owners don’t have to choose between a profitable practice and a livable life. By architecting businesses that thrive without their constant oversight, owners can boost their bottom lines, free their schedules, and create thriving firms that are valuable today – and sellable tomorrow.

If you’re ready to build a practice that funds your ideal lifestyle now while setting you up for a profitable exit whenever you’re ready, the roadmap is clear – and it starts with learning everything you can from the best in the business. Take the first step now by listening to the full interview with Brannon Poe.

Harnessing AI’s Power to Transform Your Firm (No Coding Required)

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You’re sipping your morning coffee, scrolling through your inbox, when you see it – yet another anxious client email asking about their tax return status. You sigh, knowing the next 15 minutes will be spent digging through practice management software and crafting a reply. But what if there was a better way?

In a recent episode of The Accounting Podcast, hosts Blake Oliver and David Leary reveal how they’re using AI at their company, Earmark, to boost productivity and client service without resorting to fee hikes.

Their big idea? By strategically integrating AI into your existing processes and datasets, you can unlock massive efficiency gains, deliver proactive client communication, and increase profits – without charging a penny more.

In this deep dive, we’ll explore two key themes from Blake and David’s AI playbook:

  • The AI Pricing Paradox: Is “smarter” software a justification for higher fees, or a tool for doing more with less?
  • The Power of Practical AI: How no-code tools like Zapier can help you automate routine client communication by connecting siloed data.

Along the way, we’ll challenge some common AI misconceptions and share actionable tips for kickstarting your own AI experiments. Let’s get started!

The AI Pricing Paradox: Efficiency Driver or Fee Inflator?

A recent Thomson Reuters survey found that 40% of tax pros believe AI will enable them to charge higher fees, with a bold 2% even predicting “significant” rate bumps.

But as early AI adopters, Blake and David aren’t buying the hype. In their experience, AI’s magic is its ability to supercharge efficiency, not justify steeper invoices.

“At Earmark, we’re seeing AI drive 4-8x productivity gains,” Blake reports. “That means we can slash labor costs and pass those savings on to clients.”

Rather than inflating prices, they see AI as a powerful deflationary force, exerting downward pressure on fees as more firms reap its efficiency rewards.

Cutting Through the AI Fog

So, what explains the chasm between the survey respondents’ bullish predictions and Blake and David’s more measured take? They chalk it up to a simple truth: many accountants haven’t logged enough hands-on hours with AI to separate hype from hard-won insight.

In other words, the survey likely captures more AI daydreams than real-world road tests.

Bidding Billable Hours Farewell?

Looking ahead, Blake and David predict AI’s relentless efficiency march will sound the death knell for billable hours, forcing firms to embrace flat-fee and value-based pricing.

Imagine an AI-augmented staffer cranking out in one hour what used to take eight. The old “bill-for-time” model crumbles fast in that brave new world.

Forward-thinking firm leaders proactively align their pricing with delivered value, not logged hours, positioning themselves to thrive in an AI-transformed marketplace. Luddites clinging to the billable hour risk being left in the dust.

The Power of Practical AI: Automating Client Comms with Zapier

Pop quiz: what’s the one email every accountant dreads? If you guessed “client asking for a status update,” you’re not alone. But what if you could banish those pesky requests for good without lifting a finger?

Enter Blake’s ingenious AI hack, courtesy of the no-code automation platform Zapier. With just a few affordable tools and clever stitching, he conjured an AI assistant that auto-responds to client status checks – no human intervention required.

Anatomy of an AI Email Wizard

Here’s a peek under the hood of Blake’s automation magic:

  • A client sends a status request email
  • Zapier AI parses the sender’s address
  • AI matches the address to the client database (in this case, a Google Sheet)
  • Presto! AI plucks client info like name, return status, and open items
  • AI whips up a bespoke email with all the key details, fires it off to the client

The best part? The whole thing unfolds in seconds, without an accountant lifting a finger.

Slashing Labor Costs, One Zap at a Time

Let’s do some back-of-napkin math. Manually checking a return status and pecking out an update could easily take 15 minutes. Multiply that by dozens of pings from antsy clients, and you’re wasting hours.

Blake’s AI sidekick liberates your team for higher-impact (and higher-profit) work. Even better, by proactively pinging clients, you can short-circuit many requests before they hit your inbox.

Anyone Can Build an AI Assistant

You don’t need a computer science degree or a seven-figure software budget to conjure your own client comms wizard. As long as your client data lives in a structured format (yes, even a Google Sheet), you can sic an AI on it to automate those repetitive pings.

Case in point: Blake spun up his prototype in under an hour.

Your AI Swiss Army Knife

Once you’ve caught the automation bug, the possibilities are endless:

  • Pinging clients about missing paperwork
  • Generating fee quotes and engagement letters
  • Confirming estimated tax payments

If it’s a predictable client exchange, there’s a good chance AI can handle it. Think of every minute you’ll save – and every billable hour you’ll free up – by outsourcing those routine pings to your AI email genie.

AI as a Catalyst for Reinventing the Billing Model

But AI’s true potential lies not in isolated tools, but in its power to reimagine firms from the spreadsheets up. In an industry sickened by a dwindling talent pool and the specter of commoditization, smart automation could be a potent antidote, freeing weary accountants to rediscover the strategic magic that drew them to the profession in the first place.

Imagine an AI-powered firm where every employee is a virtual CFO, unencumbered by the drudgery of data entry and free to build deep client relationships. AI, in other words, could be the catalyst for a new golden age of accounting – but only if we’re brave enough to change.

Embarking on Your AI Journey

The AI revolution is no longer a distant dream for accounting firms – it’s a present-day reality full of potential for those ready to embrace it. The question is not if your firm will adopt AI, but when and to what extent.

If you’re eager to start with AI, the best approach is to start small. Choose a single process and focus on automating it. Blake and David’s podcast offers a practical, actionable blueprint for implementing your first AI workflow in a week.

The path to a more efficient, profitable, and fulfilling accounting future begins with a single automated process, a single minute saved, and a single client impressed. The choice is yours: will you watch from the sidelines as others reap the benefits of AI, or will you take the helm and chart your course?

The opportunity is here, and the future is bright. Your AI journey awaits – it’s up to you to take the first step.

An Accounting Firm Owner’s Guide to Strategic Technology Adoption

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Is your accounting firm’s technology stuck in the past? In a world where clients expect seamless digital experiences and remote work is the norm, relying on outdated, disconnected software can be a recipe for inefficiency, frustration, and even lost business. But with so many options on the market, how do you choose the right tools to propel your firm forward?

In a recent Earmark Podcast episode, Blake Oliver shared his framework for strategic technology adoption. He argued that firms that intentionally select software to streamline operations, enhance client experience, integrate smoothly, and enable standardization will be best positioned to thrive.

Blake walked through the key software categories firm leaders need to consider, from proposal management to artificial intelligence (AI). He emphasized the importance of choosing tools that are easy to use, align with the firm’s unique needs and processes, and facilitate client collaboration.

Proposal Software

Blake recommended proposal software options that allow firms to quickly generate professional, standardized proposals, collect e-signatures and payments, and kick off projects seamlessly. “You cannot standardize the service delivery to your clients if you don’t have standard terms in your engagement letters,” he noted.

For example, Practice Ignition and Anchor allow firms to create templated proposals with standardized terms, pricing, and payment schedules. Clients can quickly review and sign off on engagements digitally, reducing friction and ensuring consistency across the board.

Practice Management

For practice management, Blake stressed the importance of workflow tools that centralize client communications, automate tasks, and provide visibility across the firm. With remote work now the norm, he argued, “If you’re in a remote environment, how can you work remotely without having workflow software?”

Platforms like Karbon, Canopy, and Client Hub offer client portals, task management, team collaboration, and insights reporting features. By standardizing processes and centralizing information in one system, firms can boost efficiency, transparency, and accountability, even with distributed teams.

Blake shared a cautionary tale from his experience, where choosing the wrong practice management tool cost his firm weeks of lost productivity. The lesson? Prioritize ease of use and team buy-in when evaluating options to ensure successful adoption.

General Ledger & Payroll

In the realm of general ledger and payroll, Blake advised firms to curate a lean tech stack of best-fit solutions. Instead of accommodating every possible client need, he suggested choosing one or two options that cover the bases for core client types, focusing on scalability, integration, ease of use, and reporting capabilities.

For the general ledger, that might mean standardizing on QuickBooks Online for most clients, with Sage Intacct reserved for those with more complex needs. On the payroll front, Blake highlighted Gusto and OnPay as user-friendly options that automate compliance and integrate with popular GL systems.

Blake emphasized the goal of going deep on a few core platforms rather than spreading yourself thin across a dozen different tools. By strategically limiting your tech stack, you can streamline training, support, and processes while still meeting diverse client needs.

Accounts Payable & Banking

Turning to bill pay, Blake highlighted the spectrum of solutions available, from all-in-one platforms like BILL for larger clients with complex approval workflows to more streamlined options like Relay for smaller businesses. He emphasized the key is to match the tool to the client’s specific needs and design efficient processes around it.

For example, a large nonprofit with multiple departments and strict controls might benefit from BILL’s advanced approval routing and audit trails. A small business, on the other hand, may prefer Relay’s simplified workflow and flat-fee pricing. The right fit depends on factors like transaction volume, number of approvers, and accounting complexity.

Whichever tool you choose, Blake stressed the importance of clear client communication and well-defined processes. Establish expectations around bill submission, approvals, and payment timelines upfront, and consider designating a dedicated team member to manage the AP queue and troubleshoot any issues.

Artificial Intelligence

Finally, Blake touched on the exciting frontier of AI, noting that ChatGPT’s new offering for teams, coupled with Microsoft’s significant investment in OpenAI, has made the technology more viable for accounting firms than ever. He advised listeners to start exploring use cases like drafting routine documents.

For instance, firms could leverage ChatGPT to generate first drafts of engagement letters, email responses, or work papers based on predefined parameters. By automating the initial content creation, staff can focus on more strategic work like analysis and advisory.

However, Blake cautioned against an “AI-first” approach. Tools like ChatGPT should augment human expertise, not replace it. He recommended starting with narrow, well-defined pilots and keeping humans in the loop to review and refine AI-generated content.

The Path Forward

Across all these categories, Blake underscored the importance of approaching technology decisions with intention and a focus on client needs. Flashy features may generate buzz, but the true test of any tool is how well it supports your firm’s service delivery and client experience.

By aligning your tech stack with your strategic priorities, designing efficient processes, and investing in training and change management, you can harness the power of modern software to drive meaningful results. The key is to start small, iterate often, and never lose sight of the humans at the heart of your business’s heart – your team and your clients. Ready to dive deeper into Blake’s strategic technology playbook? Listen to the full episode and start charting your firm’s path to digital success.

The Accounting Profession at a Crossroads: Adapting to Stay Relevant in a Changing Business Landscape

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The accounting profession is at a critical juncture. Technology is rapidly transforming the business landscape. As client needs evolve and new skill sets become essential, CPAs must ask themselves: Are we keeping pace with change, or are we at risk of becoming irrelevant?

In this thought-provoking Earmark Podcast episode, I explore the evolving role and relevance of the CPA license with Steven Sacks, a consultant who serves professional service firms and not-for-profit organizations, and David Bergstein, a seasoned innovator in the accounting software industry. Our discussion reveals that to remain relevant and valuable in today’s rapidly changing business landscape, the accounting profession must adapt its education, licensure, and skill development to align with the evolving needs of clients and employers.

Bridging the Gap Between Accounting Education and Real-world Skills

There’s a growing disconnect between traditional accounting education and job market demands. David Bergstein points out, “Accounting education focuses heavily on debits, credits, and accounting standards but does not adequately prepare students with technology skills and business advisory knowledge needed in the real world.”

For example, many young professionals struggle to apply their classroom knowledge to real-world situations. They may have learned how to do t-accounts and journal entries but never touched modern accounting software like QuickBooks or Xero during their education.

Bridging the education-skills gap is crucial for the CPA profession to adapt to the changing needs of clients and employers and maintain its relevance in the business world. This may involve:

  • Incorporating more hands-on, technology-focused training into accounting curricula, such as working with modern accounting software like QuickBooks, Xero, or Sage
  • Partnering with businesses to provide internships and real-world experience for students
  • Encouraging faculty to stay up-to-date with the latest industry trends and tools
  • Emphasizing the development of soft skills, such as communication and critical thinking, alongside technical knowledge

By aligning accounting education with the realities of modern practice, the CPA profession can ensure its future members have the skills and knowledge they need to succeed in a rapidly evolving business landscape.

Reimagining CPA Licensure for a Diverse Profession

As the roles and expertise of CPAs become increasingly diverse, the profession must reevaluate its licensure model to ensure it reflects the realities of modern accounting practice.  

Steven Sacks emphasizes the need for greater clarity around the CPA’s role and definition: “If you really want to increase the pool of CPAs, define what the CPA is, what it means. Define the definition of the practice of public accounting. What is public accounting? What are accounting services? There are a lot of things that are really not clear.”

The disconnect between the CPA license and the day-to-day work of many accountants raises important questions about the credential’s relevance and value. As I point out in the episode, “What does the license actually give us a franchise on or a monopoly over? The only thing is the audit.”

Embracing Alternative Certifications and Career Paths

Our discussion reveals a growing trend of accounting professionals, particularly younger generations, pursuing non-traditional roles and credentials to build successful careers.

David Bergstein shares his observations: “I’m seeing the younger generation not become CPAs and become advisors or accountants. Non-CPAs have tremendous practices out there. They have very lucrative practices. They’re in their 30s and 40s. For the most part, they didn’t pursue an accounting career. They took very few accounting courses. Now, they’re quarterbacking firms and hiring some CPAs, but mainly accountants and non-accountants. They’re doing managerial reports and partial CFO services with a data analytics background.”

This shift in career trajectories reflects a growing recognition that the traditional CPA path may not fit everyone best. Instead, many aspiring accountants opt for alternative certifications, such as the Certified Management Accountant (CMA) or the Chartered Financial Analyst (CFA), which better align with their career goals and interests.

A Call to Action: Shaping the Future of the CPA Profession

Whether you’re a seasoned veteran or a new graduate just starting your career, you can shape the direction and impact of the CPA credential for generations to come.

So, what can you do to help drive positive change and ensure the profession’s continued success? Here are a few suggestions:

  • Advocate for educational reforms that prioritize real-world skills and hands-on learning experiences
  • Support efforts to modernize CPA licensure requirements and create new pathways for non-audit professionals
  • Explore alternative certifications and career paths that align with your unique interests and goals
  • Engage in meaningful continuing education that expands your knowledge and keeps you at the forefront of industry trends
  • Collaborate with colleagues and professional organizations to share ideas, best practices, and innovative solutions
  • Educate clients, employers, and the public about the diverse capabilities and expertise of CPAs beyond traditional audit services

By embracing change, innovation, and diversity, the CPA profession can chart a course toward a brighter future—one in which CPAs are recognized as trusted advisors, strategic partners, and indispensable experts in a wide range of financial and business disciplines.

The accounting profession is at a crossroads, and our choices today will shape its future. By adapting our education, licensure, and skill development to align with the evolving needs of clients and employers, we can ensure that CPAs remain relevant, valuable, and indispensable in a rapidly changing business landscape. To dive deeper into this critical conversation about the future of the CPA profession, listen to the full Earmark Podcast episode.

Embracing the Remote Work Paradigm in Accounting

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In a world where the nature of work is rapidly evolving, the accounting industry finds itself at a crossroads. As remote work, alternative arrangements, and AI automation become increasingly prevalent, firms must adapt to stay competitive and attract top talent.

In episode 380 of The Accounting Podcast, hosts Blake Oliver and David Leary explore the shifting dynamics of work in the accounting industry and discuss how firms can navigate this uncharted territory to create a more flexible, balanced, and fulfilling work environment.

Navigating the Salary Landscape: Remote, Hybrid, and In-Office Work

A recent study by ZipRecruiter sheds light on the salary disparities between remote, hybrid, and in-office workers. 

David shares the findings: “Fully in-office workers average $82,000 on average. Hybrid workers average $60,000 on average. So basically, it’s almost $22,000 less than in office. Fully remote workers get about $75,000 on average. So, in the office, you’re making more; fully remote you’re making more. But if you’re kind of hybrid, not making as much.”

The study also suggests that high-performing staff prefer remote work and can command higher salaries. This trend underscores the need for the accounting industry to adapt to the changing preferences of top talent and remain competitive in attracting and retaining skilled professionals.

H&R Block’s Successful Transition to Permanent Remote Work

The shift towards remote work is not just a theoretical concept; it’s a reality many companies already embrace. 

H&R Block’s experience provides valuable insights into how a major player in the accounting industry successfully transitioned to permanent remote work. As the company continued to grow, they hired corporate employees who were fully remote. It quickly became apparent that high-performing staff preferred remote work.

Jeff Jones, H&R Block’s CEO, put it simply: “There isn’t a good reason why we would do that. There’s just no reason to have a required to come back to office policy.”

H&R Block’s experience demonstrates that even large, established companies can adopt remote work and benefit from focusing on outcomes rather than micromanaging employee time and location.

The Productivity Puzzle: Debunking Myths About Remote Work

One of the most common concerns about remote work is its impact on productivity. 

However, as Blake points out, “Studies on remote work productivity suggest that it is generally a net zero impact. While there may be some inefficiencies with remote work, these are offset by increased employee satisfaction and the elimination of commute times.”

It’s important to recognize that the true cost of requiring employees to work in the office extends beyond the walls of the workplace. Expenses like gas, car depreciation, and the additional cost of living close to the office can add up quickly for employees. 

By offering remote work options, firms can help their staff save money and reduce stress, leading to a happier, more productive workforce.

The Four-Day Workweek: Challenging Traditional Work Arrangements

In addition to remote work, alternative work arrangements like the four-day workweek are gaining traction. 

Blake notes, “In the UK, a pilot involving 61 organizations implementing a four-day workweek found that 89% continued with the model after a year, with many making it permanent. The study reported positive impacts on staff well-being, lower turnover, and easier recruitment.”

The success of four-day workweeks in other industries raises questions about the accounting industry’s traditional approach to work, particularly during busy seasons. Many firms still require staff to work weekends during peak periods despite evidence suggesting that alternative arrangements can lead to better employee and firm outcomes.

The future of work in accounting is not a distant concept; it’s already here. As the industry faces unprecedented change and disruption, it’s clear that the traditional ways of working are no longer sufficient. To thrive in this new era, accounting firms and professionals must embrace the opportunities of remote work and alternative work arrangements. For all the details, listen to episode 380 of The Accounting Podcast.