A radical approach to client relationship building

In this episode, listen to a conversation with Jody Padar, the Radical CPA, about the evolving role of CPAs in the face of technological advancements. Jody emphasizes the need for proactive communication, year-round tax planning, and restructuring business models to prioritize client needs so that CPAs can maintain their relevance in the accounting industry.

To learn more about Jody and her new book coming out soon, please visit her website.  

AICPA resources

Reimagining your tax practice — Tackle today’s top practice management issues with insights and tips from pioneers in the tax community.

Transforming Your Business Model — “Transform” indicates a dynamic but collaborative change that our business models will support. This concept invites firms to join the discussion and explore their businesses through the lens of the five focus areas.

Transcript

April Walker: Hello everyone and welcome to the AICPA's Tax Section Odyssey podcasts, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the tax section and I'm here today with Jody Padar. She is the Radical CPA. I can't wait to hear more about that.

I think we’ve both heard of each other, but we've never officially met. I'm excited to chat with you today.

I saw a LinkedIn post that you did sometime during last week about communication gaps between clients and tax advisers. It really just resonated with me and so I reached out and I'm super appreciative that you sat down with me, we're actually chatting on April 15th.

I'm happy to not be scrambling around doing tax extensions today, but I think we will have a great conversation today. Let's start off with a quick summary about your observations that led you to that post and just where you're coming to this conversation from.

Jody Padar: Sure, I'm Jody Padar, the Radical CPA, and probably one of a handful of branded CPAs. I've been creating disruption in the industry for years now and really it began as a small innovative firm owner almost 15 plus years ago. I was at early cloud adopter, disrupted the space around cloud and technology. Fast-forward, I owned my own firm for 14 years. I sold it in 2020 right before the pandemic.

I joined Botkeeper for a couple of years, so I went to the tech side and then I was recruited away from Botkeeper to April [which] is the name of the software company. I started to build tax software from scratch.

Now I currently work as a senior adviser to April and then I'm all-in on being the Radical CPA and helping firms evolve to the next level of, I'll say, disruption — it's not really just disruption. The next level of relevance, really, as AI and all the new technologies come into firms to evolve them to stay relevant in the future.

How I got to that post was, I sold my firm in 2020. A couple of clients last week reached out to me because they were actually resold. When I sold, they didn't join Botkeeper. They actually went to another practitioner and then that new practitioner was sold again.

Fast-forward, they're in a new firm and they reach back out to me because where they landed in the new firm, they are not feeling heard. Ultimately, they do not feel that this new firm is listening to them and I don't think that they're unusual on that.

When you see the post, and it got over 150 responses, a lot of tax practitioners feel that not all firms treat clients the same way from a feeling perspective. When I talk about it, I'm talking about in [terms of] small businesses under a million in revenue. I know it could go up, but that's my sweet spot.

I think what happens is practitioners get the technical right and they get the deadlines, but they forget that the consumer that they're serving really doesn't care about that. They don't know any different, but they do know how you make them feel and they're not feeling heard. They're not feeling they're getting the right explanation and they're not feeling that CPAs are giving them what they're paying for.

It was interesting because there was a little bit of scuttle on it saying — you sold your firm pre-pandemic — what do you know? That was the feeling and I get it. It's been a rough few years. But if we're not selling and we're not meeting our customers needs where they need to be due to product market fit, what value are we to them? We can't complain about deadlines. We can't complain about lack of talent. We can't complain about all that other stuff because ultimately, we're here to serve our customer.

If our customer is not getting the feeling that they need and the understanding that they need about their tax situation, guess what? We're not going to be relevant because there are technology companies coming into the space that are meeting those needs.

I think that's the hard part for practitioners to hear. Again, I'm the person who's pushing the bleeding edge, but I think it's a real eye-opener to say, your competition is not the firm down the block. It's someone else in a technology space whose meeting their needs from a feeling perspective and a communication perspective and an understanding perspective and if we want to still be relevant and do business as tax preparers in the future, I think we need to up our game.

Walker: I love all of that and I call myself a recovering tax practitioner because I'm on the other side now. But I love, it's really a passion of mine, to think about, we can re-imagine this. We can rethink the way it traditionally worked. It didn't work for me to stay as a tax practitioner and why was that? But I love it — asking the hard questions and making people think, hey, maybe it's not everybody else's fault. Maybe you need to look in the mirror a little bit.

Let's think about when back when you were in the trenches and a firm owner, what strategies did you use to build those strong relationships with clients? Because that's really what we're talking about today. We're talking about communication and relationships. And no, an AI bot is not going to be able to do all the tax returns. That's not what we're saying. I know that's not what you're saying, but technology is going to be able to do a lot of things. The relationship is where we've got to figure that piece out.

Padar: The more technology comes in, the more human we have to be. We have to up our game on relationships. One of the reasons I'm so radical is because I threw out the billable hour. I was all about fixed fee pricing. How do you price a tax return upfront by getting paid up front for the work you're going to do, making sure that you're talking to the client quarterly at least, if not monthly, from a tax perspective and doing planning year-round.

I didn't let just tax returns come into my firm. You had to come in for at least quarterly projections, if not more. Restructuring your business model so that it is meeting the customer's demands and where they want to be. It's very hard to appease a customer when you're only talking compliance because the value in tax [work] is in the planning, it's not in the return.

How do you position yourself to do that? How do you set your pricing? How do you set your sales process? How do you set all of those other things? Then when it comes to communication, it's about scheduling those calls ahead of time and having those conversations year round. If the customers are cranky in March, it's because they haven't been communicated through the whole year. Because we know in March, that compliance document shouldn't be a surprise. Because you should have done planning before year-end and you should have had conversations the prior June about where that taxpayer was standing.

Again, it's how do we re-imagine who it is we're serving, what it is we're selling and how we deliver it so that our customer is the focal point of it. Because I think in years past, it was always like, that’s the end result and that’s not it. We need to re-imagine the whole process.

The thing is we can schedule these things. We can put in strategies to have conversations four times a year. Again, if you think about pricing and how [changes to the model can be] very disruptive to a firm. But if you price upfront for it, then the customer, they see it as part of what it is they get and you're not chasing them down. You send them an email and say, it's time to schedule our quarterly appointment. They put it on their books and you have that tax planning conversation as opposed to asking them to ask for it. Because they won't ask for it because they don't know it's important to them. They don't know what to ask for.

Walker: True. Another thing I was thinking about was, and this is a topic that's come up on this podcast before, is talking about active listening. It's definitely something that is a skill that I'm working on. In my life, in my family, in my dealing with listening to what people need. But let's talk about how important it is or how important you feel it is and building that bridge really between being that compliance [focused]: I asked you questions, you tell me things, I prepare a tax return, I check it off and I'm done and being a true business advisor.

Padar: That's where, again, I think it comes into scheduling these conversations and making tax a year-round conversation and restructuring your firms. That is part of what you do in the off season. Have these conversations at least quarterly- could be more- so that you’re used to talking to this customer and they’re used to calling you when they need you.

I would argue that most of this comes down to pricing because I think pricing is the number one thing that pushes people from calling their CPAs. If they think they're going to get billed by the hour or if they think there's going to be an extra charge for this, they don't call and it's very hard to be proactive when you're not getting called. When you fundamentally shift that pricing model, now all of a sudden your customers are calling you all the time and you can be proactive and you can actually even sell more services.

Because now you can step back and say, you need that calculation, happy to do it for you. Whereas in traditional firms, what happens is the customer doesn't call, they make some decision and now you're trying to figure it out in March. Then the taxpayer is mad at you because now they have this huge tax bill and they think it's your fault when ultimately in reality, you can't do anything after December 31st. Had you called me in August, we could have planned for this. But we get the blame, because we're the one who prepared the tax return.

I would argue, but if your customer felt there was an open-door policy where they knew they could call you all year and they weren't going to be nickeled and dimed for those phone calls, they would call you and you could then get proactive around tax planning.

We've created this problem ourselves, but we can undo it. It's just a matter of restructuring our firms to be radical. This is stuff that I've talked about for years. This is not new to me. What I think has happened though, is that the market has changed so much and I would argue that tax practitioners have felt it for a while, but it seems to be more extreme these days. It seems to be that more customers are demanding more and they want more, I'll say post-pandemic. How do we adapt to them?

Because if we want to be relevant, we truly have to have product market fit. I do’'t believe that CPAs have product market fit anymore. I think that they used to, but I think today professional service firms, the way we operate is not conducive because our customers are used to dealing with an Amazon type of experience, and they want that experience. Most firms, you send them documents and maybe you ask a question, it might be three days before someone gets back to you. Unfortunately, I think part of the reason firm owners haven't changed is because it's not just the front side of the house, it's the back-end of the house that we have to reorganize. We have to standardize, we have to productize our service offerings on the backend so that we can have a clear front end.

There's packaging and pricing on the front, but firm owners have to get their act together on the backend with the way they standardize the way they collect documents, the way they set meetings, they have these advisory conversations with their clients, the way they standardize all of those activities. They can't have seven different partners doing seven different ways in a firm. Unfortunately, it's still like that today.

Walker: Definitely. I was just thinking as you were talking, I feel like where the push is that these traditional firms and practitioners have all these clients. They don't have time to service all of them or they don't take the time. This is a general statement. You don't take the time to figure out what is my actual right fit [client]? That means getting rid of some, I think it has to be, if you're going to truly give the same experience that we want to give, an Amazon type experience, it has to be fewer people.

Padar: There's a talent shortage. There absolutely is a talent shortage, but that's supply and demand. Either you have to raise your prices and hire more people and pay a premium for them or you have to cut some of the clients you are serving today. That was some of the scuttle in the LinkedIn post saying who's going to serve them? If you can't serve them to the level they should be served, you are doing a disservice to your firm and to the customers who are paying a premium price and that's reflective of your brand. I get it, you're trying to be nice to these customers you've served for all these years. I get it. I was in that place and I had taken over my dad's clients, so I had some of those legacy clients.

But a certain point, they either have to pay more to get that level of service or they have to find another alternative. It may be a do-it-yourself product or it may be something else, and that's okay. But you can't let your business suffer because you're trying to help these people who "can’t afford it.” They’re making decisions every day about their priorities and what they’re willing to pay for. Some will be willing to pay for your services and some won’t be, and that’s okay.

I think that's the place we're at today. Firm owners have to really embrace that mindset and say, okay, who am I serving and how am I serving them? Because right now, taking everybody and giving them all not right level of service is not the right business move because now your good customers get annoyed with you too, and they'll go find somewhere else because they're not getting the service level that they want so that you can take care of these people who have been with you for years, who I would argue most of them will pay more because they trust you, they love you, they want to stay with you. You just have an ask them to pay a premium price.

Walker: This is really a tough love conversation right after the tenderness of April 15th. But sometimes we need to have these conversations. I'm also thinking about professionalism and customer service versus creating boundaries like clients that'll text you at all hours of the day and night. We're saying customer service, and then we're also saying, you've got to have boundaries because this is a business relationship. What are your thoughts on that or how to tackle some of those concerns?

Padar: Well, I think that depends again, on your pricing model, because you can have first-class clients who you will respond to at all hours of the night because they're paying a premium for that service. They want that service. They want the white glove service. But the other services, when you get to packaging and pricing, you can have a standard SLA service-level agreement where you'll respond to an email in 24 hours, but you'll spell it out.

I think that's the other piece of it is like, how poor are we at communicating what the expectations are for how our customers are going to interact with us? If we don't lay it out in a service level agreement and say, look, this is the price you're going to pay and we're going to respond within 24 hours or we're going to respond within 48 hours or whatever it is for your firm, then everybody's on the same expectation. If they don't follow it, you can always go back to them and say, hey, look, this is the price you're paying and you said that you were good with 48-hour turnaround and now you want me to respond in a half-hour, guess what? You're going to either pay more for that or if they're really abusive in it, may be the conversation to have, hey, maybe we're not the right fit anymore.

But these are all clarity around expectations that unfortunately CPAs never did before because it was always like, Oh, I'll bill you by the hour because the pricing model didn't make you rethink these things. If you rethink them and you think about it from a different lens, now all of a sudden you can set those boundaries. Again, I think people always get freaked out and they're like, oh, I don't want them calling me all the time. Guess what? Nobody wants to talk to their CPA every day. You can put unlimited calls in and guess what? They're not going to call you every day. People don't call every day, they really don't. Yet it gives them peace of mind and they'll pay a premium for that because they want access.

It's like when you look at these concierge doctor practices. People will pay a premium to be able to be seen within a couple of days or that day. It's funny too, because when you think about it, if you're sick and you call the doctor, like to me, there's never tax emergency.

Walker: We're not saving lives is what I say.

Padar: How many notices happen before that became an issue?

Walker: Right,100%. This has been great. I feel like we're on the same page with this, so we just need to get everybody else on the same page and then it will be a lovely world. Any final thoughts on any of these topics as we're wrapping up?

Padar: No, I just think that you have to realize that it can be done. I think so often we come out of this rat race of tax season and we're overwhelmed and we think, oh, we've got to change something. Then we take our vacation and then with summer, and then it's fall, and then we have extensions and then we're back to another tax season. The reality is you can't live in that world anymore, you have to change something and it has to happen right away. Because if you don't, you blink and it's another tax season.

There are lots of firms out there who are doing things like this. It's not like years ago when I was preaching a lot of this stuff, people said, oh, you can't do it. Oh, it's not proven. It is proven now. And there are lots of firms who are proactive and have redefined these new business models. Look to them, see what they're doing. Most of them are willing to help and talk you through it. Because ultimately, we became CPAs because we wanted to serve our clients and ultimately that's at the core of this. How do we serve our clients better? How do we still have lives? We can work less hours and actually enjoy the things that we do.

Walker: Wonderful thoughts. In closing on these podcasts, I like to think about us taking a journey together toward a better profession. Shoot, being radical. I love that part. In doing that, I like to get a glimpse of my guest's other journeys outside of tax. Jody, I'd love for you to share a page from your travel journal or a bucket list trip or something like that you have on your mind.

Padar: I recently got back from Australia and it was amazing. I would encourage anyone who hasn't been to Australia to make the trek on the airplane, which I was a little bit nervous about, and it was definitely worth it and it was amazing.

Walker: Super. Thank you again, Jody. This has been delightful. Again, this is April Walker from the AICPA Tax Section. This community is your go-to source for technical guidance and resources designed especially for CPA tax practitioners like you in mind. This is a podcast from AICPA and CIMA together as the Association of International Certified Professional Accountants. You can find us wherever you listen to your podcasts and we encourage you to follow us so you don't miss an episode. If you already follow us, thank you so much, and please feel free to share with a like-minded friend. You can also find us at aicpa-cima.com/tax, and find our other episodes, as well as resources mentioned during the episodes. Thank you for listening and I hope everybody has a nice deep breath relaxation before they get into some of this hard work that Jody has pushed us today.

Keep your finger on the pulse of the dynamic and evolving tax landscape with insights from tax thought leaders in the AICPA Tax Section. The Tax Section Odyssey podcast includes a digest of tax developments, trending issues and practice management tips that you need to be aware of to elevate your professional development and your firm practices.

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