From Old School to New School: Shaping The Next Generation of Accountants

Careers in the accounting industry aren’t the same as they used to be.

In episode five of Accounting for Innovation, Jody Padar and Matt Tait discuss the critical transition facing the accounting industry as it shifts from seasoned professionals to the next generation. They explore the challenges and decisions young accountants face, whether to innovate within existing firms or venture out on their own. The conversation highlights the dynamics of legacy firms, the entrepreneurial spirit among young professionals, and the opportunities that modern technologies and methodologies offer in reshaping the accounting landscape.

In this episode, we cover:

• The decisions young accountants face in old-school firms
• Considerations around buying into a partnership or starting an independent firm
• Challenges of changing firm cultures and adapting to new business environments
• The role of technology and innovation in modern accounting practices
• Potential career paths for technical versus business-oriented accountants
• The impact of firm consolidation on career opportunities and firm dynamics
• How young accountants can navigate the changing landscape of the accounting industry
• Entrepreneurial opportunities within and outside traditional accounting paths
• Importance of adaptability and forward-thinking in career planning for accountants

This episode is brought to you by Decimal and the Radical CPA.

Transcript

0:00

Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical CPA, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.

Jody Padar: 0:26

Welcome to the Accounting for Innovation podcast. I'm Jody Paydar, the Radical CPA, and I've been at the forefront of innovation in the accounting industry for over 15 years. My co host, Matt Tate, is the CEO of Decimal, one of the fastest growing accounting companies in the country and an accounting innovator.

Matt Tait: 0:44

Well, thanks, Jody. I am excited to talk today. This is, I think, a unique subject of the transition, I would say, of the industry from the older generation or the more experienced generation to the younger generation of accountants. And I think there's a lot packed in there of transitioning the firms themselves, or do some of these younger accountants, maybe branch out on their own and start their own firm. What do you think, Jody?

Jody Padar: 1:14

So I think it's a hard decision. If I was sitting inside of a firm today, and I'll say sitting inside of an old school firm today, I would be thinking twice about staying with the firm. Okay. In the transition, unless of course there was some sort of buyout happening and maybe there was going to be a bigger transition. Right. So I'm going to say like, if, if you're sick, if you're, if you're in an old school firm and you get the opportunity to buy a park partner interest, right. And the partners come to you and say, Hey, you know, we want you to take our firm into the future. And you're going to have to pay X to be, to buy into this partnership. What would I do? I believe if I was, uh, if I was in that position today, I would be seriously thinking twice about it. And I would be thinking about starting my own firm. And I know that's kind of ruffle some feathers, but the thing about it is, is when you think about having a blank slate and starting a new firm versus having to go through the legacy transition of an old school firm, you really have to weigh the. Positives and negatives of both because chances are the legacy client base, may or may not adapt to your new ways. And you also have to deal with your partners and getting them all to change. And can they change fast enough? I think the question is not even, can they change, but can they change fast enough for you to reap the benefits of the opportunity of the space today? And I think that's the bigger question to ask is, is if I were to be a partner today, Could I make more, build a bigger firm faster if I go by myself, or will I have the resources and will I be fighting kind of, uh, you know, a ship that doesn't really want to change. And in five years, will my value of that partnership interest be worth anything? And I think that's a hard question.

Matt Tait: 3:16

I think, you know, what I think is interesting with you and I are. We are very biased in this decision. Like we are entrepreneurs. We are people that are really okay jumping out of the airplane and building the parachute. Not everybody is really like that though, and I think you and I also know that running a business is hard, like actually having a company and needing to understand that you have to be able to pay yourselves, pay your employees, get clients, service clients, like there's actually a lot of easy that goes with being in a firm that I think a lot of people underestimate how hard running a business is. So I say that and I also say I love it. I'm addicted to it. This is my third company. So I'm, I'm very biased in the decision that I think everybody should try. But what I think is actually just as important is, you know, when they were building roads back in the day, the horse and buggy owners shouldn't have been the ones building the roads. It was the car owners. And what I mean with that analogy is if you're in a firm and you get to be part of directing the change, and that change isn't directed, that plan isn't really directed by the older school generation, I think you have a chance to build it into what you want it to be. And I think there are two things that come with this that I think really add some layers to the challenge, which is number one, do you get to play a key role in the change? And do you get to play a key role in what the destination is? Have you really thought through like, what do you want the firm to be? What do you want your life within that firm to be? If you've painted that picture and you have some control over getting there, it's a much different choice than if you're just hoping everybody gets to where you want it to be.

Jody Padar: 5:06

Right, right. And a lot of times, even if you're being asked to come into this partnership, You may not be the managing partner anyways. Maybe you're just buying in as a, like, as a partner of seven or a partner of eight. Right? Right. And, and so where do you sit in the, the, the food chain of where, what happens when decisions are made? And I think that's critical as well. Um, so, so, so I think it's a big decision. I think. Um, if your partners to are like, are they going to retire right away or are they expecting this to be a transition plan? I think that's another question to ask.

Matt Tait: 5:45

Well, and who has control over some of that? Like we've all seen the transition plan that got built and 10 years later, it still is happening. You know, there's, there's a lot of that that's particularly happened. I think with the baby boomer generation, a lot of them are working longer than the millennial generation had thought they would work and, and that's made these transitions. A lot harder. But I think there are other pieces that come with this. I mean, to me, it's partially like, what do you want out of your career? Do you, what do you want out of your balance between work and life? What do you want out of the tools that you have to use to get there? And, and there are pieces of this that all kind of play into it. That obviously, if you start your own firm, you have control over all of it. As long as you're making money and find clients.

Jody Padar: 6:35

Yeah. And I think there's two, do you want to be technical or not? Right? Like if you want to be a technical person and a technical partner, guess what? It's okay to not like be, to start your own firm, to be that technical partner. In fact, if you want to be a technical person, chances are you shouldn't be running your own firm. You should be working for someone else, or you should be, you should find a partner, a new partner, who's really going to run the firm and you're just going to do the technical work. Right. So I think that's another choice that you need to think about is, you know, Do you like doing technical work or do you like doing kind of business work, business development, figuring out sales, figuring out HR, figuring out all the stuff, all those hats that you've never had to wear before, if you're just working inside a firm?

Matt Tait: 7:19

Well, and so much of when you, if you make the decision to start your own firm, you are always selling your entire job. You may do some technical work at the very beginning, but you are selling employees to join you. You're selling clients on work to do like your entire job is, is selling yourself and the product of what that work is. And if that's not something that you think you can do or want to do, then that also helps you kind of make that decision because you and I've seen it with, Clients of ours. There are so many of what I call the field of dreams, entrepreneurs, where they think if I build it, they will come. And that's just not the case in business. You have to actively go out and seek what you need to accomplish work and what you need to get paid to continue to accomplish life. And so that's a balance that I see with a lot of accountants that I think you really hit the nail on the head with. And coming from the legal profession, it's the same thing. There are some people that really just like doing the work. And there are some people that like to build a business and that's a different skillset.

Jody Padar: 8:25

The thing that I think is interesting today that wasn't there. Um, you know, before, if you listen to our earlier episode, when I first went out, I went on my own, but I also worked as a subcontractor for someone. Right. So I think there's ways to stair step this process as well. So if you're kind of freaked out about like quitting cold Turkey, a firm, but you know, you don't want to be there anymore and you want to start your own business, there's so much opportunity for contract work. For you to say, okay, I'm going to work X number of hours a week as the contractor while I build my book of business on the side. And I think that's like kind of an, an easy pathway, a less risky pathway to do it, but I would caution those who kind of go that pathway to, to, at a certain point, say, okay, um, I'm only going to do this for six months. I'm going to do it for a year, whatever. And I'm going to set an end date on it. And then decide, do I really want to build this firm or do I want to go get a job for someone else? Because I think also sometimes you get caught in that where you should take more risks and you don't because it's a little bit comfortable. And the other thing that I would caution Or talk about is just because you haven't done it in the past, that doesn't mean you won't be good at it. So like a lot of times in firms, you're sitting in a seat doing technical work because that's all you've been exposed to. No one's actually taught you how to sell. No one's actually taught you how to develop these relationships. And I think sometimes, you know, if you're thrown into the wild and you have to do it, you kind of figure it out. And you learn to do it and you, you do an okay job of it. So I think the other thing to think about it is just cause you haven't done all those jobs per se that a firm owner does. Don't be freaked out because like you can learn to do that, right? Like any entrepreneur has to learn how to have that 360 degree picture and learn how to basically do everything, even if it's outsourcing it, but like learn how to figure out if it's the right outsource partner or not. To, to get what they need accomplished.

Matt Tait: 10:29

No, I think that's a great point. And I, I think your point about making it a, the side hustle is also a really good point too. I see a lot of, I see it a lot in the fractional CFO industry. the pandemic really helped push that kind of fractional C suite, into a level that had never been in the past. And we see it with the fractional CFOs where you have a lot of people that are a CFO at a business and they think, you know what, I'd really like to start my own fractional CFO shop. And so they start picking up a couple of clients while also working their day job. And then all of a sudden they're, like you said, there's that tipping point where you say, you know what, I can now turn this into a real business. And you really have a choice there of like, all right, do I do this or do I stay? And, and I think that's a really good point on the accounting side is, Hey, if you haven't been exposed to selling or client development or business development, go try to do it. Sign up a couple of clients for yourselves, start an LLC, do something that you're billing yourself out. And maybe you find you like it and you're good at it. In which case you can grow it. Maybe you find you hate it and you really like to stay back where you are. And I think those are really good things to learn without all the risk.

Jody Padar: 11:43

the world is changing fast. That's one of my favorite things is like, you know, the world's changing fast around us and you can do so much more with so much less today So like you can go to Fiverr to get stuff done that you couldn't get done before. Right. Like you can go, subcontract work that maybe you would have had to pay like a marketing person to do or something like that. And it doesn't cost a lot of money. You can use AI, chat, GPT, whatever, to do a lot of things that used to take a lot of time and a lot of resources that you don't, that it's just easier to do today. So, I mean, I think there's, there's lots of opportunity for people who want to start. their own thing. but I think if someone came to me and said to on the other side of it, do you want to be a partner in this firm? I think it's a big question. I think you have to think long and hard about it because, the old school firms, the landscape is changing very rapidly and you have to decide. Yeah. If you want to be part of that old school landscape and kind of take your chances, because chances are like that firm is going to be changed significantly anyways, in the next few years, maybe it'll get eaten up by a bigger firm or yeah. You know what I mean? Like, or, or private equity is going to come in and then you'll make a decision whether you're going to stay or go, or you can, you know, decide, Hey, maybe I want to change it up now.

Matt Tait: 13:03

No matter how much you plan, if you're inside one of these firms, there is a better than not chance that firm will either get acquired or continue to acquire other firms. In which case the entire landscape of that firm is going to change and you're going to have no control over that. And what that also brings to mind for me is with these older firms, with these more traditional practices, a lot of what I'd be thinking about if I were in these firms is how far away are they from what I want to, are they relatively close or are they astronomical generations away from it? Because the ones that are the furthest away from it are the ones that are really going to have the problem at changing to what you want them to be. And so I think that's also a consideration, and we've talked in one of the previous episodes about a firm that I was, that I worked around, and their entire goal was to not get acquired, and they were also as old school of a firm as you could find, and I think that when you talk about practices like that, ultimately they did get acquired. So the goal didn't work, by the way, it's a terrible annual plan for your team. but they also were really far away. And one of the reasons they were acquired was because of how far they were from getting to modern, because they, an acquirer looks and they say that's margin we can capture with improvement, but the mid level managers, the, tax managers, the, mid level accountants, those are the ones where their entire perspective on career growth is now astronomically different. Then it was when they first joined that firm.

Jody Padar: 14:46

Well, yeah, because now like if that firm gets acquired and let's say it's a middle, it's a mid mark, right? Like I just say seven to 10 partners and however many employees go with that. Right. And now they get acquired by a firm. 450 partner or 450 person firm or something like that. Now all everything that you used to work on, everything that you are, like you've now grown, you're in this bigger, this bigger pool. Right. And what does that look like for you? And what does that look like for the clients you're used to working on too? Because not all those clients are going to stay at that new firm. And so if you like kitchen table accounting, and that's, That's your thing then. And you get eaten up what you, your firm gets eaten up by a really big firm. Will that, will that work stay at that firm anyways? Or will it get like kind of sloughed off, right? Like over the longterm. So I, I think too, it's like, what kind of clients do you want to work on? What do you like to do? And if you don't know, it's not, it's not the end of the world, but just know that, you know, the only thing. In constant life has changed. So like something's going to change. So, and I, I think that's really important whether you jump or you stay, like chances are in a year, wherever you're sitting is not going to look the same anyways.

Matt Tait: 16:06

And I think that's one of the biggest things that I would tell younger accountants today is the days of joining a firm right out of college. And then being in that firm and the culture of that firm being exactly the same for the 30, 40 years of your career, those days are gone. I, there will be very few, if any of those types of firms ever existing anymore. And that's really important to internalize because you may stay at that firm for 30 to 40 years. It will have to evolve period. And that's what you have to really think about as a younger accountant is where do I want to be to evolve? Whether that's at a bigger firm, medium sized firm, I can tell you, they're all getting eaten up right now. You're seeing private equity go after everyone. And that type of investment means that nobody is safe from change. Which I think, personally, is good.

Jody Padar: 17:03

Right.

Matt Tait: 17:04

Yeah.

Jody Padar: 17:05

Yeah, I don't think change is a bad thing. I think we just have to get more used to change every day. Right? Like, and, and have it be part of, like, just our every day. We know things are going to change and we just have to be accepting of it.

Matt Tait: 17:18

And one of the things I do think is important to really recognize though is change is scary and that's okay but you can't not accept that change is coming and that I think is you have to The head in the sand mentality is you're incapable of doing that going forward because the pace of change is only increasing dramatically.

Jody Padar: 17:45

Yeah. And I think one of the hardest decisions to make too, is like when you're sitting in this firm and you see all this stuff going on around you, you don't know who to turn to for support. maybe you have a friend in the cube or like, I'll say in the Slack channel next to you now, that's probably the equivalent, right? But who do you talk to about going out on your own? Who do you talk to about learning new ways of doing things, especially if you've been sick? Like inside of a firm that does things, you know, maybe a little bit old school and you go online and then you see all this stuff and it seems a bit extreme compared to what you're used to. Right. And so then I think there's a lot of just apprehension about, well, like, where do I learn how to do this? Or how do I figure it out? And I think, um, you know, sometimes not knowing is a good thing. And I'll say sometimes ignorance is bliss. Because making the step to say, okay, I'm going to do it and I'm going to try and I figure it out along the way you actually have more courage than if you've done something before. And you're like a little bit more apprehensive about it. So just because you don't know something doesn't mean you're not capable of it. And it doesn't mean that you're not capable of figuring it out. And I think in too many firms, the it. It's still been like, Oh, well, you know, if you're not 35, you can't be a partner. Or if you're not, when it was my gen, it was, if you had to be at least 40 before they even thought about making you a partner, right? Like that was just, you had to serve your time before you were able to become a partner. And it's not like that today at all. if you have a couple of years of experience, some of the biggest entrepreneurs that I know, Are the ones who are like, you know, they just have a little bit of experience and they're going out on their own and they're trying things and they're doing things different and they're learning along the way. So I don't think it's a bad thing. I just think it's not talked about in the accounting space. Whereas in tech, everyone like, you know, the, the person's 26 years old, they raised a bazillion dollars and they know nothing. And they're like, Oh, I'm going to start an app that does this. Right. And yet, if you were to ask an accountant who was 26 years old, To like not even raise any money and go out on their own. They'd be like, no, I can't do it. No, I can't do it. Right. Like, and so it's such a different perspective.

Matt Tait: 20:02

It is, but do you know what, there's another piece to this that I think is important as we wrap up today, which is if you do decide to. And if you do decide to, leave a firm and start your own, that's awesome. One of the things that you have done that as all these consolidations are happening and as everything is occurring is a really beneficial thing for you is, you have created an asset that can be bought at some point. So just because you leave doesn't mean you can't ever go back or can't get acquired. You've opened up a new world of opportunity for yourself. And so I think that's also pretty cool. And so Jody, with that, I have to say thanks for tuning in to the accounting for innovation podcast, brought to you by decimal and the radical CPA. You can find more great episodes of the podcast anywhere you listen to podcasts. And please don't forget to pick up Jody's new book, radical pricing, how to optimize profits. Delight clients and build a top value firm. As always, Jody and I would love to connect on LinkedIn too. Thanks everyone.