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CEO’s Corner: Lessons Learned

Friday, June 17th, 2016

As some of you may know already, NCI started an accounting firm in November of 2014 called America’s Choice. This firm was started for several reasons. One was to create a recurring revenue stream that the NCI business model does not allow for. Another reason was to “practice what we preach” by using the NCI marketing program in our own accounting firm. This also opened the door for us to test new marketing strategies and see if anything about the NCI marketing program needed adjusting or improving. We are now almost a year and a half into this new venture and we are having great success. We’ve also learned a lot. The purpose of this interview is to impart some of what we have learned to our readers for their benefit. The interview is with NCI and America’s Choice founder and CEO, Bruce Clark. In it we discuss what he has learned in running an accounting practice using the NCI marketing method for the first time in almost 30 years.

What was it that made you decide to start an accounting firm after taking a 28 year hiatus from running a practice?

That’s a good question and one that I’ve asked myself a number of times since I started this venture. The reality is, a couple years ago I started looking into buying another business. Something outside the realm of what New Clients, Inc. has been doing for the past 30 years. There were a couple reasons for me wanting to do this. NCI is great business model. It is a wonderful company that has helped thousands of accounting firms across the country become more successful through marketing and better management. We have also helped sell many of those accounting firms that we helped to build over the years. The one big drawback with the NCI model is that there was never a reoccurring revenue stream to what we were doing. Over the years that was something I always wished for. If I could go back in time and change one thing about NCI, that would be it. So I was looking into other businesses to find something that would provide a consistent income stream without having to constantly be on the sales treadmill. 

I looked at a number of different businesses, we looked at Cold Stone Creamery, we looked at Steak n’ Shake which is a fast food burger franchise. Long story short, Tyler, my younger son, suggested we build an accounting firm. What a novel idea, right? At first I thought it was ludicrous, I haven’t practiced accounting in 28 years, I had no desire to go back to practicing accounting and I hadn’t kept up with all the tax law changes and so on. At first I dismissed the idea out of hand but Tyler being the persistent little cuss that he can be at times, he kept bringing it up and the more I thought about it, the more it made sense. I thought if I was going to hire someone who would run one of those other businesses I had considered, why couldn’t I do the same thing with an accounting firm? Plus, the accounting industry is one that I know very well. That is what lead us to getting started. I had an accountant in mind to run the business, Robert Azar, who’s been an associate and a friend to my family and he even worked with me 30 years ago when I first started New Clients, Inc. We had someone available who is an enrolled agent with many years of accounting and tax experience to run the accounting firm, I didn’t have to go looking for that person. So in November of 2014, we pulled the trigger and we started our accounting firm. 

How much business has America’s Choice brought in so far?

Like many of our NCI clients, we started our accounting practice with 0 clients. We’ve been in business for 18 months and we project that by the end of this year we’ll be around $300,000 in annualized billing.

Since this is your first time running an accounting business in almost 30 years, what has changed about the industry?

Let’s start out with what we are not doing differently. What we are not doing differently is changing what we know works. What we know works is the basic NCI concept. That core concept is using outbound calling to generate leads targeting small to medium sized businesses for accounting, tax and payroll services. So we are following that model. We have tried some other things but we stuck to the fundamentals, things like using telemarketing to generate appointments and that has produced the lion’s share of opportunities. Having said that, the marketplace is changing, everything is evolving constantly and you have to stay on top of that, so we have done a lot of things differently. 

One of those things we’ve done differently is that instead of just marketing in the South Jersey area where we are located, we decided to expand those borders. That was for several reasons, first, New Jersey’s economy is not robust. The way to combat that was to market in places that had greater opportunity. So we started marketing outside our boundaries into other states and we’ve had great success with that approach. We’ve done this in a number of different ways, one was with telemarketing into those areas and the other was through using local sales reps, who we were familiar with the NCI sales methods, to go out and sign the clients up locally. We’ve had good and bad results with that approach which I’ll get to later on in the interview. 

The other thing we’ve done differently is to utilize strategic partnerships, which have been an important way of bringing business into the firm. Doing so has allowed us to secure clients we would not have had access to otherwise. One example is that we work with ADP where we refer business to them. We did this to open up another profit center by offering payroll services. One of the things that we’re doing differently is, rather than us providing some of these services, we are partnering with companies who can provide that service to our clients. They are the experts in those areas that can provide value added service to our clients while we earn a fee in the process. That is a way to leverage these opportunities and scale the business to help us continue to grow it.

Another company that we partnered with does entity formations in the United States. We have an exclusive arrangement with them where we refer them to our accounting clients to help set up corporations and we get a small fee for doing so. This company also refers business back to us, every entity they help to form that requests information on accounting services, those leads come to us and we have signed up a lot of clients that way. We’ve broadened our outreach and the opportunities by doing this. In some markets you may not have to take these extra steps to grow. If you are in Phoenix, AZ where the business growth rate is very high you might not need these extra steps, but in the South Jersey market we needed to expand our approach and so we have found ways to do that.  

Are these companies open to partnering with other NCI clients?

That’s a great question, and the answer is generally, yes. ADP has a program that we promote for NCI clients where they can run and process their payroll through ADP and they earn a fee for doing that. The difference here was, we pushed ADP to refer business back to us. Let’s say you are in Phoenix, AZ and you are running the NCI program and you want to offer payroll services but you don’t want to tie yourself up with having to process it in your office. So you partner with ADP, they send in a local rep. when you sign up a small business client. That rep handles the sale, signs up the client, sets everything up. Then you partner with that rep and they will refer your accounting service to some of their payroll clients who need it or express interest in those types of services.

The situation we have with the entity formation company is an exclusive arrangement but there is nothing stopping NCI clients from going out and forging their own partnerships with companies that offer entity formation services. The key for those reading this is to broaden your horizons, don’t think inside the box. We hear the term all the time to “think outside the box” but how many people really do it? We get stuck in our ways, our habits, our boxes and it’s hard to look outside of that. In today’s environment with the economy and technology shifting and changing so much, if you want to grow you need to broaden your horizons. If you’re happy and content where you are and with what you have then obviously keep doing what you are doing. 

What has been your biggest challenge in running this marketing program that you are so familiar with?

There have been numerous challenges. The first, and this doesn’t really apply to most NCI clients and the people reading this but I live in Florida six months out of the year, during the tax season from October until early May. While I still work from Florida, it’s harder to manage the accounting operation from a remote location. That’s been a bit of a challenge. The other thing is not following my own advice, to be brutally honest. I did things that I would tell an NCI client or someone considering an NCI program not to do. One example, I’ve had many NCI clients when they were first starting out say that they wanted to start the program with two CSR sales reps or maybe even three and I would tell them, don’t do that, start with one, get that down and get your processing squared away first and we can always add more CSRs later. I disregarded this advice. 

We started with three CSRs and six appointment setters making appointments. We picked up clients this way but not all of the CSRs were producing the way they needed to, one in particular dragged the whole effort down. That was one thing where if I had to do it over again, I would have done things differently. We did a course correction and made some changes and eventually narrowed it down to one CSR that is working much better for us. So that was the biggest mistake we’ve made and it cost the company a lot of money that could have been better spent in other areas. I was mad at myself for doing it.

Our other big challenge has been processing. One of the biggest challenges they have is getting the work in and out. That has been no different for us, we had to get our systems worked out. An advantage we’ve had that many NCI clients don’t, although we have been recommending it for years now, is that we started outsourced processing from day one. That really helped us tremendously to absorb the rapid client acquisition we were experiencing while keeping up with the work flow. Now that we have our in-house systems for processing smoothed out, things are going more smoothly.

Going off of that response, what are some of the major changes you’ve noted when it comes to processing accounting work now as opposed to 30 years ago?

In a word, everything. Back then computers were just coming into play and most things were still being done manually. Software and computing technology has changed all of that, obviously. It continues to evolve and change. I would urge people to again think outside the box and not just think in terms of local marketing because that is going to change over the next ten years. There are now major players in the marketplace that are targeting clients all over the United States. NCI clients may not see them as a threat at this point in time but they are and will continue to be, more so as we moving into the future. How do you get on even footing? You do the same thing, you widen your target market boundaries. This might be a problem for CPAs since they have the issue of being certified in the states where they practice. My understanding is that if they are not doing attest functions and not doing audit work and just providing accounting and tax services it might not be an issue. They would have to check with their independent state boards to look into that.

What additional advice can you offer to NCI clients reading this?

The first point I’d make is to follow the program. It sounds like easy advice but I found out the hard way that it’s not. You tend to want to gravitate to things you are comfortable with and away from what is uncomfortable to you. You have to do the uncomfortable until it becomes comfortable. If you want to grow, you have to be marketing. This is the thing that amazes me, a lot of people contact me every month about wanting to build an accounting practice. Very few of them do anything about it. There are many reasons for that, but the bottom line is that if you call me about wanting to grow your business and you don’t do something about it, you’re not really interested in growing. If you are truly interested you have to go about it in several ways. You have to be actively out in the marketplace, you need to have a good website and take advantage of internet marketing and search engine optimization although in our experience, even using aggressive search engine optimization does not compare, in terms of results and sales made, versus a more proactive approach of reaching out to prospective clients directly. When I say proactive, I mean setting up networking relationships, calling out into the marketplace, contacting business owners, setting up appointments. You need to have an outreach program to bring in new business, it’s not just going to find its way to your door. Eventually, as you build up your base of business, you can then develop a lot of new business and additional revenue streams from your existing client base. But you have to get there first and to do that you have to be constantly, actively marketing.

Another thing I want to touch on is the importance of signing up clients for auto-draft payment processing. Almost all of our clients, with the exception of a small handful, are on direct draft for their monthly payment. So we either draft it from their bank account or charge their credit card. This is a Godsend, it largely eliminates accounts receivable problems. This is a big thing that has changed from the last time I ran an accounting firm. We used to spend a lot of time chasing money that was owed to us back then. As an accounting firm, for some reason that I’m not quite sure of, you go to the end of the list when it comes to people paying their bills each month. When you auto-draft your fees it happens automatically and it’s really a beautiful thing. Each month we get $14,000 that goes right into our checking account from our monthly accounting fees alone and that amount is growing every month. It’s convenient for the client too, because they don’t need to do anything, no need to write a check and mail it or anything like that.  

What is the largest client you’ve been able to sign so far for America’s Choice?

Our largest client to date, including monthly fees and year end work, is about $8,500 annually. His monthly fees are $650 per month. Many of the CPAs and accountants I talk to, who are interested in the NCI marketing program, express concern over our model of accumulating a lot of small business clients at relatively smaller fees. I don’t care about small fees, we have some clients, and this may shock some of the people reading this, who pay us only $100 a month. I’m sure they are asking themselves, “How can you possibly make money on that client?” We can because we outsource a large portion of the work to India, primarily the data entry for the monthly accounting work to be able to create the financial statement. That allows us to offer rates you generally can’t touch in the United States, which helps us price competitively while still earning a reasonable profit. When you factor in year-end tax work and other ancillary billing services, you start to really see nice returns. Also, mighty oaks from little acorns grow. These clients’ fees will grow as their businesses grow, we’re already seeing that in the 18 months we’ve been in business. We picked up one software company that is growing by leaps and bounds already and he’ll end up a large fee client. He started out at, I think, $175 a month.  Plus I’ve seen this happen with NCI clients over the years. I’ve heard the first-hand accounts of a CPA firm that signs up a start-up business for $100 per month and years later they’re paying $5,000 per month and are the firm’s largest client. I’ve witnessed similar scenarios play out many times over the years.

So I don’t subscribe to the idea that these smaller clients will amount to nothing, I know better, but you have to be set up so that you are making a profit from them. Outsourcing to India is one of the best things we did with this venture. The company we work with for outsourcing, GKM, does excellent work. They are fast, efficient, accurate and cost-effective. By working through them you get rid of issues such as sick time, payroll taxes, maternity leave and the task of having to train new employees when staff needs to be replaced. What more could you ask for? One more thing, actually. I know this is very important to people reading this, not one single client of ours has ever spoken with anyone in India, nor will they. This is important because many Americans can be turned off by dealing with heavily accented foreign support personnel. Many large companies handle support this way and it has a negative stigma as a result. All of the communication with India is done by America’s Choice personnel and all of it is done through email. Then America’s Choice employees would relay any relevant information to our clients directly.

Do you need to disclose to America’s Choice clients that their accounting work is being processed overseas?

We do not disclose that the accounting work is being done in India. We don’t have to disclose that because we are not a CPA firm and we are not sending social security numbers overseas. The only work that GKM processes for America’s Choice is the monthly accounting work. They are not doing the tax returns. There is an IRS regulation that states if you are sending social security numbers overseas that the clients must be informed of that. Since we aren’t doing that, we don’t have to disclose it. Should we disclose it? I don’t think so. A lot of work is being done around the world, it is an international economy. 

For those who have an issue with us sending jobs overseas I’d say that we are still creating jobs in America. We’ve hired four people since America’s Choice started. These employees setup the clients, send the information to GKM, code the bank statements, do the tax work and support our clients. So we have created opportunity here in the United States while also creating some opportunity internationally, so I don’t see anything wrong with that. Many firms are doing business this way today and that number will continue to grow. It also allows us to offer our services at more affordable prices. This allows us to do business with and help small business owners who, under different circumstances, would not be able to afford our services. These are all good things which also allow us to be more competitive locally and nationally.

What about back work, what is the largest back work amount America’s Choice has secured so far?

I don’t know the number specifically but I can say we’ve gotten a lot of back work from most of our clients. Our accountant Robert is constantly telling me about all the extra work we are getting from our clients beyond the standard accounting and tax services. We’ve had numerous clients with multiple years of back work and/or back taxes to do. It’s been a big revenue generator for the firm. I was surprised as the business progressed over the number of people with these types of issues. I know we’ve had several clients with at least $3,000 to $4,000 in back work. 

You’ve said that one of the reasons you started America’s Choice was to be able to test out marketing ideas for potential implementation in the NCI marketing program. What have you learned so far in this regard?

There have been a couple things. We tried outsourcing our telemarketing to a company in the Philippines and initially the concept sounded great. The issue with outsourcing this type of work overseas is the accents. When people call, if the appointment setter has a heavy accent it affects the results. Telemarketing is difficult enough even when you can speak clear, articulate English, so adding a thick accent on top of that just makes it even more difficult. So what this company did was record American people reading our scripts and rebuttals in non-accented English. Then they have a person sitting at a computer in the Philippines with access to a soundboard of those recorded responses using auto-dialer software to call business owners in the U.S. To communicate they could activate the recorded scripts and responses to questions and rebuttals with prospects on the phone. This was supposed to be pretty seamless and not obvious that they were hearing recorded responses. When it came time to schedule an appointment, the call was to be transferred to a live America’s Choice appointment setter to handle that final portion of the call. 

It sounds good in theory but it didn’t work well. You could tell it was a robo-call, the transition process had a long delay from when the call was transferred and when it was picked up in the United States and in many cases people would hang up while waiting to be transferred. The bottom line is that it did not work. So we found that the best way to generate appointments, as we have maintained at NCI all along, is to hire and train local people to dial from the office. That of course comes with its own set of unique challenges. We’ve gone through a number of appointment setter hires, it’s just part of the process.  

Another concept that we have tried that is working, is going outside your immediate area for marketing and securing new clients. Even if you don’t want to leave your home state, consider at least marketing to the entire state. With technology today you can process clients from anywhere. QuickBooks Online allows you to do that. Clients email their work to you and you send it over to India. You can process clients from anywhere in the United States. The thing that proved this to me is when we were starting and thinking about doing this, I asked my wife, who was handling our accounting work for NCI, how often she spoke with our CPA at the time. She looked at me like I had ten heads and said she never spoke to him. She just sent the work to him, she had never even met him. That showed me that people don’t necessarily need to meet their accountant in person or see them in person on a regular basis, as long as the work they are doing is good. So we started marketing our services outside of New Jersey and the clients are open to it. We have software that allows us to process tax returns all across the country and we’re still only a phone call or email away for support and questions. So you can and should expand your market territory. 

Another new aspect we are trying is using a software program called Infusionsoft. This was another idea that was brought to me by my son Tyler. This is a company that is based out of Chandler, AZ that combines customer relationship management software with marketing software. It allows you to communicate internally among various sections of your company seamlessly and it also allows you to create a marketing outreach program, so you can develop automated marketing drip campaigns to market to people in various stages of your sales pipeline. This can be done without having to spend a lot of time on it, beyond setting up the initial campaigns and periodically adjusting them or adding new ones. We now market this software to NCI clients. Using these marketing tools keeps your name in front of potential clients which is very valuable in turning more of them from potential to actual clients.

One final point, regarding the pickup and delivery service of client records and payments each month. This is something that NCI had advocated for a long time, as a value added service that provides convenience to your client and increases communication. Instead of the clients having to drop off their work each month, our NCI accounting clients would provide their clients with postage paid envelopes for that purpose. We now recommend you only offer this service to clients who specifically request it and then you only do it for the first three months. Many of our NCI clients opt not to offer this service at all and with technology the way it is, it’s not really necessary anymore. Most of America’s Choice accounting clients decline the pick-up option, they prefer to email the work instead.

Where do you see America’s Choice and the accounting industry in general heading in the future?

With America’s Choice, our goal is to reach one million dollars in annualized billings within five years and we are well on our way to achieving that. As for the accounting industry as a whole, I see seismic shifts happening over the next five to ten years. As I’ve already stated, I think expanding marketing horizons for accounting firms is critical. More and more firms are going to move into the space of providing accounting services to small businesses nationwide via the internet. You won’t just be competing with the accountant across the street, you’re now also competing with the accountant across the country. So why not be that guy? There is no reason to limit yourself, especially if you live in a depressed market or a rural market. How do you grow if you are in a very small market? You’re limited right? Wrong! You’re only limited now by your imagination and willingness to embrace change, which is never easy but always necessary. I see the whole profession changing over the next several years. You’ll have more people working from home, less people ever visiting their accountant’s office and outsourcing will continue to expand within the industry. You want to position yourself to take advantage of these things now or risk becoming obsolete. With an eye on the future, you’ll want to position your firm for sale by being a forward-thinking firm.