The Art of Succession

even if there's like a specific hey can't do this 
right now the the chemo treatment's delayed I'm  

going to be here an extra 4 hours and still 
feeling like saying like you know I need this  

today is you know you find out that there's 
a business you want to run and a business you  

don't want to run and it it really just separates 
it even from money at that point how do you keep  

a family business going in the middle of a Health 
crisis when the person will takes Center Stage how  

does a new owner make the decision to specialize 
in a business while also honoring the parent that  

established those relationships and how do you 
learn to trust your own Instinct and learn on  

your own even if it might fail rather than travel 
the tried and tested route that you've stepped  

into this is the art of succession podcast I'm 
your host Barrett young and my guest today is Jim  

marrow the CEO of agency CPAs a remote accounting 
firm originally based out of New York City  

which provides tax planning CFO and accounting 
services for digital agencies Jim welcome to the  

art of succession thanks for having me Barrett 
appreciate it so uh let's do a little bit of  

History uh before we dive into your uh your first 
topic here so give me a little bit of time frame  

and what brought you to agency CPAs yeah so um my 
story is a a story of uh taking over uh a family  

run business so my father growing up uh always ran 
a small bookkeeping firm uh never really had any  

interest in being a part of it uh I so so going 
that route he kind of pushed me into accounting  

just interested numbers and I started off big four 
at PWC in Erneston young and was going that route  

for a while you know probably would have done 
fairly well there and that was during superstorm  

Sandy and they had me working long hours doing tax 
work and they then signed a contract with National  

Grid who was the uh utility provider supporting 
all of the down networks during then and they sold  

a lot of their staff to National Grid and I was to 
fly up to Buffalo in the middle of the winter and  

man call lines so I already had a little foot out 
the door and that was a push so first thing I did  

was you know put in my resignation not really sure 
what I wanted to do um and I decided to go help my  

dad out a little bit uh it was not a financial 
interested decision you know there was no money  

to pay me at the time but you know gave it a try 
um and slowly over the next few years was able to  

call carve a little salary out for myself and you 
know it actually started to to line up with what  

I was doing at ernston Young and we were we were 
turning the firm fir firm around a little bit um  

but then it was 2017 and he got a cancer diagnosis 
that was not good okay um I I want to talk about  

that before we jump in there they'll give me a 
little context about those four years leading up  

to 2017 you guys were still a bookkeeping firm 
or had you added any Services how did you find  

clients to to give yourself a little bit of a 
salary joining him really really good question  

so that was the firm was bookkeeping USA and we 
were just doing bookkeeping and some tax prep for  

clients and when I came in the accounts receivable 
balance was huge um my dad really R I learned that  

my dad ran the company as a social place so as 
long as his bills were getting paid uh you know  

and and he and he checked the social boxes like 
he had the friends to the business he was good  

uh I I didn't realize that that was okay for him 
but it wasn't okay for me so so kind of like the  

cliche I just want clients that I can sit down 
and have a beer with your dad took that literally  

into the instag literally whether they can pay 
me or not as long as we're having a good time  

yeah and I think he came from a he was the CFO 
for you know pretty big companies and I think  

he just hated that environment similar for 
maybe why I hated the big four environment  

um so he he just was less Tethered to money 
uh I wanted to get paid right so we we made  

some changes started collecting some accounts 
receivable shedding clients that were not paying  

and like a lot of firms like you just grow word 
of mouth so the fact that I was in there uh we  

we started doing different types of work and I I 
improved the function so we just were getting more  

more referrals okay um so so that really took 
us to a spot where hey we collected some old  

money and brought in some new customers and I was 
able to get a paycheck okay uh lowlevel service  

mid-level Services what would that kind of 
look like at this stage it was low okay um  

it's going to be bookkeeping right up doing 
the work remote okay which was not as common  

in 2012 and he even did it before uh well before 
so low-end bookkeeping work tax work um work that  

I tried to get away from that I ended up coming 
even back to hey but nothing nothing special  

all right so you've been working with them for a 
couple years you're adding your own clients and  

that's how you get paid dur leading up to this 
point but still gen General clients like you  

said referrals from existing clients just anybody 
that needs bookkeeping Tax Services kind of thing  

yep and I I remember the first client we brought 
on you know hand shaking and and we were in New  

York city so we were going to the the prospects 
to get the business business and nothing like  

we do now um but yep just came in hey you need 
your bookkeeping done it's a mess we can do your  

return this the pitch was we can do it cheaper 
and it was still profitable for us and that's  

the type of client we were we were working with 
then uh seven figure business six figure business  

we're we're about there if you don't six fig 
businesses okay all right uh and so that brings us  

to 2017 and so now continue your your father 
had a a cancer diagnosis yep pretty much out  

of out of nowhere there was he was slowing down 
um but we took him to the hospital one day and  

it it was pretty aggressive lymphoma and kind of 
everything dropped for me and I was able to be  

with him through the entire process process 
most days um emails can be done on my phone  

waiting in hospital rooms and there wasn't really 
a question for what I was going to do uh the the  

the reason I think I was able to do it though is 
that he wasn't providing output work in The Firm  

hey and we had people doing the bookkeeping and we 
had someone doing the tax work so the the blocking  

and tackling was getting done and we were not 
integral to that part as much okay and and that  

that I think allowed me to I I would have dropped 
everything anyway but the work was still going on  

so that's definitely different than you hear 
most solopreneurs or you know Sole Proprietors  

where they are the Lynch pin that everything goes 
through so you had already you guys had already  

worked yourself out of that before this unexpected 
diagnosis so that's actually a little bit of force  

it there or just good on you guys for for doing 
that yeah and it's kind of an a a byproduct of  

that you know my dad wanted to kind of he was 
running more of a social business so the work  

he was doing you know adds Rapport you know keeps 
clients around but if he stepped away for a few  

months like he couldn't do the tax return if 
he tried you know so having that in place was  

really helpful so kind of by default he was more 
of like a rain maker or bringing the business in  

yeah um and that's just how his personality 
preferred it and so it allowed the business  

to continue running okay and at this point um were 
you already a partner in the company was it 50/50  

was there already plans for succession I was not 
I was not a partner okay or owner in any sense it  

was implied that was there was succession um but 
none of that had been discussed just um you know  

W2 for me and your role was also still more not 
you said you had people doing the technical tax  

returns in the bookkeeping so that you were able 
to be there through all of his appointments and  

everything were you also bringing in clients 
like the rain maker kind of position at this  

time then the clients I was working on because I 
was still trying to prove myself I was providing  

basically like a CFO service and getting in deep 
with advisory work in a very unprofitable way  

so the the equity that I've that I built up with 
those clients they were extremely respectful and  

there was one that I remember who who wasn't 
and once we kind of came out of the other side  

it was clear who we were working with who we 
wer at a and things to look for in in future  

relationships but you do unfortunately get 
some people like that that are not willing  

to go through whatever you're going through 
with you yeah they're they're like the work  

still needs to get done just make sure it gets 
done that kind ofo to and even if there's like  

a specific hey can't do this right now the the 
chemo treatment's delayed I'm going to be here  

an extra 4 hours and still feeling like saying 
like you know I need this today is you know you  

find out that there's a business you want 
to run and a business you don't want to run  

and it it really just separates it even from 
money at that point okay so your father's got  

this diagnosis it's going to be a long-term 
um treatment and recovery and possibly never  

come back to the business as it turns out um never 
steps back into the business at what point did you  

start to say I need to take control of this we're 
not just maintaining there needs to be you know  

I'm I'm going to step into this and and make sure 
that there's a business here when that's better  

yeah the first thing was just making sure there's 
income for our family um but and it was like it  

was probably 80% chance he wasn't going to make it 
or it was it felt almost certain and at that point  

it was you know it was my firm mentally so we 
started operating it differently started operating  

at as a for-profit business okay um while still 
you you know getting him to his appointments and  

running back and forth on the subway um but I I 
would say almost immediately I started operating  

it as my business and it it took such a toll on 
him that I think it was like eight months that  

he was at some type of facility so it was almost 
a year of me running a firm without any support  

anybody to check into so you really find out a lot 
um and then when he came out of a facility it was  

the conversation of hey we are doing things very 
differently now um there's not really a spot for  

you here you know you can stay involved just kind 
of on an advisory level but I did push the like  

there was a decision to be made does he want the 
firm back um with no one that would want to work  

under the old rules at our firm or does he want to 
start a transition where I would buy the company  

from him wow um what was going through your mind 
when you started having those conversations with  

Dad I was at the end you know a year of fighting 
through all of that um working in some place you  

don't want to work in before hand making it into 
an environment where you do I learned how to build  

a business in my head I was like I'm going to do 
this I'll do this here or I'll do this on my own  

somewhere else and there wasn't really an option 
for him because there was nothing you know the the  

people that worked there would not have stayed 
on because it's just they would have wanted to  

to come with me and and it was basically my 
willingness to not integrate him back in so I  

mean you said you said a little bit ago that the 
technical work was still getting done but there  

were very clearly some things that were broken 
that once you stepped in and saw and took more  

of leadership within the firm you saw how broken 
they were or you saw the opportunity to change  

what you already knew was broken which one I had 
the opportunity to actually change the environment  

I I always knew what was there but easy clients 
to cut um not everything is a rush order when  

he gets an email from a client so just people we 
worked with and how we did the work and everybody  

responded to that okay so the first move then 
was trimming Down The Client List before the  

the new business was coming in just building some 
capacity there yeah we trimmed a lot okay probably  

almost half of our Revenue that on an acrel basis 
that wasn't getting paid so people that probably  

should have been out of business anyway and this 
is before any kind of decision about moving the  

company in a niche Direction then you just we like 
we need space we need to be able to breath we need  

space there's just not worth I I could always 
have gone back to Big Four so there was like  

an you know an option so it was let's let's work 
with people who we want to work with and the the  

clients that I brought in that I was going deeper 
with um a few of them happened to be marketing  

firms okay um and and that just said you know you 
hear NE Niche down Niche down and you know one day  

I just went to a marketing conference and said we 
were agency CPAs and before the company existed  

uh got some interest and you know popped up a new 
brand um same team and we've been off and running  

since yeah I definitely want to get into that 
because that's always the hard part when you take  

over a business there's this balance of how do 
we know what's been successful that's allowed the  

business to get to this point and how do we know 
what to change and how soon um so I definitely  

want to want to get into that a little bit more 
um but you said you already had some marketing  

agencies were you already doing the higher level 
services that you wanted to be doing for for those  

clients or you talked to them and then said we 
I want to be doing this can we do this for you  

we we were already doing that work so when I went 
to this conference I said we do X Y and Z but it  

I was able to say that because I've already been 
going deep and these are marketing agencies you  

had brought on in your four to five years that 
had been there okay gotcha all right um and and  

the staff jumped at the idea of niching down or 
were is their reluctance there this isn't the way  

your dad would have done it or how much of that so 
yeah my my dad started the business and he brought  

in he his he always recruited out of college 
people no experience and built them up okay and he  

brought in one woman in college no tax bookkeeping 
experience and she was like Hey I want to learn  

tax so he let her and we started doing some tax 
work before before I was there and she's built  

our tax practice since so when I ended up taking 
the firm owner the first thing I did was bring her  

on as a partner oh wow okay it it was uh she she 
fought through everything with me she was there  

you know through it all she was there longer and 
it wasn't even a question that she was a partner  

so adding her was the first decision I did into 
the equity and she is so supportive I was like  

Hey I want to try this thing and it's always 
go for it uh she'll re me in when I'm you know  

going a little over the place but she'll always 
let me try and experiment which which has been  

integral to our growth and it's really if I have 
her Buy in it we have the firm's Buy in employee  

for sure yeah had just an influencer among the 
rest of the team so so at this point your dad  

had already uh was in remission and you had 
already arranged a buyout so that you could  

bring in a partner or had you already had those 
conversations before like you said the firm was  

effectively going to be yours and you're already 
starting to talk to this partner the buyout was  

more it's like hey do you want do you like do you 
want do you want me to will you let me take this  

thing over and the answer was pretty quickly yes 
okay I didn't have his financial position wasn't  

great The Firm wasn't really worth anything so 
there was this hey I'm going to pay something  

for it but also you know he's my father and 
I need to support that anyway so we just have  

an on you know had an ongoing buyout you know 
it's there was a value on it but it's exceeded  

it and that was pretty quick and then I was like 
Hey Tiffany's my partner I'm like we've done the  

ownership change I'm going to bring you on and it 
was there was not much discussion around it it was  

pretty much agreed and everyone was on board I 
Goa okay a lot of this is just fortunate I mean  

right place right time it sounds like I mean we 
had talked a little bit before the call started  

this happens all the time in sole proprietor firms 
where something just interrupts life and you don't  

have a succession plan in place you don't have 
a buyer I'm I'm on the board for my uh the State  

Board of accountancy and we are hearing about work 
paper disputes and things like that all the time  

a widow doesn't know how to provide the paperwork 
that former clients are asking for so yeah I mean  

you're definitely in a a position to honor your 
dad and support your dad and you know support  

the family but all of the value in that firm it 
sounded like at this point was because of the  

work that you'd been doing in those 8 to 10 months 
leading to him coming back and it's even back to  

that I you know that Sandy happened and they sold 
me off to Buffalo and if if I was still working at  

ey Tiffany my business partner leaves yeah okay 
because she couldn't hold the fort down and it  

would have been chaos and he would have zero and 
our family is in a significantly worse financial  

position so uh I think everything happens for a 
reason and you know the Luckily everything was  

aligned but I mean the company without me being 
transitioned is worth zero and unfortunately I  

think that's happening all over the place did 
you ever feel any pressure uh that you had to  

I mean you did say you could always go back to 
eny um did you ever feel like Dad saw you as his  

ticket out before the cancer scare or anything 
like that was there ever any pressure that he  

definitely didn't okay but I don't think he PL he 
did not plan for it and he always told me he's not  

my responsibility but that's just not a reality 
because I think parents can say that but when push  

comes to shove they are a responsibility and I S 
most people probably feel that pull and I think  

a lot of people behind closed doors are actually 
supporting in ways that we don't even see um so  

he did not have any plan he did not have anything 
planned for what took place so it was really just  

that we we were set up to handle that succession 
so uh one of the things that you said that you  

wanted to talk about here is that sometimes you 
have to try things out on your own so you stepped  

into a business that Dad founded it he's got these 
clients he's got you know this is what we do here  

this is who we do it for and you said sometimes 
you you need to try things out on your own you  

can't receive everything from family and you got 
to run into walls on your own to figure them out  

so what were these walls that you're thinking of 
when you wrote this down yeah it so there there's  

things that basically everything my father said 
to do I was going to do the opposite and it was  

just because because of him it's you know your 
father you're going to you're just not you can  

do it better you read a Blog you know you listen 
to a podcast you immediately just have to go like  

we're going to do this tomorrow for everybody 
Dad Dad business changed it's not the way that  

it used you dummy like you don't know you started 
a firm from scratch but you know nothing yeah yep  

okay so the the rashness of every entrepreneur 
that's like I'm GNA go out and do this on my own  

but it's also directed at a at a parent directed 
I'm going to I'm going to change everything you  

did you did everything the wrong way and I mean he 
did right it was bookkeeping and tax work and the  

world's changing and you're going to go out of 
business if you do that boring work we're going  

to do CFO advisory fancy charts every business 
needs it and wants it so that's what I did okay  

and gave no attention to the bookkeeping work 
and all of my attention to this advisory work  

and there is just so many things that I did wrong 
and I got really good you know going deep but if  

you ran a p&l of my Revenue against my cost 
it was so negative and the only reason those  

accounts were positive was because this boring bad 
bookkeeping and tax work so coming out of it was  

hey we need to like we can do some fancy stuff on 
the on the top we can always we can do that work  

and we need to be selective with it and it can't 
lose money but there's a lot of value to being  

consistent reliable and doing work that people 
need and I don't need to love it and I don't  

need to be involved in it but I do need to set 
up systems that my clients can rely on and and  

that is something that he set up from day one 
that allowed him to have this grab a beer with  

the client firm that I did not acknowledge and 
you know we've come back to it but now with a  

deep deep expertise from our advisory work so it 
probably took us a little longer to get there and  

I I would not have received the messaging from him 
of how important that work is to just keeping the  

lights on K okay how long did that take you to 
learn that and was it expensive it took a long  

time and what I didn't realize is you know over 
the years you have some clients that are big and  

profitable and you take them for granted so we had 
some clients that we did really big bookkeeping  

work for and the margins were 50% nothing fancy 
but good sometimes 40% sometimes 30 but larger  

revenues and I just didn't like the work um so 
that work gave the gave me the ability to do the  

advisory it never would have been there once a few 
of those clients transitioned it kind of unveiled  

itself that o what you're doing over here you 
know they've been covering up your unprofitable  

work yeah so pretty quickly we had to make some 
changes you know reallocate some of my time bring  

on some clients that looked a little same and 
have a different product mix um I would say you  

know 3 to four years but okay we we figured it out 
once those clients transitioned away from you no  

longer needed the higher level CFO thing is that 
is that what you mean by that these client the  

clients were um were more bookkeeping focused 
and I was more of a project manager on top of  

it okay so just making sure moving well keeping 
the people doing the work out of the politics of  

the job and these clients two in particular just 
outgrew us gotta like they were growing really  

fast so they brought all of that in house uhuh 
and then to us they're just a tax return or to  

and they they went you know just to another firm 
to do their taxes so at the time probably you  

were thinking no big loss it's lower value it's 
lower level stuff I don't enjoy doing anyways  

but then shortly thereafter you were just like 
wow I had no idea how much how much where did the  

revenue go Y and luckily by then we've Diversified 
so we have just you know no one's more than like  

7% of our Revenue now okay and that's just really 
helped where before we've had clients at 40% 50%  

and we luckily had enough time to add clients 
in the meantime and those fortunately gave us  

really really profitable years but they were not 
sustainable and you get to know who you can serve  

at the best amount of Revenue you can charge 
them and there's a place in which they start  

with you and there's also a place where they 
finish with you and understanding that you know  

we're not for everybody and we're not forever 
and that was really helpful and we're able to  

serve people better with that view so you talked 
about diversifying so but also at the same time  

niching into agency CPA so you're talking about 
diversifying the services that you provide or  

just uh not immediately saying every client is 
a higher level value client but still staying  

within that agency CPA's uh Niche that you're 
working in a little bit of both okay but so we  

we said if if someone's coming to us wanting one 
product or service we can't do it because we need  

an account to be at a certain price point and we 
can usually only get there by pairing two of our  

three services so it's going to be a tax return in 
bookkeeping it'll be a tax return in advisory um  

and that let us serve clients deeper and change 
who we're addressing you you know some people  

can't consume all of that so we're probably going 
Upstream in from six figure businesses to seven or  

eight so a little bit a little bit of both but 
getting out of the tax only or the bookkeeping  

only or we need we need to be in more contact with 
you we need you to need more of what we can do in  

order for you to stay on here no that that that's 
exactly right it's that's the view from our end  

we need you to be at a price point and we need 
to have a deeper relationship but they just need  

better service and most of the time someone's not 
offering that and they they just need it so and  

you you unfortunately need to be at a certain 
Revenue profit level to consume that and we  

were able to step in for you know a lot of those 
agencies what's uh the future for agency CPAs like  

um do you have your own succession planning how 
did how has what your dad has gone through helped  

you process and think about your own retirement 
whether it's planned or unplanned uh what's that  

look like really good question um Tiffany my 
business partner and I talk about that a good  

amount okay and luckily we're really aligned and 
we we love where we're at client size team size  

are how we enjoy the work so we have no view of 
selling if and we we look at it as one client one  

employee at a time um you know I'm 35 so I don't 
need to really think about that anytime soon um  

and you know we've had conversations with other 
firms of you know key man risk definitely the  

the firms built on me at least as the focus and 
just to have somebody step in there if something  

was to unfortunately happen to me and that's less 
about my family being supported financially and  

more about the team keeping the environment that 
we have and that can continue so other than that  

we haven't really looked down the road at how we 
would want to set up a succession sure but you  

but we change our minds a lot so that could be a 
different story next year yeah I mean we've got  

20 30 years ahead of you still but I'm I I'm just 
wondering if you know you go through something big  

like that in your family it causes you to think 
different about your own invincibility or your own  

you know mortality and things so I'm just so it's 
caused you to partner with or have some kind of  

an agreement with firms that would be able to step 
in and take that uh that load if necessary so how  

I think about my family is through life insurance 
and ability and then how I think about my firm is  

can somebody kind of replicate me treat my clients 
well and treat my team well and am I going to  

maximize every dollar for my family that way no go 
but I'll I'll maximize the people's lives that we  

call our business so you have redundancies within 
your own team then yeah gotcha okay great uh so  

one of the things I like to do at the succession 
is I I've got a lightning round of questions that  

I want to ask at the end um as we wrap up 
our episode uh so I've got a series of half  

a dozen questions or so and these are sentence 
two sentences really no context um but just a  

lightning round so are you ready uh ready for the 
lightning round let's go all right first question  

coffee or tea definitely coffee um usually go 
with an arrow press or chemx if I'm making it for  

me and my wife okay gotcha uh pie or cake I'll 
do key line pie if it's on the menu all right  

specific kind of pie awesome uh what is a common 
belief among entrepreneurs uh that you would  

want to challenge I push all my clients to and not 
everyone will agree but to push off any retirement  

savings until the company is Cash healthy okay 
interesting yeah that is is definitely uh Contra a  

financial advisor's perspective I I look at it as 
a pull out of the business and uh I I see too many  

businesses fail because of money pulls so it's a 
temporary pause in my view temporary pause okay so  

not 20 years but if you're not cash healthy 
after by that point you got a bigger issues  

right exactly okay uh what's your favorite holiday 
Christmas Christmas okay are you a morning person  

or a night person and do you have a favorite 
routine I'm a morning my wife's a night opposites  

yep do you have a favorite routine for mornings 
uh coffee um coffee get outside walk the dog post  

tax season play fetch with the dog in the morning 
it's great what is one thing that you would want  

your successor or somebody that you've inspired 
in this profession to remember you for just that  

I'll leave it better than I found it uh where are 
you finding creativity right now now for your own  

Journey oddly enough my Outlet's the gym and U 
working with a new trainer who's got me doing  

some stuff that makes me think and uh that gives 
me something that's not behind a computer that I'm  

touching and uh I I'd have to say working with 
uh with Antonio right now okay yep energy from  

different sources for sure yep last question 
what's coming up for agency CPAs that has you  

really excited uh in the near- term next year or 
so um I can't shut up about hiring internationally  

right now okay um so we just we just brought on a 
a rockstar out of the Philippines and I am blown  

away by the talent and the attitude about work 
um so we see a lot of growth there for our firms  

but also you know helping our agencies grow 
that way too and it's it's kind of all I can  

think about right now so that's probably 20 2024 
Focus for us okay uh additional hires or just um  

additional hires helping our team helping our 
clients hire oh um because they're they're just  

their margins are getting squeezed and you know 
my eyes have kind of been open gotcha okay I know  

I said no context but if if you're helping your 
clients do this then you're not going through an  

accounting specific staffing agency then for this 
you're finding them independently okay all right  

interesting yeah okay very good uh Jim where can 
uh where can our listeners find out more about you  

and about agency CPAs um you can find our website 
agency cpa.com or I'll be on LinkedIn well thank  

you very much Jim I appreciate you being on 
the artist succession awesome thanks Barrett