Ep 27 – The Growth Trap.  Why More Clients won’t solve your problems until you fix your systems?

Jamie Gruol: Welcome back everyone to another episode of Diary of a Tax Practice Owner. I am your co-host Jamie Gruol, and I have with me the beautiful Jessica Smith

Jessica Smith: Hello everyone.

Jamie Gruol: Well, we are excited to bring you this conversation today because we’re gonna be talking about the growth trap and when we refer to the growth trap, when you’re starting your business, when you step out on your own and you’re ready to take the world into your hands, maybe you’ve done the side hustle for a bit and it’s like growing to the point where you’re like, oh, I can actually make something of this.

And so you’re like, I’m gonna do it. I’m gonna leap. go all in and you start bringing on clients and more clients and more clients, and you’re, you’re getting to have a great name and being able to provide amazing compliance services, whether it’s bookkeeping or tax preparation, and people keep coming to you and you keep adding, you keep adding, and then pretty soon, one day you wake up and you’re like, oh my gosh, I’m working a.

Jessica Smith: Did you have an insight into my life several years ago when I woke up one day and I was like, Ooh.

Jamie Gruol: Yes. So I wanna look at this from the particular angle of why more clients is not going to fix your problems. And I think I, I would love for you to kind of step back with us and just walk us through the growth of your practice. And we know that you started very early on with systems because that was important to you. But even with systems, even being a technically minded person who can build automated workflows, who can, you know, hack the system to make it work for her. still hit some caps,

Jessica Smith: Mm-hmm.

Jamie Gruol: can we talk a little bit about your journey and how you got to where you are today?

Jessica Smith: I know I had initially started my business as a lot of people do. It was a, you know, a side hustle. I had a small book of around 50 ish clients.

And you know, when you are working a full-time job and working a side hustle sometimes it’s very possible that. That side hustle grows into something that is maybe a little bit more than just a side hustle. And, you know, for me, because I had built that for so long and I was able to make that transition into full-time, I thought that what was gonna be the most appropriate fit for me was the typical compliance focused tax firm.

So, you know, the, the mindset was, oh, you’re going to work. Really, really hard for a few months out of the year. And then the rest of the year is gonna be somewhat of a coasting kind of scenario. And what I was struggling with, for one, my pricing was severely under market. Like severely under market. So that had its own problems in and of itself because I was trying to fix a pricing problem with a client, with increasing clients.

And that did not work for me.

Jamie Gruol: No.

Jessica Smith: No. So. Having to shift out of the lower pain, simple type compliance. ’cause it’s very easy to think, oh, well this return will take me 20, 30 minutes. I don’t have to charge, you know, a, a more appropriate market rate because it’s just, it’s just so fast to prepare these. And for myself, I found out that that actually put me into a bit of a trap. 

I ended up, constantly trying to take on more work to increase my bottom line. And the issue was I also had a poor process at the time. So I was onboarding new clients that were saying, oh, here is, you know what my tax scenario is. And then you get into it and you realize that. What you thought the engagement was gonna be about was much more labor intense than you were told, and I had did not have the confidence to say, oh, the fee is going to be different.

Jessica Smith: So then I ran into another problem that I know a lot of tax practitioners who are running those kinds of firms experience. I. They feel, oh, I already provided a quote based on what they told me. There’s no way that I can go back to that person and say, Hey, what we previously discussed and what the impression I had of what this engagement was going to be about for that price that I provide you is now very different.

We are now looking at a much, much higher fee because of, you know, these items that weren’t discovered, you know, in the onboarding process and. That was incredibly eyeopening for me. ’cause after so many times of what I felt was like losing money because I just hadn’t quoted properly, I hadn’t, qualified this client properly and, and then also realizing the way that the public kind of views that kind of transactional relationship.

It, it just, it didn’t fit well with, again, what I felt was. The business I wanted to have and

Jamie Gruol: most important thing as a business owner to know? I’ll

Jessica Smith: Yeah.

Jamie Gruol: sat down and thought about the kind of business you want because you’re in the, stuck in the, the stuff right now with low paying

Jessica Smith: Mm-hmm.

Jamie Gruol: It is safe. I’m, I’m gonna give you permission. It is safe for you to dream about what you want because unless you can identify what you want, you will never get there.

It’s like putting a, like saying, I’m gonna go to this town in Indiana and not putting it in your GPS, but just saying, I’m gonna Indiana and just start driving. You are never gonna get there unless you have an actual destination of where you’re going and you have the. Coordinates of where you wanna go and that dreaming is what gets you there.

So I think that’s where you were at

Jessica Smith: Mm-hmm.

Jamie Gruol: right? Like you started like thinking like, no, what do I really want?

Jessica Smith: Well, and, and you know, when, when talking to like other tax practitioners who did have more high volume compliance type firms, you know, I was like, oh, well how many tur returns do you, you know, prepare per year? And I was getting some out their numbers. Okay. I mean, I had some people saying that, oh, as an individual practitioner you should be able to do between four and 600 returns all on your own.

And then I have other practitioners who do like a thousand returns on their own. And mind you, these are all varying levels of complexity. For me, when I started having those conversations, I was already at the 250 mark ish of number of returns I was preparing each year, and I wasn’t necessarily struggling to get them all done, but I was struggling with the idea of, okay, I have.

To get the kids to school and then the kids are out, and then I have to have family time on the weekends and you know, we have, we have just things that need to be done. The kids would go into sports and I was starting to realize that now I understand why this 60, 80 hour work week is the norm. Because if you have to prepare for 6,000, you know, all of these kinds of returns just to have what is deemed the desired salary in this like high tax prep only environment.

I was, I was gonna burn out. I was gonna burn out because there was no way I could sustain a responsible and involved family life with my, with my children, and working 60 to 80 hour weeks in the busy season. It just, it did not make sense to me.

Jamie Gruol: No, it doesn’t make sense. There’s a lot of, energy that goes into that. So when did you. Like where did systems come in? Because I heard you say like you started identifying that your clients that you had were not the ideal clients and maybe they were coming through. So when we talk about systems, like there’s different kinds of

Jessica Smith: Mm-hmm.

Jamie Gruol: right?

But in general, like a system is something that you do the same way every time. And that can include automation, which we know and love because that gets rid of the administrative

Jessica Smith: Mm-hmm.

Jamie Gruol: But a system is really the ability for you to start doing things in a consistent manner that allows you to either say. is a good fit or this isn’t a good fit. So did you start seeing the systems developing behind like Jessica as the like prep only like simple preparer and then transitioning into a higher level system. So you were bringing in higher value clients, like were there differences in those systems that you had to, to create?

Jessica Smith: Yeah, so a big part of what drove me to want to make sure that systems were a, a significant focus in my practice was just the experiences that I had at other places that didn’t have systems and it. With, with my own understanding of how my brain works and how having to like remember something and thinking that that was just gonna always like serve me as my client base got more diverse and, and I started serving more people.

That just wasn’t a reality. I mean, there’s only so much that your brain can hold. , and if it was just me relying on this like checklist that I had in my head, I was never going to actually be able to help. The number of people that I was hoping to, to bring onto the practice. and this was really the most evident when people were like, oh, we really like the work that you do.

We think that you are, you know, someone that we enjoy working with. We want to send you a referral for this person. And I had no way to track those. And then I realized incredibly fast. That was bad. That was really bad. And so, you know, I’ve, I’ve been open about this, that when I first started, my, my first like experience with systems on my own was a very simplified spreadsheet with columns and dates that I put just to see like when things got, you know, checked off, which worked fine when I had only 50 clients, but as soon as I had more than 50, you know, once you start to get into the hundred num, you know, hundreds, , it’s a lot of data to go through and a lot of, again, manual.

Confirming when things took place. And sometimes, , the work that needs to get done, you are just pushing through all the work saying, oh, I’ll just go back and I’ll maintain that spreadsheet. And then you don’t ever do that. And so then what happens is that spreadsheet that is your proof of when something took place, now that’s inaccurate.

And I was like, there’s gotta be a better way to be able to push these projects through, you know, the. Assembly line at that point to make sure that I’m not missing things, because the more I miss, the more of likelihood that the client would be, you know, harmed at the end of the day. You know, the return wouldn’t be accurate or, you know, something was missed and they would get a letter, which created a different form of work for me that I could have mitigated with a more thorough and carefully planned out system.

Jamie Gruol: Yeah.

Jessica Smith: Um, and I really didn’t know much about like automations or those type of like, practice management, platforms until I had just, I had been contacted by this one girl who, happened to be a dato expert and she had helped other people similar to me to set that up. And she kind of like just showed me this whole other world of like. It really, it really was eye-opening because automations, like, if you would’ve asked me, you know, early on, I would’ve been like, what are you talking about? And then when she showed me in practice and we actually got to use it, and I was like, I understand now. , that was really powerful.

’cause now I was realizing that if I just planned this process out correctly, I could take on. Appropriate amount of clients without actually adding more work to my plate. Because those, those things like telling the client I filed their tax return, which I know a lot of people are like, how do you not tell people?

I don’t know. I just forget, Hey, your return’s filed. Like, I know that seems silly, but now I have an automation that, you know, I mark that the task has been complete, which is my mental checklist, right? I get to mark that off. That now is a trigger which sends the communication to the client to let them know that, you know, we’ve reached this part of our engagement and this is what’s occurred.

That was really powerful for me and once I learned about that, I think I’ve gone down a couple rabbit holes on like some of the different things you can automate as of late. There’s so much out there and, and sometimes I’m even like, am I really an automation boss like I claim to be. Because sometimes there’s like stuff out there we’re like, oh my gosh, I had no idea you could do that. Um, but it’s, it’s actually been a really fun learning process because I, I’m able to improve efficiencies without sacrificing what I want to be that client experience.

Jamie Gruol: Yes. I think that’s so good. And I think like the, the growth trap, again, you know, to Jessica’s point, like you can grow, grow, grow your compliance, but you also had to make a decision, you know, about a year and a half ago or two years ago, I. That you didn’t wanna just keep doing the compliance. And I wanna talk a little bit about when you make that pivot, when you make that decision that I want to provide a higher value of service.

Because you started recognizing yourself not as just a compliance gal,

Jessica Smith: Mm-hmm.

Jamie Gruol: you started recognizing yourself as somebody who could bring real results to people and that you could really have an impact on them and providing, you know, higher level advisory and resolution. And you started like. You had because of your systems.

I’m

Jessica Smith: Mm-hmm.

Jamie Gruol: this out there because your systems, you had the time freedom to go and educate yourself on new ways of serving them, on new ways of providing resolution work on providing advisory work. And so because you had that extra bandwidth and you weren’t filling it with more clients, you

Jessica Smith: Right.

Jamie Gruol: okay, for the temporary time, I’m gonna fill it with skills to then bring on more higher value clients. Can we talk a little bit about what the expectations are? Our belief, ’cause you and I

Jessica Smith: Mm-hmm.

Jamie Gruol: in this, but what our, the expectation of higher value clients are when it comes to the client delivery, like the actual service delivery. ’cause it’s not spreadsheets, it’s not paper, it’s not random forms that get sent out or clunky portals that are just attached to a piece of software you’re using.

Can we talk about that?

Jessica Smith: So a big part of, you know, the shift for me into advisory work is, you know, you have to remember when, when you’re, you’re looking at advisory services and you know, looking at a value pricing model, it’s really easy for people to think, oh, well, I’ll just add a bunch of things to this package and I’ll just add a bunch of services.

To this package to justify this new fee that I’m gonna charge. And, you know, that was my adaptation when I first looked into that. I was like, oh, well, you know, I will just carefully map out like all the things that go along with this service. And that is going to then turn into, this value price model.

Because there’s so many, there’s so many things in this price model and. When I started to figure out how I was going to standardize and automate pieces of providing all those services, I realized that that wasn’t the right way to do it. And I also was realized that the participation level of my clients in like having all these services that we’re engaged to do.

Like, not everyone can do that. And so I had to actually go down to a more like, here are the really core pieces of what we’re going to accomplish together. And then I really poured myself into making sure that those core pieces were, performed very exceptionally when I had my client check-ins.

You know, I’ve gone through a couple of different, phases with different worksheets that I’m. Discussing with and sharing with them, you know, through those calls. And, even the improvement in something as simple as that, that’s where I was able to communicate my value. ’cause I was able to now show different metrics for, you know, different opportunities potentially that could reduce different tax savings.

 Also allowing people to, schedule some, like one-off calls when, when a situation comes up, they’re like, Hey, I think this could be tax related, but I don’t need to go ahead and book like a full on, you know, consulting meeting. Like, let’s just get on the call and like chat about it. And being able to kind of bake those things in there, but taking away what I thought was this, this package that they just had a lot of things in it.

Jamie Gruol: A lot of fluff.

Jessica Smith: a lot of fluff and I really, and actually, I mean I, I, I find from a lot of people that I’m, I’m working with now. What is being provided they feel is of great value and they’re willing to pay for it. , and then also too, they, they understand if they need something, you know, as long as we are communicating with each other in a respectful manner, I’ll jump on it right away.

And so there’s added like kind of unspoken value from just a mutual respect in the engagement together that. When they need something that maybe is just like a little favor outside of what we, what we are engaged to do, like, I’ll, I’ll just do it. Um, and that’s been, that’s been great. Um, but that’s also a process of qualifying these people, marketing and speaking to the people who are not looking for just a once a year transaction that are looking to form a relationship together to ideally meet the common goal, which for them in many cases is, you know, reducing their tax burden overall and just.

Hopefully resolving the past two problems or preventing future ones. Those are usually the common goals I see people, um, reach out to me for.

Jamie Gruol: Yeah, I love that. Think there’s a lot of people out there that are probably unsure how to make that shift. I know we talked a few minutes ago about like kind of visioning what they want once they do have an idea of what they want. Can you just very high level, like talk us through the, the few steps that you went through to like get you to the point where you did start bringing on those high value clients?

’cause I think sometimes people just don’t even know. What path they can go down to be able to make steps like that. Would you mind just kind of how you went about that? ’cause I know you lean into a lot of your

Jessica Smith: Mm-hmm.

Jamie Gruol: and I think it’s probably a big part of how you got there.

Jessica Smith: A, a big thing for me was listening to what, not just my clients were saying, but what people in general, the, the talk about how they felt about accountants in general, and hearing that a lot of people felt, I. Their accountants don’t ever speak to them. Their accountants don’t ever provide information about how to save.

They just tell them, you know, how much money they owe and call it a day. Um, that they were hoping to be able to work with someone who could have regularly scheduled meetings throughout the year to discuss, you know, change in their tax situation. And if you really do pay attention to those things, there’s plenty of people complaining about what they don’t have so that you can model.

What people really want. And you know, when I, when I first tried the package situation again, I just thought to make a very fluffy package. And then after really learning what my clients wanted, that they didn’t want all the fluff, they just really wanted these like core services

Jamie Gruol: Mm-hmm.

Jessica Smith: that really, that really helped to narrow down what it is I that I, that I like providing, but that also met the needs of my clients.

Um.

Jamie Gruol: do client interviews or anything, to find that out?

Jessica Smith: Yeah. So, obviously through the discovery process, you know, I, I, I try to make sure the client has at least done enough due diligence and research on who I am and what I do, so that at the very least, you know, they, they understand like what they’re getting into. You and I have talked about this at length, the, the onboarding and discovery process, at least in my experience.

Has been a test to see does this person actually work with the way that I’ve devised my systems? It’s, it’s, it’s not a, you know, you can’t just go to my website and get a booking and book a call and call it a day. There is a process, and while I understand some people might find it to be inconvenient or annoying, I still have dozens of people every month reaching out to me for service, regardless of how difficult it is to like initiate the, initiate their process.

 But you know, if they, if, if they, I hate to say they pass all those tests, you know, by the time we get to the point where we’re on the discovery call, you know, then we’re able to get down to the, like, Hey, from a personality perspective, do we mesh? You know, and ideally the other things that I’ve done is I, I do make sure to have like a, a good transparent pricing on a lot of the different ways that they have to learn about me.

Jamie Gruol: Critical. And it’s about

Jessica Smith: Yeah.

Jamie Gruol: Like it’s, it’s not just, this is what I do. It’s like this is my val, these are my

Jessica Smith: Mm-hmm.

Jamie Gruol: This is what I believe. This is the kind of client we like to work with. Like you were, you were literally calling in your ideal clients on your website,

Jessica Smith: Mm-hmm.

Jamie Gruol: a missed opportunity that so many accountants and tax professionals have.

Jessica Smith: They have to envision themselves when you’re talking about who you serve, they need to be able to physically see themselves in that ideal client that you’re describing. And once you figure out your voice on that, it’s very, very powerful because I don’t. Typically attract a lot of people who are not willing to pay the fees that I charge or who, are looking for a prep only engagement.

You know, I occasionally get referrals for those, but it’s not, uh, it’s not the same as someone I say off the street, you know, coming to my website and say, no, I’m just, I just wanna prep only engagement. They’re looking for that more high touch, supportive environment, which has the meetings and the projections and , the no surprises.

We try to discuss how we’re proactive and that it’s not our goal to text you at 1159 on April 14th, that you have to make a payment that’s due tomorrow. , and that again, just listening to what other people are complaining about and even what your own clients have maybe communicated with you that they want to see change.

Jamie Gruol: Yeah. Yeah. I love that. systems are key

Jessica Smith: Mm-hmm.

Jamie Gruol: and creating the business you want. Like that’s my, that’s my takeaway from this conversation,

Jessica Smith: Yes.

Jamie Gruol: because without it, you can’t, you can’t do those things. You can’t structure, you can’t grow. You can’t. Bring on team members. Like it, it just, it’s all so much easier when you have standardized automated systems to support you, your vision, and your clients.

Jessica Smith: Just like you can’t out exercise a bad diet, I don’t believe that you can outtake on new clients like you can’t. You can’t bring on more people with bad systems and expect to have the same consistent results.

Jamie Gruol: Yeah, absolutely. Well, Jess, I appreciate you sharing so openly about your business and about your experiences. I know it’s valuable to those that are new to the idea of creating a firm that they love and a

Jessica Smith: Mm-hmm.

Jamie Gruol: serves them. But, , your willingness is, is huge. So thank you for that.

Jessica Smith: Of course.

Jamie Gruol: Well, until next time, friends, we will be back with another podcast for you, another share of what we have going on in Diary of Attack Practice Owner. Until then, we hope you have a wonderful day. We’ll see you soon.​