What will it take to ensure a successful future for your CPA firm? Perhaps it is setting your firm apart from the competition in the technological realm? Maybe it’s marketing your firm in the avenues that draw the modern client’s eyeballs? Well, according to Robert Schulte, founder of LumaTax Inc., the answer is “both,” as well as many other steps you can take.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

What will it take to ensure that your CPA firm has a healthy, secure future? How will you set your accounting firm apart from your competition in a packed marketplace? According to today's guest, Robert Schulte, founder of LumaTax Inc., it will require presenting yourself as a modernized organization, effectively marketing to would-be clients, closely monitoring your online reputation, and much more.

Let's set some context first as we go through this: What does future-proofing your CPA firm mean? It's something that I think people would definitely like to know as we go through these questions.

[Schulte] It's a great area to start the context, but it's really difficult to future-proof completely. You have to be very creative. What do I mean by that? As technology continues to evolve, software providers are providing you more and more tools to use. They're casting a wider net and a broader array of offerings. CPA firms are going to have to adapt, and they're going to have to use some of this innovation to deliver the services to their clients. You don't have to use everything, and just because we're having all these different software choices doesn't mean the software's going to displace the human component of it. I want to make sure that we're not completely overlooking that. What I think is important with future-proofing is really around a disruptive thinking process, and there's a difference between disruption and innovation.

Innovation is using technology to deliver better, faster, cheaper services. But disruption is really about changing the way the market you serve does business. I like to tell the CPA community, get out of that old column pad, debits and credits thinking process and get into a thought process that produces unconventional strategic initiatives and that those unconventional strategic initiatives force your competitors to scramble a little bit to adjust to you. It's a thought process that turns consumer expectations upside down and pushes an industry into its next generation. So I like to think that a disruptive company, or those whose innovations or processes completely change the market they serve, might use innovation to accomplish their goals, but not all innovations are disruptive. So that's where I really challenged folks is to become much more adept at thinking about what can I do to really change the market?

What are the areas where a CPA firm can set itself apart from the competition, and what are the differentiators to measure that?

[Schulte] That's really important to understand. So I have a little model that I think of and some attributes I consider as far as points of differentiation. But you can also be creative here, whether you serve a vertical or a niche or a specific industry. All those things have to go into the thought process around what makes you a differentiator, but making a point to know what your competitors are already advertising and offering will allow you to step back from that and say, how can I be different from them? There's clearly five or six areas, and I would call it, there's a product differentiation area, a service differentiation, channels, relationships, reputation, price. I don't always recommend being the low-price leader because that sort of smacks in the face of value. That's the Walmart model. What I always recommend is a product service differentiation, and a lot of CPA firms don't consider themselves delivering a product, but I actually do.

It's a product and a service. You give your clients, your taxpayers, whatever those people are, you give them a product every month, whether it's a set of books and records or reports. So I would look at the product and service differentiation as key components. What services do you offer? Are you a CFO on demand? Do you provide insights? Do you differentiate yourself on not only the deliverable, but also on the derivative data insights that come from that deliverable? Do you differentiate yourself on the relationship building? Are you more a partner with your clients or is it more of a channel distribution model, where it's more self-serve and the client doesn't have to have a lot of interaction? There's choices to be made there, but those are the key differentiators in my mind along those six attributes.

We're kind of talking here about modernizing your CPA firm. But let's talk about the actual business client for a second. What does the modern business client need from a CPA firm right now?

[Schulte] that's a really critical factor and this is where you can look at what they need and how to differentiate to meet those needs. It's information on how to improve. Really, frankly, if you think about a business today, we have always provided them, the CPA community has always provided them, with their financial reports and their profit and loss and their tax returns. That's really, honestly, at this point in time, irrelevant. You have to give them that. Everybody has to give them that. You're not going to differentiate yourself on that. A modern business client needs to know how to improve and what are the data insights from monthly transactional data, give them an insight dashboard even if you have to put it in an Excel or you actually partner with an off-the-shelf software company. But you have this really rich data and classically all businesses need financial reporting, data entry, record keeping, reconciliations, and so on. Many need help budgeting and forecasting, many need management accounting things, many CPAs who are gap accountants really aren't that gifted at providing managerial accounting type of analysis or financial analysis.

They need help with their business decisions, like how much inventory of a specific skew should I have? What's my inventory cost of capital? What's my inventory turnover rate? Am I selling the right number of appetizers that are the highest margin menu items every night? Who's my best performer in the industry? Who's selling the most margin business? Those are the things you get from your point of sale systems, your time sheets, your Gustos, and in your square platforms. They should be able to take that data and give some insights back to the client so that the client can make a better business decision in the future. Stop telling your clients what they've done, meaning the reporting for last month, and start telling your clients what to do.

How would you say that the business owners of today are different from business owners of the past, and how does that inform how CPA firms need to serve them?

[Schulte] As we all know, and you can just think about you and I in our daily life, the first and foremost is we are all armed with a lot more information. When you think about the vast arrays and availability of information, datasets, competitive analysis websites. There's really five traits to the modern consumer. And the first trait is Google is their first stop. Nothing in history has changed the way we gather information more than Google. The first stop is going to be Google. They're going to look you up. They're going to look up competitive products. They're going to look up other things. They're going to do some research and they're going to use search terms to find these things.

Secondarily, the modern consumer is looking for referrals. If you show up on Google and you have some reason for me to drive to your website, the next thing they're going to do is they're going to look at places like Yelp. They're going to look at other referral services to see if there's people that are actually raising their hand for you as a provider and that's critical for them. Reviews and referrals have become so critical as we all know from websites. Today, they're going to comparison-shop because they have so much access to information. And because they can do this comparison-shopping cross-border … they can actually look for firms in India, they can look for firms in Canada, and they can look for firms in the U.S. that are going to all provide them comparable services … you've got to be able to stand up to the comparison-shopping.

Not only are customer referrals critical, but peer reviews in the CPA community in particular, as all big firms have a peer review. They'll have a certain group of folks within the organization that's going to review the quality of work of their peers. Peer reviews would be very important for a CPA firm or anybody that's going to basically handle the transactional analysis, the cashflow, and those critical important factors for business. Those would be super important. And traditional sales tactics are a real turnoff. How many times a day do we all get inundated with spam phone calls or do-not-disturb phone calls? Be mindful of that and be mindful that, if you're going to implement old-school marketing techniques like direct dial or email blast, you've got to have a real great reason for doing that. I think that's one of the things that becomes really important is, how do you inspire the prospect to come to you? Then, once they get there, how do you let them set the preferences for when and how they want to communicate with you?

A lot of people want to communicate via text rather than call, or they want to communicate via email rather than call. They don't want to get you on the phone yet. They don't want your phone number quite yet. Those are the things you have to adjust to. But the critical factor is how do you drive them and inspire them through whatever tactics you're using on your website, whatever marketing things you're doing, how do you inspire them to contact you so that it isn't the traditional sales tactic. I think that's the critical factor of modern business owners.

Before I go to the next question, I'll definitely second your sentiment on the direct-dial calls. Get way too many of those every day.

[Schulte] For sure. And it's a modern consumer. They're a lot younger nowadays. Business owners are 18, 19, 20 years old, and they're driving revenue somehow. So they have that modern intellect around the way they communicate. We have to be cognizant of that.

What would you say at this point is the most effective way for CPAs, CPA firms, to market to the modern-day business?

[Schulte] I actually think that content is, and I'll go into that a little bit and what I mean by that. But providing your potential client with a well-researched, well-written content that answers their questions in detail makes a fantastic first impression. If I'm Googling best practices for cashflow management and you come up and you have a really, well-informed, concise, not market-fluffy, but very informative, solving problems, giving them actual use of resources in that content, you're going to stand out. So one of the things I always tell people is that, and most CPAs won't do this because either they're too busy or honestly they may just be lazy, but writing well-informed content and really researching the topics is a critical factor for not only getting up the top of search engine optimization and marketing in just content searching or keyword searching. But also being smart in how you title those so that the keywords and the titles are very similar.

And you have a great deliverable. If you're a constant resource for someone and they come to your website to look up something, say sales tax rules or something like that, and they're constantly coming to your site, you've got a leg up over the competition right off the bat. Then taking that to the next level and using that content and delivering that either behind the landing page or you'll see people, let them download case studies or on-demand webinars, or podcasts, any of those things. I think using social media marketing to promote your content, not so much promote your service, is a better way of marketing. Become an expert, become authoritative in your field, make the person inspire them, make them want to do business with you because of your authority, not because of your marketing savviness.

Remember, you're a CPA, you're highly professional, you're highly technical, you've got training, you're better trained than the majority of the people out there. Make sure that the customer knows that, make sure that the modern-day business is aware of that kind of power for you. So, I think it's content. I think that delivering that content through social media channels is great. And being smart about how you deliver that and keeping that content fresh so that the person keeps coming back is the best way to market to today's consumer.

Peer reviews, referrals, they're obviously highly important to today's consumer, but at the same time, when that is something that is so important, how vital is it for CPAs, CPA firms, to monitor their online reputation?

[Schulte] Oh, it's critical. I can give you a use case. It's not one of my finest moments in life, but we had two service offerings here at LumaTax. We had a free service offering for the small business and we had a paid service offering. Our free service offering did not include customer support. As you can imagine, it was designed for the small business to take advantage of a free tool. Along those lines, today's modern businesses have expectations about their apps being free, they download them from the App Store, and we didn't deliver upon a promise that that person had an expectation for. We weren't trying to deliver, we never set that expectation, but the expectation of the modern world, even on a free software, is high now. So they emailed me, they called me, and I ignored it to be honest with you because I had paid customers that I had to really deliver for. It wasn't so much that I didn't want to talk to them. It was just that I didn't have time.

Finally, on the third or fourth attempt, I got in touch with them and I said, "Hey, look, this is a free offering. We don't offer that kind of support for this." And they really berated me online. they went on Facebook and posted this. I wouldn't call it detrimental, but it was one of those things where it's unfortunate because now you have to defend yourself and getting into a back-and-forth in an online forum isn't a great place to be.

Because there's going to be a million comments. As we see today in the political environment back-and-forth, you want to avoid that. So what we do is we try to set it up expectations clearly and let people know that this is what you should expect from us. Even if it probably goes without saying, we still say it.

Then secondarily, we monitor our social media channels and we monitor clicks where there's comments involved and we monitor hashtags that involve our name. We look for things that could potentially lead to a devaluation of our reputation. Now, having said that though, we don't shy away from it either. One of the things that I think is important for businesses to know in peer reviews and monitoring online reputation is that we all make mistakes, and making mistakes is not the problem. If you're in software, you're going to have bugs in your software. How many times have we seen the blue screen of death? I mean, Microsoft, it's a 40-plus-year-old company. They still have bugs. A software company or a CPA is going to make mistakes. Every CPA has made a mistake on a reconciliation. That's not the issue. It's how you deal with those mistakes that really will help or hurt your reputation.

If you see something that's a hashtag with your name on it, or you did something incorrectly, own it. Just own it. Don't try to dodge it. Just own it. Say, “Hey, we recognize this. Thanks for bringing this to our attention. We pride ourselves on doing. One of our differentiators isn't that we don't make mistakes. It's how we handle those mistakes. I'll reach out to you shortly.” I think that's the way you can actually differentiate yourself. That is back onto those six categories I talked about previously about reputation.

Differentiate yourself on reputation by being the person that owns your mistakes and fixes them. If you see it before the customer sees it, if you see it before the client sees it, reach out to the client. Tell them, “Hey, I found a mistake. I'm going to credit your account for that calculation.” Do whatever it is you have to do to make sure you're proactive in that. Along those lines, I recommend the modern firm have an assessment of the work they do by somebody else like a peer in the organization, even though it takes extra time, to make sure you are delivering to expectations. If you have a checklist of things you're delivering, make sure you deliver all of them. Handle your reputation very proactively and just own your mistakes.

Front-of-mind marketing is a term I haven't heard a ton about. What is that, and why is it important for CPA firms to employ it with their clients or prospective clients?

[Schulte] Front-of-mind should be, it's going to really be driven if you will, by the way you decide to differentiate yourself. If you decide to differentiate yourself around a specific industry vertical, or a specific size of business, less than three million or three to five million. Whatever that differentiator, that market segmentation, whatever that is, front-of-mind marketing has to consider that persona. What we do in our firm, and what I tell CPAs is create four personas. A persona is a marketing persona. What the persona is designed to do is, if you created four personas of what I call the perfect prospect profile, the people that you would most likely be able to serve in a perfect environment, create four personas that make up about 80% of the desired business you want. Don't focus your marketing on the outliers, focus your marketing on those four personas.

Always take into consideration not only the persona, but the personas, the masculine and the feminine version of the persona, because marketing to females versus marketing to males is different. The things that drive women in business are going to be different than the things that drive men in business, and the things that the women value and time-savings during the day are going to be different than the things men value. You want to keep in forefront those personas of who it is you're actually trying to target in your market segment and do a really good job of segmenting that market.

The whole purpose of segmenting the market and identifying these personas and describing them is so you can find them. It doesn't make any sense to segment a market if then, with all the demographics you use to segment that market, you don't have an easy way to aggregate them in a location that you can actually target them for marketing. For me, the critical factor is the market segmentation, developing personas. I say four personas that cover 80% of the revenue you want to drive from that market segment. Then, make sure that you can find someone who aggregates that segment in an easy way so that you can target your messaging to them. To me, that's the most important part is that market segmentation and the persona development. That's front-of-mind.