Small and aspiring CPA firms face several formidable challenges. From workload management to technology implementation and expanding their professional expertise, they will likely spend a disproportionate amount of time and energy on things other than building their book of business and serving clients. To solve this problem, today’s guest started a firm that provides the necessary resources and support to enable CPAs to build scalable, profitable practices and stay relevant for decades to come—introducing Chase Birky, the co-founder, President, and CEO of Dark Horse CPAs, which was born from the belief that small businesses, intrapreneurs, and entrepreneurs are often seen as “dark horses” amongst their larger, more well-known competitors. Chase believes that the proper guidance can help propel these dark horses to unexpected heights, and in this episode, he shares his goal to democratize the modern CPA firm and provide a better life for CPAs (and, by extension, their clients). During our conversation, we also touch on the need for a safe space to make mistakes, the immense value of mentorship, the role of AI in the future of accounting, and so much more. For a fascinating and insightful conversation with a trusted advisor specializing in serving small businesses and individuals often overlooked, tune in today!
Key Points From This Episode:
- Two major challenges facing small CPA firms and how Dark Horse solves them.
- Why modern CPAs need support to make the leap and build a scalable practice.
- Advice for burnt-out senior managers who want to step out on their own.
- How Dark Horse helps CPAs gain perspective and gives them a “safe place to fail.”
- The value of eliminating uncertainty while offering guidance and mentorship.
- Obstacles Chase encountered as he pivoted his own business.
- Chase’s take on the future of accounting and the role of AI.
- How technology will augment the way solopreneurs and micro-firms perform.
- The rise of fractional CFO services for small to midsize organizations.
- Why the road to success is paved with systematized, scalable, “outsourceable” offerings.
- A non-binary reflection on the 150-hour credit requirements for CPAs.
- Free and budget-friendly alternatives to formal education, including podcasts.
- Where and how you can learn more about “the CPA firm built for CPAs!”
[00:00:01] ANNOUNCER: Welcome to Branch Out, a Connection Builders podcast. Helping middle market professionals connect, grow, and excel in their careers. Through a series of conversations with leading professionals, we share stories and insights to take your career to the next level. A successful career begins with meaningful connections.
[0:00:21] AD: Chase, welcome to the Branch Out podcast. Excited for our conversation today.
[0:00:24] CB: Thanks for having me, Alex.
[0:00:25] AD: Chase, you are the co-founder and CEO of Dark Horse CPAs. What is that? Tell me a little bit about that.
[0:00:32] CB: Yes. It’s actually a CPA firm for equestrian businesses. Kidding, of course.
[0:00:36] AD: I like that.
[0:00:37] CB: Yes. Far from it, although we do have a few of those clients. We’re essentially a platform business, so a platform CPA firm. If you haven’t heard of that, it’s because we created it, so it’s a new category of business, which is both an opportunity and a challenge. But really, what we do is we create all of the infrastructure that you would need to build a practice from scratch and also to scale it. So marketing, branding, technology, staffing, you name it. If you need it to run a practice, we’re focused on building it out for our people.
What we’ve identified is that there are really two major challenges when it comes to starting a practice. One is that when you’re getting started, you know, there’s a lot of you, and your money, and your time that’s required to go into that to make it successful. I know that because I did it myself. It comes at a cost, which is more than just financial, can often be personal. I could get into that story a little deeper maybe at a different point.
I had a personal situation that came, from everything I had to pour into creating the practice from scratch that was almost irreparable, but thank God, it wasn’t. On one side, you’ve got that struggle of just that zero to one. Even if you’re a good practitioner, there are so many things that are necessary beyond just being a good practitioner. What ultimately leads you to being able to scale often is not your practitioner skills, it’s the other things, the other skill sets, the soft skills that you have to have to be able to scale yourself.
Along the whole spectrum, there are just a lot of resources that a lot of accountants don’t have because it’s either just them or them in a small team and to do things they want to do in technology. For example, who’s going to create that time, who’s going to make sure that that gets from start to finish, that it makes sense in the broader framework of the clients you’re trying to serve, and what you’re trying to do? The traditional model is really what we rally against, which is practitioner owners because the folks that have traditionally been running firms have had a heavy hand in client service, which isn’t all bad.
But the tradeoff is that you can’t invest that time in your people, and in your firm, in the way that really can up-level those folks, create a more sustainable career path for them, which – that’s evidenced in the talent war that we have, and the average tenure being below three years, and just poor employment experiences. We just took a totally different view on what a CPA firm could be and really oriented it from the standpoint of the CPA is going to be our customer, the client is going to be their customer. We’re here to serve CPAs so that they can better serve their clients.
[0:03:41] AD: I want to grab on to that last part you said there, that you as a business, your customer is the CPA, and then the CPA’s customer is the client, right? Just thinking about that and what is – here is a differentiating element, is that your customer is the actual operating business that the CPA, the firm. Because that’s your shift, your focus can be all around the enhancement, improvement, and development of that, of that part of it, right? Which is, where oftentimes can be lacking because there isn’t a focus on that on its own, right? Am I hearing that right?
[0:04:19] CB: Yes, totally. I mean, all you have to do is look around at your fellow firm owners to realize that a lot of them are just heads down on compliance work and in the weeds of getting that stuff done at the expense of moving towards advisory and taking advantage of the technology that’s out there to drive results for your clients to the extent that you’re bogged down in kind of the old way of doing things because you haven’t allocated that time to make that happen, and the money, and everything that goes into that. It ends up just resulting in more of the same.
Our thing is more about, how can we create impactful, resources for our folks to be able to better serve clients, to drive a better price, to create more value, and bring them along the way, without overwhelming them with too many changes, and too many bells and whistles. Because we’re already dealing with a ton of information as accountants and trying to sift through what’s important, and what’s not. So there’s almost a bit of a science, maybe more of an art, I don’t know, in terms of what’s going to drive the needle most, what’s going to be digestible, when it’s going to be digestible. How you’re going to deliver that, so it actually moves the needle and isn’t just another thing that put on the back burner for folks.
[0:05:44] AD: Question for you on, I can relate to this myself, the leap, the kind of the zero to one, the going out, and for anyone who is entrepreneurial, which is – I certainly would describe myself as that, and I think many of our listeners here are entrepreneurial, and many professionals that I meet whether – in this case, we’re talking specifically about accounting, but I think a lot of professionals, in general, are entrepreneurial by nature, at least a chunk of them are. Hanging up your own shingle is – I mean, why are all the accounting firms named that, right? I mean, how did they start? Go back. That’s a very common element of the industry.
That jump, that start, especially if you have an existing book of business, or you’re in the right place where you can peel off part of a customer base, that’s great. Not everyone is in that place on their own. And even those that are to be at full size, to fully be able to take over that, still puts a lot of responsibility on you. But if you are just jumping, or want to be able to just jump, it’s hugely huge, absolutely massive, right? It sounds like in many ways, and in a platform, obviously, there are different meanings. But I think maybe there’s that kind of an element of the platform to allow them to step off lightly instead of diving off headfirst and kind of go after that. Tell me your thoughts around that?
[0:07:04] CB: Yes, that’s definitely a fair way to put it. What I would say is that, as a profession, a lot of times we suffer from paralysis by analysis because we are smart people, and we know the things that we don’t know. Maybe don’t lead with passion or naïveté, or just, I’ll figure it out because we’re just so paralyzed by what we know we need to learn. On top of that, when you’re of the age, typically, where you start a firm, a lot of people have young families or are about to start that young family. It’s like, “Okay. How am I going to make all this work? Not just financially, but emotionally, and maintain my marriage, and be there for my kids, so they know their father or their mother as they grow up.”
Really, it’s a tough time in life for folks to be able to make that leap. But on the same hand, it’s when they’re most able to do so because they’re younger, and they have more energy. It’s a little bit of a double-edged sword there. But what we’ve enabled folks to do is to say, okay, you can make this leap with us, we’ve got a track record of building people from zero to six figures within a couple of months. You’re going to get a salary that’s going to allow you to pay your bills and be comfortable while you’re building. You’re going to be able to do it a lot quicker, and overall, a lot less time spent to get to a place that you envision when you start a firm, than the years you might spend if you went out and did it on your own.
It’s not to say that that is a 40-hour-a-week job, it’s very much drinking out the firehose. Our folks have been able to go from accelerator to principle, typically within five to nine months, on average. That means, they’ve got at least 150,000 of recurring revenue at that point. If you compare that to going out on your own, if you’re starting from scratch truly, and you’re not bringing a book with you from a previous firm or purchasing a book, that’s very tough to get to that point. If you do, it’s kind of like, what infrastructure and resources do you have to actually serve that business at that point? So you end up getting stretched super thin.
Really, a lot of this was born out of the experience that myself and my co-founder had in terms of, yes, we grew, and yes, we were somewhat successful. But it came at a very large cost while we were trying to build a wheel that everyone else is trying to build on their own. We just figured, why don’t we just focus on building a wheel and leverage that for other folks, so we’re not all trying to replicate the same sorts of things? So we can collaborate and put people’s knowledge together to make that wheel something that a small team could never do on their own, and just leverage that for the whole. That’s a big part of what we’re doing.
[0:10:05] AD: Walk me through, I’m at a firm right now, I’m at a top 25 CPA firm. I am a senior manager that is burnt out and wants to go try something. I know a couple of people that have some small businesses that might be able to help with this. I’m thinking about this, like Chase, what do I do? Tell me like, how do you help? What do I do? Walk me through that.
[0:10:31] CB: That burnout issue is a tricky one because there’s a time period before you’re in actual burnout, where you’re just so overwhelmed with what you have to do that looking outside of your job to see what you truly want to do next is very difficult. A lot of time –
[0:10:49] AD: Apathy. You needed apathy. Right?
[0:10:53] CB: Right. Sometimes, you actually have to be in that stage of burnout to be like, “Okay. I cannot keep doing this. Just to survive, I need to figure out what’s next.” At that point – I’ve been there more than once. It’s a good space in terms of driving positive change in your life. But it can also lead you to make a desperate decision from a desperate situation. I’ve done that myself more than once. There’s, I guess what I would say to someone in that position is, don’t just take the next opportunity that is somewhat better than your current one. You really want to think of, okay, this situation, this job has caused me burnout shouldn’t be my barometer for my next job. It should really be, “Okay. Let’s rethink my career in general. Do I even want to be in accounting? Do I want to be in public accounting? What’s actually going to resonate in my life, and provide purpose and meaning?”
If that is public accounting, it’s just the context of what you’re practicing right now is unsustainable, unfulfilling, those sorts of things. There’s a much better way to do that, right? I think what we offer is one of those ways, it’s not the only way. If someone wants to start their own practice, then it’s really about how do you want to do it? I mean, do you want to be autonomous to the standpoint that it’s your name, your decisions, the buck ultimately stops with you? I mean, a lot of folks that start their own firm want to be that person and that’s great. For us, we’re not trying to solve for that. We’re a collective brand, and we bring people together to get the best out of everyone.
One of the challenges you have, when you start a firm, is, no matter how smart you are, and how experienced you are, you only know so much, right? There’s just too much in tax and accounting, audit, consulting, so on and so forth, that you can only know a fraction of each area. You might be super deep in certain areas, or you might be more surface-level across a number of areas. But ultimately, you know, if you’re going to go out on your own, you’re either going to have to be very clear on what you’re going to do and for whom, or you’ve got to have a substantial Rolodex of strategic relationships to be able to tap on to be able to serve clients to the expectation that we all have of ourselves.
It really comes down to what are you looking to do career-wise? And for us, even if someone wants to become an accelerator, a dark horse, and really wants to be a part of what we’re doing, obviously, they’ve got to meet criteria, because we’ve got to brand uphold. But more than anything, they’ve got to be a great culture fit. Meaning, they got to bring something to the table. They’ve got to want to contribute versus consume in our collaboration, bringing more than trying to take from the whole.
Kind of a roundabout answer there, but it’s really that inflection point of when someone is burnt out. It’s a time to be intentional, a time to not move too quickly. But once you know you’ve made the right decision to move as quick as you can.
[0:14:13] AD: I think that’s good advice. I’m going to take – I’m still the same person, I’ve now made the decision that I want to stay in public accounting, that I think I want to start my own practice. I want to be able to have agency in my life/ I want some autonomy. I’m not sure if I go with you, if I join you, if I apply, and you accept me, I should say. But the pathways, if I look at the pathway of doing it solely on my own, or as an accelerator. Walk me through what are the pros, the cons, what agency am I losing, what’s the gain? Just walk me through that thought.
[0:14:47] CB: Yes. I mean, the agency really is more about ego. Your ego is such that it requires you to be the person who makes the decision, have your name, and entirely your creative direction. Then, we’re not going to solve for that, you’re going to want to go out on your own right. But when it comes to the autonomy to work with your clients the way that you see fit, design a lifestyle that incorporates your practice into your personal life in the way that you want, we’re here to make that happen across the board. It’s really just a philosophy thing for us, that as long as you’re happy, your clients are happy, your family’s happy, and you’re doing quality work, we don’t really care how you make that happen. We just care that we’re supporting you to make that happen in a way that works for you.
We’re aligned with our principles from a financial standpoint so that we’re sharing in the net profit. So if you’re not making money, we’re not making money. As a result of being aligned in that regard, there’s not that level of top-down control that a traditional partnership has to have to make sure that people are doing the requisite amount of work at the requisite amount of quality. We’re aligned, so it’s really just more about how can we support you better, what are your goals? Maybe you don’t want to have a million-dollar practice, that’s fine. But maybe, where you’re at right now, you need to have more time for your kids that are young to be able to be around for them, and not be so distracted, and so overwhelmed with work. How do we get you there? It’s really more about working with each individual principal to help them be where they want to be at a given point in their career.
Because we have folks that have young kids now, but those young kids won’t be young forever, and they’re going to want to reorient more of their focus to their practice as those kids get older and scaling that so it’s not static, right? We’re having conversations constantly, establishing a plan for any given year. What do you want to accomplish this year? How do we help you get there? Because one of the other things, it’s just human nature. You can’t read the label from inside the jar. Oftentimes, practitioners are inside the jar in their practice and aren’t able to see certain things objectively or for what they are, because they’re so in those details. Whereas, we’re able to look at it from an outsider’s perspective and provide some feedback as to what we see and how that compares to other practices. Help steer them away from situations that we know that you can go towards if you’re operating subconsciously, not intentionally.
Another dovetail here, but that ends up being something that a lot of folks don’t realize when they come to Dark Horse is, subconsciously, how many bad habits they’ve created in their previous firms that they’ve worked for. That paradigm no longer exists at Dark Horse, so let’s not self-sabotage because we don’t need to do that anymore. What led to you doing that previously is not our reality. So unwinding some of those bad habits, I think has been a surprising element of what we’re doing here that I think is really impactful for our folks to be able to realize, they don’t have to say yes to everything. They can say no to clients, they can charge prices that are twice what they feel comfortable with, and people will accept it.
There’s a lot of learning and self-discovery that comes along with running a practice. We’re here to help people, not prevent them from making mistakes, but prevent them from making the types of mistakes that will hold them back or be risk-or-ruin sorts of mistakes, but a safe place to fail, to learn.
[0:18:50] ANNOUNCER: This is Branch Out, a Connection Builders podcast.
[0:18:58] AD: I want to tie into what you just said and somewhat shift the direction of the conversation a little bit. We’ve chatted a little bit before and you mentioned this, I think, in the early on of recording here. The unknown, the uncertainty, the dynamic of building a business, any business, regardless of what type of business is, what the function is. When you are building something new, and in particular in your business are, let’s say, maybe at a much bigger level in some ways, because it is almost a new – it’s a new market, it’s a new category in the space. That makes it more unknown.
Before we get on, I want to talk about that. But before we go there, I want to point out, I think what I’m hearing you say, some of where you’re able to help the CPA base, help your accelerators and ultimately, principals in the business is, you eliminate some of that unknown. You’ve helped take that and create some of that through both your own learned experiences but also the shared knowledge and shared community of the business, a larger platform that eliminates unknowns. I’m sure we’re going to talk about here in a minute about unknowns. That can be the hardest part, right? That’s in many times the hardest element of building the business isn’t the work, it’s the unknowns of what to do, and not doing the things that you thought would work, but you didn’t know if they wouldn’t, and turns out they didn’t, and it hurts you along the way. Right?
[0:20:18] CB: Right. Yes, product market fit is the way that I look at that. When we pivoted in 2019, I had no idea if there was a product market fit, because it was a new product. We had to find a way to educate enough people about what that product was to see if there was a demand for it, which is an interesting inflection point because we had a preexisting business, a tech-forward CPA firm that was viable. We decided what was going to be fulfilling, and what we really wanted to do was different than that, which is why we decided we were going to put all of our eggs in this basket. When I say all of those eggs, from my standpoint, I really mean that because I knew, if we were going to make this pivot, that I was going to have to get out of client service.
If I got out of client service, that meant that however long that went on, it’s likely that I wouldn’t go back into client service. If I did, there would be a major uphill climb to get back into that. I’d be losing client relationships in order to be able to serve what would ultimately become our client, which is a CPA. I knew, I was like, “Okay. If this doesn’t work, there’s a huge cost to this.” But at the end of the day, I was fine with it because it was something that burned within me so deep. Just because my own experience is that I figured I would have more regret not trying this than I would trying and failing.
I mean, we’re now at a place where we can confidently say, if you join Dark Horse as an accelerator, or you merge your firm in as a principal, this is what it’s going to look like if you follow the game plan. We now have a track record that we can show people. This is what happens – I mean, within a range, obviously, because it’s not so predictable that we know the date that you’re going to sign X dollar engagements that are cumulatively going to get you to six figures. There’s variability, right? But within that range is a pretty comfortable proposition for folks, that they know, they’re going to be supported financially, while they’re doing it. They’re going to be coached on how to have these sales development calls. They’re going to really have their hand held to become a competent practitioner and firm owner, practice owner that can take it from there.
[0:22:48] AD: It helps take out some of that uncertainty, and the unknown, but also brings some of that best practice, and mentorship in there. For you, and that, I guess I’ll call it the journey of the unknown. Because you made this pivot, you made a big investment and knew it was going to be a big investment, because there were some doors, one-way doors, if you will, that you were going through. When you look back at some of that journey of getting from the unknown to having confidence and viability, what did you learn? What was challenging? Just walk us through some of your thoughts through that.
[0:23:19] CB: Yes. I mean, from the very get-go, it’s interesting because if we hadn’t found someone to occupy that first accelerator seat, I don’t know how long we would have gone on the road of trying to get someone to agree to do this if we didn’t have John Warner who we were able to convince to become our first accelerator, within about a month’s time. I just don’t know how far we would have taken it. If we got no interest to the level of I want to do this, how far we would have tried to take it, because it was really just an idea at that point, and we needed buy-in to the vision to start executing on it.
That early inflection point is something that I think a lot of entrepreneurs struggle with. It’s like, how much do I believe in this idea and how far am I going to push it to force it down people’s throat, to get them to see what my vision is? We were fortunate.
One of the other double-edged swords in public accounting. For us, it’s been opportunity but it’s also been something that’s been personally painful for myself, my co-founder, and others in our firm. We were able to get people to take a big risk in an idea, and a vision that we had yet to build out, because they were coming from a standpoint of misery.
Going back to what I was saying about “don’t make a desperate decision out of a desperate situation.” I think we’ve benefited from the first few people making a desperate decision and saying, “Hey, this at least sounds better than what I’m currently doing. I have to get out. Sounds cool. I like what these guys are saying, I’ll give it a shot.” That ended up being huge for us.
[0:25:05] AD: Where do you see the accounting industry going? There’s a lot of dynamics in both the consolidation, some of the bigger firms, the investment firm, private equity that now looking in smaller and smaller firms. You also have a generation of folks that are slightly less entrepreneurial, or maybe less risk-averse, I should say, or more risk-averse because of some of the dynamics that many millennials have grown up through, but still want to be entrepreneurial. You’re solving a huge armor on that.
Taking all of those factors in and the shortage of talent. I don’t know. I’m curious. We’ll go down the industry talk here for a minute. Where do you see things going?
[0:25:42] CB: Yes. I mean, I think you could take that a number of ways. There are a couple of things that I see happening. I mean, the most pertinent thing that everyone’s kind of talking about right now in this moment in time is AI, and how that’s going to impact accounting and just about every other industry that’s out there. I’m of the mindset that AI is not going to replace us, it’s going to augment us. But it’s also going to be an inflection point, in the same way that mobile was an inflection point for a lot of technology companies. That if you couldn’t make the transition to mobile, you became a dinosaur and failed, eventually. I think AI is really that same paradigm shift that firms that can’t leverage AI in ways that allow them to spend less time and create more value for clients are going to be cannibalized by the firms that do.
That cannibalization may look something like merging up into a larger firm, that maybe is private equity backed. To be able to get that level of technical expertise and resources to make that transition that people are realizing is necessary. We like to look at ourselves as an alternative to that upstream merger into a traditional firm, where you become one of a couple of hundred, a couple of thousand partners, and end up being a little bit rank-and-file in terms of your leadership, and no longer run the show you used to.
Whereas in our model, you continue to run the show the way that you want to with your team, and you’re leveraging the resources at the same time, and earning a lot higher splits in terms of the partner compensation. Because traditionally, it’s been a third, a third, a third your average accounting partnership, a third partner compensation, a third staffing, a third overhead. Our principals make anywhere from 45% to 50% off their gross, so they’re making substantially more than they would at a traditional partnership. Because we’ve just got a leaner, more horizontal, operational model that doesn’t have layers of management that are allocated in a black box to partners.
[0:28:00] AD: Let’s go back to your comment about the pivotal moment that is unfolding with AI. I think technology as a whole, it has been happening, we’ve watched it. I agree with you wholeheartedly that the transformation of machine learning in the application of machine learning around the data that you have at your hands, and how that can augment the way we perform. It’s the businesses, the organizations that brace it are going to excel. The ones that don’t are going to have major challenges. What I think you’ve done, we chatted about this a little bit last time we talked, and I think you’re seeing it more and more.
A smaller proprietor, whether that be as a sole proprietor, or as a smaller organization, your ability to access and leverage tech as a whole is wildly changed in the last handful of years. The affordability, the usability, the accessibility, all of that as a whole. Plus, when you’re smaller, you’re more nimble. Your ability to try something, to try six things that all fail, and to keep trying the seven so you find the one that works and learn as you go and develop the knowledge around it is far greater than a larger organization. There’s more to focus on in the adaption, the change. So much greater of an investment at that level.
It sounds like that’s a value prop that you bring as a platform. But as a whole, do you agree with that in the technology, and how is that going to play out in both your business, but in the kind of the broader services industry as a whole?
[0:29:30] CB: Yes. I mean, I think there are two things there. One, I really see a boom in the solopreneur and the micro-firm. I think that this is really the point in time for a lot of reasons, beyond just what’s happening specifically in accounting, but more from a macro standpoint. That there’s going to be more and more folks that are going to be starting firms. I think that’s a great thing. It’s helpful for us because we’ve got a value proposition for those folks that want to do that. I also think that this moment in time, in terms of what we now know AI is, and where we can more tangibly see where it’s going, is that this is the moment in time where, if you’re not transitioning your practice towards advisory by leveraging these tools, that’s what’s going to cannibalize you, specifically.
This is the moment in time where it’s like, okay, we now have a clear roadmap to get to advisory. But we’ve got to be willing to say, “Okay, I know I can get great fees for tax prep right now because the demand is so much higher than the supply because of the talent shortage. I can really get high on the hog and just create the assembly line to crank this out. I’m going to be great for a couple of years because the supply side is not going to right-size tomorrow.” It’s going to be very easy to get high on the hog because you’re able to command these prices at margins that are super attractive. That’s going to blind firms from what’s on the other side of that a couple of years down the road, where enough non-CPA firm players get into the business of compliance in ways that marginalize fees, compress fees, and then, “Oh, shit. What do we do now?”
It’s like, “Okay, this high-margin service line is now getting cannibalized, and we haven’t done what we need to do to have a consistent delivery model for our advisory services that actually drives value that we can scale.” Firms that aren’t pivoting towards that right now, albeit while times are good from a compliance work margin standpoint. That’s where you’re going to see, a couple of years down the road, who is doing that work and who wasn’t.
[0:31:52] ANNOUNCER: This is Branch Out, bringing you candid conversations with leading middle-market professionals.
[0:32:00] AD: I was having a conversation with somebody the other day, and I won’t mention who it was, but they definitely have some great insight into the industry, professional service as a whole but specifically, accounting. The dialogue was around this concept of where you’re seeing firms, the successful firms that will shift look more like – the term they use as an agency. Think of like a marketing or an ad agency, where part of what you’re doing is consulting on strategy, brand creation, ideas, thoughts, concepts, innovation, and growth opportunities.
Then the other side is, you’re helping them figure out how to execute a part of that and doing it as an ongoing set of work because you have the technical expertise that makes you good at executing on it. It’s having that technical expertise that makes you good at the consulting arm of it, right? It’s a well-done advisory, right? Because it has a revenue engine behind it, it’s not just project-based because pure project-based work can be challenging because you tend to go in the rhythm of, “I get busy, then I slowed. I don’t do BD. then I slow down.” You’re ebbing and flowing. But the reoccurring work, oftentimes, is what starts to become commoditized, and ultimately – the blending of those together, I think is going to be a major shift. I’m just curious about your thoughts and kind of reaction to that.
[0:33:20] CB: Yes. I mean, I think if I’m interpreting what the individual is talking about correctly, the way that I see public accounting, moving towards is, “Okay. We still have to do the compliance work, right?” That’s going to be table stakes to have the advisory relationship with folks. AI, machine learning, or whatever you want to call it, can augment that, but it is only an augmentation. It’s not the replacement, right? You can replace a lot of compliance things with if this, then that sort of logic. Because there’s a defined set of decision points that can be programmed.
When you talk about advisory, you’re talking about white-boarding, you’re talking about a blank slate, you’re talking about bringing in so many different questions and decision points into a strategy that there’s just no way AI is at a place or will be at a place to handle that from start to finish. I would presume, at least while I’m working in public accounting, but it will continue to augment. It’s like, as you as a practitioner get better at, at least getting something off the ground, AI is going to help you get that to 30,000 feet. I think that ultimately, the value that we’re creating is just going to have to be much different than it historically was. Where primarily, we were here to make sure that the IRS doesn’t come knocking, and that financial statement auditors, external auditors will allow your financials to pass their audit. Just more of that. We have to do it, we have to understand our business historically.
Now, what we’re moving towards is, okay, all of that is table stakes. We got to do that, we’re going to do that, and it’s not going to cost you nearly as much as it used to. But we’re uniquely in a position where we can help you think through strategies that incorporate financial models, and unit economics. We can help an entrepreneur take something from great idea, super sexy, super interesting, and compelling to how is this a business? That’s the role of the CFO.
Fractional CFO services are continuing to rise because your early-stage ventures don’t have the money to be able to allocate towards a CFO if they could find one unless they’re substantially funded, and probably don’t always have a need for that person to be full-time anyway. Why not leverage someone who is great in that field for whatever time you need them to in a way that you can afford, to hopefully get to a point where then, at some point, you’re hiring a full-time CFO to drive it from there?
[0:36:20] AD: The fractional CFO comment, and we’re going down a path different than what I anticipated here, but it’s a great conversation. I think it’s really –
[0:36:26] CB: I tend to find the rabbit holes.
[0:36:28] AD: We found one. Again, a similar conversation with the same individual, part of that same dialogue. Fractional CFO, that forthcoming explosion of that, and it’s going on, but I think it’s increasing more and more. Think about it for a vast majority of your middle market, and smaller companies, kind of midsize and down where, even if you want a CFO – and there are a lot of different levels of a CFO. But let’s take that smaller organization, you’re paying someone, let’s just say for the sake of the discussion, 150 grand for a CFO role on the upper end, and before you get into much larger. But let’s just say, you’re paying 400,000 on the top end for someone. There’s different calibers of individual that’s available, depending on the skill sets, and what build that career make sense to pay that person, and hire that person that’s paid. The likely more skilled they are and the more team below them you need to help so that they’re focused on bigger picture items, right?
Remember that that cost kind of – it’s not just the one individual, it’s what’s that department around that have to start looking like. Then on the smaller end, at the lower end of the pay scale, you still can get very qualified individuals to do it. But it’s smaller, it’s less experience, it’s probably more in the needs and some of the work in picking up the lifting around that. So then, you may lose some of the experience, some of that higher kind of big picture things. The challenge becomes that sliding that scale in the right place, depending on the size of your business, the growth, the complexity, and recognizing the financial arm, and how that ties into everything you do across the business line can be pretty complex. I think it’s challenging to find that right design, as compared to if you have an outsourced person, an outsourced fractional CFO.
Your probability of having someone that can nail that, and actually has the right skill sets, and is comped appropriately for the hours that it takes, the time it takes, and has the resources, I think that’s a hard proposition to beat in many cases. Until you are substantially spending on a finance and accounting department.
[0:38:29] CB: The way I look at it is the same way I look at IT. For a small business, it makes sense to outsource your IT, not only because of cost, although that’s pretty much the primary driver. But do you know how to manage someone who wears a technology hat? Probably not, right? For so many reasons, it’s like, we’re going to outsource this because it’s not a full-time job. It’s less expensive than having someone full-time. I don’t have to worry about creating a career path and managing someone in an area that I’m not comfortable in. All of these same factors led to it really going from in-house to out-of-house. It was probably one of the first to do that, because they were using technology. That’s what their business was.
The same thing is happening in accounting, where the super high-level people, hard to find, very expensive. Can you manage them? Can you give them a career path? All these things. Yes, maybe at a certain size, you can, but from day one through 365 and beyond probably for most businesses, you don’t have the capacity to do that.
[0:39:36] AD: One hundred percent. Again, until you get to a certain scale, I think it’s very challenging for most for a good chunk of the market. I think it’s in the technology element of it to really do it well. It’s becoming easier and easier for firms that focus on that, to build out a scalable platform around it.
[0:39:54] CB: Right. For the consumer or the client, they’re benefiting from more on more firms niching down. It’s not just finding a fractional CFO that has generalist experience or has hit a couple of different industries. It’s, I want to find a fractional CFO in the homebuilding space. As time goes on, those people that are focused in those specific industries that already have a template of how to provide value from day one are going to be more and more prevalent. It’s a hugely growing area in public accounting. It’s also the most nascent practice, public accounting firms have because it’s just traditionally been tax audit and consulting.
This client accounting services or client advisory services, whatever you want to call it has been this redheaded stepchild that hasn’t gotten the investment it should because it’s a harder nut to crack. You go to any conference out there that’s talking about how you productize, and scale these services. There’s not a lot of great input, that’s actionable. I think there are some great 30,000 feet philosophies that you can figure out how to translate for your own firm to make it make sense. But everyone’s still trying to create this plan mid-flight. The firms again, that are investing in how they’re going to create an offering that is systematized, that can scale, that doesn’t require the brain of one or two people that if they leave the offering, leaves with it. There’s going to be a ton of market share to be gobbled up by firms who can figure that out.
[0:41:42] AD: I completely agree with you. Chase, it’s been a great conversation. We went totally off script than anything I thought we were, but I thought we –
[0:41:49] CB: Do we even have a script?
[0:41:51] AD: Kind of. No, not really. This was good. I enjoyed it. You’re shaking the industry up. You really – you’re offering a platform and bringing in a new category that certainly seems to be not only very timely, just given some of the macro changes that have unfolded, but also just – it’s something that makes a difference for people, and has kind of an impact in really solving some of the challenges in where the industry is and watching it change. Also, I really appreciate you sharing your thoughts around where things are going because I think it’s going to be an interesting ride to watch the professional services as a whole. But I think accounting, given the number element, and technology works really well with numbers. I think you’re going to see that that part of the industry rapidly change.
[0:42:37] CB: Along with the existential crisis of talent that we find ourselves in, it kind of put up or shut up with that as well as where technology is. There are so many factors coming to a head all at one time that it’s going to be interesting, to say the least, it’s going to be scary for a lot of firms, and exciting for others, but we shall see.
[0:42:55] AD: We’ll watch it unfold. Well, I’m going to ask you one final question, simple question to wrap us out, just because it seems to be a hot topic right now. What are your thoughts on the 150 credit hours for CPAs?
[0:43:05] CB: I just replied to a post yesterday on that, so I could maybe regurgitate the high-level point there. My thought is that it’s not binary. I have a couple of thoughts. Number one, I think 150 hours is meaningful if it was specifically in the area of a master’s in accountancy, or master’s in tax. I think that there’s real value that I could get behind. The way that it’s currently set up to just really be a fifth year of whatever is kind of a, I don’t know, it’s a dog and pony show. It just, to me is no value, but it’s just to increase the barrier to entry to give us some perceived benefit of being more educated, more qualified.
But the simple reality is that an extra 20-plus hours in underwater basket weaving does nothing. The fact that you’re taking away a year of experience from that license, someone who’s done a year of underwater basket weaving, and only has one year of experience for someone who did four years of traditional undergrad work and has two years of experience. You cannot give me a logical reason for how the former is better than the latter. It’s all about industry work, being in public accounting is where you actually learn. All you’re learning in school is how to learn in public accounting.
The experience that you have in public accounting is what actually makes you good. The same way that a doctor isn’t good out of medical school. They’ve got to be in practice, practice. The whole idea of practice is that you’re getting better as you’re practicing. That’s why we practice. All of that to say, I think the 150-hour requirement as it’s currently set up has a major hole in it. There are also issues, even an issue that I’m encountering myself, where I was licensed in California, under the old rules, had my two years. Didn’t have 150 hours. I moved to Nevada, and Nevada says, “Well, you have to have met our requirements when you got licensed in whatever state you got licensed.” AKA, you have to get 150 hours, because that’s what it was in Nevada when you got licensed. I can tell you without a shadow of a doubt that there’s no way in hell I’m going back to school for 25-odd semester hours, just to be able to transfer my license to Nevada. I will sooner leave Nevada than I would do that.
[0:45:42] AD: The thought of it is crazy.
[0:45:43] CB: It’s wild. I mean, the other thing too, that’s underlying all this is that education has a substantially worse value than it historically has been. If we’re talking 20, 30 years ago. I might say, “Well, the money and the time I would spend to learn whatever I’m going to learn in those extra semester hours, I could justify that.” Now, with what it costs, with what the alternatives are in terms of podcasts and other sources of information that are free or very minimal costs, I can’t justify that other than if I have to do it to check a box.
[0:46:20] AD: Hundred percent. It’s definitely a barrier that doesn’t need to be there, in my opinion. I see what you said, there can be value if it’s structured appropriately. But the root of it, when we talk to anyone who’s practicing in public accounting in any professional knowledge base career, and lawyers will say the same thing, despite three – your base of knowledge you learn, but the real knowledge is getting in the job and having the practice.
[0:46:41] CB: Yes. I mean, I can’t tell you how many times I’ve had the conversation with people that say, “Okay. You learned how to do something in a vacuum from a theory standpoint, that if there was no time or economic constraints, sure, we would do it this way. But in a small business, we can’t do it this way. It does not make sense. We’ve got to bridge theory to reality and have quality, but there’s a ton of learning bridging those gaps.”
The other thing I would say, and this is me on my soapbox, I recognize. I believe people will go through most hurdles that are put up in front of them if it’s worth it. So 150 hours is a big barrier, because it’s another year, it’s more cost. There’s a lot of reasons why that’s now a higher barrier to entering the profession. But people will still do it in sufficient enough numbers if it’s deemed worthwhile for them. But the real problem we’re dealing with is that, even if we were not at 150-hour requirement, I don’t think we’d be substantially in a better position from a talent perspective, because salaries have been too low for too long, and employment experiences have been crappy for way too long.
All of that information is documented on Reddit and other forums for would-be accountants to read, and they’re reading it, and they’re like, “Okay, I’m going to go through 150 hours of coursework, have all this debt to earn maybe $6,000 out of school while working anywhere from 40 to 100 hours, depending on the time of the year. I’m going to be treated like I’m reading about on Reddit, as a robot as opposed to a human being. I’ve got much better alternatives. I could just not go to college and learn how to code and make six figures immediately.” I mean, there are just way too many better alternatives for what accounting has historically offered. I think you’re just getting a savvier individual that’s evaluating their options more critically than they have historically.
[0:48:56] AD: There’s a lot of different pathways to be successful in today’s world, that we’re more narrow historically. The narrowness of it before used to allow the traditional partner, or hierarchy model to play out pretty fine, because you knew that there is always a line of people that were willing to take it, bear it out, and work their way up because the reward is great at the top. But now that there’s different ways to get to a different top, I think that people aren’t as not as desirable, in all fashion.
Great thought there, great advice. Again, Chase, I appreciate you sharing the thought. This was a good conversation. You’re definitely bringing a different approach and a change to the market. For listeners that might be interested in learning a little bit more about you and Dark Horse and everything you all are doing, how can they get a hold of you? What’s the best way to get in touch and to learn more?
[0:49:45] CB: LinkedIn is kind of where I’m most active in terms of social media. My name is differentiated enough that I’m pretty easy to find and connect with. Also, abetterway.cpa is the web domain where we’re talking about what our offering is to accountants, so they can learn really just about anything they want to know about what we’re doing for accountants, and what our value proposition is to them at that site. Then, darkhorse.cpa is our client-facing site, which is our main traffic generator. But yes, those are kind of the three areas to dive a little deeper. I’m more than happy to have conversations with folks that want to reach out with LinkedIn to schedule some time with me.
[0:50:27] AD: Well, awesome. Well, thank you. Make sure if you’re interested to learning more, reach out to Chase. Chase, again, I appreciate you coming on here and sharing your thoughts today.
[0:50:33] CB: Absolutely. Thanks for having me, Alex.
[END OF INTERVIEW]
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