CPA firms are often more productive and profitable when owners work less, according to Brannon Poe, CPA, owner of Poe Group Advisors in Charleston, S.C.
Here below, Poe, who has more than 15 years of experience buying and selling CPA firms, explains how delegating work can free owners to focus on what matters most. He also gives advice for determining which work you should delegate and how to do so with fewer worries.
“Firms can actually be more profitable and more productive when owners work less”.
That almost seems like a contradiction in terms. Can you explain how that’s possible?
I think a lot of CPA firms — maybe less so now than used to be the case — a lot of them are high owner hours, high hours in general. It’s very easy to get caught in the weeds when you’re working on a day-to-day basis at that sort of high level — or high hours.
So, what we see is a lot of owners don’t take that time to back up, take time away from the practice to get perspective on the practice. Years ago, I had a client who I was talking to him about his practice, and he let me know that he was going to be unavailable for about a six-week period. I said, “Well, what are you doing?” He said, “My wife and I are going on a vacation. We’re going to be gone for six weeks.” I said, “How do you do that?” He said, “The first time you do it, you wonder. You’re literally in the airplane, taking off, leaving your city, and you’re looking down and saying, ‘Gosh, I hope I have a business when I come back.’” He said, but now — he’s been doing this for years and years.
This guy had a really profitable practice. He had high margins. I think his cash flow to owner was over 60%. It was a one-owner firm. It was a really excellent firm, and he was able to do this. Obviously, he had a wonderful team that held things down. He had great clients. Those all take time to build. You know, if you’re building a firm, that takes time to hone in on. But you know, think about that. What happens when you go on vacation?
Everybody can probably relate to this if you take a true vacation where you’re not working when you’re on vacation. But you have to plan for it. You have to prep your team when you go. Often you have to let your clients know that you’re going to be gone for a little bit. So, all of that planning really helps. Then when you go and you unwind from the business, you often come back to a fresh perspective.
You have new eyes on the business. And you have more energy than you had before. So, that’s a perfect example of how working less can actually help you improve your business.
Our observation in selling practices has been that often the people who have the most balance in their schedule are the ones that are the most successful.
Are owner hours something that people track and report when they’re selling or buying a firm?
They do. We always ask the question. I don’t know if they’re tracked and reported to 100% accuracy. I doubt they are. But I think people generally have an idea of what their schedules are like and how much they work. But it’s definitely something that buyers today are more and more focused on, more so than they were even five years ago, much more so than they were 10 years ago. So, owner hours, it’s important when you go to exit. If the business is built all around the owner, it’s not going to have as much value.
So, to be able to reduce your hours, you need to be good at delegating work. Is this something that owners tend to struggle with?
They do. I think that is the key to building a better business.
It’s like the key is letting go. And, I mean, I struggled with this early on in my career. So, I think the profession sort of rewards perfectionism. Mistakes are expensive; you don’t want a mistake on a tax return, or an audit report, or anything. The work out the door, the quality, needs to be high. So, that’s the environment for perfectionism. CPAs often are detail-oriented anyway, so delegation is something that has to be practiced and worked on.
How can an owner know what they should be delegating and what they should continue doing?
Well, it’s not as hard as you might think. We created this tool; we call it the Three Bucket Tool” You can recreate it; it’s really simple.
You take a piece of paper, and you draw two lines to make three columns down the paper. In the left column, we put “Keep”; it’s the keep column. The middle column is “Delegate One Day.” The column on the right is “Delegate Now.” What people find is that the stuff they want to keep is pretty easy to determine. Just as a guide, if you like something, if it’s high value, if your clients like it, you probably should keep it. The “Delegate Now” is also a fairly easy column because you know what you don’t like. You know what someone else can probably do just as well, if not better, than you can do it. So, those are fairly easy. The middle stuff is either you don’t have the team member to hand it off to or you don’t have a process yet.
So, that middle column, unfortunately, is the longest list of things that you want to delegate one day. That little tool can help give you a vision of what to let go of and rearrange your schedule.