And that should be their firm, says David Wurtzbacher of PE-backed accounting firm platform Ascend, so they can spend the vast majority of their time working on the business, rather than in the business.

Transcription:

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Dan Hood (00:04):

Welcome to On the Air with Accounting Today, I’m Editor-in-Chief Dan Hood. It’s not uncommon for managing partners of accounting firms to keep up a book of business, but that might not be the best use of their time. Here to talk about why firm leaders should only have one client is David Wurtzbacher. He’s the founder and CEO of Ascend. It’s a private equity backed accounting firm platform. David, thanks for joining

David Wurtzbacher (00:22):
Us. You’re welcome. Thanks Dan for having me.

Dan Hood (00:24):
Yeah, thanks for joining us. This is a really interesting topic and one that I think a lot of managing partners sort of think about and struggle with, but why shouldn’t they have a book of business? I think a lot of them think it helps me stay in touch with clients, it helps me stay touch with technical issues, what the firm is doing, what problems the firm, some of our service lines may be involved in, and it really helps me stay with clients and clients are hugely important. So why shouldn’t they have a book of business?

David Wurtzbacher (00:50):
It’s a great question and I can definitely understand the perspective that having a book of business can be a positive for a lot of reasons. And after all, a lot of folks who become managing partners got to be CPAs and in this profession because they were passionate about serving clients and doing a great job for them. My provocative sort of outsider view, and by the way I’m not a CPA, is that in the long run, putting the firm last as you elevate clients into the first position isn’t the best thing for clients in the long run. And what clients in the long run need is for you to run a great firm that attracts great people and keeps those people so that those people can do a great job for clients. And so the role of leading your firm is of paramount importance.

Dan Hood (01:44):
Gotcha. In the theory that if you’re running the firm, you’re making the firm better, the firm’s better, it’s serving clients better, and the people who aren’t you who are actually working with the clients are in a better position to do that and deliver higher quality services.

David Wurtzbacher (01:56):
Yeah, I really believe that. And there’s so much very good discussion about, hey, we’ve got this pipeline problem, this talent shortage, what causes it, right? And people will talk about entry level compensation and the 150 hour rule, and these are all barriers in one way or another. But my view is that the cause really is more fundamental than that, which is that for many decades the profession just hasn’t had strong leadership in CPA firms and it’s not coming from a bad place. CPAs are great people and they want to put clients first, but the last decade especially has been so difficult. There’s so much technology transformation, you’re going through the great resignation, covid stimulus changes to the tax code. Everyone is so burnt out and people don’t teach you how to lead and manage when you’re in school. So something you learn on the job. But I think people who really step into a full-time position in their firm are going to create a better place to work, which is going to be better for clients in the long run. Right.

Dan Hood (03:05):
Well, and they’ve spent, there is always enough work to do, right? There’s always enough client work to do that. I think a lot of it’s very easy to say, well, I’m just going to serve the clients. I don’t have time figure out all the things I don’t know about leadership. So I think you’re right that all that decade, it’s made it much easier to work in the business as opposed to on the business. And I think we’re getting ahead to answering my next question, which is if they’re not working on clients, if they’re not serving a book of business, what should they be doing? What should they be doing instead of client

David Wurtzbacher (03:37):
Work? I like what you said there about drawing a contrast between working on the business and working in the business. I think the mark of a true CEO is that they’re spending 80% of their time working on the business.

Dan Hood (03:51):
Got you. So they’re out there, they’re taking a step back and taken the 10,000 foot view. But this raises up, and I think this is a very specific question I think that a lot of accounting firms are going to have a problem with, they’re going to have with this is if they’re not doing that 80% of their work, how do you set compensation for ’em? If they don’t have a book of business, they don’t have billable hours, how do you measure the value that they’re bringing or how do you reward them?

David Wurtzbacher (04:17):
CEOs ultimately are measured on the long-term financial performance of the business. And as they elevate out of work, it’s a little counterintuitive. You think, oh my gosh, if I don’t work on these clients, my revenue’s going to go down. But actually elevating to your highest and best use and working on the business such that you have the right people working on the right clients and everything’s working well in your firm will actually produce more growth than if you get behind the keyboard and try to do it all yourself.

Dan Hood (04:46):
Gotcha. Right. So you’re creating, helping create work for other people, other people at the firm. Well, let me ask you, because this raises another question. I’m just all about raising up problems. That’s what I’m raising, problems, objections. But if I’m a sole practitioner, obviously I can’t delegate that work. I’m alone. I can’t just sit back and say, I’m going to work on the firm because no work will get done. And at some point, obviously somewhere between there and the big four, some changes have to happen. At what point does it start to reach a point where the leader of a firm has to start thinking about, Hey, maybe I need to step back from client work or where a firm needs to start saying, Hey, we need someone who doesn’t do client work. Who’s only client? Is the firm itself? Is there a size for that? Is there a number of clients? Is it a revenue number or is there a situation where you look around and go, Ooh, yeah, this is the time where we really need a managing partner who’s more of a CEO?

David Wurtzbacher (05:40):
Well, that’s an interesting spectrum that you paint. So proprietor all the way up to big four, the journey of the first step from sole proprietor to being a larger firm is someone deciding I’m not going to be a sole proprietor anymore. And that requires them to show up and work differently. They’re going to have to decide, okay, I got to have more people to do these things that I can elevate. I think what I see is that if you’re approaching 5 million a revenue or you want to approach $5 million, that’s a really good time to start thinking about how you are spending your time and how much energy you’re dedicating to working on the business. And I’m kind of pulling that number out of thin air. I know managing partners of 50 million firms who are still carrying client loads. So I actually just think that’s a good signal that, hey, your business is big enough and probably has enough potential at that size that it would be really smart to take a hard look at it.

Dan Hood (06:43):
Right. Now, let me ask you, those 50 million firms CEOs there, you think they’re making a terrible mistake. Is that a safe, safe description? Why are they working with clients if they have a $50 million firm? They’re dumb. Can I say that there? No, I’m kidding. Want, they’ll probably know who you’re talking about. I’m kidding about that. But does that make sense for them? Are there particular

David Wurtzbacher (07:06):
Reasons? I think it is. I think it is risky and it may not feel risky in the short term, but there’s long-term risk. And here’s the reason. There is some truth to the saying that if you’re not growing, you’re dying. And that matters a lot if you want to take good care of clients because what happens in a growing firm is growth creates opportunity and reward for great people. And so great people stay, they want to access that opportunity and make more money over time and do a great job for clients. And then success begets more success. And the opposite is just a downward spiral where you great people say, there’s nothing here for me and so I’m going to move on. If you’re at a medium, certainly at a large size firm and the managing partners carrying a large book of business, you are not, in my opinion, setting up the firm to reach its full potential in a way that’s going to attract and retain great people, which as we know is the big nut that everyone is trying to crack.

Dan Hood (08:08):
Right? Yeah. That’s the big current challenge and for the foreseeable future, the ongoing challenge for firms everywhere. But it’s interesting you said if you’re carrying a large book of business. So maybe the next question is for managing partners of 5 million firms who are looking to grow, is it going to be a gradual thing where you say, maybe I’ll stick with just a few clients that I really love or that are particularly headline clients that’re crucial for us, or should they go cold Turkey or is it a thing they can wean themselves off?

David Wurtzbacher (08:38):
Cold Turkey is tough because you need to have somebody to delegate to, right? Because you’re not going to jet us in the clients. And one of the very key roles of A CEO is to design the right seats in their organization and make sure that they have the right people in those. And you actually can be quite strategic and scientific about that. I know it sounds right, people, right seats sounds so fluffy and easy when it’s really actually hard, but you can actually be scientific and strategic about that and you’ll need to be if you want to delegate so that you can elevate. But what I see, and we help our managing partners transform into true CEOs through some processes and programming that we have for them, and the path that I see work the best is drawing the line somewhere. So you say, I have this client base that I work on, but as a whole mix of clients, and some of them are super, super important and the relationships are deep and the rest of the clients are also important, but they do not require me to the same level.

(09:43):
And once you draw the line, you have to create a void because, and you got to do that responsibly. But one of the things that will happen as you try to move some clients over to other people is your clients are going to keep calling you. So you’re in the car and they’re calling you and you’re at dinner and they’re calling you and you’re on your way into work and they’re calling you. You have to start talking to your clients. But hey, I’ve got these. I’m building a great firm. We have so much client demand cause we’re doing a great job this Mr. And Mrs. Client. And so we are developing the future leaders of our firm and there are some questions I will love to personally dive in with you and talk about, and there’s a lot that you need that we have other people that can do a great job for you and creating that void so that your staff can step up. And one of the things that we have seen at our firms, the staff love it. They love getting the chance to step up and do more than they’re doing and participate in intimate relationship with the client. So I think it’s something that you can do gradually, but there is a cold Turkey element in that you can kind of segment your clients and say, Hey, 80% of these folks really could be managed by somebody else.

Dan Hood (10:58):
And certainly at the very least, you can stop taking on new ones. That’s got to be

David Wurtzbacher (11:02):
Yes, absolutely. Excellent.

Dan Hood (11:04):
Absolutely.

David Wurtzbacher (11:05):
And there is an important aspect with new clients that you set expectations properly. You’re going to send, you may go yourself, you’re going to send some other heavy hitter in to go pitch a new client, and they’re going to fall in love with you and they’re going to want to work with you, and that’s okay, but you can’t miss the opportunity to tell them, here’s what it’s going to look like to work with our firm. It’s not going to be me. This is the team that’s going to take care of you, and we are all committed to doing a great job.

Dan Hood (11:32):
Just to clarify, it doesn’t require a CEO O, and let’s call them, let’s make the distinction. It’s artificial, but say managing partners are ones who still have books of business for this discussion, and CEOs are ones who’ve given it up and now their only client is the firm. It doesn’t mean that the CEO can’t be part of the sales process and can’t help with that, but they should be making it clear all along that you’re not going to be working with me, you’re going to be working with the brilliant team.

David Wurtzbacher (11:54):
Yeah. I think in every case I know of the CEO is still the number one client advocate. They’re responsible for new business and the quality of the work and managing the internal processes and bringing in great staff and training them up. Those are all, a lot of that requires working on the business type work, which would fall on the plate of A CEO.

Dan Hood (12:17):
Right. Excellent. You mentioned working with your partner firms at Ascend. I want to dive more deeply into how they look at the CEO versus MP thing and how you work with them on that. But we’re going to take a quick break. Alright, and we’re back and we’re talking with David wba of Ascend. We’re talking about, the question is really, should a managing partner have a book of business? But really the answer is that there’s a whole other set of stuff that CEOs of accounting firms should be focusing on a whole bunch of other roles that they should be playing. And I am going to steal your face delegate to elevate, right? If you say, I’m not going to have this client work because I put together great teams of people who work with clients, and that’s one of my major roles here. I want to talk about, we sort of mentioned Ascend is backed accounting platform where you put together firms, and you can correct me if I’m getting this wrong, but you brought together a large and growing number of super entrepreneurial growing firms, and one of the things you do, you provide ’em a large number of resources, but you also take a hand in a little bit of teaching them, let’s put it this way, a different way to be a CEO, different way to run the firm and involves partly, I think you’ve said one of the things, you require them all sort to have no clients, but the firm.

(13:41):
Is that a fair assessment?

David Wurtzbacher (13:43):
We help them on that journey? Absolutely. The firms that we partner with are very entrepreneurial. They care about their independence, but they want to tap into resources that they don’t have on their own. And so we’re bringing this sort of paradoxical blend of preserving independence, but also preserving resources and doing some things together. But in any case, these entrepreneurial firms are seeking business transformation right in this moment where we’re all facing a crazy pace of change and technology, talent shortage, succession issue, private equity coming in, shifting from compliance to advisory reckoning with the partnership model. It is a really interesting moment in time in the profession, and the leaders of our firms really need to get very serious about their role as CEO in order to enact the transformation their business needs to continue to succeed as an independent firm. And really the hallmark of what we do with someone that joins, we call the CEO Power launch, and we’re actually quite ceremonial about moving from managing partner to CEO, and there are some core lessons that we go through with them. We’re all on a leadership journey together, and it’s really fun to walk it together. Right.

Dan Hood (15:05):
Well, can we talk a little bit about that transition, what that transition looks like? I mean, we don’t need to, I’m not asking for names and specific instances, but is there as a standard path you see people taking from, as we said, from MP to CEO?

David Wurtzbacher (15:20):
Yeah, I think there’s a framework that we suggest to them that might be helpful to share. And wherever you’re curious, we can dive in a little bit. I think the biggest challenge for anyone that comes from this profession and is thinking about what does A CEO do is really just embracing the mindset that the CEO role is so different. That’s a big mindset shift, and you really have to unblock it in order for the evolution to occur. So we start with the person, the leader who needs to, they got to transform themself before they can lead and transform their business. And then we talk to ’em about setting vision, right? Seats right people, and the culture. Then we go into prioritization and execution. So we kind walk through the CEO role in that order

Dan Hood (16:07):
Right now. Do you find that most of your partner firms, that their leaders have books of business, that this is a thing that most of them or some of them, what percentage of them do you think come to you with books of business? And one of the things you say is, Hey, you get

David Wurtzbacher (16:24):
Almost every time. I think once there was someone who had no clients that they worked on, which is pretty impressive, but almost every time they have some book of business, the question really is about quantum. Is it a big book of business or have they managed to work it down some,

Dan Hood (16:41):
Right? Do you find that it’s a hard sell, convincing them to give it up? Do they recognize, oh, yeah, right. This is the goal. Let’s point it out again. Your firms are top tier, super entrepreneurial. These are people who are already thinking about, as you say, thinking about the transitions they need to make. Even if they’re not necessarily thinking about, if they haven’t got wrapped, their heads completely around it, they’re prepared for it. These are some of the most forward thinking firms out there. Are they ready to embrace it or do you find like, no, no, we really got to explain it.

David Wurtzbacher (17:16):
It kind of goes back to something we said earlier, that you don’t learn this stuff at school, but an entrepreneurial managing partner, they kind of understand, I don’t have the whole playbook or the toolkit here. I know I need to evolve as a leader, but I’m not sure exactly what to do. And the Ascend team is a lot of people from other industries that have become deeply passionate about public accounting, but we can bring best practices and frameworks from other places where leadership development has done very well and bring that here. And what I actually see most often is this release of entrepreneurial energy when they finally have their aha moment, this is what I need to do. This is my place in the organization.

Dan Hood (17:58):
Right? Yeah. You would think, I mean, I would think for leaders who are already thinking about all the things they want to do with their firms being shot of all this work being freed from, it would be like, aha, now I’ve got four hours extra in the day, or 20 extra hours in the week, or whatever the case may be, or now I don’t have to stop building the firm during tax season focusing on whatever else.

David Wurtzbacher (18:19):
Oh, that’s such a good point. And it would be understandable to have a little skepticism about, gosh, what you’re describing sounds so easy. It sounds like you’re encouraging them to do nothing, but it is far from that. This is the hardest work there is, and it requires lots of deep thinking and strategy and people management it. It’s a tall order.

Dan Hood (18:46):
Yeah. Well, the eye is closed, sitting alone in your office, not doing anything, not on a phone call or anything is actually some of the most productive time a leader can spend, right? It’s that internal thing. And I’ll also just go back to you talking about the finding the right seats on the bus. Anyone who’s ever put together a wedding seating chart, you understand this is not an easy thing. This is never easy fight. Well,

David Wurtzbacher (19:06):
Here’s actually a very interesting comment on that. So when you’re planning a wedding, you’ve got all the people that need to come and you put the seats in the right place. That is actually, if you were to translate that into a business setting, that would actually be very limiting to you. What you should do instead is design your org chart. So these are the seats that I need to achieve the vision that I’ve set for the company. Maybe I need a marketing person, maybe I need service line leaders, what have you. And then you go out and you either promote people into those seats because you have a strong belief that they can be successful against the objectives that you need from that role, or you go outside and find someone who can be successful. But I think something that can trip you up as you try to elevate and start to work on your business is you are not constrained to use the people that you have to think deeply about the seats that you need and then go get the right people to operate on the

Dan Hood (20:08):
Roles. But honestly, these days, it also requires some creativity in looking at what you’ve got. I mean, I think there are firms that have found, I’ll tell this story and about Alan Colton, he’s told this story before that when he was a staff accountant, he got called in and the head of the firm said, I want to fire you as a staff accountant, the worst accountant I’ve ever had, but I want to hire you back immediately. And he ended up being in a sort of a marketing role because that was where his genius lay at that point, I think. So you’re quite right that you shouldn’t be constrained by who all is there, but on the other hand, you also have the option of saying, who do I have here and what skills do they have that I might be able to take advantage of in a different way? In the same sort of way, as you say, the best use of me as a managing partner isn’t serving clients. The best use of me is building the business. You may look around to your staff and say, the best use of you isn’t doing tax returns. The best use of you is going out and selling, or the best use for you is going out and recruiting or whatever the case may be. So yeah, certainly.

David Wurtzbacher (21:05):
Yeah, I love that story. And it sort of highlights something that I think is actually pretty hard to do in a very busy resource constrained CPA firm, which is take time to get to know each other. And that’s something that a leader does is they get to know their people, they understand what they’re good at, what they’re not good at, what they’re interested in, what they’re not interested in, where their ceiling is, where they want to go professionally in their career, what are they solving for in their life, and that creates all the different puzzle pieces that you can begin using to put everyone in the right seats.

Dan Hood (21:38):
Very cool. Very cool. Let me ask you, you’re a CEO yourself, but I’m assuming you didn’t come from an accounting firm back. I know you didn’t come from an accounting firm background, but I mean, as a CEO, was this a lesson you had to learn or is this a thing that, because if you don’t come from a partner and the managing partner background, it might come have a different impact on you, but how do you relate to this? The notion of the CEO is having only one client.

David Wurtzbacher (22:03):
I tell this to our firms. I have a lot of humility about this because although I now have a lot of clarity about what a CEO should do and what a CEO should not do, my journey to figuring that out was very circuitous and a lot of trial and error along the way. A lot of reading. I’m very fortunate to have been the beneficiary of great wisdom from mentors and executive coaches over time, which I would encourage people to seek out as they’re on this journey. And Alpine Investors, who is where we raised our private equity money is really known for leadership development, and I’ve benefited a lot from them too. But the thing that is so interesting about being a CEO of a growing company is the role is always changing, always. I’ve never been a CEO of a company exactly like the one that we have today at Ascend, and I could have said the same thing a year ago. And so that’s one of the fun roles of A CEO, I think, is to constantly scope and re-scope, re-scope the role because the needs of the business change as it succeeds.

Dan Hood (23:04):
Well, yeah, if you’re doing your job, you’re building a different firm,

David Wurtzbacher (23:07):
Right?

Dan Hood (23:08):
That’s right. Your whole job is to create a different new job for you to do

David Wurtzbacher (23:13):
What got you here will not get you there

Dan Hood (23:15):
Exactly. On both the firm level and the individual level, right? As you grow bigger, you’re going to have different sets of challenges and different sets of opportunities. So it’s fascinating, and again, like so many other things with change, if you successfully manage this change, your reward is to be faced with an entirely different change to manage,

(23:33):
Which I guess some people think that’s a reward. I think it’s more of a punishment, but there you go. That’s why I’m not a leader. We could dive into a lot more specifics of this because it is a difficult transition, both because accounting has not often thought about managing partners this way, and a lot of people, the traditional model has not encouraged them to be this kind of single client, single client. I’m using air quotes that you can’t see as you listen to this podcast, but to have the client firm be your client as opposed to the firm is just something you help manage when you’re not working with clients, but also because it’s a different kind of leadership than most people are used to.

David Wurtzbacher (24:13):
One thing that might be really refreshing for people to hear, just because I know how burnt out everybody is top to bottom in organizations, we’re saying, take care of the firm first. That’s going to take care of your people, your people take care of your clients. You can actually go upstream. One more click, which is take care of yourself as a leader of a firm. That is part of your job, to take care of your mind, your body, your spirit, your friends, your family, your community, your health. And if you do that, it allows you to show up with an energy that everyone in your firm needs from you. And so I really believe that embarking on a leadership journey, if you’re a managing partner that has a book of business or maybe you’re someone who envisions yourself, becoming a managing partner by way of a great book of business, the leadership journey to transforming yourself to a true CEO can really be freeing in a way that I think people in this profession really are desperate for,

Dan Hood (25:05):
Right? I mean, I would say that is a spectacular point. All the most successful people I’ve ever talked to, successful leaders I’ve talked to and in inside accounting and out all prioritize, I don’t want to say they prioritize themselves, that’s not really the right way to put it, but they make sure that they look after the health, health, make sure that they get their exercise in, they make sure that they are carving out time to be with their families and to do interesting things, things that interest them beyond their day-to-day work. They do make sure that they are, as you say, able to show up with the energy they need to do, to do the job appropriately.

David Wurtzbacher (25:35):
Yeah, it’s good for them, and it also sets an example that I think will help us retain great people in this profession. Yep.

Dan Hood (25:42):
Awesome. Well, as I said, this is a topic we could dive a lot more into, but we’re running up against the constraints of time. Any final thoughts on this transition? Any final words you would leave people with as they think about, Hey, should I really get rid of my book of business? Will that really make my firm better?

David Wurtzbacher (25:57):
There’s a phrase that we use a lot at Ascend, which is about, be careful about limiting beliefs. So these are beliefs that occur to you when you think about the potential of something and it just completely shuts down your thought process. Oh, I’d love to do that, but I can’t because of this reason. And limiting beliefs can be conquered. It starts with a personal mindset that I can overcome this limiting belief. I can ask myself instead, what would have to be true for me to be on this journey? And then you can go and work on making it true bit by bit, but I would just encourage anyone in this profession to watch out for limiting beliefs and don’t let it get in your way.

Dan Hood (26:41):
Absolutely. We can put together a list of firm leaders who do this to prove that it can be done so that when you absolutely run up against that limiting belief, you can say, yeah, that didn’t limit these people. Great advice. David Wurtzbacher of Ascend. Thank you so much for joining us.

David Wurtzbacher (26:57):
Thanks, Dan,

Dan Hood (26:58):
And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Adnan Kahn. Ready to review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guests, and thank you for listening.