Firm Studio exists to be an innovation flywheel for the accounting profession. We allow the users of accounting tools to be able to participate in the value creation and capture of making those tools for themselves.
Simply put, firms are solving problems at scale that turn into software by which other firms can participate by becoming a channel and/or a capital partners.
I recently read about a TR heiress and her mansion in a WSJ article. The home was something north of $10M and she rarely used it, so she sold it and made money. That's capitalism and that's totally fine, but it also summarizes the vendors in our space.
Innovation from decades ago is still lining the pockets of the uninvolved and the uninterested. This is true in many spaces, but it's time for a different reality in the accounting profession. Time has been favorable to the creators, allowing people of all walks to participate in tool creation. It's no longer just for the deep pockets, the public companies, or PE backed groups. It's for anyone, and in our case, any firm and any team.
Audere est Facere – ‘To Dare is To Do’
What follows is the above argument, or posit, for why FirmStudio should exist through three lenses:
- Philosophically
- Principally
- Practically
If you are on a deserted island and have a net-worth of $1B, how would you use your money? The answer...you can’t. I believe this is the position firms will find themselves in before long, if they aren't there already.
For eons, wealth typically has provided leverage over people to allow those with capital to persuade others to do their bidding. Much like the island where your wealth provides no shelter, no labor, and no sustenance, it is becoming like this inside of the accounting profession.
Chargeable hours of partners are climbing as they have no real capacity beneath them to do the work, so they must do it themselves. They must kill it, skin it, cook it, eat it, and take out the trash themselves.
Capital is less useful than ever in the professional services firm model. Sure it's great for net partner income, but not great for lifestyle (which is why you have the capital), which more and more partners want for themselves now and not just to leave it for retirement.
So, given we have more capital with less leverage, how else can we spend that capital once again affording us leverage? Technology, but of course. As stated, this should not mean more for TR, CCH, Intuit and the like. That would be a bad vote because they take your capital and distribute it to the uninterested, but how can firms be better allocators of capital in the technology arena?
It's fun to win a new client. That joy has not gone away, but most firms are solely concerned with keeping their team so they can appease their current client roster.
Gone are the MPs that are obsessed with the firm down the street or partner groups that spend too much time talking about so-and-so’s new landmark deal. Rather, the enemy is lurking inside each of our firms and has us finally worried about the right things: building sustainable businesses around a healthy model with a great team.
As this scarcity mindset wanes, more firms will join forces to fight the tide instead of bickering about table scraps. We have seen the same thing in sports over the last decade. As the bigger picture becomes clear, the smaller picture matters less (ex. players being friendly with each other). The profession's problems are more existential than ever and people are finally waking up to this reality. Sure, there will also be a partner who is a certain kind of cutthroat tyrant, but those people will hollow their own businesses out all by themselves.
Our firms' tech roadmaps (which is synonymous in many cases with business roadmaps) are being held hostage by the legacy providers.
These tools we use from the large providers today are the slightly more attractive cousins of what was created 25 years ago. The tools created then were sku-morphic -mimicking online to feel like offline (think original Library app on the iPhone with wood panels), and many have kept true to that heritage. Thus, terms like binder and organizer still exist in pretty much the same form. They have forever been embedded into the apps, which means they have not been rethought through a better lens from the ground up in quite some time. It's time for a reframing of the tools we use, and who better to do this than the experts of the profession.
On top of the above, even vendors that would like to have a change of heart cannot due to the debt levels and/or shareholder conflicts of interest they have accrued. Their bank covenants will not let them slip on their EBITDA, thus reducing what they can spend on innovation. Their executives comp packages likely solely depending on all these watermarks reinforcing the stayed hubris. And as Bezos famously opined, your margin is my opportunity. In this case, so is your debt.
Fish and water. Humans and technology. It's about as ubiquitous. Thus, the centralized function of technology within firms and business will cease to exist as there is no longer a need for a separation.
There will not be IT Directors in the very near future at our firms. The role of an IT Director implies there are non-IT aspects to the business. The line leaders of various services will have autonomy to pick and choose the tools of choice and be viewed as COGs vs. a line item in the budget called IT.
This movement in our firms, and it's already begun, will bring with it countless new apps that are hyper specialized to fit each unique business. Each unique business segment with its unique-isms will eventually have a tech stack that supports it. Sure, the ClickUps, Monday.com, Salesforce, Microsoft, etc. will all have a broad appeal because there will always be some universal functions.
Think of the perfect GL app for a brewery: a GL made to interact with various modules, but perhaps an inventory module that is monitoring grain prices around the world and will auto-purchase your next round of supplies based on limit orders pre-arranged while also valuing your inventory, adjusting your balance sheet, making it easier for your audit firm to trust the numbers, which allows your bank financing to move faster because...you get the point.
This is where we are headed at large. Every business type will have tools that will be so unique to their niches that firms will have to match to win (or to keep) them as clients.
The pinnacle of a firm's technology is one that is integrated into their target clients' daily use.
I say 'target client' because, by and large, really good practitioners will be able to pick a lane or two and make a boat load of money while not sacrificing their team or their lifestyle due to systems working for them, enabling them to do more with less.
To be all things to all people/businesses is antithetical to scale. It's hard to get to the pinnacle of the hierarchy if your users can’t have an integrated tech stack and/or proper training around it. Try being good at seven apps let alone seventy apps. It's hard to do and even harder to scale.
They are pillaging firms over using data that should belong to the firm and their clients, and they're being ransomed via API access fees. Lately, they even have APIs and brag about them like someone in 2012 who started banking and shopping online. They are easily five years late to the party.
Staff turnover is glaring. People who know accounting are gone or going and people with business degrees and MBAs are coming.
Insert healthcare analogy here: doctors to administrator ratio we will go!
All for educated people, but there is a difference between a person with degrees and someone with real knowledge of billable client work and tax codes.
More managers and sales = less support and developers (i.e. product getting stale, yet more ways to skin the pricing cat and have your bill climb by %%.) Between their margin % and these costs lie a tremendous amount of opportunity for the new creators. Remember, they can’t invest because of their bank covenants that tied them to cost cutting versus value creation. If and when they buy a new company or tool, they take on more debt to do so, furthering their entrenchment to cost cutting and price increasing.
Trading time for money is exhausting. It's time to rethink the model and have a layered revenue approach - i.e. core services (sure, time will always be a thing) that are enabled by core tech that the firm had a piece in creating.
Monkey punching in data is sucking hours out of an ever-declining inventory of hours, and no matter how profitable they are (i.e. realized), it will still push out staff. We must find hours by taking hours out of the current production cycle. As long as we trust the legacy vendors, this won’t happen.
Firms, now more than ever, should fire their ‘non-fit’ clients to create downstream opportunities for other firms. Non-fit will eventually mean tech stacks. (check out a Firm Studio company helping firms scale profitably)
The CPA firms I know love to help tech vendors get it right because that means they can get their day job done more efficiently. I get it - scratch the itch. However, you are selling an hour which has ever-increasing costs v.s. pixels, which has ever-lowering costs.
Tech bros are capturing your value. In essence, we are letting them (non-profession related people and entities) solve our problems for us and make $$$$ while we make $$, which is perhaps the problem. The profession is making more money than ever, which means that beaver ain't eager. But when the wood runs out...ok analogy over...you get it.
Firm Studio is a more complete vision of capturing the value from the trusted advisor status that has been earned while applying the modern angle of software and the lower cost of company/tool creation that is here to stay.
If you are an accountant reading this who has strong belief and resolve around a problem you are solving, PLUS are starting to figure out a way to scale that problem solving, then you are close to the starting line of a new company.
The development, marketing, and capital, amongst other things have never been easier to organize. Sure, it's not easy and perhaps not your forte but you MUST BELIEVE that your domain expertise is the most valuable part of the equation. Boots-on-the-ground domain knowledge related to a specific problem and user experience is pure gold!
Firm Studio's model is to propel you with areas outside of your expertise while fully recognizing it's your vision, not ours. We purely want to be an aid in how you think about go-to-market and nailing the product.
Yes, really.
It could be a unique problem for left-handed CPAs born in a certain month in a specific state. It's a narrow market, but if you charge the right price and the ROI is there, then you may have a great Micro-SaaS company that can spin out $1M of ARR with 40% EBITDA. That could be the whole thing and a huge win. It could support your service niche and get your team out of some of the minutia that take away from their mental well being. Or it could be the start of a broader platform play and only reveal itself one product at a time.
Either way, start to ponder and plan. Holler at us if we can help.
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Perhaps Firm Studio is not the right fit. All good! If I'm you, I am going to dive deep into some product management resources and learn what that process is like. Either become one in your spare time (unlikely), or learn enough to know how to hire a freelancer to be your product manager and start to figure out the product. That should be quickly leveraged into working with a team you assemble to build it.
It's not easy, but you can DIY all day. (See Upwork or Fiverr.)
FirmStudio exists to help those who dare to go and do. Plain and simple.
