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Join Stuart McLeod as he interviews the world's top accounting leaders to understand their story, how they operate, their goals, mission, and top advice to help you run your accounting firm.
Stuart: 00:00:06.137 [music] Hi. I'm Stuart McCleod, CEO and cofounder of Karbon. Welcome to the Accounting Leaders Podcast, the show where I go behind the scenes with the world's top accounting leaders. [music] Dan Luthi, welcome to the Accounting Leaders Podcast. Tell me all about Ignite Spot. How did that come about?
Dan: 00:00:27.787 We started out actually as a totally different name, Dashboard Accountants. Our whole goal was to be able to provide this beautiful view for our customers and everything with a dashboard. And the reality of it is, dashboard's really common. And so at one point in time, we started the process of trademarking our logo and trademarking our name so it was a little bit more consistent. And the trademark team was like, "That is not going to work with that name," and asked us to think more about our culture and about who we were. And really, our goal was always to kind of be that trigger and kind of that ignition spot for our clients and helping them to grow their businesses and develop by having good financial information, and it just evolved into Ignite Spot from there.
Stuart: 00:01:07.510 And the dashboard itself, was there a particularly sort of-- was there a technology stack that you sort of thought, "Oh, well, we can put this together for our accountants," or was dashboard sort of in more the conceptual view of a dashboard?
Dan: 00:01:22.201 We've been around for just over 14 years now. So we started out well before a lot of the applications were out there. So for us, we actually had built something in Excel that looked more like a car dashboard. And so it was just more of that kind of fluctuation of your revenue and cash objectives, more like fuel and how things are going from there, and marketing investments and people investments and showed you more like your speed and things of that nature. But that was originally our trigger, and we've used tons of different reporting tools since, but yeah, that was kind of our initial focus at the start.
Stuart: 00:01:55.120 No, fair enough. So 14 years, what was the genesis of the firm?
Dan: 00:02:00.905 I've been lucky enough to be with the firm for just over 12 years, so my partner, when he first started the firm, he was actually an auditor. And he was sitting down with one of his audits that he was going through, and he had to actually explain to him that the bookkeeper had screwed up and had posted the wrong amount of cash reconciliation. So when they went back and audited, he ended up telling him, "Sir, you have, $50,000 less in cash than what your books were showing." And the man fell to his knees and started crying and was just heartbroken over this situation. And Eddie walked away from that position, within the next week or two, had left the firm, and decided his goal was to make that so it didn't happen to the customers we worked with so they had better transparency, more accuracy in what they were doing. And I joined a few years later, and I've always worked in small businesses, usually being a part of some team in development and have worked with several who struggled with cash, had been laid off at times due to cash positions. And so the goal and objectives really just stuck with me and has been a part of our structure ever since.
Stuart: 00:03:01.897 I love hearing the journey stories. Is there a customer or two that comes to mind when you think about the journey that you've been on in the organization and where the contribution of the firm to a client has made a significant difference or a client that the relationship really sticks out to you?
Dan: 00:03:25.698 We've worked with a lot of different clients over the years, but I remember one of the first clients that I worked with, I started out just as a bookkeeper. And they were pre-revenue on everything when they were going through the situation. So of course, money was tight, and their goals and objectives were huge in what they were trying to accomplish. And I got to be a part of their journey for the first couple of years that they were getting moving, and it was just phenomenal to be able to be a part of the development and the goal. And they ended up being acquired for about $80 million, something like that, which at the time was great, 10 years ago to be able to see that. And--
Stuart: 00:04:00.335 Oh, that's okay. $80 million's all right [laughter], even these days. Yeah, nothing to be sneezed at.
Dan: 00:04:06.044 Yeah, no, no, not at all. But it was just really cool to be a part of that journey with them from nothing to being able to expand. I mean, I was even with them when they were a two, three-person team and transitioned into where they were over almost a hundred by the time that they were acquired. And it was just awesome to see that transition and see that movement over that two-year span and just be a part of the growth and the cycle with it. And probably one of the parts that was the best with it is they had a fractional CFO, and is now one of my partners, but we got a chance to really deep dive and connect really well with this client and help them facilitate a lot of growth and opportunities, which was just really, really cool. And it allowed he and I to also create a deeper bond and also helped me to better understand kind of just that overall space that we were moving into and the growth and development with it. So it was super cool.
Stuart: 00:04:53.330 What sort of company was it?
Dan: 00:04:54.854 Pharmaceutical management is what they were doing. So they had a couple of a couple of really key clients that were--
Stuart: 00:05:00.726 Drug dealers, basically. [laughter]
Dan: 00:05:03.096 Yeah, definitely. Yeah, they'd work with smaller kind of either PEOs or smaller organizations who were looking to manage their own healthcare instead of outsourcing it to larger providers. And so they were just providing the pharmaceutical side of that for those contracts.
Stuart: 00:05:18.378 You can make money in anything these days. [laughter]
Dan: 00:05:21.472 Yeah, very much so. Very much so. And I mean, manage and negotiate rates from big dealers and providers, it just ended up creating a really good solution for those customer groups.
Stuart: 00:05:31.222 In terms of the customer base now, what's your ideal customer at Ignite Spot, do you reckon?
Dan: 00:05:36.247 Yeah. Our ideal customer's kind of between that, I would say, 2 to 10 million is really where we fall into a good sweet spot with our relationships. And it's not because we don't want to work with people who are smaller or people who are bigger, but that's usually where we found that they're at a size where they need efficiencies. They need operational consistencies. They need some recommendations, and they're looking to offload a lot of that work. And that's really where our fractional services come in and shine heavily in those relationships and where we can really make a difference for them. And so usually it's that 2 to 10 million, but also kind of a little over 10 employees is that sweet spot as well.
Stuart: 00:06:12.836 Is there an industry niche or something, or it's just across the board?
Dan: 00:06:16.472 Yeah, it's just across the board. Yeah. We've always worked with clients in the US, and that's been kind of our primary position from that perspective. But we've had niches that were niches that we focused on really heavily in the past, but really, most clients that fall into that bracket are really good for us because we have a vast amount of experience across our team.
Stuart: 00:06:36.592 Yeah. And what about technology-wise? Are you QuickBooks or Xero users, predominantly?
Dan: 00:06:44.132 Yeah, we're a big QuickBooks user. So all of our clients fall into QuickBooks, and most of them fall into QuickBooks Online as well.
Stuart: 00:06:51.268 Yep. And what else is in the stack?
Dan: 00:06:54.183 We're big users of Bill.com as well, or BILL, as they call it nowadays, Divvy as well, that coincide with that from that relationship aspect. We've worked with actually a lot of different tools over the years. I mean, DEX is a big part of our tech stack as well and working that relationship with our clients. We've done a lot of transitions over the years with just different tools and resources that we've worked with. And one process we're using that we're implementing right now to add some more value to some of our clients that we do consolidations with is LiveFlow, which we're super excited to spend a little bit more time with them and dive into that product and provide better quality details for our customers there, but also and a keeper because we feel like it's done a really good job with anomaly detection and providing a really good functionality for our customers and making sure their monthly product is cleaner.
Stuart: 00:07:37.076 It does help in your staff if you can consolidate the tech stack a bit and keep people using the same kinds of things. What is the-- your corporate structure look like? You're fully remote at the moment? And was that always the way? How are you set up?
Dan: 00:07:51.285 Yeah, fully remote. So we actually started going fully remote just before COVID. Half of our team was already outside the state of Utah and working from home, and we decided to offer up to the rest of our staff to have the same flexibility with their schedules and the same flexibility with working from home. And so everybody packed up their equipment and moved home. And we shut down about half of our office space that we had at the time because we were still in a lease. And then COVID hit, and everybody went home. The rest of us went home. And so it's been about a year and a half ago we got out of our lease, finally. We sold it off to someone else. And all 21 of us are completely virtual.
Stuart: 00:08:28.065 Predominantly, where you go as base?
Dan: 00:08:29.931 We were initially predominantly based in Utah, but now our two biggest groups are between Utah and Florida. We have a really large team based out of Florida. There's about 8 people there and about 8 people in Utah, each, so 16, and then the rest are just kind of smattered throughout the US.
Stuart: 00:08:44.531 The Utah team can take over while the hurricanes hit Florida at the moment, right?
Dan: 00:08:48.810 Yeah, that's usually what we try to do. Yeah, and I will say, I mean, that's been crazy over the last-- they're going through one right now. A couple of people are getting wet. A few weeks ago, they had another one, and it was awesome to be able to see the rest of the team rally around and support them and make sure their clients are taken care of in that process. And that's one thing we tried to do is just trying to balance this so everybody can be able to take care of their needs. Whether it's natural disasters or whether it's family, it's crucial to have that kind of team.
Stuart: 00:09:13.816 Where do you see yourself in, say, three or five years with the organization?
Dan: 00:09:18.712 Our goal, it's just to continue to grow and develop into the quality of the product that we provide. We've been a fractional bookkeeping firm for a really long time and have felt like it's been a good fit for the customer groups that we're going into. And a few years ago, we started adding in fractional CFO services, and that has grown really quickly. And now this year, we decided to expand into fractional controller services along with that as well to kind of meet that full need from end to end on bookkeeping to CFO. And it's turned out really great. And so just continuing to develop that and continue to try to expand and provide as best quality product for our clients as we can.
Stuart: 00:09:55.948 And what about in terms of the way that you attract a client base? Is that typically referrals, or have you got a marketing engine that you're sort of promoting growth with?
Dan: 00:10:08.998 We focused really heavily on being organic for the last couple of years. We've put a lot of energy and effort into the articles that we write, into the content that we create and really try to focus it on just being helpful and helping small businesses to be able to grow and develop. And that's really been the structural focus of us for, I would say probably the last three to four years, really focusing our marketing efforts into that. Our goal is to continue to develop into a further and a deeper referral structure over the next couple of years, just because that bond that you create with your clients, if it's valuable and they feel connected with their friends enough to share it with them, it just creates a stronger unity and a stronger community for our products as a whole, as well as for them and their businesses. And so that's one of our goals and objectives as well is continue to advance into that space.
Stuart: 00:10:54.400 Yeah, well, I mean, referrals, seems to be the way that the accounting industry predominantly works. There's plenty of ways that you can perhaps crank that engine a little further. Have you tried many of the-- trying to increase the rapidity of referrals, or what are your tactics?
Dan: 00:11:13.134 Oh, very much so. And I think that the tactical approach is the part that's, I think, the most interesting, right? I mean, you can push hard into you leading them to be a referral function, or you can create a culture of it due to the desire that the customer has from just the relationship. And I mean, there's so many different ways you can touch both of those key areas, but, really, our goal is to really focus heavily on that quality of that product. And we're starting to see some of that right now with just the relationship expectations that we've created.
Stuart: 00:11:41.254 What's your role in the organization these days?
Dan: 00:11:43.953 Yeah, no, that's a really good question. It's changed so much. This year, it changed pretty heavily. For several years, I managed our operational side of the entity and making sure that really that COO role and making sure that all our tech stack was where it needed to be, making sure our team knew what tools and what processes to follow. At the start of this year, we transitioned and added two directors of accounting services. So I have a director that manages the entire accounting service team and then one that manages specifically our bookkeepers in their roles. And so I help facilitate them and manage that piece, but I really now focus more on the company and its operational flow and then also on our partnerships and continuing to develop further with our software stack as well as our customers.
Stuart: 00:12:26.258 With the operations, how do you go about being more efficient, more effective?
Dan: 00:12:32.190 Yeah, one of the big things - you mentioned this earlier - was just that tech stack, right? I mean, we started out the year with probably 30 or 40 tools that we were using in a wide variety of spaces. Some were using them a little bit, some were not using them at all, but we were still paying for them. And this year, we've really hunkered down and really focused on minimizing that stack and minimizing that the amount of function that's available out to people. That's been one of the big parts for us, one of our big objectives. Another piece with it, too, is looking at our operational flows of closing a client from the marketing standpoint of transitioning into onboarding within the accounting space. Making sure that flow is more consistent and removing the restrictions that go along with it has been a big part of it. So a lot of back end workflows, diving into our HubSpot connection and how it's working with everything else, and making sure we're really getting the most value out of each of those tools and each of those resources that we're working with has been a big part of it.
Stuart: 00:13:28.165 It does take significant effort to sort of make sure that those transition, those flows through the organization are as effective and without friction. In your client base, have you seen any change so far given the macroeconomic conditions at the moment?
Dan: 00:13:49.220 I would say about two to three months ago, we started actually seeing a shift in clients who were really making the decision on, "Do I want to continue to go through another recession?" COVID was hard enough, as it was for a lot of our clients, that several have decided to sell off their businesses. And so they were acquired. I think we had about a half a dozen clients who actually were acquired within the last 60, 90 days, which was just a big change overall. On the other side of it, we had a handful of clients that just closed their doors and said that they didn't want to continue to do what they were doing. And--
Stuart: 00:14:21.942 They're tired.
Dan: 00:14:22.825 Yeah, exactly. I mean, they were able to weather enough of COVID, but it was a really long two-year stint, and they just wanted to look at a different way and move on to something else. And so it's definitely created a change in the dynamics overall and kind of the shift holistically in moving our customer base. But also to the same point, clients are just refocusing on how to conserve cash and how to make sure that they're making good business decisions, which is always great for an operational-minded organization who's focused on efficiency. So it's worked out really in our favor from that perspective, but also we're being cautious and careful about what's coming around the corner.
Stuart: 00:14:56.796 Yeah, well, it's interesting, isn't it? I mean, people selling off because people are tired across the world. They're like, "Oh, I've done COVID, we survived, and now you're throwing this shit at me?" It's like, "I'll go and do something else, or I'll spend time with the family," just as long as your finances are structured so that you can do that, or, "We'll change completely." Yeah, tell me.
Dan: 00:15:23.670 Yeah, some of them, it was a consolidation into larger organizations. And so they were able to take away some of that heavy burden that they were managing on their own and even take care of their team, which is always-- I mean, I would say from that position with our clients who have had those-- that had to make those transitions, where it made it easier for them is not only were they taken care of, but they were able to take care of their team too. And so having those people be consumed by another organization holistically and not be laid off or any of that kind of stuff just made that situation so much smoother and so much easier for them to deal with and cope with, which has always made it-- I think, makes it easier in those business decisions when you're making hard calls because you're not just worried about you. You're worried about your customers. You're worried about the team. You're worried about half a dozen-plus people and making sure their lives are taken care of. When you have opportunities, it makes it smoother. But I agree. I mean, COVID was rough. It really affected a lot of people, especially with supply chain development and everything else like that. It's just been totally crazy to have to deal and manage all those pieces and shift through it. And so being able to also make a good decision for your business and for your family, to your point, sometimes taking a break is nice. Not having to stress is nice, so.
Stuart: 00:16:36.099 Yeah. It makes sense, right, selling to a bigger organization, your team stays employed, you stay employed, so your finances are-- maybe you've got a bit of a check or some golden handcuffs or something or a bit of both, but you just be an employee and take a rest, in air quotes, for a year or two. I get that. That makes complete sense. I mean, a lot of people are burnt out across the world. There's no doubt about that. And then, now, this is sort of like, particularly in the tech industry at the moment, valuations are through the floor, and jobs are disintegrating. Although in America, the overall job numbers are still strong. It's just very different, depending on where you are geographically.
Dan: 00:17:19.890 Yeah, in America, it's been a really huge shift. You've seen over the last, I think, two, three weeks, tech companies are the ones that are massively laying off, but it's everybody else who, to your point, are bringing strong employment numbers. And so I think there will probably come a phase and a point in time in the next couple of months that that number evens out, and we start to see a drop in that space and see more people on unemployment from that perspective. It seems, at least just with the way the market is showing and shifting. But yeah, no, I mean, manufacturing and service-based organizations are really strong right now, which has been good.
Dan: 00:17:53.841 But I think that also shows, to the same proof, that on the tech side of things, a lot of times, whether it's tech valuation and the cash that you're getting in from those and the infusions, you bet big in a lot of cases on what you can hopefully create and develop and sell into the future. And because of the way the markets shift, you have to be more-- you have to be more strategic about some of those pieces because if not, the whole core can fall apart. Whereas with service-based organizations, you generally have a little bit more-- a little more stability in the valuation. It's not as high as a valuation, which changes expectations on production if you have investors, and so it's just a different ball game in both spaces, for sure.
Stuart: 00:18:30.632 It's hard to see. I mean, Elon came out yesterday and said that Twitter might not survive the recession that's coming. So there's plenty of doom and gloom. You don't need to go too far to find a miserable headline. Put it that way. [laughter]
Dan: 00:18:45.910 Definitely, yeah. I mean, Meta was another one, right? 11,000 people in the last two days were given notice, which was crazy, to be able to see that. I mean, how many-- Microsoft's dropping 1,000, and Credit Karma just put a hold on all of theirs. So it's crazy.
Stuart: 00:19:01.378 What I don't get at Facebook, that was only 13% of the people. What are the other fucking 40,000 people doing? [laughter] Anyway, I don't use any of them.
Dan: 00:19:14.122 Well, it's funny because I was actually reading an article the other day about that. And there was someone that was a former Facebook employee, and he was just like, "I don't know what these people do." Just legitimately, he goes, "We were the exact same company with 180 employees. So what are all these people doing?" And I'm sure there's some objective, but I mean, his point was the livelihood of what Facebook can do doesn't need the context of what it's created, but.
Stuart: 00:19:39.606 How fucking hard is it to put up a couple of photos on a web page and a few news items, right? [laughter]
Dan: 00:19:45.644 Very much so.
Stuart: 00:19:46.592 Give us 10 minutes anyway. I being cynical. I'm being very cynical. But the economy is so fragmented at the moment. Tech is down, but there is inflation through-- well, inflation is way up, and therefore, interest rates are trying to catch up to dampen inflation. But inflation has been caused by huge wage increases over the last couple of years, particularly in tech. And minimum wages have come up. Supply chains have been disrupted by COVID. Energy prices are dramatically increasing because of the invasion in Eastern Europe. And the point of all that is, it comes full circle, right? What you're seeing in your small business customer base is influenced by all these macroeconomic factors that are way out of their control, and yet everybody's sort of affected. So I guess the point of that little rant was having your finances in great place gives you some optionality when things out of your control mean that you have to make pretty big decisions. How's that? How did you like that roundup? [laughter]
Dan: 00:20:55.501 No, I mean, it's a super good point. And it's also at a good point, I mean, to tie into it. I mean, 10 years ago, 15 years ago, that wasn't the issue. That wasn't the problem that everybody was dealing with. I mean, we've had such a massive tech movement in the reliant-- I mean, our just sole reliance on technology has been a huge part of that. And so when you have those kind of things change and fluctuate-- and I would say even on the media side of things, when someone voices opinions, stock dropped through the floor, even though it has no material value on what that company was actually producing. We've become kind of leveraged on opinions and on context versus the deliverable that people can actually produce. And so I would say my hope with all this inflation and all this change and everything that's going on is that we find a balance in that. I mean, truthfully, I think, not to harp on the news media, but man, I just sometimes wish they would shut up because they cause most of the chaos, it feels like, in these areas. And we all deserve to know the news, but man, speculation is what kills.
Stuart: 00:21:57.080 Can be depressing sometimes. I get it.
Dan: 00:21:59.052 Yeah, definitely. Well, and it also can change. I mean, it changes the winds and the tides on so many different things on what people believe is going to happen and where things are going to go, so.
Stuart: 00:22:08.608 As you go into the holidays, how are you thinking about finishing out the year with your client base?
Dan: 00:22:14.943 We've been fine-tuning a handful of things on our side and trying to help improve, but I'm excited to actually go into the end of this year to be able to really focus on providing that good quality clear product to our clients as quickly as we can. I think that now more than ever, really financial transparency is one of the most important factors for a small business. It's been essential, and it's been important for a really long time, but just the need to be able to see that detail provides just much clearer, actionable functions. And the sooner we can provide that for our clients, especially going to year end as they start preparing for taxes next year, it just becomes more essential and more important for them to be able to not worry and to not stress about what 2023 is going to bring them.
Stuart: 00:22:54.444 Yep. All makes sense. Well, Dan Luthi from Ignite Spot, thank you so much for joining the Accounting Leaders Podcast.
Dan: 00:23:01.282 Yeah, thank you so much. [music]
Stuart: 00:23:08.290 Thanks for listening to this episode. If you found this discussion interesting, fun, you'll find lots more to help you run a successful accounting firm at Karbon Magazine. There are more than a thousand free resources there, including guides, articles, templates, webinars, and more. Just head to karbonhq.com/resources. I'd also love it if you could leave us a five-star review wherever you listen to this podcast. Let us know you liked this session. We'll be able to keep bringing you more guests for you to learn from and get inspired by. Thanks for joining, and see you on the next episode of the Accounting Leaders Podcast.