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Building a Remote eCommerce Firm with Meryl Johnston of Bean Ninjas · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Meryl Johnston: [00:00:04] Taxes are slightly different in Australia. We don't have as tight deadlines, So our end of financial year is the 30th of June and as a tax agent you have up until about the 15th of May the following year. So the work is spread out. So there's a little bit easier for us rather than the tax deadlines in the US. David Leary: [00:00:23] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:30] Hello everyone, and welcome to another episode of the accounting show. I'm Blake Oliver. David Leary: [00:00:34] And I'm David Leary. Blake Oliver: [00:00:36] And joining us today is Meryl Johnson from Bean Ninjas. Hey, Meryl. Meryl Johnston: [00:00:41] Hi, guys. Great to be. Blake Oliver: [00:00:42] Here. Great to have you. So being ninjas is one of those firms in Australia. That was an inspiration to me when I started my own practice cloud sourced accounting years ago. Meryl What makes bean ninjas different than your typical accounting firm Down Under? Meryl Johnston: [00:01:01] Well, I suppose we started with the name. I actually ran a different accounting firm which had my initials consulting prior to being ninjas and made a lot of mistakes with that firm, found it difficult to scale. And so we've been ninjas. That was my attempt with my co-founder at the time, Ben, to build a scalable business model where it was bookkeeping only one tech platform. At the time we were 100% Xero remote team, which is probably common now, but eight years ago it wasn't. And fixed fees, three pricing packages that were on our website and we really were trying to be like a software business where you could come onto our website, sign up, not have to talk to anybody and then get straight into a really streamlined bookkeeping process. We realized that it didn't quite work like that when you're selling financial services. But but that was the original goal. Blake Oliver: [00:01:51] And people could actually sign up on your website. They could pick a package and and and. Meryl Johnston: [00:01:57] Started out like that. There was a sign up pay now option and they'd enter their. That was through Stripe so they'd enter their credit card details and get going. Then we realized actually probably it's worth having a discovery call and having a bit of a conversation, making sure they're on the right package, setting expectations, and then off we go. Blake Oliver: [00:02:14] Well, you know, you went really far in one direction. You went completely. We're going to operate like a software company and you pulled back a little bit, but you're still way ahead of most firms here in the United States still. I mean, we've made progress. We've moved to the cloud. That's why we are no longer the cloud accounting podcast, and we're simply the accounting podcast. We made it finally. It took us five years here, but I think most firms are now and a lot of us are moving towards those fixed fees and and all those those types of services. David Leary: [00:02:42] And Meryl, can you refresh me a little bit on this? Because I listened to probably the first 30 episodes of your podcast back in the day. And like what was great is you documented kind of the process and the journey you went on with your firm from day one. And you initially, I think when you launched I don't know whose book you followed, some model where it was like, We are going to launch in 14 days or whatever it was, and you you really stuck to that and, and getting kind of explaining like, what was the model you used in like, like how did you get yourself to be comfortable with that? Because most accountants, they resist change. So to be able to just launch something that's not perfect, not done and just do it. But what was the model of the book that you followed? Meryl Johnston: [00:03:20] It was called The Seven Day Startup by Dan Norris. And he's he actually lives on the Gold Coast, where I live in Australia, and had had written that book, which was applying startup methodologies. So Lean Startup, if anybody's read that. But for service businesses. So you're saying you learn the most when you launch and talk to customers. So that was the model that we followed. My my co-founder flew to the Gold Coast to meet me, and in seven days we built a website. We came up with our fixed fee packages and we got a customer within seven days. We'd never done bookkeeping before. We're accountants, but so so that was we had to figure out how to do bookkeeping. We had to figure out how you run a bookkeeping practice. But the whole goal was sell, talk to customers, figure out what they want and don't don't create a business plan. Don't spend six months figuring out what your marketing strategy is. Just get out there, sell. And through that exercise you'll figure out very fast what is important to customers, Make mistakes along the way and and go quickly. Blake Oliver: [00:04:23] I love that philosophy because I feel like we accountants have the opposite tendency, which is we want to plan everything out and have it all be perfect before we launch and then we never launch anything. We're always planning. Oh, and then busy decades for decades. And then busy season comes, and then we. We wait. And then we. Yeah, go ahead. Meryl Johnston: [00:04:44] It's funny you say that in a couple of accounting communities where people are at different stages of running their firms. And I was replying to someone yesterday and he was saying, I want to create the perfect marketing system. I want to have my tech stack. Right? Who should I talk to? You know, I can spend six months getting this organized and I'm saying, No, no, no, don't do any of that. All of that will change once you figure out who your ideal client is and what they want. So don't plan out any of that out. Figure that out and you'll be you'll probably change it 2 or 3 times over the first couple of years. So don't spend all that time planning. Just dive in and you can mitigate risk. So you don't want to be sending out reports with errors as a few things you need to get right that you probably need to get that locked down. But a lot of other things can can happen on the fly or you can learn and iterate. Blake Oliver: [00:05:29] So you started being ninjas eight years ago and you've recently moved into an advisor role at being ninjas. So I take it that means you've stepped back and you're not directly managing day to day operations anymore? Meryl Johnston: [00:05:44] That's right. And that was my goal even when we started the business. In fact, I was hoping to get there in two years, but it took more like six years to get there. Blake Oliver: [00:05:53] It's still pretty good. Congratulations. Well done. You know, and it was. Meryl Johnston: [00:05:56] Quite a process. So I had the organizational chart sketched out and my name in the beginning was basically in every single box. It was doing onboarding, marketing, sales, reviewing work, internal finance, and to gradually step by step, I removed myself from every box and eventually moved out of a full time role. And now I'm part time in the business. So I'm an advisor, which means I work with other country leaders. So we're in Australia, the US and UK, and then I still run marketing, but I have a team that does execution and that's probably more just because I really enjoy it. Blake Oliver: [00:06:32] What order did you take yourself out of the business? What did you start with? Meryl Johnston: [00:06:36] So I started with service delivery. So that was hiring bookkeepers. Then it was hiring team leaders who could review work. Then it went to Onboarding, which was providing a great first 90 days for our customers and then sales. So sales was one of the last parts, and I found that harder to hand over because I felt and I was probably wrong about this, but I felt like, Oh, I'm instrumental in this process and I'm going to have a higher conversion rate. Actually, we've got great team members that that handle sales. And that was actually key because if I handled a discovery call, then it was hard. People would then email me if there was a problem a few months later. So it was really an important step in removing myself from anything client facing. Blake Oliver: [00:07:23] I had the same, I don't know, call it arrogance, if you will, or I don't know. I felt like I was good at the sales and so I delayed giving that away. And then as soon as I did, our conversion rate went up that, you know, I mean, go, go figure. Like an actual person who's like got experience and trained in sales, like, could do a better job than me. Yeah, you know, it makes sense now, but I had trouble with that. So you're fully remote. That's another thing. That's that's, I mean, not so new now, but when you started doing that eight years ago, was that like a revolutionary thing where people saying, how could you do this? Meryl Johnston: [00:08:01] It was uncommon. And the reason for it was partly because Ben, my my co-founder lived in a different city, so he lived in Sydney, I lived on the Gold Coast, so we were forced to work remotely, but we actually met in a community for location independent entrepreneurs, which is I suppose kind of like digital nomads, people that want to run businesses from anywhere. And so that was really important to us. We were trying to create freedom and you probably can't see it behind me, but if I move my head, um, one of our core values at ninjas is freedom. Blake Oliver: [00:08:32] And so we've got that on the wall there. Freedom. Yeah. Meryl Johnston: [00:08:34] Yeah, yeah. Blake Oliver: [00:08:35] And the other one is always growing. I see that. Meryl Johnston: [00:08:38] Yeah. Meryl Johnston: [00:08:39] So the that's about continuous growth, so making 1% improvements. But freedom is at the core of what we do. So we wanted to have location, freedom that we could run the business from anywhere and we could hire people from anywhere and our team could move around if they wanted to. We wanted to have freedom over our time, so no set business hours. We could work when we wanted, not 9 to 5. And then also we're trying to create financial freedom. So we have some financial goals as well for running the business. So that was a core part of who we were. And so we built the business remote and and that gave us the advantage that we could hire people from anywhere back when having team members in different countries wasn't as common. Blake Oliver: [00:09:23] So I see. David, you've got a question. David Leary: [00:09:27] Saying now you have a location in Tucson like. Meryl Johnston: [00:09:30] That is right? Absolutely. Meryl Johnston: [00:09:33] Yeah. Great city. Meryl Johnston: [00:09:34] By the way, I've visited a couple of times. David Leary: [00:09:36] Is this your headquarters then? The US headquarters are in Tucson. Meryl Johnston: [00:09:40] It is, yes. So my business partner, Wayne, is based in Tucson and we say headquarters, but Wayne is the only person that lives there. But the same kind of thing. We do have other team members who work on the US business, but they're scattered around. So we've got someone in Utah, our director of service delivery in the US, lives in Barcelona. So we have people that are kind of flexible as to where their location is as well. Blake Oliver: [00:10:06] So your team is distributed. They can be all over the world, they can work whenever they want. So if you're not tracking their working hours, I assume. All right. You're not tracking time. How do you manage their work? Meryl Johnston: [00:10:23] So we do actually track time, but that's not performance related. That's two for scope creep purposes. Just to check, are we capturing? Do we need to have a conversation with the client about extra work that we're doing? And that's a good way to pick it up, but we're not really managing based on hours. We're managing based on outcomes. So as a remote team, one of the disadvantages is that it's hard to train junior staff. I think training works much better for junior staff when you're actually in the office together getting really fast feedback. So we now we're forced to hire senior staff that can manage their own portfolios. So each team member would have a portfolio of clients that they manage. And as long as they meet their deadlines, we don't mind if they're a mum and they want to work in the evening when their kids are in bed. They want to have time off during the day to go to school, assembly or to play sport. It's pretty flexible about the hours that anyone works as long as they can meet their deliverables and also be available for team meetings when we need that. So if someone chooses to take a team leader position, then they have a bit less flexibility because they have to be able to sync up with their team members and be there to support them. So we found sometimes that doesn't suit someone that wants a lot of flexibility, even if they're ambitious. And there's definitely challenges as the team grows in having that level of flexibility, but it's at the core of what we're about. So we just figure it out and and work around the challenges that come with people working at different times. David Leary: [00:11:52] And Meryl, you guys went niche right away, if that's correct. And then can you speak to like the niches you started with and where you're at is regarding what niche you're in now? And then also, I know you said you guys were Xero exclusive, but I think now you support QuickBooks Online as well. But kind of what the timeline is for the expansion and changing of platforms and priorities of customers. Right. Meryl Johnston: [00:12:14] So it was. Meryl Johnston: [00:12:14] All in evolution. So in the early days we worked with any type of customer, and as long as they wanted one of our fixed fee bookkeeping packages. So I was off at BNI, which some people might know of. That's an in-person networking group where there's plumbers and sign writers and lawyers. And so we initially had some customers like that, but then we were also involved in online communities with online business owners. And we figured out within the first year that, oh, actually we provide a more valuable experience to these online entrepreneurs because not many bookkeepers understand people selling in Stripe and using PayPal and selling in multiple currencies, having overseas contractors. So again, all of these things are quite common now. But eight years ago there weren't that many bookkeepers that understood that kind of business model. And so we started to carve out a reputation there, and that's actually how we ended up expanding overseas and outside of Australia, was because US businesses and UK businesses were talking to each other and saying, Hey, big ninjas, they understand this online business model, go and talk to them. They might be able to help you. Even though they're based in Australia, they can probably help you. So we can talk about that, the international expansion later if you want. So so we went from every type of customer to only online businesses and that, so we focused on that. Meryl Johnston: [00:13:32] So it used to be the tagline was bookkeeping for online businesses. So we did that in about 12 months and we stayed with that for around three years. And then we started to realize, Oh, there's actually segments of online businesses, there's e-commerce, there's software, there's marketplaces, there's coaches who are selling courses. So there's different business models. And our services are more valuable to some kinds of businesses more than others. And that's when we did a deep dive and thinking, let's pick one of these. And so we had a spreadsheet where we were looking at our profitability per industry group. What kind of customers are referring work to us? We rated them on if we liked working with them. There were some other criteria and that's where we realized our e-commerce is. That's what we should focus on. But it took us a couple of years again to kind of rip the Band-Aid off and change the header on our website to say benzinga's e-commerce growth accountants. So behind the scenes we were focusing on e-commerce. We were selling off portfolios of clients that weren't e-commerce. So we were kind of moving towards that. But it felt it still felt risky to actually change the headline on our website. So we moved in that direction, but it didn't happen overnight. Blake Oliver: [00:14:47] Yeah, it's scary because who wants to narrow their focus and potentially limit the number of clients you can work with and leads you can get. You might cut off your source of of new clients. Did you did you find that you were getting fewer inquiries after you did that? Meryl Johnston: [00:15:04] It was the best thing we ever did. So there were a couple of benefits, but it didn't happen immediately. So so once we decided, okay, we're focusing on e-commerce, there were two things that happened. One, it became really clear what tech stack we needed and where we where our team needed to focus their attention on. So learning software like to dear inventory, we could really specialize and go deep on that software rather than trying to learn the tech stack for all different kinds of businesses. So that was really helpful in building our expertise, which ultimately meant we could charge much higher prices. So our fees significantly increased once we moved into the e-commerce specialization. We're saying we're experts in this one thing and so we could charge higher prices. And then marketing also became much easier. What events do we go to? Well, we go to e-commerce events. What podcasts do we sponsor? Oh, things in the e-commerce industry. So it became very clear what our marketing activities should be and where we should focus our attention. And so again, that didn't pay benefits on day one. It probably took a year of that kind of sustained effort to to see the benefits there. But ultimately we've got we could charge higher prices. Our team is more focused, so more efficient. And then we built a marketing engine that brings in more of our ideal client. David Leary: [00:16:24] Yeah, I'm always I've always questioned this in general. I mean, going back years and years and years, like I don't know how you can do anything at an accounting firm if you're not niche, frankly. Like it's just there's too many apps. How do you market? How do you get customers? How does your staff gain any knowledge? I just I'm always shocked that that I'm surprised more don't niche actually don't know how they run their firms like especially. Meryl Johnston: [00:16:50] I agree with you. David Leary: [00:16:51] Bookkeeping firm. Blake Oliver: [00:16:53] But that's most. Meryl Johnston: [00:16:53] Firms most firms. Blake Oliver: [00:16:55] Don't have a specialty. Meryl Johnston: [00:16:56] Right and that's. Meryl Johnston: [00:16:58] Why they rely on word of mouth referrals from their existing customers that their staff are pulling their hair out, trying to learn 30 different apps in their ecosystem. And it's hard to go deep on any of them. I think it would make sense to. For most firms to have some kind. It doesn't have to be one if that feels like it's too risky. But have a couple of specializations, focus on that. Go to those events, build a profile as the expert in that space and think it's a it's a more relaxed or calm firm to run, but more profitable, too. Blake Oliver: [00:17:31] I mean, that's that's how we were. I mean, we didn't my firm didn't really focus at the beginning at all. We just took all comers. I was a freelancer. I needed money. Right? I needed to survive. And the problem is, once you've done that and you've taken all these different kinds of clients, it's really hard to focus now because you've got to let them go if you want to do that. And so, you know, I had attorneys, I had e-commerce businesses, I had agencies. You know, I had I can't even a SaaS business like I had all these different clients that I was serving. And yeah, it was a tech stack disaster. So I if I was doing it again, I would absolutely niche down. I think the hard part is just getting started with that. Like from zero right to to be in a niche is really challenging. Or maybe, I don't know, maybe not. Maybe it's easier to start from scratch. What do you advise firms to do? Meryl Johnston: [00:18:26] Meryl If I was to do it again, I would pick a niche straight away and just focus on that and start networking. So go into industry events in that specialization. So say it was farms or digital digital marketing agencies, whatever it is, I'd start trying to build relationships and network there. Meryl Johnston: [00:18:47] Yeah, I think going to the events. Blake Oliver: [00:18:49] Going to the events is like such a good idea because how often like David, I think you've said this before, all you have to do to pick up clients is like, go to the massive conference for whatever it is, construction. David Leary: [00:19:00] Conference, whatever. Blake Oliver: [00:19:01] It is, and wear a QuickBooks t shirt. Meryl Johnston: [00:19:03] That's all you have to do, you know. Blake Oliver: [00:19:05] Walk around, right? Because there's nobody else there doing that. Sorry, Meryl, I cut you off. You were going to add something, too? Meryl Johnston: [00:19:12] Absolutely. I think events is the fastest way in person is the fastest way to get that handful of customers and then do a great job. And then they'll tell their friends in the industry and then also some kind of longer term play, some kind of content play that's a podcast or a newsletter or something that's specific for that industry. So what are what are some taxes that are relevant for the construction industry or what what's their accounting tech stack? So, so things that are not just general accounting content, but something that's specific to that industry. So I think it might take a little bit longer to get the flywheel going because your friend down the road who runs a restaurant, they might not be able to work with you family members, that might be your original or early clients. It's probably going to take a bit longer to to find those early clients. But then I think you'll get the flywheel going and you'll have a much more enjoyable business to run. Meryl Johnston: [00:20:04] How long. David Leary: [00:20:05] How many months did it take for your firm to get expertise in just e-commerce or just in your niche itself? Meryl Johnston: [00:20:13] Well, we were already working with a lot of e-commerce clients and we had been for probably for four years before we actually committed to it. So we already were building that expertise, but it was hard to go deep while we had all of these other clients. I'd say probably took six months for us to really feel like we were experts. I mean, don't really like to use that term expert. But but six months of really concentrating on that, doing training with the team skilling up, but also just getting exposure to lots of different clients in that industry. Then you start to see patterns and also start to see exceptions and can recommend best practice. Say, Well, you want to do it like that, but we've got 20 other clients that are doing it this way and this is the benefit and the reason that we recommend you follow this process and this tech stack. David Leary: [00:20:59] So it's like, you know, six months minimum to like get good at a niche because I've seen this where you run into accountants at conferences and be like, You've talked to them, you talked to them at this conference and like, I'm doing dentist, and then you see them six months later and they're doing a different niche. And I'm like, You haven't done any niche long enough to like get good and actually get the benefits of going niche. Blake Oliver: [00:21:21] Well, Meryl said it was four years of working with e-commerce clients before deciding to focus. Yeah. Meryl Johnston: [00:21:26] It probably depends how you define good because if you're a smart accountant then you're probably often you just need to know more than the client to to feel like they're getting value. So so because I don't want people to feel like they can't start in a particular niche. So you just need to stay a little bit ahead of. Blake Oliver: [00:21:45] One step. Meryl Johnston: [00:21:45] Ahead. Yeah. Meryl Johnston: [00:21:47] To to be good enough, but then to be good where you can have conversations with the client about, well, this is what we're seeing in the industry. Your margins aren't in line with what we would expect. This is what we're seeing other businesses, similar type of businesses do. Have you thought about this? This looks a little bit odd. Probably have a chat to your supplier about that. To have those kind of conversations, it takes a while to build up that industry knowledge and you need exposure, I think, to quite a lot of clients in a. Particular area to build up that kind of knowledge, but to process accurate bookkeeping with with an appropriate tech stack, you could probably solve that problem fairly quickly. So it probably depends on the definition of good. Blake Oliver: [00:22:26] Hey, do you mind if I go back to an earlier topic? The remote work topic and allowing people to work whenever they want here in the US. I don't know what it's like in Australia, but there's this whole big debate going on in corporate America about return to the office and you know, my wife works for a fortune. I think they're like top 20, you know, Fortune 500 company, right? And that's going on at her company right now. Like everyone is supposed to go back to work, swipe in their badge. And the idea is like we all work better together in person and we can communicate more efficiently. How do you get the team communicating when everybody's on different time zones, different schedules? This async communication is really a challenge. What do you what are you doing to make it work? Meryl Johnston: [00:23:16] I think it can be a challenge, especially if you've come from an in-office environment where I think you can have what I call lazy conversation. You can just pop by someone's desk, interrupt them and have a quick chat about something immediately, and it doesn't have to be planned and it doesn't have to be thoughtful. Yeah, but the downside of that is interruption interruptions and everyone has to be in the office. I do think there can be collaboration opportunities and brainstorming opportunities if you're in the office. So there are some downsides to remote work. But for me, that freedom, I think that's a massive lifestyle upgrade. There has been, in my case with remote work. And so it's it's about finding a way of how can you communicate effectively and it might take a little bit more effort. How can you build relationships? So so I'll talk about some of the things that we do. So I'm a massive fan of asynchronous communication. So for listeners that aren't aware what it is, synchronous is where you're talking at the same time. So this is we're recording this synchronously, we're all online at the same time talking, but asynchronously would be an email. So I send it and you might read it ten hours later or my favorite I record a Loom video with me walking through something or sharing my thoughts. So it's kind of like a conversation. Then you go and watch it in your own time at two times speed often and then can think about your reply and not put on the spot and then you can reply back. Meryl Johnston: [00:24:35] So David. Meryl Johnston: [00:24:36] Communicate a lot. Blake Oliver: [00:24:37] David is grimacing right now because I went through a phase where I was sending him loom videos every day. Meryl Johnston: [00:24:42] I couldn't keep up. Blake Oliver: [00:24:43] And he couldn't keep up. He was like, Oh no, I got to watch another Loom video. Blake Can you just send me an email? Meryl Johnston: [00:24:50] People probably say that about me. Loom has your statistics, so I think I generally create about 80 videos a month and then watch a similar amount. And that's actually my preferred style of communication. So I'll give some examples. So every Tuesday so wanes Monday and we have a scorecard where we look at all of our key metrics for the business what's our customer count, monthly recurring revenue, money in the bank, any churn team member count, and that's just a two minute loom video. Whereas when we started that was an hour meeting once a week to go through our metrics, see if there were any issues. But there's lots of updates like that that can just be a quick video that you don't need the hour meeting. It's it takes two minutes to watch it and you can stay up to date with things with our content. We have a weekly scheduled content call, but often so we discuss the agenda before the call. Video is going backwards and forwards and then we can cancel the meeting. Often we don't need it because we've already addressed it asynchronously. So that's one type of communication we encourage. Meryl Johnston: [00:25:51] But then we also want to build relationships. And it's harder to build relationships when you're just having more transactional conversations like that about status updates. So we do have things like team games via Zoom would be better in person, but we're have people in six countries, so in person is difficult to do often. So the Zoom meetings, we encourage team members to do one on one coffee calls. So every month they have the opportunity one on one to talk with someone else, have a virtual coffee and a chat, and we pay for that and provide the coffee or the meals. And then we also prioritize in-person retreats when we can. So we'll fly people out to Australia. We we try to do one in the Philippines a couple of years ago, but Covid hit, so that's in the pipeline for later this year. So we do prioritize in-person where we can. We do have face to face calls which are more about relationship building, not to talk about status updates or work, and then a lot of asynchronous communication. Blake Oliver: [00:26:53] So how It's been eight years. Eight years ago, it was you and your co-founder. How big is the team after eight years? Meryl Johnston: [00:27:01] So it's almost 30, but that's split across different business units. So there's the US team, there's the UK team, there's a, we call it like a global operations team that kind of does internal finance and some marketing for for all of the regions. We did have an Australian team. My business partner there got sick last year, so we had to sell that part of the business. So with, with that and so all of that team moved to a new firm. So we're between 25 and 30. Meryl Johnston: [00:27:32] All right. Meryl Johnston: [00:27:32] Is the headcount at the moment. Blake Oliver: [00:27:34] And you said you started with bookkeeping, not with tax. Are you doing tax now or are still just bookkeeping? Meryl Johnston: [00:27:41] So we that's an interesting question. So when so the Australian side of the business. So that was where we started and then we expanded into other countries and then we also had an Australian firm merged with us. So they were e-commerce specialists called cloud accounting and they also had a tax service. So they merged in and became Ventures Australia. And so for about a year and a half before we sold that business, then we also offered tax services in Australia. And I'm in two minds about tax services. So, so that that business actually started as a bookkeeping business for e-commerce as well. And then the owner there got so frustrated working with 30 different tax accountants who all wanted things done differently. The bookkeeping was done beautifully, full, reconciled balance sheet accounts, beautiful work papers, really. We're proud of the work that we do. And then the tax accountant would pull it apart and say, Why is this here? Why is that There? We say, hang on. Where the e-commerce experts we know there's a reason that we've done it this way and then we'd have to explain it over and over again. Meryl Johnston: [00:28:44] So she actually went and she's a chartered accountant, but went and trained and got a tax agent license in Australia so that we could use the accounts that had been prepared. There's a few tax adjustments, but it's pretty easy, not easy, straightforward to put together the the tax numbers if you've got a really clean set of accounts and it saves a lot of time working with all of the the different accountants. So that was the reason. But we've found it stressful. There was a lot there's a lot of different tax laws to stay on top of. There's a lot of changes. It felt like a higher risk service than the bookkeeping. So on the one side, I liked that we were retaining that margin because it's high margin work and there wasn't that much work because of the good bookkeeping work we've done, but it just seemed higher risk. If you make a mistake or if there's some obscure tax law that you haven't stayed up to date with. So yeah, I don't know if it's for me or not. Blake Oliver: [00:29:39] So you're still doing it or you got you. Meryl Johnston: [00:29:42] Well, we sold rid of it, so I sold that. Meryl Johnston: [00:29:44] When we sold the Australian business, the tax fees went with that. Blake Oliver: [00:29:49] Yeah, it's a tough call. I mean, here, here it's worse, right? Like the laws are even more complicated as, as so I've heard. And you can make a lot of money, but the deadlines are just brutal. And the thing I always loved about bookkeeping is that it's just year round. You know, maybe you got some extra work to do at the end of the year, at the end of the fiscal year. But, you know, it's not that much if you've been on top of it and it's steady. And that's the I. Meryl Johnston: [00:30:15] Prefer. Meryl Johnston: [00:30:16] Yeah. The bookkeeping business model. I love recurring revenue. And so bookkeeping, it makes sense. Just there's work to be done every month and it's, you know, it's you can it's a lot more predictable. So you know roughly what's going to happen throughout the year. You can build a team to service that clients are on retainer paying on the first of every month and taxes are slightly different. In Australia we don't have as tight deadlines. So our end of financial year is the 30th of June and as a tax agent you have up until about the 15th of May the following year. So the work is spread out a little bit easier for us rather than the tax deadlines in the US. Blake Oliver: [00:30:54] So I first heard about this from Giles Pearson, who was a tax partner at PwC in New Zealand and now runs a contests. They have 12 months also from the end of their fiscal year to file taxes. And I went over to my friends here who are tax people in the US and I said, Why don't we do that? Why? Why do we have to have this crazy tight deadline? And, you know, even with the extensions, it doesn't really help because you still got to pay. It's just mind boggling to me why we do it here this way. Meryl Johnston: [00:31:27] From a workload perspective or a lifestyle perspective, it doesn't make sense. Why would you want everybody to have to cram and do all of that work all in one go? And then what work are they going to do the rest of the year? Maybe they go into CA's or something else, but it doesn't make sense from an industry perspective. Blake Oliver: [00:31:45] So, you know, you mentioned that if you do tax in Australia, you've got additional pressure to get things right. You know, there's more risk, but. There's not the same workload compression that we issue that we have here. Is that right? Like do people. Meryl Johnston: [00:31:59] That's right. Blake Oliver: [00:32:00] There's not like a busy season the same as it is in the US. Meryl Johnston: [00:32:02] So it depends on the business. So some some businesses, so larger businesses can have deadlines. For example, I used to work in audit and then if you're doing an audit, then you needed tax numbers that are fairly accurate. So the tax team still had to do most of their work before you could sign off on the audit. And then big companies only have until the 31st of October to do that. So it depends if you're if you're working in big business, it's probably different. Yeah, but small business tax practices like the kind of business owners and accounting firm owners, we would know they can spread their work out across the year. They would complain that they never get a break because there's work for the whole year and clients will still not provide their information until the eight month mark. Blake Oliver: [00:32:45] Yeah, same problem here, right? Universal universal issues. But I suppose that's, you know, that's a practice management, client management issue that can be can be dealt with. I've always said I've always I mean, I've never done it, so I don't know if this would work, but I would love if one of our listeners would try it. Set your pricing based on how soon the client gets you their information. So, so, right. So if you get it to me in month one, it's a totally different price than if you get it to me in month eight and see what happens. Maybe it wouldn't inspire some, you know, timely, timely clients. I don't. Meryl Johnston: [00:33:18] Know. I'd be. Meryl Johnston: [00:33:19] Interested in that. Meryl Johnston: [00:33:20] Too. David Leary: [00:33:21] But that takes a lot of courage to reprice things that way, right? It's just everybody's afraid. Like, Oh, you're going to get rid of clients if you do that. But chances are everyone. Blake Oliver: [00:33:28] Has too much. David Leary: [00:33:29] Work. Maybe it's better to have a lot of low paying clients that have all their ducks in order and give you a really nice package. Yeah, right. Maybe that's actually better. Nobody knows because nobody's done it. Meryl Like what? What do you say to accountants and bookkeepers that want to do niche? But they, they like, they have that mindset of like, well, what if the niche goes away? Like, like what if that niche? What if nobody buys anything from e-commerce? And now you put all your eggs in one basket? Like, where do I know? I have my opinions on it, but I'm kind of wondering where your your mindset is on this. Meryl Johnston: [00:34:00] We're seeing that a little bit at the moment because e-commerce boomed during Covid, and so we just saw our clients making so much more money than they had projected to make. And now I think there's a bit more of a downturn. And so they're not doing as well. There's not as many new businesses. So it does feel like we're exposed a little bit because we've picked one niche and if that industry goes badly, then we don't have another industry. But for me, the upside of focusing on one area outweighs that and I think there's enough solid business. So so we're seeing some clients that have had some trouble and that happened in Covid as well. If they were in selling travel goods, then they got impacted. So so things can happen, But there's still enough solid businesses with strong financials, a good foundation, a good management team that it feels like we will have enough client work to continue even in an economic downturn. But if something happened to the industry and it's like it did with travel in Covid and the your client base goes to zero, then I just think, well, start up mindset, off we go. We can probably go into another niche and create a stamp there in six months. So we just have to iterate, pivot and try something different. And off we go again. And now we've got experience. I think we could do it much faster than we did next time. So not ideal, but I think we solved that problem. David Leary: [00:35:26] I would suspect because you're in e-commerce, you're going to you're probably know that there's this downturn happening way before an accountant who has clients doing everything realizes their e-commerce clients are having a downturn. And so we thought it was an illogical fear, right? Like, yes, it could happen. But you being the expert in that field should know before even the clients know because you have access to lots more data. Like you would know that it's coming in theory, you know. Meryl Johnston: [00:35:52] Yeah. Well that's, that's right. Meryl Johnston: [00:35:54] And so we are seeing that a little bit. It's definitely harder for e-commerce brands at the moment, so there's less capital and they need access to working capital, particularly if they're growing because they've got to buy their inventory before they sell it. Just global shipping is still a bit of a nightmare and times to to get their product. So it does feel like the market is tightening up and it's harder to especially with not as much cheap capital around. So we do see that. But I'm not making any changes to the business at the moment. It feels like we're in a pretty strong position to ride things out. But if something happens, then yeah, we'll pivot. Blake Oliver: [00:36:32] Well, speaking of declines and downturns, one of the topics that we talk about a lot on this podcast, perhaps too much on this show, is the accounting talent crisis going on here in the United States. Meryl I'm curious to know, is there the same decline in accounting and. Enrollment in colleges in Australia. Meryl Johnston: [00:36:55] There is so don't have the exact statistics, but I'm on the Chartered Accountants Queensland Council, which is like a it's an industry body like CPA. So go along to the, the monthly board meetings. And so that is one of the hot topics is that university or college enrollment numbers in accounting are down, which then leads to lower enrollments in the industry bodies, which is contributing to the talent shortage. So it's definitely an issue. I mean, we're seeing it just that it's hard to hire accountants, so it feels like there's a talent shortage, but it also is trending in the wrong direction. Blake Oliver: [00:37:31] What do you think is the cause of that? Meryl Johnston: [00:37:35] I think the the profession's not seen as attractive. There's other options. So if you're a smart 18 year old and you're thinking about, well, what profession should I follow, I think a lot of them are looking at, well, what are what are the graduate pay rates? What kind of salary can I expect in five years time? And anecdotally, I think they're choosing fields like finance, banking or going into investment banking or tech. So joining not necessarily a start up, but more like a scale up where there's opportunity for larger salaries. So I think it's partly that and I think it's partly a perception problem. I think back when I studied accounting, it was seen it wasn't seen as a sexy profession. It was definitely seen as a good choice, get a good foundation. There's a lot of career opportunities. Even if you move into something later, it'll open up the career path for you and don't. For some reason, I don't think students are thinking like that anymore. David Leary: [00:38:32] Well, I think I mean correct this by bringing you in will help us because we see some of the news and you're not totally it's not all clear in my head, but arguably, the accounting industry has lost a lot of respect down Under over the last 4 or 5 years. There have been scandals at many different levels, with the latest being the PwC Australia, you know, feeding tax possibilities. But even with the governing board of accounting, there were some issues, right? This would be like corruption at the CPA level here in the States, like it wasn't there. So but then it's like national news. It's not like it's just only on the accounting podcast talking about it, Right. Meryl Johnston: [00:39:05] Can you. Yeah. David Leary: [00:39:06] The percent on the last half decade of drama. Meryl Johnston: [00:39:09] Well yeah. Blake Oliver: [00:39:10] How big a deal is the. I want to hear about all the scandals going on in Australia but like especially the PwC one, how big a deal is it? Meryl Johnston: [00:39:19] So that feels like a big deal in that that is national news and people outside the profession know about it and it's actually been brought to the attention of the Australian Federal Police. So it might be a criminal matter. So that is front page news. Some some people still in the street still probably wouldn't be talking about it. But if anyone knows you're an accountant, then oh, how's Peter? What do you think of the PwC scandal? So I can explain it briefly if you'd like me to talk about what's happened. Blake Oliver: [00:39:48] Yeah, I think that would be great to get your take on it because we've been watching you know, probably how you Australians watch our elections here. We've been watching the scandal unfold from abroad. So yeah, give us the give us the insider take or the the close to the action take. Meryl Johnston: [00:40:08] So the quick version is that there was a partner at PwC and he was involved in advising government. So PwC has a government contracts arm and so he used confidential information there which he then fed back to other tax partners and put that in an email to help these other partners sell advisory services to their tax clients about how they could get around these new rules coming out. So he's breached confidentiality, confidentiality and is using his position with the government to then try and profit and help profit. So that was part of the issue. And then the Senate in the Australian government, then realized that not only had used this information for profit, but then they were actively trying to cover up the scandal as well. So that's led to, I believe, eight partners that have now stepped down. The CEO of Australia has or is in the process or has left and it's been referred to the Australian Federal Police. Something else that's interesting is that the Government contracts arm was doing about 600 million in annual revenue in Australian dollars a year and that whole business unit, I guess the name is, got some brand damage in Australia that was sold for $1 to another business that's taking over and that was a private equity firm, Allegro. Blake Oliver: [00:41:40] Yeah, that's incredible because I also read it was like 20% of PwC, Australia's revenue was the government consulting business, so they sold that whole thing for $1. Yes, that's how, that's how, that's how much that's risk. That's a lot of money, right? I mean, like if you just valued it at one times earnings, I'm sure it was a lot of money, hundreds of millions of dollars. And I was. Meryl Johnston: [00:42:04] Hearing. Meryl Johnston: [00:42:05] Anecdotally from people that work in government that if you were hiring, hiring someone from often they work with the big four, you would you don't want to risk your career by picking as the the winner of that tender or that contract. So I think not only they've got all of these brand problems, but also any of the government bodies or the staff that work there are going to be very careful about who they award these contracts to in the future, which I suppose is partly why PwC sold sold off. And they're basically it's a similar team using a different name. So I don't know whether everyone's going to see through that or not. Blake Oliver: [00:42:41] Yeah, right. It's just put a new same probably the same building too, right? Take off the PwC logo, slap on the new logo. Oh look, guys, you know we no longer do the government consulting. Meryl Johnston: [00:42:53] That happens here with. David Leary: [00:42:54] The the crypto audits, right? Like they kind of instantly a whole new website and a whole new company was spun up under a different. Yeah, yeah. And they separated themselves from the big firms. I forgot which one that was, but some. Blake Oliver: [00:43:06] Think it was. It was my old stomping grounds. Armanino had a crypto consulting practice. They cut it off and it started, you know, the same people just go and start a new firm. So. And that happened after Enron, too, right? With Arthur Andersen partners. They all just went elsewhere. Meryl Johnston: [00:43:22] I think that happens a bit with the consulting arms of the Big Four with the conflict of interest. I interviewed someone on my podcast recently who was a partner at one of the Big four, but the type of work that she was doing, there was always conflicts with what the audit team was doing, so she ended up leaving and working under a different consulting practice. So I guess in that case, the independence and ethics studies were actually doing doing what they should be and preventing conflict of interest work happening. Blake Oliver: [00:43:51] Unfortunately, though, I think like most of the time it doesn't. And it kind of amazes me. It amazes me. And I never was an auditor, so I never had to deal with this. But like it amazes me that we allow audit firms, auditors to work at the same firm that does consulting, and that's how you end up with exactly this kind of situation, this kind of conflict of interest. Like maybe here's a crazy idea. Maybe auditors should only audit. But you know, why not? Meryl Johnston: [00:44:21] Yeah, absolutely. That does make sense because otherwise you can so worked in audit at BDO in Melbourne. And so the auditors were on one floor, but then there was consulting, there was international tax, there was corporate finance. And so you could see the partners come, come marching down and knock on the door of the auditor's office. Meryl Johnston: [00:44:39] Yeah, Hey, you. Blake Oliver: [00:44:40] Just got a new audit. Client. Can you introduce me to your contact there? You know, I've got some great, you know, consulting services strategies. David Leary: [00:44:47] On how to strategize the audit. I have two new stories from Down Under I want to get Meryl's opinions on. Meryl Johnston: [00:44:55] Oh, yeah. Blake Oliver: [00:44:56] Meryl, I understand that you're an angel investor now, so you're like in the startup ecosystem there in Australia. Meryl Johnston: [00:45:03] Yeah, getting. Meryl Johnston: [00:45:03] Started. So I've made my first angel investment and invested in a service business as well this year. So pretty early to it. I'd say I'm in the learning phase. Blake Oliver: [00:45:12] All right. Well then you're, you're an analyst now for the accounting podcast. So let's let's hear what David has. Meryl Johnston: [00:45:18] And both of. David Leary: [00:45:18] These articles have very grandiose headlines, right? So one of them it's an app called Friday like Friday, but with three day swings at big accounting platforms with an expense tool. Then the other one, this article I found was titled A New Threat to Zero The Rise of Henry. This is Henry, a one stop shop for sole traders and too many. Blake Oliver: [00:45:42] Misspelled names here. Okay. David Leary: [00:45:44] Yes, the misspelled names. I don't know if these are plays on Down Under words and we're not saying it properly, but what's the story on these two companies? Because they went they're going after zero zero has competition now from from which. Blake Oliver: [00:45:56] One do you want to start with, David? I'll put it up on the screen. David Leary: [00:45:59] Let's start with Friday. Blake Oliver: [00:46:01] Okay. So this is Friday. Do you know about this Meryl or. Meryl Johnston: [00:46:05] I. Meryl Johnston: [00:46:05] Know about Henry. Not so familiar with Friday. Blake Oliver: [00:46:09] So make tax time, relax time 3D uses AI to automate accounting and tax. Get your small business finances sorted today. Perfect for businesses of all shapes and sizes. Meryl Johnston: [00:46:21] There's it is. Meryl Johnston: [00:46:22] Interesting. I mean, to me it sounds quite hard to automate tax when you talk to the tax accountants that that are doing tax work and there's still a lot of work that they need to do to actually get the data into a state where it can be filed as a tax return. So I haven't actually heard of this business, but it sounds like this is actually lodging the tax return with the the tax or the Australian Tax Office, the ATO. Meryl Johnston: [00:46:46] So it's I think it's. David Leary: [00:46:47] Trying to do the full end to end, but their press release is very they really go out of the way to call out Xero and Mob like so they're really going after this, you know, the leaders of cloud like it's like the next generation are coming up to pick a fight with Xero now like Xero is in that they're it used to be Xero picking the fight with everybody and now these apps are picking a fight with zero which I find is interesting. Meryl Johnston: [00:47:09] So my take just generally with AI is that I think Xero and a lot of the incumbents are playing around with AI, but similar to the way that Xero rose to the front with cloud by completely rethinking how things work, it might. There might be a new accounting platform that's more got AI at the core that might come and attack or threaten Xero with the tax tools. That sounds like they're also cutting out the accountant, and I think that was Xero's early strategy that they went after the business owners directly and then change strategy. And their main or their primary sales channel was accountants and bookkeepers and they they didn't want to be doing customer support to the businesses. So instead they went through the partnership channel of accountants and bookkeepers, and I think that's worked really well for them. So with a business like Friday, if they're cutting out, they're competing with Xero think they're also competing with the accountants and bookkeepers. And it'll be interesting who takes the liability if there's errors in the tax returns? Lodge I imagine it's the business owner. And then who does the customer support when the business owner wants to minimize their tax obligations and get some advice? So we're how complicated Australian tax law is at the moment. Maybe that would work for micro businesses who don't have who don't need a lot of advice but can't see it working for bigger businesses where the accountants fees are well worth their time in making sure that things are structured properly. Meryl Johnston: [00:48:35] Yeah. David Leary: [00:48:36] He goes out of his way to claim. The founder says that Friday is not anti accountant like you to replace the account but not anti accountant. And then Henry really like they're really calling out you know like is this the question is this a threat to zero. Right. They're they're going big after that and now this is a little bit more soul traders, right? Meryl Johnston: [00:48:55] Smaller It is. Meryl Johnston: [00:48:57] I've actually been chatting with some friends about Henry and I think they're being a lot more specific with who they're going after. So it's soul traders. So the needs of a sole trader are generally quite simple. So it's not like they're running a business and hiring lots of staff and have a whole lot of complication. So I could. Maybe there's a market for something like this, that it's it's simple, it's streamlined, and it's going after something in particular. And I wonder maybe we'll see more of this in the accounting industry. I think we saw that in software that there were software businesses doing everything. And then they it was their job management platform for painters. So things became a lot more niche and specifically designed for a smaller subset. So it'll be interesting to see with Henry how their users go and whether they're comfortable not not having an accountant that they can talk to. David Leary: [00:49:52] But if you grow up, is there a price on this website pricing? Because we were talking about two episodes ago, I listened to it. We were talking about the pricing. You know, QuickBooks is the big dog in the States and keeps rising prices and zero kind of undercuts them. But the opposite is happening in Australia and so is this. This is I think they charge differently, right? Blake Oliver: [00:50:11] I have never seen an app that charges like this. They're charging a percentage of income, 1% of income capped at $1,500 per year. Meryl Johnston: [00:50:23] That is that's very interesting. Blake Oliver: [00:50:25] And I've actually suggested to firms to consider charging or at least ballparking your pricing rule of thumb using percentages of of income or expense, because that's what I ended up doing. I had this complicated matrix that I had built in Excel to do pricing, and in the end I would just it would end up being a percentage of revenue is what it was. What I would come up to. I would figure it out as because I don't know, that's how I feel. Like business owners think in a lot of cases, right? You know, I'm on a budget one 2% for bookkeeping and accounting. David Leary: [00:50:59] So what is zero a month now in Australia? Meryl Johnston: [00:51:03] They've just had a price rise. So I think they've got the different packages. But the standard one was about $50 a month and then they have a lot of extras. So if you want projects or if you've got a certain number of staff, so it was around $50 a month, but I think their price just increased. But I can't remember to what so. David Leary: [00:51:22] So zero got you for everything. You might be paying $1,500 a year maybe. Meryl Johnston: [00:51:27] Yeah, depending on. Yeah. David Leary: [00:51:29] So this has a cap of $1,500. Wow. Meryl Johnston: [00:51:33] But that. Meryl Johnston: [00:51:34] Includes the service side, it sounds like as well, it's the software plus. Meryl Johnston: [00:51:38] The service with. Meryl Johnston: [00:51:39] The lodgment. Blake Oliver: [00:51:40] I am really curious to know, like I feel like Australia, New Zealand have led the way for accounting technology for many years for modern firms. And is this is this where things are headed? Is is my question is it software plus a service? I mean, it seems compelling. If I was a sole trader, sole proprietor, as we call them here, maybe I would sign up for this and have it all rolled together. David Leary: [00:52:11] Well, these are both kind of like QuickBooks Live. Right and then they have live in the tax. But going back to my prediction, when we first broke the news on QuickBooks Live zero will have to do this one day. They say they'll never do it. But if you have competitors in your own backyard doing it now, you're going to have to do it. There's no choice. Meryl Johnston: [00:52:31] I think it would be such a hard call for zero because their whole sales channel has been accountants and bookkeepers. But I've seen a shift in their marketing over the last couple of years where it was all pushed through the accountants and bookkeepers and trying to keep them happy. But there's more direct to business marketing happening now. And from what I understand of their strategy, I think they're doing more of that. But also if you think of the early adopter curve in Australia, they're getting to the laggards now. They're they're pretty much all of the Australian accountants are on zero and they've got to work pretty hard to convert the last few. But if they do this, they're going to upset the people that have generated the business for them. But I don't know whether they'd lose customers or not because I don't know. The business owners have a relationship with their accountant, but they also probably don't want to move off the software. But something else I think is interesting is the margins that software companies make. So the margins aren't going to be the same on the services side. So if I owned a software company and I didn't have to do services, I'd probably just want the software unless there was some kind of competitive reason or building a moat or some other reason to have services. Blake Oliver: [00:53:38] I think the the opportunity, the huge opportunity for them when it comes to that margin is the is the impact of GPT. If you can use ChatGPT to answer and resolve most client questions. You could have really good margins, right? Because you could have an army of people just available on the back end like they have with QuickBooks Live and TurboTax live available and monitoring everything that's going on. David Leary: [00:54:06] And that goes to like, do it. Those tech companies, the tech companies, you're the Ubers and the lifts and the Doordash's and the delivery companies, they're all valued at software valuations, but they always have humans that have to do all that work. But accounting, there's a chance a lot of this labor that you could do this in a way and scale it because in theory the technology could help with the labor. It's not as labor intense because who knows when it's true self-driving cars will ever be here or grocery deliveries by robots, right? That's so far. Meryl Johnston: [00:54:35] Away. Blake Oliver: [00:54:35] Well, the problem with self-driving is you've got to get to 100%. But if you just want to increase the margin on a service business, you only have to automate half of what those people are doing so they can have twice as many clients. David Leary: [00:54:48] You can't have the automated car drive halfway there and then tell you to drive the rest. Yeah, well. Blake Oliver: [00:54:52] I always thought like, couldn't they, couldn't they have self-driving cars that are like remotely operated by like people in a call center. People might be weirded out by that. Meryl Johnston: [00:55:02] Professionals. Yeah. Blake Oliver: [00:55:03] Like drone. You know how we fly drones all around the world? You know, our kids could do. David Leary: [00:55:07] This like they're all trained. They've been training their whole lives for this. Blake Oliver: [00:55:11] This actually actually the next version of Grand Theft Auto is just like you're actually driving real people around in their Ubers. Anyway, I've taken us way off track, and maybe that's a good way to end this episode. Meryl You have your own podcast. Would you like to tell our listeners about that and where they can listen? Meryl Johnston: [00:55:31] Yeah, it's. Meryl Johnston: [00:55:32] Called the Lifestyle Accountant Show. And I'm interviewing people from the accounting industry, accounting firm owners, and it's about how can you have a great professional career but also live a great life and a life of balance, have time for your family and do other things so you can find that at Lifestyle Accountant Ko Soko and Blake, you've been a guest there and had one of our popular episodes recently. Blake Oliver: [00:55:56] Yeah, I love that. That was so much fun talking to you about content creation and we will put that link to that episode in the show notes. David Leary: [00:56:05] And I would still plug your old podcast, Be Ninja's podcast. Like if you could still go back to those old episodes and you must join Meryl's thought process on their journey. She's building the firm. It's it's a valuable lesson. Meryl Johnston: [00:56:18] So that's at Bain ninjas.com and ninjas and that would be probably the first 30 or so episodes where we're recording live as we're going through decisions about building the firm and challenges what's working well and what's not. Blake Oliver: [00:56:34] David anything else you want to add? David Leary: [00:56:36] I've know more Down Under stuff, so I saved it up. I saved it up for this episode. Blake Oliver: [00:56:41] Thanks for chatting with us. Meryl You can follow David. He is @DavidLeary on all the socials. I am @BlakeTOliver We'll see you around and David. I'll see you next week. Speaker5: [00:56:52] Hi everybody. Blake Oliver: [00:56:53] Bye. Thanks. Bye.