Month 4 – A Rising Tide

This month I thought I would take some time to talk about my experience. This story spans more than a decade and follows my unconventional path in the accounting industry. I spent my early years as a humble business services accountant in a reputable Melbourne Mid-Tier firm. I then moved to a role as a tax technical writer with a not for profit with a mission to represent taxpayers in an increasingly complex tax law framework. I tried to come back into public practice with a different angle. Finally, I embarked on the task of owning and building a truly new age, world beating professional services firm.

Most colleagues and well-meaning family think I am crazy, to be fair I probably am mad. I am a natural worrier and so my motivation to follow this path began as a way to avoid the harm of what I saw as the coming disruption of my industry and has ended in the realisation that I am the disruption.

My formative years

I know it is boring, but this is my story and it won’t make sense without context. I started my career in a Big-4 firm in their middle market tax consulting division. After 3 months, I realised it wasn’t for me and rather than tuck my head in and be a good little corporate drone, I rang a mid-tier firm I had interviewed with previously and promptly changed jobs. I recognised two very important things. Firstly, the Big-4 guys I landed with weren’t going to teach me anything I actually wanted to know. Secondly, even if they did I would be their arms and legs for so long that by the time I was allowed to make a decision, my career would be over.

I went into Business Services and started my CA doing 99% compliance at the Mid-Tier. The work was pretty repetitive and mindless. That isn’t to say it wasn’t challenging. For someone who is not naturally structured and organised it was a nightmare (yes I was a creative flower rather than Mr. Organised). Importantly, this job gave me time. Time to think strategically about what I wanted to do. I realised that the accounting industry would be disrupted. Not at the end of my lifetime, but within the next few years. The coding of bank statements and processing I was doing at the time would be largely automated and I was living on borrowed time. I needed a strategy for my career to ensure I did what I enjoyed but also wasn’t left with no skills and no meaningful work when the tide rose as it invariably always does.

I stayed in compliance for all of 2 years and 9 months even though I was mediocre at best in terms of the work. Then I sourced and took a job as a tax technical writer. I distinctly remember being told I was silly to take this new direction after having just established myself at the firm. Notice a theme emerging yet?

This is when I found it. I realised not only that I love tax but that I needed numerous building blocks to build a wall against the disruption and that tax consulting could be one. These blocks could build a boat to float (I’m sticking with blocks to build the boat, but bear with me). Bill stop talking in metaphors! Sorry guys, I needed certain skills to build myself into a professional. A professional with a career that existed in the here and now.

Tax Technical – The first leap of faith

I started this phase of my career with next to no experience in tax technical or advisory engagements. This is unless you count my 3 months at a Big-4 being told how to hole punch paper files so that when they are bound they sit flush.

Back to technical writing, I had great mentors and quickly expanded in my role. I finished my CA and promptly applied for my license as a registered tax agent. I recognised the risk of providing advice and the new Tax Agent Services regime, largely encapsulated by the Tax Agent Services Act 2009 (Cth) and associated regulations and guidelines for those playing at home, being implemented during this phase of my career. I realised the expectations were increasing, the tide was starting to turn and rise.

Once I finished my CA, I started my law degree part time and progressively attacked tax legislation and case law like it was going out of fashion. I developed an almost encyclopedic knowledge of tax rulings and administrative guidelines and almost psychotically dreamed up how the rules could be applied in the real world. The thought experiments and countless hours of advice I poured into my writing were a labor of love.

I however quickly realised I was still missing two important building blocks. The skill of managing staff and the skill to truly lead (oh yeah and implementing the advice I could give, who needs to count past two... Wait, I'm an accountant). I also grew tired of advising lawyers and accountants how they should advise their clients. I moved on knowing the pace of change was accelerating.

Public Practice – Back into the Fire

I was met with sustained difficulty in re-entering public practice. The Big-4 and Mid-Tier were not interested in such an unconventional background. I didn’t fit their mold anymore and frankly, they represented failure to me. These firms were incumbents, while they paid lip service to the disruption that was around the corner, they had strategically decided to either slow down the inevitable change or focus on a different industry all together. These firms chose to try compete with the management consultants and lawyers in everything from IT to the environment. They didn't have the courage to be true tax warriors anymore.

This left the wild, wild west of small firms. I was still viewed with skepticism and caution by these players but was able to obtain gainful employment at a CPA practice that was pretty much entirely compliance based. I spent a short time proving to myself that I could put into practice the advisory skills I had gained as a tax writer in real world scenarios. I failed more than I succeeded but when I was successful it was very lucrative, much to my employer’s satisfaction. Once I de-risked my ability to apply my tax technical ability in this context, I was confident to apply for management level roles in public practice and my employer lost their free ride.

Importantly, I continued to write for tax law journals and publications. I recognised that without the ability to do this, my advisory skills would deteriorate. This took a toll on my personal life but it was a sacrifice I was willing to make (plus, free CPD am I right?). I again faced a market that did not believe an unproven and unknown quantity could manage their accountants. How could a guy in his late 20s and early 30s possibly do things better than the old boys or the young guys who made the safe bet in staying within public practice the whole time?

I was getting used to proving people wrong by now. I also knew what motivated older practitioners, as cynical as it sounds, it is price. So, like a true Greek, I got in my Trojan horse and gained employment as a supervisor in a practice on very competitive terms (cheap, I was cheap).

The young professionals I took charge of were junior but ready and willing to develop. I split my day up spending time either training or managing them. However, I still had to consult and undertake the higher-level engagements that came with the territory. I also had to find time for my law degree and my writing for publications. This time was incredibly stressful but the performance of the organisation was positively impacted.

Further to this, I tried to provide an example to junior staff of what it takes. Despite being driven and ambitious, I genuinely cared (and still care) about the guys I had the privilege to work with. I think everyone's journey makes them who they are and my guys were all fighters.

Not Even My Final Form

My boss was happy to promote me into a Senior Manager position with the chance to have a say and lead the organisation. I jumped at the chance. I was able to institute and finalise the implementation of electronic working papers. I started gaining my own client referrals and building up my profile. The world was taking note.

I quickly understood that I had no idea how to undertake practice management and that the firm needed to move to cloud based accounting to drive efficiency in their compliance and the price point at which these types of services were offered. I also recognised that clients were crying out for advisory services even though they didn’t understand them and often balked at their cost.

My natural affinity for strategy meant that even in management consulting and purely business advisory engagements, I was able to provide services exceeding those of both accounting and law firms. I could offer these at a fraction of the cost and with more expertise and time. The perfectionist in me hated that I didn't feel comfortable in these spaces.

The cashflow and profit of the business increased considerable to the point that another senior practitioner could be hired to assist me. I chose a professional with the same passion as myself, different strengths and abilities and a common vision to progress his career. I was promoted to salaried partner and the firm hired Tom Palmieri as a Senior Accountant.

I promised Tom two things. Firstly, that I would give him the opportunity to consult and secondly that anything I knew that he wanted to know I would outline to him. In return I wanted the same, I wanted the mentoring and skills development he had undergone in his training to become a Jedi in the management consulting and business and automation advisory space.

The A Team - Two Turtles back-to-back

The profitability and cashflow of the practice skyrocketed again under Tom. Tom was promoted to Supervisor and Senior Tax Manager in quick succession. He redesigned the firm’s practice management and implemented a cloud solution to drive efficiency through a single ledger. He did the migration in under 3 months of all firm clients. He then attacked the lodgement list of the practice, improving this and lowering the firm’s risk profile which in turn reduced the occurrence of regulatory audits. He championed the finance and insurance referral revenue streams I had implemented and drove record growth. Finally, together we identified regulatory risks to the firm and went about rectifying them.

I was free to move the firm to a CA designation to ensure we retained unlimited professional indemnity from liability under the PSC scheme when this was taken away from CPA practices. I also bolted on new clients and revenue to the firm in huge multiples. I was able to focus on staff performance and with the enhanced metrics Tom provided, understand the performance of staff and look to hire further staff with different and valuable skills.

I was also finally able to share with someone else the advisory work. The thing was, as a team offering unique skills the value of our advice and the outcomes we could achieve together surprised me but also made me happy. I was finally doing what I should be doing. We were two turtles, strapped back to back, when one fell over the other one kept walking forward (this is Tom's analogy if you cringe particularly hard).

Before the Final Leap

There was a lot of movement in terms of work performed to future proof the business. Both Tom and I worked between 50 and 60 hours a week, tirelessly to ensure the business hit targets but also continued the ambitious change program we envisioned for the firm. We built it the way it should be built. I was working so much that I had forgot where I wanted to be in my career and what I wanted. I missed the fact that I now had all my building blocks.

The next question was what I wanted to do with the blocks. I despaired because despite how hard I had worked, how strategic and methodical I was in obtaining my blocks, I still had weaknesses that meant I needed more blocks.

I resigned from the firm. Independently from myself, Tom decided to resign from the firm as well.

VT Advisory – The Difference

I stand in the same position as I did at the start of my career as a CA. The only difference is that I have a number of building blocks around myself. Fortunately, Tom has a number of building blocks that I don’t have. Two turtles strapped back-to-back as it were.

I finally realise, that the disruption I was fearing all those years ago was myself. Tom and I are harnessing the relentless tide of automation and we are the multi-disciplined professionals that will disrupt the established players in professional services.

We see the new aged firms with their subscription model of billing and outsourced technical ability pushed largely by software providers. I understand why they succumb to the attraction of these business models, they are easy after all. But there is a difference between making a client’s life easy and seeking ease in your professional life.

I certainly agree that making a client’s life easier is worthwhile and I will even go so far as to say tools that help practitioners adapt are also valuable. Having said this, buying in to an easy professional life while seeming attractive, leads to a firm that is homogeneous and only able to race to the bottom of fees for compliance, be they subscription based or fee for service. The fundamental problem is that anyone can replicate this business model (there are no barriers to entry). Simply put, professional services is meant to be hard, it is meant for the Jedi that trains relentlessly to be the best.

The current crop of new age firms typically play at consulting without understanding that to advise is an art that takes years and experiences that are fundamentally different from their peers. It takes courage to walk a different path without knowing if it will mean you will derive reward from it. It means putting your clients before yourself, not just saying that you do while you monthly bill them for not providing tangible benefit. It is certainly not bolting on a third-party application to software and charging a margin for this privilege.

To truly advise you need depth of subject matter expertise. To be an absolute Spartan in applying this expertise to obtain results for your clients that are literally not obtainable by any other professional. This is a high bar, but this is the unfashionable reason why any other firm is still subject to the rising tide and will not be viable when automation comes full circle.

The professional service industry is changing all right, god help the guys who weren’t gathering blocks to keep out the rising tide or building the boat to ride it (again with blocks). I'm done, month four was tops.