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CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.
There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.
Earmark CPE: Hello, listeners, welcome to a special bonus episode of our podcast. Today we're sharing a recent webinar put on by Thomson Reuters and Paget that talks about key issues facing the accounting profession, like talent shortages, pricing strategies, and technology adoption, with a particular focus on mid-sized firms and how they can adapt to current industry pressures. So sit back and enjoy this bonus content.
Zach Warren: Hey there everybody, welcome to today's webcast. [00:00:30] I appreciate you joining us where we're going to be talking all things common industry woes. As you can see, the title of today's webcast trending how modern firm owners are addressing common Industry woes. We're going to be going through that both from a quantitative as well as a qualitative standpoint, talking about really how you do the work you do today. But just a little bit better. We're going to be running through a few different ways of doing that. Of course, [00:01:00] we have the data, myself, from the Thomson Reuters Institute, and one report that we're going to dive deep into to talk a little bit about how to run a modern tax practice better. And then, of course, we have Amanda from Paget here as well, to talk about how to apply Paget's small, firm experience to face a lot of these challenges that are coming up today. But who exactly is here talking to you? Well, first of all, my name is Zach Warren. I'm from the Thomson Reuters Institute, [00:01:30] so you may know the name Thomson Reuters from the suite of tax and accounting software products, but I'm on the institute, which means that I help lead a lot of research and thought leadership around, particularly technology. And what all this is going to mean for the future of the tax practice. I've helmed multiple research projects on technology and professional services, including earlier this year, a series of generative AI. Reports for the tax, [00:02:00] legal risk and fraud and other industries also headed up some research on the state of corporate tax technology. I'm not a tax professional myself. I come from a journalism background, was previously editor in chief of ARM's Legal Tech News and featured on Law.com and other publications. But I do have somebody here with a tax background and that is Amanda with Paget. How are you doing today, Amanda? Hey, Zach.
Amanda Aguillard: How are you? Thanks for having me.
Zach Warren: Absolutely. Would you mind introducing yourself and [00:02:30] a little bit of your background?
Amanda Aguillard: Sure. So my current role is the chief operating officer of Paget, which is a network across North America of accounting and tax practices. But my background is pretty deep. I started in public accounting when I was 16, actually, um, worked at Deloitte back when there were six of those big firms. Um, started my career there in their tax department, became a corporate controller and then eventually opened my own accounting firm in 2013. [00:03:00] That was really the beginning of cloud technology in the accounting industry, and I fell in love with that part of running a firm. And so that's kind of where my expertise is. Lie late for the last ten years. Um, thankfully, I was tapped by our CEO to join the pageant team a few years ago. So I get to bring that background to our 150 firms across the country, help to standardize processes, evaluate technology, work on efficiency and workflow. [00:03:30] And now we're going to be talking a bunch about that today.
Zach Warren: Yes we are. And to that point, too, there are a number of ways to gain efficiencies to standardize those practices. And we're really going to dive into a few of those. Just looking big picture, in case you haven't heard of either pageant or Thomson Reuters and who we are. Like I mentioned, Thomson Reuters is very large company. You may have even heard of the Reuters name of it from Reuters News. But this is a completely separate part, which is software enablement. [00:04:00] So Thomson Reuters likes to say that we are a content enabled technology company, and I think both of those are very important where there is the content, if you're doing tax research or other types of insights that are needed into what you do on a day to day basis. Thomson Reuters has that and then the software as well, doing a lot, just like Amanda said, in reducing inefficiencies, adding greater value, and really trying to use that software to anticipate [00:04:30] what people in tax and accounting firms need next. So a wide array and as you could probably guess from the fact that we're both on this webinar, Thomson Reuters has proudly supported the Padgett Network for years with those software tools and best in class content.
Amanda Aguillard: So, Padgett, if you haven't heard of us, we've actually been around since 1965. So going on 60 years in the United States, we're a network of small tax [00:05:00] and accounting practices, but we've always been focused on small business since our inception. So that's really where we spend a lot of our resources and help develop our our practice owners. So we support our owners from the corporate office based in Athens, Georgia. We support our owners with um, marketing tools, with workflow practices, development technologies, discounts on software, um, and tax technical [00:05:30] support. So we really do enable our firm owners to build whatever their dream practice is. And we and we help to support them in whether that's growth, whether it's lifestyle. Um, our, our corporate strategy is around making happy firm owners.
Zach Warren: Absolutely. And I think that there are a lot of issues that today's firm owners really are trying to overcome. I know that you talk with people on a daily basis, Amanda, about some of the [00:06:00] struggles that are today's small and midsize firm owners are dealing with. And if you wouldn't mind just talking a little bit about some of those struggles that you've heard.
Amanda Aguillard: Yeah. It's overwhelming. I mean, folks who are listening, I'm sure feel this, that there's so much to be done on the work side, but then also the business management side. So it's hard to find enough hours in the day to do both of those. Well. Um, and also to evolve, keep the practice evolving, keep it current with trends. And so one of the things that Paget does is to come in and do some of that heavy lifting [00:06:30] for our folks. Um, and so I know we're going to talk a bunch today, Zach, about what some of those strategies and priorities look like. So I can't wait to get into this data with you.
Zach Warren: Yeah. So let's get into it. Really. We're going to break this down to a few different sections. The first one is going to be the 2024 State of Tax Professionals report, which comes from the Thomson Reuters Institute. Something I know very well. We're going to pretty much throughout the entire presentation, go through some of the data that we found, [00:07:00] but start at a really high level about what exactly that is. Then we're going to dig deep into some of those issues, challenges that today's firms have, primarily talent retention and hiring. Do you have the right people, not only in the office, but in the room for each matter? Pricing and revenue. This is something that we've seen as become a big issue, especially even within the past 12 to 24 months for a lot of firms. And then growth and strategy. A lot of people talk a big game about getting [00:07:30] new clients in the door. But really, when you're trying to grow the firm, what is the best way to do it? And is it all about new clients and maybe not so sure. So let's dive into the report itself. So the state of tax professionals report what it is really just kind of what the name says. What exactly do tax professionals, what are they do on a daily basis, and what do they need to know as they're looking from a business [00:08:00] perspective particularly and trying to grow into the future? This is the fourth annual survey. We started this bad timing. 2020 is when we were trying to start it. 2021 is when the first report came out. But really it's just talking with a number of tax professionals across the US, UK, Canada, Australia, Brazil and Argentina.
Zach Warren: But the majority are US based and the majority are small and midsize firms. One [00:08:30] thing you'll see throughout is where there's really a difference between small, midsize and large tax firms will put that in there. And that's something we'll be talking about as we go through, as well as some of those differences, especially in terms of priorities, but also approaches to the tax practice. So let's go into some of those findings. And just from a very top level, one of the very first things that we asked is [00:09:00] so what are the issues? What are the challenges that you really have. And we asked people just open ended type something in what are those challenges. The number one, as you could see, far and away more than a quarter of people said their top challenge is people hiring, attracting talent, better staffing if you can see maybe a little small in your screen. But some of the quotes over there in the right hand side, I really like that final one. Under Talent and staffing, it's [00:09:30] all the strength of the team. There's currently too much dependance on a few key people, and I think that that's something that we saw over and over in the research is not only getting people in the door, but using current teams to the best of their ability. And I'm curious, Amanda, from your standpoint, is that something you're hearing from Paget firms as well, that the people side of this is really an issue right now?
Amanda Aguillard: Absolutely, absolutely. Especially almost the smaller the firm, the bigger the issue. Um, [00:10:00] it's it's very hard to backfill find got find good talent to backfill what an owner is probably producing in the practice. I think we'll talk about that a little bit more. So definitely seeing that as being the number one issue around among small and mid-sized firms.
Zach Warren: And a few other of these issues. Time management obviously a big one keeping up with latest laws and regulations, also big. And then we get into the billing issues and the managing client expectations [00:10:30] of it all. Do those ring true to life for you as well?
Amanda Aguillard: Yeah, absolutely. Um, you know, the money side of it, we can't ignore the fact that we're in this to do to do good work, but to make money doing it. Um, it's not a volunteer job. And so it has to be a profitable proposition. And and so that's, that's it's a business venture. It's not it's not for fun. So yeah, those are definitely things that our folks are looking to to fix and improve 100%.
Zach Warren: As much as pretty [00:11:00] much anybody listening to this webinar is in the tax business. Probably likes doing tax work, but you're not in it for the joy of it. You are in it to your point to run a business. So that's part of what we're doing today too, is giving some data to help try and run the business better. So similar question to the first one, but also a little bit different. First we ask what are the challenges? And then we asked oh okay. So what are your priorities to overcome those challenges. [00:11:30] Where are you putting your time, your investment dollars to try and change the way that you're operating the firm in the future? And as you can see in the bottom left there, there were some main priorities. Efficiency, a word that we've already said a bunch. You can knock off your bingo card and probably will say it a lot more. Talent growth client service. These are areas that may not be surprising, but we are continuing to see investment in these areas [00:12:00] because they're continuing to be an area of challenge to a lot of firms. And I'm sure you're seeing the same. Amanda.
Amanda Aguillard: Yeah. I think what's really interesting about this, Zach, is that the number one challenge was talent. But the number one priority is to build efficiency. So that sounds to me like folks out there are realizing the talent problem is not going away anytime soon. And so it's not going to be solved with more people probably. So they've got to figure out how to squeeze more of [00:12:30] more productivity out of what they already have. A lot of that's probably around technology and process, but I think that was that was just an interesting point, that it the priority was not the solution for the challenge was not the challenge itself.
Zach Warren: Yeah, I find that particularly interesting as well. And we're going to go into a little bit of that talent retention hiring. But I think that that's something that's worthwhile to remember as we go through this as well is a lot of these challenges are interconnected. [00:13:00] A lot of times you can't get greater efficiencies because you don't have your people connected. You can't have better client service because you don't have the internal processes up to snuff. A lot of times you really need to. It's a little bit of a chicken and the egg. I think sometimes of what do I fix first before I fix everything else. But it's all got to be one part of one coherent system, I think.
Amanda Aguillard: Right. And I think the struggle for a lot of firm owners, especially on the smaller side, is I would love [00:13:30] to spend time rebuilding my processes and learning new technology, but I don't have the time because I don't have the people to do the work that makes money.So.
Zach Warren: That's very, very true.So let's talk about those people problems to start off where we asked oh okay. So the left you see the strategic priorities driving efficiency, talent and kind of how those have changed within the past four years. As you can see, one bar there pricing a much bigger issue in 2024 [00:14:00] than it was previously. Put a pin in that. But as you can see, efficiency and talent have been consistent over the past four years in terms of strategic priorities. But where I want to draw your eyes to the right side of the screen, where you can see we broke this out from 1 to 3 employee firms, the small firms, 4 to 29 employee firms, large range there. But that's what we're categorizing as midsize firms for the purposes [00:14:30] of this webinar. And then larger firms, 30 or more employees. The orange line in particular is where you get those midsize firms. And as you can see, while efficiency and talent is a big issue for everybody, it's an even bigger issue for employees of midsize firms. And I'm curious especially because I know that's a lot of Paget sweet spot, whether you've seen the same in a lot of Paget firms in there.
Amanda Aguillard: Yeah.
Amanda Aguillard: So let's let's dive into that for [00:15:00] a second. This is going to become be important as we go through the webinar is thinking about the mindset of these different buckets of firm sizes. So so size does matter. That's that's the headline of the size matters. The 1 to 3 employee firms that we're calling small firms tend to be where the owner is probably 100% of the product. Right. So the owner the partner is is the product. There's less um, top, you know, high level management of the, of the company. It's [00:15:30] it's more of grind doing it. Maybe some admin help, maybe some tax prep help. But the owner's basically the product of the company and it's a lot of times not sustainable beyond the owner. There's not like a look at succession this midsize. Let's go the other way. Let's go all the way to the bigs. Right. So the bigs are hiring machines. These are the huge firms that are constantly having open door, um, have nice benefits, nice salaries, all that. You know, the prestige in their region, wherever they are. So those are the [00:16:00] bigs. But when we look at these, these middle sized firms, which is most of what our pageant firms look like, um, it's a mix. So it's still owner heavy. A lot of times it's still very partner heavy. But there is hopefully a look toward succession planning, building talent underneath to backfill when the owner decides to slow down or retire. Um, and still holding some enterprise value. There is, um, a lot more segregation of duties [00:16:30] generally. So you've got maybe some tax people, some accounting bookkeeping people, maybe some sales people, maybe some client onboarding management people. So it looks very different from the smalls. Um, so so I want folks who are listening to be mindful of that as we go through the rest of these slides.
Amanda Aguillard: Um, I will say, when I'm looking at that orange line at the top, efficiency and talent. You know, we've this this report's been around since the pandemic. The pandemic did not do us any favors in the accounting industry. None. [00:17:00] Um, except maybe except maybe some billings on some project based stuff. But it was very stressful for for midsize firm owners in particular, because there was constant legislation, um, change. We were trying to take care of our clients and get them the funds they needed to stay in business. Um, the partners carried the load for a long time. It also created or I say it created the talent shortage, but it it exacerbated the talent shortage. Um, accounting is not typically [00:17:30] the the most lifestyle friendly industry to work in. And so we were having high demands. We've got these partners that are needing to slow down and bow out with maybe not the the, the backfill of talent because, you know, folks in younger generations generally have have prioritized lifestyle over, you know, material things. And so and so it's hard it's hard to convince someone to come into this line of work. And we've seen that that is not just me, um, waxing poetic. I mean, we've seen the statistics around [00:18:00] less folks coming into the accounting industry to take care of clients. So we're really seeing a squeeze, right? That's the point. We're really seeing a squeeze between our partners in the midsize firms, um, looking to slowly exit, maybe, but not having the backfill. And so how do how are they going to do that? They've got to address the talent problem. They've got to have somebody to provide these products either with people or with efficient technology.
Zach Warren: Yeah. And I think that's particularly interesting as we move to the next slide and break down a little bit more, where that hiring is [00:18:30] coming from, because your point about getting squeezed where especially for the smaller 1 to 3 employee firms, it's very owner led and they have to think about their own succession planning. But it's not really thinking about like, how exactly do I grow the people and bring in all sorts of tax professionals? On the other side of things, you have the large firms where they have a lot more red tape maybe to cut through, but also a lot more ability to hire things [00:19:00] like, say, you could see in the bottom left data scientists or tech and IT support the midsize. Firms are really trying to do a little bit of everything where they are trying to hire more junior, mid-level and senior tax professionals, but at the same time need a little bit more general support. You can see the really I don't know if you could see the numbers super well, but the orange bars are essentially how much people are trying to hire. And as you can see, bottom [00:19:30] right admin and general support, It's about 50 over 50 for those mid-sized firms where 47% say we are trying to hire right now. We really need not only tax professionals, but people to help us out on the back end, to get those efficiencies, to make sure that we're doing things the right way, which can get a little bit sticky when you're trying to also get the type of work that the larger firms are having, but you [00:20:00] have fewer people to do so.
Amanda Aguillard: Yeah. So that admin general support on mid-sized firms, that's super interesting to me because, um, we're not sure exactly what folks were thinking when they selected that. But what it indicates to me is that, um, we know we feel that there's a professional talent shortage in accounting. Right? We feel that, um, it's there's not enough people to go around. So can we push down some work to admin and general [00:20:30] support? Right. So can we. Can we take some things that maybe took a professional I in years past. But with technology and processes can be done at a more admin level. So that that's kind of what I'm sensing is going on here, is folks are saying, okay, maybe I need instead of having a staff of only accounting and tax professionals, maybe I hire somebody from the hospitality industry or from education and have them manage projects for me, manage client onboarding, something that's [00:21:00] not necessarily technical but requires organization and get that off my desk as the partner so that I can focus on doing the delivery of services.
Zach Warren: 100%.
Zach Warren: Requires thinking about things, maybe in a slightly different way, which I know tax and accounting professionals very numbers oriented, but thinking about things more, maybe from a project manager standpoint as much as anything else about not necessarily what do the numbers say? I need to do x, y, z, But [00:21:30] from a holistic standpoint, what's the best way to get something done? And it's maybe not necessarily the way that you had done it in the past. So this kind of gets to what we were been talking about the entire time as well, in terms of, yes, it's nice to think about, maybe we want to do things in a different way, or maybe it's nice to think about we can just hire tax professionals to try and fill some of these roles, but maybe not. We also [00:22:00] asked in the report, so not only where are you trying to hire, but can you even hire? And we found, especially for tax professionals, 69% of both of people that were trying to hire both senior and mid-level tax professionals said, we're having difficulty doing that. And that really gets exacerbated as we look on the right, too. Who's having the most trouble? It is those midsize firms, 72% [00:22:30] said that they are having trouble hiring either senior or mid-level tax professionals right now, which to what we've been saying the entire time is an issue. If you are really trying to do a lot more work and do more with less.
Amanda Aguillard: Yeah, no surprise here. I mean, this is what we've been feeling for a few years in the industry, and it's nice to see the data prove it out. Um, we we've we've seen it, Paget, through our across [00:23:00] our network. It takes about a year to find a good mid to senior level tax person. Um, which means it's not a quickly solvable problem. If somebody leaves you, you are not going to backfill them, um, right away. And it also means we need to start looking for either something to fill the gap temporarily or changing the way we do. We do these things, um, because it's not going to go it's not going to go away. We've seen this for a while and and the, the data [00:23:30] is showing like it's it's really hard. I mean 70% that's that's a lot.
Zach Warren: Yeah it is.
Zach Warren: So the question then becomes what exactly do you do about it. How can people, Amanda start tackling this problem.
Amanda Aguillard: Yeah. So um, on a couple slides back, we we showed that the big firms just constantly are hiring. They're not stopping and waiting for a vacancy. They they are constantly hiring. Um, so in some way, small and especially [00:24:00] mid-sized firms have to have that mentality of if I see good talent, I've got to get it. So whether that is taking care of the good staff that you have, um, and that can mean lots of things. It's not always money. A lot of times it's lifestyle. A lot of times it's culture. Um, taking care of those staff and making sure that when you've got somebody that they do not leave you because they are being poached, they there is somebody that they could walk out the door and go work for in a heartbeat. Um, always leaving the door open for new hires. So like constantly having a way for folks [00:24:30] to reach out to you and to to get your attention if they're a quality hire. Um, making sure again that that our that our employees are feeling like they're doing valuable work, that they're not just putting numbers on a form and they're not just a body, you know, in a cubicle, cranking out tax returns, making sure that they have a sense of ownership. And then the biggest one, I think, is we've got to think outside the box.
Amanda Aguillard: It is great to grab a, you know, mid-level tax professional coming from another firm with experience [00:25:00] and the degrees and the certifications and the credentials. That's wonderful. But that's probably not always going to it. It will not always be available when you need it. So what starting the starting the process to look for these alternative hiring solutions. So like I said, hiring folks that maybe are not credentialed in accounting or tax but can do some of these, um, project management pieces or Our customer client relation pieces and take some of the low weight off the other professionals looking [00:25:30] for efficiency through technology, and then also looking at promote and offshoring hiring options and, you know, getting those started those don't you? It's you can't just click a button and have somebody, even from another part of the world showing up and doing quality work for you. You really there's a ramp. There's an on ramp for that. Um, a lot of times it requires having solid processes in your practice, um, to be able to hand off. So, so just constantly be thinking about, okay, this if it's not a problem from your for your [00:26:00] firm right now, talent will be a problem for your firm. And what are those things you can do to mitigate the damage.
Zach Warren: Certainly.
Zach Warren: And I think that that's particularly instructive as we move to the next slide as well, which is kind of I guess the overarching point of all of this presentation is, especially if people are hiring is a problem right now, the answer They're either hiring more, may not be available to you, or maybe you start to have to think about doing things in a nontraditional way. [00:26:30] We basically asked that question in the survey, which is, oh, okay, well, how are you trying to tackle this? And like Amanda said, there's a wide variety of different ways. Automation is a big one, and we're going to get a little bit more into that in the future. We see over on the right hand side there, more than half, 54% of the midsize firms that we're talking about have turned to automation as a way to potentially mitigate some of the issues [00:27:00] that we're finding with hiring. Also, like Amanda said, maybe you're looking at a different way we see about a third of the people either recruiting freelance workers or turning to outsourcing either onshore or offshore. To really mitigate some of this. There are a variety of different ways that people are trying to tackle this problem, and it really might be a case by case basis, depending on your firm and what. Strategy there is for you. But really what we want to get across here is [00:27:30] there are. Options either way, no matter what way that you're trying to choose.
Amanda Aguillard: Absolutely. Um, it's interesting we, you know, we keep saying this talent pool is finite, right? Or near finite. Um, so how do we get more? Because we're, we're often, um, turning away work, which we'll talk about in a second, but we're. Often the issue is not there's not enough work. There's not enough folks to do it. So with the same number of people, how can we get more work out of the same number of people? And this is not, you know, um, [00:28:00] you know, this is not the working conditions of, of London around the turn of the century. This is like, how do we how do we take care of our folks? And, I mean, the option is probably technology. And you know, this, Zach, this is your sweet spot is, um, the tech is getting really good. You don't even have to be good at the tech for it to be good for you now.
Zach Warren: So that is very, very true. And something that I'm probably going to bring up a lot too, is you don't need to be a data scientist. You don't need to be a tech expert [00:28:30] to create automation. There are a lot of different ways to do that now. But as we're talking about in the big what exactly people need to know about how to hire in different ways, to think of it, I want to kind of look at the small as well. And I know that obviously Paget has a lot of different firms out there, and I'm curious how one here really tried to tackle this talent problem.
Amanda Aguillard: Yeah. So this is Emily and Andre there in Tennessee, and they're one of our practice. Um, they own one [00:29:00] of our practices. And they took what was traditionally a seasonal position and made it a full time, salaried position around tax. And knowing full well that they would have they would hire a qualified candidate, not, you know, an intern. This is a professional person, um, for, you know, for as a salaried position and use her for tax prep during tax season but also give her some freedom and free rein on the off season to to better their [00:29:30] own firm. So to go and do um development, to look at internal processes, to manage to talk to clients off season. Right. So to go out and reach out to their good clients and, and, and have build relationships with the clients in the off season. So they again took something that was they had traditionally filled with a seasonal um or contractor position and made it a leap of faith and, and hired a full time salaried person. And they have have nothing negative to say about [00:30:00] it. They have loved how this has worked out for their practice. It's really, um, deepened the relationship with the clients. So.
Zach Warren: Yeah, and I think that's particularly important for the midsize firms that we're talking about is kind of that flexibility. I really like what you said during tax time you have a tax person, but during the off season, you have somebody that can look into some of these improvements, talk to clients, do things in a different way. Maybe the larger firms can just hire different people for that. But in a midsize firm, you have to have people that have a few different hats [00:30:30] and are trying to push things forward, kind of, no matter where they sit.
Amanda Aguillard: That's right.
Zach Warren: So kind of tied in with all of this that we're talking about. People there is, like we said earlier, the very important business aspect of this as well, everything around pricing and revenue. You may remember earlier we talked about priorities and how those priorities have shifted. Really, we've seen a big swing toward more people being interested in [00:31:00] pricing and revenue. Even within the past couple of years, I think particularly post Covid, we saw a lot of people, okay, let's just get our operations in order. But now that the operations are starting to be a little bit more grounded, they are turning toward the growth and how exactly they're doing that. And what we're seeing, particularly in terms of pricing models, is a lot of time based pricing, a lot of flat fee pricing, or a lot of time based and hourly pricing [00:31:30] in particular is what I wanted to say, particularly for the midsize firms, about two thirds. That's primarily what they're offering. But even though a lot of people have been talking about value based pricing or doing things in a different way, that's not necessarily Amanda, what we're seeing.
Amanda Aguillard: No, I will say this, and this is one of our core tenets at pageant, is the the most important thing a firm can do is to get their pricing right. When things are chaotic, getting pricing [00:32:00] right is the most important first step they can take. I do think the state is very interesting, and we were when we were talking about it last week, I was like, this is I've been around the industry for a long time, and they've been screaming at us about value based pricing for a good decade. And you look at the data and you're like, well, either folks aren't hearing it or they're deliberately ignoring it. And what is that about? Um, I don't know what what that's about, but what I do know is that time based and hourly pricing is about the least [00:32:30] efficient way to do pricing, and that it's so admin heavy, right? It is so administratively heavy. Um, there's a tendency to drop, to lose, to lose time. So you're not even probably, um, realizing everything that you're doing anyway. Uh, so so there's a reason that that folks have been screaming at us about value based pricing. It's more efficient on the admin side, it's we're making sure we're preserving our profit. Um, but for some reason, folks, it looks like folks aren't doing it. [00:33:00]
Zach Warren: Yeah.
Zach Warren: And I find that interesting, too, because I know that you know your customers very well. I know pageant firms very well. I take your word for it. But even in the data, we asked. Oh, okay. So have you had success with these models, particularly in raising prices? And to your point, I feel like a lot of people would say, oh yeah, time based hourly pricing. Maybe we've had some success there, but it's tougher to get people to adopt value based pricing or think about things in a different way. Right? [00:33:30] Um, maybe not necessarily. We're seeing success across the board, which is interesting.
Amanda Aguillard: Yeah, I think there's a fear with firm owners and partners that if we if we change the way we price or we price higher, um, that that clients are going to leave. And it just doesn't happen. I mean, we've seen it across magic where we've we've pushed down price increases. And you would think, you know, statistically [00:34:00] like I can look at this as a data person, right. And say, well how many of these clients are what is the price sensitivity? How many are actually going to leave? They don't leave. Um, you may have a few that leave. Those tend to be, in my experience, the ones that you don't want anyway. Um, the ones who are probably heavy needs real needy, clingy, uh, calling all hours. Um, those tend to be the ones that leave, even if you lose a couple, a handful. I mean, we've seen we've seen numbers of [00:34:30] clients leave less than 10% in our price increases, but the revenues more than make up for it. So. So you're increasing your your fees. Your revenue tends to at least plateau with less work. But generally you're your top line revenue is going to increase with with pricing changes anyway. And you and you end up building capacity, right. You end up getting a little bit more time margin on, on your client base.
Zach Warren: Very, very fair. And I mean, that's something to the point of what we're seeing on the screen. You [00:35:00] can kind of see across the board that right hand column, the top two boxes basically. Have you been either successful or very successful in raising prices, and pretty much no matter what type of pricing that you're trying to attempt, it's either between half to three quarters of people say, yes, we've been successful. In addition, there's a substantial portion that say, yeah, we tried, but really no change in the overall profit and revenue of the firm. [00:35:30] There are very, very few, pretty much no matter the model, less than 10% say that we were either unsuccessful or very unsuccessful in raising prices on this particular model, which tells me across the board, there's a lot better value that today's firms could be having in terms of how they're pricing their services.
Amanda Aguillard: Yeah. So message is everybody needs to go out and price to what they think they should be charging. Don't be afraid of it. Don't [00:36:00] be afraid of it.
Zach Warren: Yeah.
Zach Warren: And I mean, you did a similar report with your own Paget firms looking into how exactly Paget Pageant firms have been approaching those increases and how clients have reacted.
Amanda Aguillard: Yeah, and it's the same data, right? So this this would be a more specific data set group. Our firms run from 200,000 of revenue to about 2.2 million of revenue. So it's a very much narrower group than the than your report. [00:36:30] Um, but the answer is the same. I mean, we we have seen that there have been great successes with raising fees anywhere from, you know, tiny increases all the way up to 25, 50%. Um, we don't we don't lose top line revenue. It doesn't happen.
Zach Warren: Yeah.
Zach Warren: So let's go from the macro to the micro once again. What? Tell me a little bit about this success story in terms of valuing their work out of Colorado.
Amanda Aguillard: Yeah. So Mary Beth is one of our practice owners in the Denver [00:37:00] area. Um, and she had historically been Underpricing just just, um, Pricing with, you know, lower than she probably should have been. We know that. Um, and she had an emotional tie to it. I think this happens especially with smaller firm owners. There's an emotional tie to it. I want to take care of my clients. What if they can't afford it? Then they're not going to have an accountant and we're going to have a bad relationship. We won't be friends anymore. And so there's so many, um, threads of emotion when it comes to pricing. [00:37:30] And so what we did at pageant is we instituted a pricing tool across our network that will objectively price engagements. And so we have a, a matrix of you just put in the information how many transactions, how many forms, whatever the engagement looks like, and it will objectively price for you. And Marybeth took a leap of faith and she just did it and said, I'm going to get out of it. I'm going to remove myself from the emotion of this, and whatever the tool tells me the price should be, that's what I'm going to tell the client is going to be. And, um, and [00:38:00] for some of them, it was a huge increase, like doubling their prices. And they had great success. I think they lost one client.
Zach Warren: Even with doubling prices. That's wild, but awesome. And I think that that's really shows the value of information as well, like the pricing tool that Paget has, like some of frankly, the tech tools that Thomson Reuters has as well. The more information that you're able to bring in to make those decisions and to think about things again, maybe in a little bit different way, [00:38:30] where it's not just, oh, I can't lose these clients. I got to do everything to keep them and just make sure that, like, they're happy no matter what, even if it's worse for my business, that's not great. You got to think about this as a business as well, and assume that your clients are as well, and make this into a little bit more of a business transaction with a little bit more information.
Amanda Aguillard: Yeah. And I'll say one thing for the people that have done this, they've. Done this, um, with Angel, [00:39:00] the one thing that they will say is, I wish I'd have done this sooner. I should have done this sooner.
Zach Warren: We hear that a lot. Definitely in the TR side of things as well. And as we're really we're talking about this, let's get a little bit into the firm growth and strategy of it all as well. We've talked about the people. We've talked about the pricing. So ultimately what are you trying to do with that? How are you trying to push the firm forward as a whole? So I'm going to bring up this slide. And it [00:39:30] was funny when we had our pre call because we said, oh we might argue against these numbers or at least what people are telling. Uh Thomson Reuters Institute's researchers, because what we found is people say, yeah, what we really want to do is grow the client base. That's number one, two thirds overall of our sample said that. And 70% of people within the midsize firm said that. But what are they basing it off of vibes kind [00:40:00] of honestly you can see that orange bar at the top? Only 38% of firms cite having a specifically defined growth strategy over the next 12 months, which, frankly, is a little bit lower than I'd want it to be. You have to think that firms really need to think through not only how am I doing business today, but how do I want to grow? And Amanda, maybe it's not necessarily growing the client base.
Amanda Aguillard: To your point [00:40:30] about this. It's like throwing darts at the wall is what this kind of feels like. There's not a defined growth strategy. But you know, we gave them a you guys gave them a survey and said, what do you think? And they're like, oh well, growing client base. We have more clients. I'll grow. I'll make more money. But the reality is that when we talk to firm owners, we're like, okay, well, you know, how you grow your client base, you have to market, you've got to pitch, you've got to have a product you believe in, that you can deliver on time with good clients [00:41:00] or customer service. You're going to have to build the back end for adding, you know, net new clients into your. And a lot of times they're like, I don't know about that. You know, I don't I mean, we've seen it, you know, across the industry with um, not just Paget, but with other peer groups I belong to where they're like, I want to be more profitable, probably, and I might want to get bigger, but time out. I'm going to get net new clients when when folks are calling in or sending [00:41:30] in client leads. Um, a lot of times we're saying we we don't take them. So so that's an interesting. But again, that is not scientific. That is that is me and what I'm seeing in the industry and, um, you know, with discussions. But I don't know that I believe this and I don't I don't know that I believe this. I don't think that's really how a lot of firms are intending to grow their, their business.
Zach Warren: Yeah.
Zach Warren: And like I said, up top, all of this is [00:42:00] self-reported. So we go out to the firms. We ask them, what are you doing? This is what they say. But we do notice in the data. Sometimes what they say and what they're actually doing may not necessarily be hand in hand. So you kind of have to interpret this data like Amanda is and talk to the people about, okay, you say you want to grow the client base, but what actually are you trying to do here? And I think that that kind of gets to the second bar on this screen as well. The [00:42:30] greater use of technology and automation, which you can see on the right hand side, a lot of large firms, they have money to throw at technology, but especially for the midsize firms like what Paget serves, how exactly are they approaching this technology and automation that you're seeing right now?
Amanda Aguillard: Well, as you as you know, there are a lot of great things on the on the market, I mean, a lot of great tools on the market. And they keep getting better exponentially faster, I guess. You know what [00:43:00] used to be. Oh, how innovative to have an accounts payable tool that you can use online and pay your client bills. Now it's like generative AI driven and and I think I think our firm owners have like kind of come heads up after the pandemic and been like, okay, a lot of stuff happened in technology in the last 3 or 4 years. Like, I need to go figure this out. If I don't figure it out here, we're done. You know, and so I think I think maybe that's what some of what we're seeing is like this technology has been great for a long [00:43:30] time, but it's gotten exponentially greater while we've been exponentially busier. And I think a lot of things are picking up. And it's time for me to to figure this out.
Zach Warren: Absolutely.
Zach Warren: And drilled down particularly on the tech and innovation piece. That's kind of what we saw as well, is you would think, oh, we need to use our internal processes better. And there definitely is an element of that, but also a substantial number of people saying, we need to figure out what's new here. So there's a lot [00:44:00] of numbers on this slide. And I don't want to confuse people. But basically the question was what are your top five investment priorities when it comes to technology and innovation? So if it was anywhere in the top five, you'll see that right hand bar, um, it'll show up as one of the top five. So 66% of people, for instance, said we need to improve our processes or workflows. That's understandable. But what I [00:44:30] really thought was interesting is, number two, their new tax technology solutions, 47% of people, which is a slight increase over 2022, said, we need to have something new. We need to think about this technology in a better way, scroll a little bit down, improving technical support. I think that's particularly probably a lot of larger firms, but a decent amount of midsize firms as well say we have this technology, [00:45:00] but we need to get our hands around it a little better. We need to understand how exactly we can use these within our processes, within our workflows, and try and figure out what exactly to Amanda's point, this new future of tax is going to look like. Um, I'm curious. Amanda, is there anything else from this particular slide that really stands out to you as well?
Amanda Aguillard: Yeah. Um, yeah, I'll hit a couple of them. First of all, better use, uh, improving processes [00:45:30] and workflows. I am so proud of the folks who responded to that, because sometimes we just say, we're going to go put our credit card in a, in a, you know, an app, and it's going to solve our problems when the problem is really the underlying process or workflow. So I am applaud those who recognize that technology is kind of meaningless until you know what it's supposed to be doing and how. Um, so hats off to the folks that that that raised their hand on that. I think this new the number two and.
Zach Warren: Number. [00:46:00]Five.
Amanda Aguillard: And new tax tech and new practice management tools. I mean that's that speaks to the labor shortage, right? That speaks to the talent problem is we have we've got to figure out ways to get more out of the folks we have in, in house. Um, and then again, using what we have better so technical support, um, improving training and digital education. I mean, those kind of go hand in hand. Right? So there are a lot of great things on the market that are out there. I mean, tons of things. But but are [00:46:30] we using them well? So like just because something says it can do something doesn't mean it should. Um, and so we need a curated, um, you know, we need curated folks who, who understand technology and accounting firms, who know what, what is supposed to happen and, and like, again, squeezing everything you can out of this technology. We do that at Paget. That's one of the things we offer to our to our firms is we we act as sort of an outsourced, [00:47:00] um, CTO for our firms. Um, but it's it's overwhelming again. And remember, this is all around in the lens of we don't have enough time to do the things we're committed to do already. Um, so definitely, definitely understand why that's an investment priority for folks responded.
Zach Warren: Yeah.
Zach Warren: And jumping off that because you nailed the exact other one I wanted to talk about, which is that improving training and digital education. It's 45% saying it's ranked among their top five. That's solid. That's actually [00:47:30] down from two years ago, though, where 58% said the same. And that kind of worries me a little bit because particularly right now, the pace of change of these technologies is only increasing. I mean, think about something we mentioned, generative AI. Chatgpt came out November 2022.
Zach Warren: 18.
Zach Warren: 19 months ago or so. And this it has changed a lot in a short period of time, but I'm not sure people necessarily know [00:48:00] how to harness that using a different study that we didn't include here. But I mentioned I wrote a series of generative AI reports, including for tax and accounting professionals. We asked that question, so how many of of you firms are actually providing generative AI training right now? The answer less than 20%. And I think the number, particularly for tax firms, was 11%, if I remember correctly. That means, [00:48:30] yes, this is out there. And particularly if you are trying to hire new juniors, they may be using this already because they kind of grew up with it. They're maybe a little bit more tech savvy, but they don't know how to do it correctly. They don't know, particularly if you're working with a lot of tax and accounting information, which.
Zach Warren: Tends to.
Zach Warren: Be private information. Are you actually using these tools not only correctly, but ethically, responsibly, privately making sure that any data [00:49:00] that is in the tool is actually in the best service of the client, and you're not just trying to rush through things. It's a little bit of a balancing act that I think today's firms have to try and walk where you have the technology, you want to be doing the best for your client. But how to your point, are you going to have the time to learn how to do this? But then also how do you make sure that you're doing this all correctly?
Amanda Aguillard: Yeah, that's really interesting, Zach. So like I think about [00:49:30] my evolution as a firm owner over call it 2012 to, you know, for ten years or so. And I lived the cloud evolution. Right. Like I lived what I call like real cloud, like browser based internet app cloud. I lived that evolution. And I mean, there's still some folks that are in the laggard end of that. But it was it was probably a good, you know, six years of runway where we were learning, we figured it out and then we were comfortable with it. We don't have that time with them. [00:50:00] I like that that timeline to your point. I mean, we're less than two years with OpenAI having ChatGPT and it being embedded in things we don't even know about. Um, and it has changed the way that work is being done already. So we can't sit on it and see how it goes. Like, we can't we can't see if it sticks, you know, like it's it's here. It's going to be the stuff that we touch every single day if it's not already. So there's, there's can't wait and see. Got to get in. And you're going to [00:50:30] have to invest time and money into learning it.
Zach Warren: Oh that's great Amanda. So then how how do we do all this if we're a midsize firm and need to do more with less?
Amanda Aguillard: So this is a simplified version of the vetting process we use at Paget for our technology partners. But the first thing which I alluded to on that survey is you've got to figure out what you need, and you've got to make sure you understand the workflow, the process that you are trying to make more efficient with the tool, [00:51:00] like the tool comes out. So I'm getting things documented, drawing them out. Where are the holes? Where are the speed bumps? Where are the bottlenecks for the things you're trying to move? I'm thinking about data movement, right. So generally a lot of these solutions are efficiently moving data around without people touching it. So where where is the data coming in. Where is it going. Where is it ending up. Is it coming in correctly, like figuring that piece out first and [00:51:30] then saying, okay, here's the problem I can't get from this system to this system without somebody touching it. Is there a piece? Is there a tool that can fix that? So once you figure out what your needs are, um, then you go down the rabbit hole googling things, right? No, I'm kidding, I'm kidding because I've certainly done that. But people.
Zach Warren: Do that. So if you do it.
Amanda Aguillard: Right, you type in our accounts payable tool, Xero and or whatever it is. And, you know, seven [00:52:00] hours later you've, um, like, I don't know, it's somehow that stuff happens, but the way it should be done is that you figure out what your must haves are and what what what would be nice haves are, um, and then narrow it down to, I mean, maybe 3 to 5 players in the market and then start asking people who actually use these things. I think that's the best, um, strategy. So marketing websites are written by marketing people to [00:52:30] sell things. They are not written by data, um, integrators or accountants generally. So like it's better to, to really heavily rely on peer input and see, can you get what you need out of these tools. And then And once you've made that decision, you have to jump like you've got to adapt and go in and shorten or shorten as much as possible that onboarding and implementation period, because it stinks and it's really uncomfortable for a lot of folks. So like the shorter the better. I like to use [00:53:00] the burn the boats analogy. I don't know if you're familiar with that, but there was a Spanish explorer, um, who landed two Spanish boats. And so the idea was like this explorer, this captain said, landing on this new land, and we're burning the boats so we can't leave. There's no turning back. And it's kind of the same thing with technology. Like once you you have done your research, you have made this decision. You got to go in there. You can't be one foot in and one foot out. You've got to go all in and commit, [00:53:30] um, make the time to implement correctly. Hire people to help help you implement if you can, um, and go for it and know that you've made this good decision and your life's going to be better for it once you get through the the tough part 100%.
Zach Warren: And to the point earlier, hiring somebody doesn't necessarily mean increasing headcount. It means get a partner, somebody you trust, somebody that can help you through the process. And I also want to stamp down on what you said in terms of research as well. I 100% [00:54:00] agree it's so important to be hands on with this. And I think a lot of people think about product demos or trying technology for the first time to see, oh, this is what I don't like. This is what I like, don't think would be helpful. I want to cut this out, etc. but I think it's important to think about it from the opposite end of helping people realize, oh, the technological capability here and get people thinking a little bit, maybe I can do things in a different way. Maybe I can have a different process [00:54:30] for this, try and do my work a little bit differently, a little bit better. And it's somebody can tell you that, sure. But it's a lot more different and better to actually get your hands on a tool and be able to figure out for yourself, oh, this is what this can do. And this is the what they're talking about. When they say greater efficiency do work quicker, better, better, faster, etc..
Amanda Aguillard: Yeah. And I think what we're seeing in the tech market is a lot of [00:55:00] expansion of functionality. So when I started working with cloud software, it was very specialized, right? It was very much like this piece does this one thing, this other piece does this other thing. But now we're seeing big companies, um, buying up and folding stuff that may have felt brand for them and folding it into their into their ecosystem. Um, so having said that, if you've looked at something in the last, you know, 3 or 4 [00:55:30] years ago, it could be vastly different. If you're looking at a tool, it could be very different than what it was back then. But it also unlocks possibilities of, you know, a functionality and data movement that maybe you didn't realize were even out there?
Zach Warren: Certainly.
Zach Warren: So once again, let's talk a little bit about an example of this. Somebody who turned to technology to do something that was a little bit tough to do. Just so many hours of time before.
Amanda Aguillard: Yeah. So Gene is one of our owners in Utah. And [00:56:00] she acknowledged that filing 1099 was a in her practice before she she moved was a very paper based, very time consuming process. And it shouldn't be. There's nothing really magical about 1099. It is a reporting form, right? It's it is informational. It is not there's there's really not a lot of human decision making that needs to go in the preparation of 1099. So we helped her find a tool that would essentially automate 1099 filings [00:56:30] out of her general ledger. And she doesn't even as the owner and partner doesn't even have to touch them anymore.
Zach Warren: Certainly.
Zach Warren: And I know automation is definitely something that Thomson Reuters is focusing on. Uh, checkpoint in particular. Is something going to be coming out with some generative AI features, but really ultra tax and across the board for tax and accounting firms, there are a number of different ways that Thomson Reuters is trying to invest in this. But ultimately, like we've been talking about, it comes down to not only the technology, but the [00:57:00] people and process of this all as well.
Amanda Aguillard: Yeah. So Paget has been a partner with Thomson Reuters for many, many years, and I think we're one of the bigger, bigger partners of Thomson Reuters. And so we've fully invested in in building around the suite checkpoint ultra tax in particular. Um, and what we do for our firms, for folks who join the Paget network, we cover their their ultra tax subscription for the first year that they're with us, so we can help them really learn how [00:57:30] to get the most out of it if they're not already on ultra tax. Again, we have a tax support team for dedicated professionals who help our firms manage not just the ultra tax piece of it and the technology piece of it, but also the research and compliance issues.
Zach Warren: Excellent. So if you are interested, make sure to write down that email on the screen. And we'll have our own emails at the end of this that you can write down and contact any of us as well if that is something that you're interested in. But as we're really [00:58:00] ending here, kind of big picture, what exactly do you want, Paget firms to know and really take away from what we've had here today?
Amanda Aguillard: Yeah. So we are the partner that may be the missing piece in a firm that is not optimized. So that sweet spot of midsize firms between 200,000 and $2.5 million, we are very good at getting those firms to be moving [00:58:30] a a flywheel of new leads. We have marketing support. We get them cranking out, on profitable work. That's the most important thing. That cannot be taken back. So? So we support our folks in all these ways. We'd love to talk to anybody who's interested in maybe getting some some assistance.
Zach Warren: Absolutely. And from Thomson Reuters standpoint as well. I mean, like you said, we've worked with pageant for years and think it can be a very healthy partnership when firms are reaching out to [00:59:00] try and get a little bit of help with their own processes, their own business and technology increasingly is going to be a big part of that moving forward. So I think the overall theme of what we're talking about here today is don't be afraid to think about things in a different way. This is a changing landscape that is evolving very, very quickly. Weather and a lot of these problems aren't going away either, whether it's in terms of hiring. Figuring out the right pricing, client service growth. [00:59:30] But if you're adopting a growth mindset and a change mindset. Then, even if a lot of those problems aren't going away, maybe you're thinking about new solutions that you never really thought about before and could really pay dividends in the firm of the future.
Amanda Aguillard: Absolutely.
Zach Warren: So thank you very much, everybody, for listening. This has been an excellent webinar to present with you. Amanda, I really appreciate you joining us and really being able [01:00:00] to present this with Thomson Reuters and patch it together.
Amanda Aguillard: Thanks, Zach. It was a pleasure to talk about this, this nerdy data stuff with you, I love it. We can do it again at some other time.
Zach Warren: Hopefully if anybody wants to contact us. Our contact information for both Amanda and myself is on the screen, and we can refer you to other people within Paget or Thomson Reuters accordingly as needed. Thank you all for listening to this presentation. Hope it was an excellent one. And like Amanda said, we hope to see you again [01:00:30] here very soon. Have a great day everybody.