Jeff Phillips, CEO of Padgett Business Services, helps entrepreneurs start accounting firms through Padgett franchises. Jeff is also Co-Founder of Accountingfly, a hiring platform that matches firms with CPAs.
Jeff speculates that the Great Resignation may push accountants to question their goals and perhaps encourage them into entrepreneurship. Padgett is there to help accountants seeking a turnkey way to open a firm.
Based on his experience with Accountingfly, Jeff advises entrepreneurs to raise money only with a minimally viable product (MVP). This keeps investors happy and relieves some of the pressures of being a startup founder.
Jeff Phillips plays both sides of the entrepreneurship coin.
In 2012, he founded Accountingfly to help accounting firms with the hiring process. He went through fundraising rounds and acutely felt the pressures of running a startup. Today, he’s handed off Accountingfly’s work to its team and is proud of what it continues to achieve.
Now, as CEO of Padgett, Jeff is able to help entrepreneurs in a completely different way. The franchise opportunity that Padgett offers gives those wanting to start their own accounting firm a launchpad without all the legwork of establishing a firm from scratch.
In both areas of his career, Jeff celebrates the benefits of remote work for accounting. He credits COVID for pushing the industry out of the office and into the home, which broadens the hiring pool.
“It was the greatest thing that could have happened for remote work in the accounting profession,” Jeff says. “Everybody realized, ‘Wait a second, there's no one at the office. We're making more money than we did last year. I guess we can be productive from home after all.’”
Fresh off a family trip to Costa Rica, Jeff shares insights from all parts of his career with Karbon CEO Stuart McLeod on an episode of the Accounting Leaders Podcast.
Relying on a remote workforce opens the hiring landscape to far more candidates than looking locally, but what does that mean for compensation? For example, a Midwestern firm hiring locally would pay a far lower market price than what a Californian firm might offer. But if the hiring pool is open to a nationwide search, what’s considered a competitive rate naturally varies depending on location.
“Back when we started remote hiring for our clients in 2015 and 2016, you could hire a remote CPA or bookkeeper for a bit of a discount over the average market,” Jeff tells Stuart on the podcast.
“But when the industry started to adopt remote work more at scale, the Californian firms started setting the wage rates. A lot of firms that used to be hiring remotely started losing their staff because the Californian firms and the New York firms were getting people in Minnesota, Oklahoma, and Nebraska at Los Angeles wages.”
Jeff says that he’s gotten pushback when hiring a remote bookkeeper for a small firm, often because the cost is much higher than expected. He compares the accounting wage market to the housing market.
“The market wages are determined by a market, not by your opinion or how you feel about it. It’s the same with selling your house—you can ask 50% over, but you're not going to get it. The market decides that and wages are decided by the market as well.”
Remote work also affords firms the ability to move away from the ‘one gas tank’ model of getting clients.
In the past, it was common to find clients by searching for businesses that were one gas tank’s drive away from the office. But with many offices disappearing in favor of working from home, regionality can now be traded for focusing on a specific niche.
“[The one gas tank mindset] was driven by the fact that we used to do pickups and drop-offs [of paperwork]. What's changed is, I can go and build the accounting firm that serves dental offices around the entire United States, or I could go serve advertising agencies,” Jeff elaborates.
Being able to hone in on a specific industry or niche is a novelty for many firms. Traditionally, outside of operating in a large metropolitan area, there wouldn’t have been enough clients to sustain a niche accounting firm.
Now, the ability to specialize means greater potential for efficient and streamlined work—helping firms maximize profitability.
With many accountants retiring and selling their firms, there are more opportunities than ever to become a business owner in accounting.
But it wasn’t that way in 2012 when Jeff first started Accountingfly. While Jeff doesn’t feel it’s completely solved the hiring problems in accounting, embracing remote work is a huge part of the company’s success.
“By being an open firm, embracing remote work, and making some changes to workplace culture, firms could hire people who want to stay in public accounting and accounting in general,” Jeff says. “[Employees] want to serve clients but they don't want to work for shitty employers. And so we wanted to make better employers and help them hire people.”
Though in a better position now, Jeff admits to being worn down by the grind of entrepreneurship early on. He describes how Accountingfly initially raised funds to build software to solve a specific problem—only to find that it wasn’t as effective as hoped.
The important lesson Jeff gained from this experience: always have a minimum viable product (MVP) before raising funds.
“Don't raise money on a hope and a prayer of a business. It's got to have validation,” Jeff advises. “Now I could do it and be very successful if I did it again. But gosh it was hard.”
Weary from the long haul of being a startup leader, Jeff jumped on the opportunity to join the full-service accounting company Padgett in 2020. Jeff sees Padgett as a way for entrepreneurial accountants to start their own businesses without starting from nothing.
“My hunch is that the Great Resignation is code for ‘reevaluating my life and my career.’ I wonder if it will lead to a rise in entrepreneurship,” Jeff speculates. “I'm hoping to see a lot of people start firms in the profession as a result of this.”
With a resource like Padgett, new franchise owners don’t have to go the startup road alone.
“[We] do the R&D to have a viable technology stack. [Franchise owners] want us to be able to answer tax questions that they are getting from clients that they don't have time to research,” Jeff explains. “So we have an entire research staff. They want to be a part of a community—we have an awesome community of our owners. They have a playbook on how to make money in the tax and accounting space.”
Jeff hopes to see more young accountants interested in owning their own firms, and for Padgett to be a springboard to their success.
Recommended reading: How to keep your remote team engaged, supported, and connected
So what’s the secret sauce for the ‘perfect’ accounting firm? Jeff doesn’t think it boils down to any single ingredient.
But one important factor: understanding your firm’s identity—that is, knowing what the company does well and what is better suited for another firm. Part of that identity is knowing how to price with what he calls “aggressive, value-based pricing”—not overcharging just to do it, but also not undercharging to pick up more clients.
The perfect firm stays true to its mission and provides a supportive workplace for its employees. Delegation is also key, helping leadership stay focused on direction while smaller matters move downstream. Along with that, the firm needs to serve its owners.
Jeff cites the popular business book, The E-Myth, to explain this final point. “The whole premise of E-Myth is when you start a business, the purpose of the business is to support your personal life. It's selfish in that sense. You are not your business. Your firm is the supporting mechanism to run your own life.”
As an example, Jeff describes how his wife opened an interior design firm when their children were young. Accountingfly was in its infancy with a long road to profitability, and they had a goal of sending their kids to a certain private school. Thanks to her careful strategy in developing a business that served her needs, they were able to meet their personal financial goals.
So whether an accountant wants to start a firm from the bottom up, purchase an existing firm, or get help from Padgett, opportunities abound for today’s entrepreneurs. Keeping to Jeff’s advice as a guiding star will lead to success: make sure the firm serves the owner’s needs, maintain the firm’s identity, and find the right balance of remote work to satisfy staff.