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This is your destination for feeling empowered in building your business.
These are the real, raw stories of entrepreneurs and business owners who have built their businesses through the messy middle of $1-20 Million, hosted by serial entrepreneur Matt Tait.
Matt knows what it’s like to scale past the first million, and on this show he’ll be bringing on other serial entrepreneurs and business owners who have been there, done that (or, are currently in it) to share what’s worked, what hasn’t, and what’s next.
Jody Padar [00:00:00]:
What is your job? What is your role as an accountant? To me it would be to impact your customers lives. Not about the data entry, it's not about the work you do, it's not about the transaction. It's how do I have a real impact on my customers life. Whether it means peace of mind that they don't have to worry about the compliance deadline, whether it means that they have enough cash in the bank to pay their employees in the next eight weeks. To me that's outcome based and it has nothing to do with any of the transaction.
Matt Tait [00:00:28]:
Hi, I'm Matt Tait, Founder of Decimal and host of After the First Million podcast. And like you, I've taken the leap not just to start a business, but to scale and grow it. I've hustled from zero to that first million, and now I'm building for the next 50. I know firsthand what the messy middle looks like, and we need more than just numbers. We need strategy, we need community and we need real conversations about what growth takes. In our line of work, scaling beyond a million means going beyond the spreadsheet. This is where you learn how to grow.
Matt Tait [00:01:05]:
This is After the First Million. All right, welcome to this week's episode of After the First Million. I could not be more excited to welcome my friend and accounting influencer Jody Padar to the show today as we talk about AI and accounting. For those of you that don't know Jody, she is the Radical CPA. She has not only, I think, helped and mentored dozens, if not hundreds of accountants and accounting firms on how to implement technology, but she's run her own firm, she's sold her own firm, she's advised with a lot of the partners and technology providers in the space. And now she is jumping from cloud accounting, which was her first big jump into helping lead the profession forward into AI. So with that, Jody, welcome to After the First Million.
Jody Padar [00:01:57]:
Thanks for having me, Matt.
Matt Tait [00:02:00]:
So I think everybody already knows your background, but talk me through kind of where you started in the industry and where you started owning your own firm and how we've gotten to where we are today with, with what you do.
Jody Padar [00:02:13]:
Yeah, so I like invented the cloud firm and I know that sounds a lot, but I think I have to own it. There were really about 10 of us back around 2010 who were kind of figuring out the new business model and it's really about a business model. It's not about the tech. And what cloud did is it brought real time transparency to the accounting profession and it forced the accounting profession to change. Its business model. And what that meant back in the day was okay, how do you use cloud technology for efficiency? How do you use social media or what I would call social business. Cause Twitter and Facebook and everything was just starting around that time as well. Like using social to get business, not just living in the referral world, right? Content marketing was just starting at the time. Thinking about your experience because being in the cloud allowed for a really different customer experience versus kind of like a walk up experience, right? And pricing differently. Because now how would you build two minutes? You couldn't build two minutes. You had to redefine what outcome based pricing became. So that was the business model that shifted back in 2010.
Jody Padar [00:03:25]:
There were a handful of us who figured it out around 2014. I wrote my first book which was essentially laying my claim as to the new business model and what was changing. And it only took the profession 15 years, right? In a pandemic.
Matt Tait [00:03:40]:
Yeah, I was going to say that wasn't a fast. I mean like you transitioned very quickly. I still think the accounting industry is transitioning.
Jody Padar [00:03:48]:
We're still less than 10. If you truly call cloud firms, we're still less than 10% of the population. Which is crazy to me because it took so long Right now most firms have adopted parts of it, but most of them really haven't fundamentally changed their business model. And when I say that change their business model, that's what I'm talking about when they're. You talk about a true cloud firm. And now like there's lots of cloud firms out there and I would argue decimal is one of them. It's not a firm per se, it's a company. But it was built on those same similar things where you price differently, you have an experience, you use digital marketing, all of those things that you just didn't transition from an old school firm.
Jody Padar [00:04:28]:
Right? Like you began new, right? So fast forward, like I have that historical perspective of how the industry changed as the technology changed and what I want to do for the profession, because I love the profession and I want us to be remain relevant in the year 2030, is I want to help define what that AI first firm looks like. And we're calling it an AIX with an X firm and help us go through the transition. And the thing about it is there's no roadmap for it. It's not like you can say here's your best practice because we don't know what we don't know yet, right?
Jody Padar [00:05:10]:
And that was kind of the walk that I did back in 2010 and so I've done it before. So now I want to say, okay, let's do it with AI and let me find those early adopters, those innovators. Let's figure it out together. Let's define it so that when 2030 comes, we're not like, oh my God, what do we do now, right? Like you kind of have to, you have to iterate through it. And that's what I'm here to do. And that's what, you know, an AIX firm is. And that's the leadership, the AI stuff that I'm building to help firms and firm owners kind of go through the transition as it's happening, as opposed to waiting for a pandemic or as opposed to waiting for the end result and then say, okay, here's the end result, I'm going to change it now. We don't have time for that.
Jody Padar [00:05:59]:
We have to kind of iterate through it.
Matt Tait [00:06:01]:
We're at a much different point in the terms of technology adoption and the rate of change. And I've got a funny story for you, and I think this is going to crack you up. So as everybody knows, Decimal was originally started out of a local kind of big mid-sized CPA firm called Somerset. And Somerset's now part of CBIZ. But back in 2019, I'd convinced Jacob, my co founder, to join me at Somerset and we had the idea of starting what became Decimal. We bought it from them, we grown it into way behind what we ever thought it would be. And I'll never forget sitting at Somerset maybe three weeks after I brought Jacob in. And we're not accountants, we came from the kind of tech small business world and they asked us to go to this tech lecture.
Matt Tait [00:06:45]:
And so we are sitting in Somerset, we're at this tech lecture. The entire premise of this Tech lecture in 2019 was the Cloud is coming. And Jacob just looks at me and he goes, what did we get ourselves into? The cloud has been here for like 10, 15 years. Why are they still talking about it still coming? And I just looked at him and I said, this is an industry that's going to move generations behind the rest of the world when it comes to tech adoption. Now we come to AI and we come to a technology where the rate of change is just astronomically faster. Before we get into AI specifically, one of the things that I've always really appreciated about you, Jody, is you have a passion that comes first from helping people, specifically accountants and the accounting industry change. How do we actually look at people that run their own firm today? Or people who are working in a, and running a portion of a bigger firm, how do we actually look at them in a way that doesn't freak them out or intimidate them and say, hey, how do we help them change fast enough?
Jody Padar [00:08:01]:
So I think you have to come at it with a growth mindset. I think you have to say it's okay to say we don't know what we don't know yet. And I think accountants are so stuck in, I have to know it all before I start, right? That's just part of the risk adverse mindset. And so if you come in it with a growth mindset and you come at it with a, it's okay to not know, but we're going to figure it out together, I think you'll be okay. I come at it from the perspective of when I changed my firm with the cloud, it gave me back time, time that allowed me to have a life. And I think if you think about it from, from something that you want as opposed to something that you're giving up, I think it makes you want to learn about it better or easier, right? And if you think about like why I do what I do, it's because that old school firm didn't work for me, it didn't work for me as a woman.
Jody Padar [00:08:59]:
It doesn't work for most people. Nobody wants to work 65 hours a week during like tax season, right? Or whatever. And the thing is, is like if you know better, you can do better. And I think that's where a lot of people get caught because they forget that they didn't know before. They can't get past their ego that like, I've been doing it wrong for all these years to get into the mindset that I need to change. And I would say let's flip that and let's say now that I know better, I'm going to do better. And don't worry about what you did in the past and that maybe that was broken or it wasn't the best thing to do because you didn't know any better, it's not your fault.
Jody Padar [00:09:37]:
Now you know better, now you can do better. And I think that's the mindset that you have to have. And the reality is, is that with the technology, with the tools, with the business model shift, hopefully, and I would say hopefully, because I know that I was doing it when I sold my firm in 2020, right? Like we were almost at that million dollars with two and a half full time equivalent. And that wasn't even AI, that was Just like efficiency and process and productization, you're going to be able to build a phenomenal firm with not a lot of labor, with a lot of tools. And when everyone says 75% of the profession is retiring or going away, it's not going to matter because we're going to have the tools to replace the labor and the people. The humans are going to do what the humans need to do, and the technology is going to do all the other stuff.
Matt Tait [00:10:32]:
One of the things that you hit on that I think is so important is too many people look at their business or their career as, how do I get to a point where I've just figured out what to do and I can just keep doing it exactly the same way? And we don't live in a world where that's possible anymore. We live in a world where you have to think, what am I going to improve this year or this quarter? What's going to change? How am I going to change? You may have core fundamental aspects of your personality and how you work with clients. That isn't going to change. I'm going to always be hyper responsive. That's just one of my quirks. I think responsiveness is a big part of who I am. Everything else is going to change. I may even try to figure out how to be more responsive using better technologies.
Matt Tait [00:11:20]:
And this is where I think a lot of accountants and look, I come from law and lawyers are the exact same way. They think I want to get to a point where then my life won't change. And I can get to that. Where everything is the way we've always done it and the way you've always done it is changing on an annual, if not quarterly basis.
Jody Padar [00:11:38]:
Yeah. And that's the world of work today, right? Big time. It's not even just accounting. It's everyone who goes up, goes to work, and works in a corporate setting who doesn't know if they're going to have a job tomorrow or not, right? Like, the reality is nothing is stable anymore. And it's very unsettling. But I think the sooner you realize that you have agency for yourself and only agency for yourself, you're going to be okay.
Jody Padar [00:12:06]:
And that's what I'm trying to teach my son, who's 23, telling me, you know, he's going into the world to get a new job, and he's trying to figure it out, and he's telling me about all these things that are happening that are going to prevent him from getting a job. And I keep telling him, dude, you have agency. You are the only one who can control what you can control. The world's going to happen around you, but you have to figure out how to show up in the world and control what you can control. And I think that's where we get complacent. We get tired. We're like, oh, we have all these other things going on. But I think we have to remember that we have agency.
Jody Padar [00:12:41]:
And when things are happening in the world around us, like AI, like job changes, all of these things, then you have to say, okay, what can I do and how can I show up and how can I be my best self to, you know, flourish? And that's the people who win in life versus the people who kind of like half empty versus half full glass, right?
Matt Tait [00:13:02]:
Right. I think so many people. And this isn't just accounts. This human beings look at risk first. Here's this change, and it's, where's the risk? I view it first as, what is this opportunity? How can this improve my life? And if I determine that it will improve my life, then I look back and I say, okay, how do I make this safe and de risk it? Or where are the risks? And too many people start with risk first. Let me understand all the risks, let me protect against all the risks, and then let me see the opportunity. And what that means is that you never actually fully see the opportunity because until you see where you are, you can't de risk it. If you de risk ahead of time, you lose every time.
Jody Padar [00:13:46]:
And the hard thing for accountants is they've been profitable. They're making money, right? So it's very hard to have someone who has clients lined up the door to say, okay, change now, right? That's why accountants haven't changed. It's because they've been profitable businesses. What they were doing was working.
Jody Padar [00:14:05]:
And the reality is, is the market has changed so much that if they don't lift their heads, they're going to be gone the way Blockbuster went away. And it's not to scare them, but the reality is, is the marketplace has changed drastically in the last three years. That didn't happen in years past, right? And you can look at even other thought leaders. I like, listen to Alan Colton talk about it, right? Listen to other accounting thought leaders talk about how different the market is today versus what it was. And you can see it because the money that's coming into the space, all the VC capital, all the private equity money, they're here because they see an opportunity to make more money. They're not here because they want to help clients.
Jody Padar [00:14:52]:
They're here because they see an opportunity to make money in exit. And I'm not saying it's good or bad, but it's a reality. And we who, our professionals, who love our clients, who want to keep the profession relevant in the future, have to look at those outside forces and say, okay, what are we going to do ourselves to change? And it's more than just recruiting people in high school to become CPAs. It has to be more than that. It's more than 150 hour rule. It's more than that. It's saying, look, we know what we do best. We bring the ethics, we bring all the good things about being an accountant to our clients and let's figure out how to capitalize on what's being human.
Jody Padar [00:15:33]:
And then let's meld it with the technology so that come 2030. Like the firm of 2030 looks very different than the firm of today, but it's still really profitable. It's still making a difference in customers lives, it's still viable.
Matt Tait [00:15:49]:
You know, when I first started working, working, one of the things my dad told me was he said, in every job you're in, look at the person who's your boss and your boss's boss and think, do I want their life? Like is that the life that I want? Do I want their job? And if the answer is yes, keep working. If the answer is no, then it's time for you to look somewhere else. I actually think that there's a lot baked into that premise that accounting is struggling with. Because so many people that are either running their own firm or working in a bigger firm have so much of work, so many parts of their job they don't actually like or that the people that are coming into the profession don't want to do. I'll never forget being at Somerset and seeing a managing partner filling out a couple hundred tax forms. And I'm like, why are you doing this? And he goes, it's just part of my job. And I'm like, that's a terrible part of your job. It is also a very bad use of your time.
Matt Tait [00:16:49]:
And I thought to myself like, that is definitely not a job I want. But I think so many people in accounting are caught in parts of their work that they don't need to do or want to do. And so many of these new tools, technologies, even outsourcing business models are there to help create space. And space creates opportunity to level into work you want to do. And that's part of the attraction of a job where accounting can go. It's why I'm so excited about the profession is because so many of these advancements, so many of these business model changes, technologies are really creating space for people to create the lifestyle, the work life, balance the job that becomes much better than the jobs that they had five, 10 years ago.
Jody Padar [00:17:38]:
That was ultimately why I left that mid sized firm and started my own firm. Because I thought that I could do it better. And I did do it better. It took me a little bit of time, it didn't happen overnight. And I got my life back, right? And that was what really started me to kind of like beat the drum and to tell everyone, look, you can have a better life, you can actually make more money, you can have your time back and you can lead a firm. And not everybody wants to grow to be a hundred million dollar firm. There are a lot of people who just want to be $500,000 firm, but working 40 hours or whatever, right? Like it doesn't have to be this all or nothing. And I think that's where people get lost too.
Jody Padar [00:18:16]:
Like they think they hear, oh, I got to grow this huge firm. Well, you know what? You don't have to grow a huge firm if you don't want to grow a huge firm. If you just want to have one or two employees, that's fine. If you just want to be a solopreneur, that's fine. But make your firm delightful. Make it work for what you want. Don't be stuck in thinking like, ah, it's this job. Like, basically, I quit a job to have a job.
Jody Padar [00:18:41]:
That's the joy of. If you own your own firm is making it what you want.
Matt Tait [00:18:45]:
Even if you're working in a bigger firm, that's okay too. You and I are entrepreneurs, so we like owning and having full control. I'm a control freak. I'm a terrible employee. But I think so many people find happiness working in firms. The key is to design your life. Think about the end. How much money do you want to make? How much do you want to work? How do you want to balance your life? And when you then look backwards from there, how do you get there? If running your own firm and it's a $350,000 firm and you're taking home 150 and working 30 hours is what you want, great, that's perfect.
Matt Tait [00:19:22]:
If you want to make 400 grand, how do you work to that? How do you get to the point where you have the lifestyle and the income that you want and too few People actually do the work to think, what do I want in the end? And how do I work backwards from there? And it's why too many people, and this is in all careers, just kind of get started in their career, and they never actually think about that. They never build themselves into what they want.
Jody Padar [00:19:53]:
It's just where people are, right? Especially when you first start a new firm, it's like, oh, my God, I got to take this work because I got to feed my family, right? And then all of a sudden you have all this work and you're like, wait, this is not what I want to do. But you had to pay the bills, right? And so then you have this transition period. And it's not that anyone sets out to do that. I just think you're not told any differently about it, right? And I think it's part of the whole experience of life, of kind of like, you get your first job and then you realize, oh, this isn't what I want to do. And then you realize, oh, I got to go do something else, right? It's like we learn by doing what we don't want as opposed to actually designing what we do. And part of it is because we don't know. But I think the good thing is when you think about the Internet as a whole and the opportunity to learn from podcasts, from YouTube, from the world as a whole, is very different than when I started my career. And that the only people that I could talk to were people in person, maybe at my firm or at a state society.
Jody Padar [00:20:53]:
And now you could go online and you could see all the different ways to design a firm or to design a job or whatever it is you want to be, right? And so I think from that perspective, you're luck. Like, the next gen is lucky, right? Or they have more opportunity. And then I think we don't know what we don't know yet. And to me, that's like the renaissance or the rebirth, right? Like, when you think about, like, AI and all the things that it's going to bring is opportunity and even more education, I would say, than Google. When I first started, Google was not even really a thing, right? Like, I was pre Google. Then we got Google and we're like, oh, like, this is cool. Like, oh, I can find out things, right? Like, I can be at a bar and I could Google something and I could have a conversation and we could look something up, right? And now when you think about what I can do and you're like, it's like next level, right? To me, that's the opportunity. That's the exciting stuff that's happening, and that's the stuff that I want to help people design for.
Jody Padar [00:21:55]:
What is 2030 going to look like?
Matt Tait [00:21:58]:
So let's work our way towards there. There's something that you just hit on that I want to unpack a little bit. You and I are both avid learners, and I think that in today's new accounting world, you have to have some aspect of that. How would you advise firm owners and people working in firms to think about technology today when we say keep up with technology, implement AI like that can be a very intimidating thing. How would you advise people to kind of start along that path and make it less intimidating?
Jody Padar [00:22:32]:
So a lot of people think that I'm a technologist and I'm not. And I would say you start with the business problem first and once you define that business problem, then go figure out what technology can help you solve that problem. I think too many people look to technology to solve a problem they don't have. They buy all this cool tech and then it never gets implemented or they haven't figured out the process. Because the process is usually the problem. It isn't the technology. They look at it backwards. And then you have all these vendors who are selling shiny new widgets and they're like, oh, you need this, you need this.
Jody Padar [00:23:10]:
And the reality is, is you don't need it. What you need is you need to figure out what your business problem is. And then you need to think technology first. And then you need to figure out how you're going to solve that problem utilizing technology first. And so that's where I would argue. Cause I think most people think, oh, I'm going to go buy technology. They get sold on what the technology solves for, but it wasn't their problem in the first place.
Matt Tait [00:23:36]:
I've got two stories that kind of lend themselves and I think hone that a little bit too. One thing that I see as a problem that a lot of people do is they don't break things into small enough bites. They say, I need to fix my workflow in my accounting firm. That is a big problem. You need to break it into smaller problems. What about your workflow is broken? What is most broken? What is the next most broken? Start thinking in smaller and smaller buckets to really break down what it is that you need. If you have a large conceptual problem, you haven't broken it into a small enough piece. And really thinking through how do I break problems into small enough bites? It's the whole concept of how do you eat an elephant one bite at a time.
Jody Padar [00:24:29]:
Get specific.
Matt Tait [00:24:31]:
Right. So get very specific. And as you start getting into technology, the better you are at getting more specific, the better you'll be at utilizing and leveraging technology. You very much clearly need to figure out how to break problems into smaller and smaller subsets, which means actually clearly thinking about the problem. The other thing is try to think through to the initial underlying issue. I was talking to a big firm the other day and helping advise them and they were looking at, we just launched a big partnership with Puzzle and they were like, we need to look at Puzzle. We want to implement Puzzle. I was like, great, tell me about your firm today. Tell me about your problems.
Matt Tait [00:25:10]:
And like, hey, number one, I think you should totally look at Puzzle. But before you do that, you need to actually put in a firm management solution. Like right now, everybody's doing a million different things a million different ways. If you're solving too far downstream, all you're going to do is create a much bigger problem set. You need to actually look further towards the source and really try to simplify and standardize and productize closer to you. But before you look at the products that you're putting in front of your clients, and that's another piece of it is really looking at the underlying problems. And it's the whole solve the initial problem, not the symptoms.
Jody Padar [00:25:48]:
I think that's where like firms have traditionally not been. They never productize their service offering right. Like that. You know, like my whole book on pricing is really, it's pricing, but it's really about the productization because you can't price something. You don't know what it is. You don't know the scope, right? The reality is, is when you sell by the hour, you never had a productize anything.
Jody Padar [00:26:11]:
And so if we're going to sell outcomes, which we're going to have to, because AI is going to make you sell outcomes. Because if you couldn't build two minutes, how are you going to build 10 seconds, right? If you are going to sell outcomes, you need to figure out what it is you're selling. And you need to define it, you need to document it, you need, you need to standardize it, you need to do all of that first in order to sell it. And that's where firms get, they get lost. Because if they've always sold an hour, it's very hard to think the other side of it. And so again, these are business problems. And I would say business model problems, not even just general business problems. They're business model problems.
Jody Padar [00:26:54]:
And until firms holistically look at their business model and I would argue it's going to change even more with AI than it did with cloud. So whatever that cloud business model was that I invented 15 years ago, it's going to change with AI until you look at that business model, until you start thinking business model, all you're doing is putting expensive technology on a bad business model. It's putting lipstick on a pig. It's not going to solve it.
Matt Tait [00:27:25]:
Well, and let me push this even further. If you are in a firm and you started productizing services, you have to align incentives. Here's one of the biggest breaks I see in big firms is they'll do the all right, we can do fixed fee pricing, but we're still going to have our team track time and we're going to incentivize and pay them and bonus them based on the time they track there. You're just making everything worse. Because if the only way productized services work is if your job as a company, as a firm is to continue to work on getting more efficient because it allows you to capture margin behind the scenes. If you can't continuously do that, then you have a problem. If you are aligning incentives for people that they are going to get paid off of billing hours, guess what they're going to do? They're going to bill hours. But if you're not charging for those hours, you've misaligned incentives and your economics may actually get worse.
Matt Tait [00:28:24]:
It's one of the really hard things that I see is that the other hard thing that I see in the productizing services I just had a conversation with a big firm about this was they said, well, we thought about it, but then we realized that there were a couple of cases that we got caught in and we said, you know what, we just can't do that one. And so we decided to scrap the whole thing. And it's like, wait, so you made perfect be the enemy of much, much better. And it didn't make sense. And it's like, hey, this isn't going to be all perfect. Some of it's going to be messy and that's okay, you'll continue to get better. But you have to be dedicated to changing the model so that you can improve.
Jody Padar [00:29:03]:
Well, you have to go through the journey and unfortunately people want a quick fix and it doesn't happen overnight. And your team has to change and there's change management and, and there's buy in and there's all that stuff that has to happen. And unfortunately, most big firms are going to struggle with that because they have competing priorities, right? Like CAS is only one piece of that firm. And you have tax and you have audit, you have all the other things happening. It's about having the mindset and be willing to change.
Matt Tait [00:29:35]:
I want to get to AI because there's a lot of really cool and fascinating stuff that you're doing. But before I get there, one of the things we're talking about on this season of After the First Million is what it's like to build a firm after that first million. If you were to do it today, you're starting your own firm today. Build me your firm that's larger than a million. What's it look like?
Jody Padar [00:29:59]:
When I sold my firm, I was around 700,000 and I was two and a half full time employees. And I always said you could do a million dollars per full time equivalent. So if I were to build a firm today from scratch, I would have one accountant and I would utilize technology for everything else and I would have a million dollar firm per full time equivalent. And that's what I think we can get to. And I actually think it can probably be even bigger than that. But I think to me that's like the starting point is one accountant can have a million dollar book of business utilizing AI to do everything. Now I might argue that there might be two people. One being a business owner who's coordinating and organizing and orchestrating, and an accountant who's actually managing the million dollar book.
Jody Padar [00:30:54]:
So maybe if you expanded that to a $5 million book, you'd have one managing partner, whatever you want to call it, business owner, and five accountants, but I believe one accountant can handle $1 million book.
Matt Tait [00:31:09]:
Do you add outsourcing in there too?
Jody Padar [00:31:12]:
No, I would structure it that you wouldn't need outsourcing. Now, I know some people believe you still need outsourcing. I'm not saying you could or you couldn't. But I would build it technology first and I would build it without using outsourcing. Because I would build it with the intention that by 2030 you won't need outsourcing.
Matt Tait [00:31:30]:
I would do it different. I don't think you're at a million dollars. I think you're probably at about 650k today. And I think you need outsourcing.
Jody Padar [00:31:40]:
But I would argue, and this is where we're very different, I would live in the advisory space, not in the transaction space.
Matt Tait [00:31:47]:
I agree you need to push up into advisory to do that. But here's what I would do that's just a little bit different because I actually think you're getting there. I don't think AI is fully ready to be interchangeable with outsourcing yet. What I would do is I would build my operating system behind the scenes so that I could interchange AI when ready to replace my outsourcing team or to allow them to do more. Because I actually think you can probably push to about a million and a half soon, but I think you'll go from 650 to a million and a half much faster. And so I would just let that leap happen.
Jody Padar [00:32:26]:
Where I would argue differently is I was already doing it with cloud tech and most of my pricing was based on advisory, not in transactions. And so that's why I don't believe you need that, because I believe that if you're truly selling advisory, you can price significantly higher and have a lot less transaction work to do. And so I think that's just a fundamental difference of, like, how we operate. I would price more on advisory, less on transactions, and that's how I would get to my million with one person.
Matt Tait [00:32:59]:
You know, it's kind of funny is neither one of us mentioned tax.
Jody Padar [00:33:02]:
Oh, I still think you need tax. It's part of the package. But I don't necessarily think that that's the be all, end all. And I would even argue too, where do you have the RIA come in as well, right? Like, where do you complete that financial picture from a financial plan? Because again, when I own my firm, I was a licensed financial advisor as well. I would even put that in the mix. But I would say I lead with advisory first, not transactions. And that's, that's just the difference between us. Not right or wrong, just different.
Matt Tait [00:33:31]:
Oh, I agree. I talk a lot about creating space. Where I think AI is going to create a lot of space is it's going to help make advisory a lot more approachable for people that it wasn't approachable before. So you had the skill set for advisory. I feel like a lot of bookkeepers, a lot of people in our space don't have that skill set today. And I think AI is going to help make that more approachable and easier. But I also think, and this is, you teased it earlier AIX what you're talking about, that next generation of firm talk about how you are taking an approach of helping teach and train people to be ready for 2030, which, it's funny, we talk about 2030 and when you and I were like growing up and born, that was like we were Going to have flying cars and, you know, we were going to be in space and living on Mars and all this crazy stuff. And we are going to have AI and accounting in 2030, which isn't that far away.
Matt Tait [00:34:29]:
How are you helping people get to becoming an AIX firm?
Jody Padar [00:34:34]:
So I think AI starts with the individual, not with the firm. I think, yes, it needs to go into the firm, but it starts with a basic skill, skill set. It's kind of like how do you fundamentally change your firm if you yourself don't understand how AI works in your life, right? And so we're starting with AI basics, where you're going to start thinking about AI first, you're going to be treating AI as your business best friend. If you need that thought partner where you go to AI to get that help, first you're going to learn AIQ, which is actually MIT-studied, which is basically, you know, they have IQ and eq. Well, there's such a thing as AIQ. And it's basically how you as a person interact with AI. And you don't have to be the smartest person in the room, but you have to be able to think creatively.
Jody Padar [00:35:20]:
And if you can think creatively, you can ground your AI, you can merge it with the AI, you are going to get a 10x better result than someone who just writes some generic prompt that they copied from somewhere, right? It's thinking about how to work with AI as opposed to just using AI, right? It's kind of changing that mindset. And then it's about thinking how data in your firm leads to transformation, about all the unstructured data that you have in your firm, turning it into structured data, and what does that bring? So that's like your AI basics, right? Then we're going to go into AI leadership. What does it mean? How do you use AI to think strategically? How do you use it to make better decisions? How do you use it as a thought partner in your own leadership as you're making decisions, how do you use it to help change management, right? Like, how do you use it to help have better conversations instead of having to be coached to do all of this stuff? Especially those young professionals, they're going to get the ability to learn faster because they're not waiting for a human to teach them all the 30 years of experience that they had. They have AI to kind of help them through that.
Jody Padar [00:36:33]:
So it's about accessing your own leadership. Because again, what's in it for me? I think when people think what's in it for me? First they embrace it faster, right? Then we're going to go into advisory, right? What does advisory mean with AI? How can you actually use data driven advisory insights to make yourself be a better advisor faster? How can you get your own scorecard? So you see how you're doing it as an advisor and everybody likes data and like your game ramification, right? Let's see, am I getting better as an advisor? Am I getting worse?
Matt Tait [00:37:06]:
Right.
Jody Padar [00:37:07]:
Or how many times have you had that call and you knew it hit and you're like, yes. And then you actually have documentation to show it to your boss to say, look, I hit it? Or how many times have you had that call you got off the phone and you're like, oh my God, they didn't get it. But I don't know how to fix it, right? Or I knew it didn't land, but I didn't know what to do with it. And now you're going to get that real time feedback that's going to say, hey, this is where you hit it and this is where you missed it. And then you can take that feedback and you can improve in real time. Not waiting like for a month to talk to a coach or whatever, like the next conversation you have, you can learn from it. And to me that's data driven and accountants love data. So let's, let's chart it.
Jody Padar [00:37:51]:
Let's help them get better at their own advisory skill sets and so that they don't have to wait 15, 20 years to be a partner to learn how to have those conversations. And then last but not least, managing your practice, right, like what is pricing and profitability and how do you connect that to AI to learn how to price better, to have your team learn how to price better? How do you take those AI in customer experience? What does that look like? How do you use it to adopt in marketing, right? Like, how do you use it to gather new leads, all of the things that happen in what we would call as a firm practice management. And then last but not least, okay, how does AI work in bookkeeping? How does AI work in tax those tangible products that currently exist on the market? How do you actually implement them into your firm to run a well oiled machine? So I'm starting with all the soft skills, which actually are the hard skills, and starting there and then I wouldn't say ending, but complimenting kind of the bookkeeping, the AI, all those things that everybody else in the marketplace is already talking about, I've been there, I understand them, but that's not where I'm leaning because I believe at the end of the day, it's about you as a professional and where do you want to be, whether you own your own firm or whether you work inside a firm, where do you want to be in 2030 so that you, as an accounting professional, you are ready for what's next in your career?
Matt Tait [00:39:24]:
It's getting to the individual. It's how do you take that AI mindset and apply it to yourself? And, you know, how do you learn the basic skills of it? And then how do you apply that to training and teaching and managing a team, whether it's in a firm or your own company or your own firm? You know, how do we take that AI mindset and start there? And I think what I love about what you're doing is, and you and I have seen this over and over again with change, but I think AI is a particularly intimidating one. People look and they say, all right, A.I. is coming. What's going on? I know I need to do it. I just don't know where to start. And you're telling them, hey, start with me. Let me teach you and train you, and let us work with you to start.
Matt Tait [00:40:19]:
And I think that's a really cool thing.
Jody Padar [00:40:22]:
Yeah. Because I think otherwise it's just intimidating, right? And the more you can identify with it, then you can take that mindset and you can apply it to your firm and figure out what's happening in your job, that you can use AI to make your job easier. So if we start with you, then we can think later about agency and saying, okay, how can I change the workflow of something I do specifically in my job, right? Again, different schools of thought. If you start there, you're almost starting in the weeds or instead of in the place where your mindset has to shift first. And I think when you have buy in it mindset first, change becomes just so much faster.
Matt Tait [00:41:07]:
Well, and easier. Like, it becomes less intimidated when you understand it. When you're comfortable, change becomes more comfortable. One of the things that's been annoying me is all of this talk about AI replacing accountants. How do you feel about that whole narrative that some of these tech companies, Some of these VCs, Andreessen, came out with something about replacing accountants. How do you feel about that whole narrative?
Jody Padar [00:41:36]:
So I think the more tech there is, the more human you have to be. I don't think accountants are going to go away. I think you're always going to need the human. I also know that everybody has more work than they know what to do with. And 75% of the CPAs are retiring. If that shift makes it easier, then I think we're going to be much better off in the future. And I think that AI is here and you have to figure out how to work with it. You can't put it back.
Jody Padar [00:42:08]:
AI was here years ago. When we think about, like, AI, right, yes. This new form of AI, but like, we were already using machine learning to code transactions. We were already doing a lot of this automation stuff. AI is just making it move that much faster. The automation was already here. It started with the cloud. And I would say it even began even before the cloud.
Jody Padar [00:42:32]:
If you think about, like old school tax returns and data input sheets versus OCR, right? Like, automation has always been part of an accountant's life cycle. It's just happening a lot faster now. So the faster you embrace it, the better off you're going to be.
Matt Tait [00:42:47]:
Well, and look, anybody that searched on Amazon for a product has been using AI for a decade or more. They just found it less intimidating to not tell you. What AI is going to do is it's not going to replace accountants, it's going to replace tasks accountants do. And it's going to make the import of the tasks that accountants still do way more important. But it's going to replace tasks, I think through to my first hire. Jacob and I were deciding between a woman named Katie, who's still with us, she's amazing. And another person. And we were down to final interviews and we couldn't figure it out.
Matt Tait [00:43:25]:
Jacob came up with a question that we still use today. And he said, how do you feel about manual data entry? And Katie said, I hate it. I do everything I can to automate away from it and avoid it, blah, blah. We said, okay, you're hired. The other woman, who still has a great career at a large accounting firm and is doing awesome, said, you know what? I actually really love it sometimes. Like, I find it to be very soothing every once in a while to just sit down and do a couple hours of manual data entry, that's going to be gone with AI. That should be gone today. Today will definitely be gone with AI.
Matt Tait [00:44:06]:
But you still find it in a lot of accounting firms and you still find that that is an acceptable track. I'll never forget our first Gusto implementation at at Somerset. We'd sold it to this company, and Gusto, one of the great things that they do is they offer to go into your old software, pull all of the information into Gusto for you. The accountants at Somerset turn that down because they wanted to build the time to do that work. And that was just like mind blowing to me. But that's misaligned incentives. Like our goal was to make it as efficient, cheap and easy as possible. And that was just not an aligned incentive at the time for them.
Matt Tait [00:44:44]:
And I think they've since changed some of that business model, but premise behind it is I think AI will replace tasks and allow accountants to do more things they haven't had the space and time for in the past.
Jody Padar [00:44:59]:
Well and I think that's where it just gets down to outcomes, right? Like what is your job, what is your role as an accountant? To me it would be to impact your customers lives. It's not about the data entry, it's not about the work you do, it's not about the transaction. It's how do I have a real impact on my customer's life. Whether it means peace of mind that they don't have to worry about the compliance deadlines, whether it means that they have enough cash in the bank to pay their employees in the next eight weeks, whether it means that they're planning for their exit. To me that's outcome based and it has nothing to do with any of the transactions. The transactions are a piece of it. But I'm selling an outcome and ultimately that's where accountants should sit in their customers lives.
Matt Tait [00:45:46]:
Be that strategic advisor. Which to be fair is what most businesses are really looking for and that will align incentives too. So Jody, other than on that amazing podcast Accounting for Innovation, where can people find you to listen for more?
Jody Padar [00:46:05]:
So just connect with me on LinkedIn but if you go to Radical CPA, you can sign up for my substack and I will send you two emails a week and I will keep you up to date on everything an AI first firm would want and also other content, other things that just in general about the practice and you can get some of my just Jody, which is a little bit of quirky fun.
Matt Tait [00:46:30]:
Well I love it and I am an accountant that wants to start learning and training on AIX. When will I be able to start doing that?
Jody Padar [00:46:40]:
So, come May, we will have courses and opportunities for you to actually sign up and you know even some AI apps for you to start using in your firm to make it better.
Matt Tait [00:46:53]:
I love it. It's time for the accounting profession to start co piloting with AI and you have it here. Jody Paydar is going to help everybody do it. Jody, thanks again for joining me today.
Jody Padar [00:47:03]:
Awesome, thanks Matt.
Matt Tait [00:47:09]:
As you all know, I firmly believe that growth doesn't stop at the first million or the first milestone. It's truly about what comes next. Build your firm or your company as if you've already passed that first million and are going to still go. In every episode, I am going to pull out key takeaways from my conversations. So here are some of my takeaways from my conversation with Jody. Number one; Embrace change with a growth mindset. I know that's particularly hard for accountants, but it's so important to embrace change with that growth mindset. Number two; Start with a business problem, then apply technology. It's a really good way to look at the implementation of technology. Finally three; AI is not about replacing accountants. You've heard me say this over and over again. It's about embracing the role. It's about embracing the right type of work. So going back, embrace change with a growth mindset. Accountants really have to fight and shift from that risk adverse mindset to one of growth and abundance. It's okay not to know everything and to learn as you go. We're entering a phase of change, particularly with technology, with the changing business models, private equity entering the space, the proliferation of outsourcing and offshoring change is just speeding up. We have to embrace it the right way. With that growth mindset, change is inevitable. It's happening. By embracing it, we can regain control over the balance not only of how to build the correct firm, the correct business that we want to run, but also that work life balance. It provides so many opportunities, but we have to fight to embrace change rather than to run away from it. Number two, start with the business problems. So many people are a either scared of new technologies, not sure on how to implement them, or some people just implement all of them.
Matt Tait [00:49:09]:
What really works though, is thinking about what are the business problems either in your own business or for your clients that you're solving and then work backwards from there and implementing the right tools. If you identify those business problems that you want to solve and then adopt the new technology, it'll be a much better experience. Provide the framework for making a decision and that'll make the whole process a lot easier. And when you fail, you'll be able to use that framework to then pick up the next option. And that's another part of this. You're going to fail. There are going to be things that you do that aren't right. That's okay.
Matt Tait [00:49:44]:
That's how you learn and that's part of running a business. Technology should complement and enhance the business model, but not just adopt it for the sake of adopting it. Finally, AI. We talk about it all the time. Jodi is a huge proponent of it. She helped lead accounting through the adoption of the Cloud. She is now really working hard to help lead through the adoption of AI. I think it is really cool to hear her talk about how she plans on helping and the conversation she's had about how to do it right.
Matt Tait [00:50:15]:
AI is going to really work to automate these repetitive tasks, freeing up accountants to focus on higher level advisory work. So many people are caught doing too much work, they just don't even have the time and space to to be advisors. AI gives us the ability and will continue to give us the ability to create that space to be the advisors that businesses truly want and need. The role of the accountant, the role of the bookkeeper is evolving and it's going to continually evolve. We need to, as a profession take a look at really wanting to become the strategic advisor. Help our clients help these businesses make strategic decisions, guide them to long term success. I view a metric of success as can we help more businesses succeed and less fail? That to me, so many businesses fail because they just don't understand their economics. They don't understand cash flow.
Matt Tait [00:51:12]:
If we as a profession can use AI to create the space to give us the opportunity to become that strategic advisor, it means that we can level up. I am really excited to see the many ways that firms and accountants are going to continue to adopt AI successfully as failures and then successes. I think it's going to be really cool to see how the tools that come out of building and using AI enhance advisory roles and create more meaningful and better relationships with clients. The more successful firms, the more successful clients are going to be the ones that embrace AI. There's the adage that I firmly adhere to. I don't think that AI is truly going to replace jobs, but I think people and accountants that can use AI will replace people and accountants that can't.
Matt Tait [00:52:02]:
Thanks so much for listening. After the First Million is presented by Decimal. To listen to more episodes and find tips to help make running a business easier, visit decimal.com/afm. Want to join the conversation? Reach out to me on LinkedIn and let's explore the messy middle.