From Startup to Scale-Up: Achieving Sustainable Growth with Shannon Badger

Shannon Badger, co-founder of Badger CPA, joins John Randolph on Episode 17 of CPA Life. A fast-growing accounting firm founded in 2015, Badger has been recognized as one of the best firms to work for by Accounting Today and as one of the fastest growing businesses by Inc. Shannon discusses how they have achieved this rapid growth while prioritizing people over profits. They started small and built up gradually, emphasizing the importance of fixed fee pricing, managing workloads down to a 2,200 hour work year, hiring remote talent, and setting boundaries with clients to create a sustainable work environment for their employees.

Transcript:

Thanks for joining us today for another episode of CPA Life, the podcast where we spend time talking to firm leaders and industry insiders who are pushing the boundaries of conventional wisdom and building firms that are going against the grain of traditional public accounting mindsets—firms where people are the priority, not just profits: Firms like Badger CPA, a rapidly expanding and growing firm based in San Antonio, Texas that’s been recognized by Accounting Today as one of the best firms to work for in the country, as well as if I saw this right, Shannon, correct me if I’m wrong, but recent recognition by Inc. 5000 as one of the fastest growing privately held businesses in the country, is that correct?

Yes, thank you – we just got notified too, that we were recognized as one of the best companies to work for in San Antonio. So that was exciting. So that came out last week.

More great news! We’re gonna be talking with Shannon Badger today, who is the co-founder along with her husband, John Badger, and also serves as a managing partner for Badger CPA. Shannon, welcome.

Thank you for having me. I appreciate it, John.

We’re going to spend time as we typically do on our podcast, talking about your firm’s history, the growth you’ve experienced, some of those not so traditional things that you guys have done to set the firm up for success. But before we do that, can you give me a little bit of an idea of where you came from prior to taking this step into firm ownership? You had a somewhat traditional start to your accounting career heading into week four, is that correct?

Correct. So my husband and I, we’re both Aggies, we went to A&M, and we did the CPA program there. And we met in grad school, actually both have a master’s in finance. So met in grad school moved to Houston, worked for Ernst and Young right out of school for a little bit, both of us did. And then we left and went into the energy sector, primarily, for about a decade of our career. And so Jonathan went more like the finance, CFO route, and then I went more the technical accounting, financial reporting route.

And then when we were having our third child, I left my corporate role to start doing some consulting, kind of on the side, I had some small clients. And then there was such a demand for that. So we’ve been now, both full time in the business since January of 2015.

Oh, wow.

And so about eight, nine years now. So it’s been a wild ride. Entrepreneurship is just, it’s an adventure, for lack of a better word. We only work with business owners now. And I think part of that is just to even our own experiences, like we’ve experienced, like the upside and the downside of being self employed and trying to build a company and learn and learn a lot the hard way, you know, sometimes the hard way. So we’re very passionate about entrepreneurship and supporting businesses and helping them be successful. That’s really our primary focus as a firm. So, but yeah!

Is the client base that you focus on kind of, you know, SMBs, predominantly small, entrepreneurial businesses.

It is. I would say most of our clients are maybe a little bit more established than a pure startup. And so our client base our businesses, generally between about $1 million and $30 million in revenue is kind of our sweet spot, and that are looking for outsourced accounting or fractional controller CFO support our industries we serve. We have lots of different types of clients throughout lots of different industries. But we’re very heavy in the construction, nonprofit, and then also government contractors. So those three industries are really our primary focus. But we also have lots of service companies, marketing agencies, attorneys, pretty heavy footprint in the energy space because of our primary background, but probably 80% of our business is really construction nonprofit and gov con.

Got it. So when you and Johnson started the firm as you’re saying it wasn’t a leap off the ledge into firm ownership, right? There was a lot of consulting on the side juggling full time job before you took that step. Is that right?

Correct. We recommend, even to clients like wanting to start companies, like building out your concept as a side hustle really is the best way to do it. And yes, you can jump and then try to figure it out. But you know, at least building out your concept when you have you know, your full time job and you’re able to do that on the side and and there really wasn’t a conflict or anything like that with the type of work I was doing my full time role and I was helping really just family Friends with like bookkeeping and tax work, it was like pretty basic stuff. And just trying to kind of, you know, cut my teeth on it, learn it, make sure it was work that I enjoyed, figuring out how to price things like that.

And then my husband, with a CFO background, there’s lots of opportunity for kind of fractional CFO, COO, that type of work. So he’s more on the I would say, strategic business development type side. And so now it’s really great because I manage more like the day to day ops of a lot of the compliance and consulting work that our team does. And then Jonathan really focuses on sales, and more strategic. And then if a client is ever evaluating, I’d say, like a higher level strategic thing. He’s a great partner just to wait on those meetings and help, you know, have you thought about this, we thought about that? And so things that our kind of ops and strategy tag team works really well.

So in eight years, you’ve gone from the two of you to, what’s your FTE or employee headcount today?

We have roughly about 46 team members now. And so the growth trajectory was really fast. So the first four years or so was all pure, like organic, and sales, first four to five years. So we, you know, we grew to about two and a half million over about a four to five year period. And then we acquired an existing firm in 2021, that was really heavy in the gov con space, and really loved getting to know the owner and the team, we had on a lot, a lot of alignment from just processes and procedures and the type of work we were already doing in the construction and nonprofit space. And so it really made a lot of sense to merge those two together. And so our gov contracts now is, you know, about half of our accounting revenue is all in the gov con space. And so that’s been a new, a new environment, for me personally, coming primarily out of energy and construction. But the cost accounting, and the principles are very similar. And so it fit really well with like, our overall strategy.

So the firm has gone from basically zero to almost 50 employees in that seven to eight year span, with a big part of that growth coming, would you say in the last two to three years, two to four years, post COVID almost?

Yeah, we had about 20 FTE, probably going into 2021. And then going into COVID, we were really heavily weighted in the energy sector for like our client base, we’re doing a lot of like oil field service, upstream, midstream type of consulting work. And some of that was as a result of, just like the three existing partners in the firm right now, we all came from energy. So a lot of our contacts and network are really in that energy space. And so in 2019, like on the heels of COVID, really was like a pretty material downturn in the energy space as well. And so we had kind of come out of 2019, 2020, saying, you know, we really want to kind of diversify away from energy some.

And so it is still a part of who we serve and what we do. But instead of at the time, I think that’s probably 60% of our client base, now, maybe about 20, 25%. And so adding the the gov con really helped us diversify our client base in that regard. So yeah, that was part of the acquisition strategy really, was to diversify our industry focus.

I want to touch on several different things. But I want to jump in real quick, because you guys have have grown pretty rapidly over the last two to three years. I think the number that I saw from Accounting Today, when you guys were recognized as one of the best firms to work for in ’22, I think the headcount at that point was right at 2728, somewhere in there. And today, you’re right at 50, almost a doubling in size of headcount. When you look at that in today’s marketplace, and you got firms in the marketplace that are struggling to fill one, two, three positions, how have you guys been able to sustain that growth from a headcount perspective, in a marketplace when people are doing everything they can to fill just a handful roles?

That’s a good question. There’s a couple of prompts to that. So you no one, which is I think, just the baseline now is we’re noticing in the public accounting sector is the employees are really not willing—which is not necessarily a bad thing to put in—like the hours and the pain of what used to be required for public accounting. So the old school kind of mentality, and it was true when I was in public accounting, too, it’s like, you just knew you’re gonna work a ton of hours, you’re gonna work a ton of overtime, and you’re gonna try to get as much experience as you could, as quick as you could, to try to like parlay that into, you know, a better role later. And so it was just like the, you know, what you did.

And so now what we’re seeing is, especially with younger professionals, is they’re not, you know, willing to sacrifice that time with their family, and their health, and other things, to do that. And I think, I think that’s a good thing in a way because it’s really forcing our industry to evolve past the, you know, this is what it is, and you’re just not going to see your family for five years kind of thing. And so I think that now firms have a challenge to try to be more efficient, have people work less overtime, and create it more people first culture. You know, they would tell you, it’s some of these big firms that, you know, it was very family focused, and this and that, and, and yes, like you would work with some very good people. But the nature of the role and how it was set up, really required just lots of hours, it just was the nature.

And so a few ways that we’ve worked to make this a great place to work is to, you know, have our base based on a 2,200 hour work year. Whereas a lot of the big firms, it’s, you know, 2,500 to 2,700 work year. But then it’s on us to figure out, okay, well, we’re gonna have a 2200 hour work year, how do we make things efficient to try, because you still have to run a profitable company, or people don’t have jobs. So if we can’t build that much, we’re not going to work that much, then you have to work on your fixed fee pricing and generating value, so that your average hourly rate can go up for the work versus what you could do hourly.

And then I also think hiring offshore is a big part of that as well, in hiring remote talent that might be less expensive than what you could find in the US. And so we opened up our hiring pool, geographically outside of the United States, for clients where that makes sense, because we have some clients that have different security requirements, and we adjust, you know, as we need to, but there is some current transactional work and also some internal support work where we have opportunities to hire really talented CPA accountants that are outside the US. And that allows us to have less hours that’s required of everyone. And so it’s just managing, managing the workload a little bit differently.

I think that the story that people have said, of like, you have to work 60 to 70 hours a week, for the firm to be profitable—like, that’s just unacceptable now, like we have to figure out how to do it better. Because you don’t want to work people that hard, it’s not healthy for them, it’s not good for their family. So that’s where we were like, how do we build the widget different, you know?

So that’s a long winded answer to that. But I think that’s why people love public accounting, like client service is extremely rewarding work. Like you’re literally getting paid to help people on a daily basis. But you know, to what expense at some point people just get so far now, they can’t do it anymore. And so we wanted to be able to create the benefit of like, the learning of public accounting, and the client service and public accounting, but without the 60-70 hour workweek. So that was really the goal. And I feel like we’ve accomplished that to an extent,

I mean, we’re always improving and public accounting is a very fast paced environment. So that is what it is. But most of our team members now work 40 to 45 hour work weeks. So they’re really here because they love the client service aspect of what they do. So yeah, that’s been our overall strategy for recruiting is, you know, if you love public accounting, but you want to work 40 hours a week.

And then also virtual, so we fully went into virtual work. So COVID happened, you could kind of read the tea leaves early on, that people coming back to the office full time, especially in our profession, when you can work from home, they’re just not going to do it, they don’t want to do it. And so we pretty early on pivoted to a we’re going to embrace this like remote work environment and try to build a strong, high performing, high accountability, remote work culture. And what we’re finding is a lot of CPAs and consultants that we’re wanting to hire, they want to be a part of that. Like, they want to be home with their families, they want to be able to go to the gym and go for a walk, things like that. But they also want to be part of a high performing culture, you know, and have the ability to learn, and serve clients and all those kinds of things.

So we were doing already a hybrid before COVID even happened, we were doing a two, three workday from home and office. So once COVID happened, we didn’t really miss a beat. And then we just expanded our hiring parameters outside of Texas even more. And so I think we recruited a lot of great people because of that, because I think we pivoted faster, to be honest.

You know, one of the things that I’ve contended and you tell me if I’m making it more simple than it really is. But I think that all the things that you’re talking about having to come up with a better pricing model, having to be more critical of the clients that you bring on and the quality of work that you’re passing down to your employees, offshoring people, hiring remote talent—all of those things on the surface are easy answers. But all of those things in my opinion, I don’t run an accounting firm, I run a recruiting firm, but there’s a lot of similarities. It’s a service based business. All of those things you’re talking about mean that you as an owner, have to work harder and more intelligently so that your people can have what it is that they want in their careers. But it ultimately makes your job just a little bit tougher because It is a little bit more work to manage that person sitting in Des Moines, Iowa, or managing that person in Bangalore than it is managing the person right around the corner in a cubicle.

Correct. Remote work environment does not lend itself well to companies that don’t have good processes or procedures, because being able to walk around the corner to somebody is really covering up something procedurally in your workflow. So it’s kind of mandating it, because you can holler at them down the hall, like, oh, hey, like, I didn’t know the answer to XYZ question or I don’t know where to find whatever or I have this client question is client background? And so the question is, like, how can you build a system that can help alleviate the need to be around the corner from somebody? And so, you know, you still need to have a plan a remote environment around team culture and team camaraderie and helping people still feel a part that they’re not on like an island. So that’s kind of its own separate challenge.

Early on in remote we were talking to the team about it, it was like, how do we solve onboarding people making them feel like part of the team when they’re onboarding remotely from home? How do we solve training for younger team members that need resources and training that they’re used to getting in an office environment? And then just overall team culture and cohesion, right? So to me, those are the three things that were really hard. So onboarding, new team members training, and then team culture.

All that, to me, it takes a hit in a remote environment, if you don’t have a very intentional strategy around how you’re going to address those needs. And I feel like as a team, we really worked hard to do it. But it kind of goes to just even asking your team, like we have a lot of really smart people in the building. Like my husband and I don’t know everything, like we’re very open. Like we’re, we’re young leaders ourselves, like we’re trying to figure this thing out. But we do team surveys, we have, like our manager levels, they do presentations, like where they’re like, hey, these are the things that are working and not working. And so I think having like a feedback culture, they were the ones that came up with a lot of great recommendations around how we can onboard team members and make them feel integrated early on, like remotely. And then team training has been a big push. And so I think that the team had lots of great ideas that we could just, you know, help implement, frankly.

Yeah, so that’s kind of how we’ve addressed those things. In we have had to be a little more strategic, I think, minded in post COVID culture, but part of that also requires you to be less client billable, because if you’re super client, billable is the owner, you can’t you don’t have time to do those things. And so we were pretty intentional, pretty early on, about trying to pull client work off of us and be less client billable, so that we could actually spend time on the things where the business needed us. And I think that’s the challenge for a lot of CPAs really early on, is until you can hire from people that can pull work off of you like you will be stuck. Because it’s just too much. You can’t fulfill all the client work plus, do all the strategic and running of the business, it’s just too much for one person. So I always tell people, try to get that next hire that right hand strong person like as fast as you can. Or you’ll just kind of you’ll put a lid on it really early on.

Well, I think it speaks to number one, your confidence that we’re going to hire good people that I can offload this stuff to, and they’re going to take care of clients as well or better than we do. And it puts you in a position where you’re focused more strategically on not just the transaction today, but where you guys are going into the future. And that is—that can be a tougher job, when you take yourself out of that day to day, so to speak, and you’re not down in the trenches.

And I think that you’re you hit on some that is a big issue in a lot of smaller, more traditional firms, is you’ve got a leader that is hyper focused on client billing. If they’re not the top biller in the office, they’re pretty stinking close. And so in their mind, their thought process is well, I’m already working 2,800, 2,900, 3,000 hours, how am I going to manage this other stuff and do it?

You would be surprised to the small firms like how many of you took out like the owners’ billable revenue, how much money the business is actually making? Because then you’re just like, well, you might as well just go solo because you’re billing half a million yourself and your business is making barely that, and you’re now managing 10 people because there’s a lot of waste and other things that go on but you’re so busy in the client work you can’t pick your head up to see it. And I mean, I’ve been there. Like I mean gosh, when we had a handful of people like that was my reality. It was like I just felt like I couldn’t see the forest through the trees and you’re trying so hard to just make clients happy and meet your deadlines, and so it’s like I have so much empathy for like that season because I remember how hard that it was.

But it’s like, you have to very intentionally, even if you have to reduce your income for a season, you know, we talked with our clients too about there’s dividend companies, and then there’s growth companies. But it’s really hard to do both at the same time, you either have to have some delayed gratification where you’re like investing in your company to scale. But if you’re gonna pull everything out, and have it be more of a quality of life business, that’s fine. But then it’s hard to grow if you don’t have the capital to like, hire and expand and invest in technology and people and all those kind of things.

So I think one thing that we did do was we, we didn’t really have a lifestyle inflation early on, we invested everything back in and we lived on like the minimum that we really could, for a season, while we were trying to ramp everything up. So we were always hiring people in advance. And in trying to because we wanted to build something we wanted to build it. And so we, I think, adjusted to do that.

When you look back at the starting of the business, and I know that we’ve talked about, and I want to dig into a little bit about your pricing structure, you know how you guys have more of a subscription based model with the bulk of your business. But when you look back to seven, eight years ago, when you started the firm, was it always that type of a pricing structure? Or was the pricing structure back then more stereotypical, time and Billing? And I see you laughing, so I think I know the answer.

When we first started, it was like, we both kind of jumped within six months, we we’re trying to pay our bills. And I feel like we kind of did everything for everyone. It was like all the projects, all the individual tax returns, all the bookkeeping, you know all the things. And we started doing fixed fee pricing pretty early, but it was almost like too early, because we didn’t really have the systems to manage like budgets well. So we would fix fee something like, oh, this will be 800 a month, and then we would lose track of like, how much time the team was spending on it. And so then we would kind of look up all of a sudden, and then be like, oh my gosh, like why did we spend 60 hours on that, like what’s going on?

So that was really, like the crux was like trying to figure out the workflow where we could manage the fixed fee subscriptions and the budgets and have a handle. And then also where the team knew, like, how much time should this take, and how much is budgeted, because we didn’t have a workflow system, it was all like in Excel spreadsheets and things like that. So implementing workflow, which we run on a system called Financial Sense, which I actually really like it’s it’s specific for CPA firms. But implementing a workflow system was very helpful, which in hindsight, I’m like, that sounds like common sense. But when it was us and just a few other people, we just, and we were all in an office, so you could just like holler down the hall. So we just hadn’t spent the time and effort to do it. And so that was really helpful.

Now our challenge that we’re having, which we’re still in this challenge, so we’ve definitely not arrived yet, is when it was a few of us early on doing the consulting, we did a lot of customization. So whatever that business needed, we would customize our package, you know, this will be 6,000 a month or 8,000 a month, that type of thing for these types of services. But it’s very consultant-based because it was either myself or my husband or Crystal, who’s now a partner as well, like doing that work. And so what we’re finding now is we have a lot of customizable custom scopes.

So it’s not like a package 1-2-3, it’s like, you could have eight clients that all have completely different scopes. And so yes, they’re on a fixed fee. And there’s a budget for all those tasks. And so we’ve improved in that regard. But what we’re working through now is really trying to clarify, how do we get this to kind of an option 1-2-3 basic service offering that is more standardized, where the team now, the curve when new people join isn’t so steep , it’s not like, here’s 10 clients, they’re all different, and they’re all in different industries, like good luck, you know? You want to be able to say, okay, you’ve got eight nonprofits, these are on package one, these are on package two, and it’s all pretty much the same. And then those tasks tie into like our training videos and documents. And so that’s what we’re building now is, we have this document called “The Badger Way.” And it kind of goes through, like how we do things. And then we have our micro trainings that we’re doing now to kind of categorize all that index it and then we’re trying to move our clients to these packages, if you will. Like, okay, this is what we’re doing for this client, how do we get it kind of tied into this battle engine and make sure that it’s all consistent throughout?

So that’s kind of our main lift that we’re working on now as a firm is moving into these like packaging and pricing. But yes, most of our clients are on a subscription model, but it’s very custom subscription. It creates other issues with scaling. Like I kind of feel like we’ve gotten as far as we can, with the custom aspect of things because what you’re having to do is hire very heavy technical accountants that can implement on a custom model like that, versus creating a standard model that can be trained and, you know, replicated over and over. So we’re kind of working through that as a firm. Like I feel like maybe 20% of our stuff is standardized and 80 feels custom and we’re trying to kind of push it the other way where it’s kind of 80/20 the other way. And that will help us manage turnover and training and help people feel like they’re successful. And it’s not just something brand new thrown at you every day, you know? So yeah, that’s what we’re working on now and kind of how we evolved that.

So when you look at the pricing model that you now have in place, one of the big discussions along with some of the things we’ve talked about—remote versus non-remote, hybrid pricing structure. One of the big debates in the world of accounting today is timesheets. Value, not value, do we do them, do we not do them? What is your stance on what you guys do in regards to timesheets with your people?

So I do believe in timesheets, because I think that you can’t measure, like, your ROI and profitability like on the client relationships without that information. And I think it would be great, like in a perfect world. And you know, what we’ve talked to wanting to get to is if you could get to where you have an account manager with a team, and they’re managing a certain amount of revenue, and as long as they’re hitting their targets, you could adjust all their comp to be associated with that and kind of let them work in their ecosystem, and if they get it done, they get it done. That would be really great and ideal. But what we found, as you know, we have so many clients coming off and going on, and then sometimes you have team members coming on and rolling off, is that we haven’t been able to systematize our reporting quite to that level to get there where we could just say, oh, we don’t need timesheets anymore.

So I believe in them, I think they give you really good information too, to understand, where you have efficiency problems, where you have training gaps, because you can see like, oh, like we’re taking a long time to like do this type of thing. Like, you know, do we need to train that, do we need help there? Do we need to standardize something? So I think that the time sheets really gives you the information, but we don’t believe in hourly billing, always we try to fix fie our billing as much as we can, so that the client is really clear on the scope and the value that we’re providing. And our team is really clear on like our internal, you know, budget, and trying to be as efficient as they can be. Because hourly billing sometimes with clients, I feel like there’s always somebody that feels like they have a short end of the stick and the client’s like, why did it take so long, and you’re having all these like write offs and write downs. And you know, so we’re trying to avoid that as much as we can.

But we still have clients that have very complex consultancy engagements, and a lot of us love that kind of work. It’s really fun for us. And so we keep hourly billing on some things where it’s kind of nebulous or a bit of a rabbit hole. Andd we’ll be honest, like, we think this is a 60 to 80 hour thing. But if we think that the second that changes will raise our hands. And so we do still have hourly billing, but it’s, I would say it’s for more like the 20% and more complicated or harder to fix price scope type work. But yeah, I’m in the timesheet camp, I think it’s important information. And I know even my team is like “ugh, timesheets.” And we have like, team talked about that. It’s like I know their hassle. I know that nobody likes to keep timesheets, I get it, but especially in a virtual environment, it’s really challenging for us to understand what’s going on with clients, and what’s working and not working without that info. So that’s kind of where we’re at right now.

Well, I think that if I hear what you’re saying, it’s a tool that we need to effectively manage and lead the business so that we can understand, you know, how much time is something taking, because we’re pricing something with the expectation of this amount of investment of time. And if we’re consistently putting in more than what we thought, either it’s a scope issue—we didn’t price it right, we need to go back and look at that—or it’s a technical training issue internally that we need to work on with our people.

And from what I’ve seen, Shannon, the firms that are like you guys that have a a majority of their business in a subscription-based pricing model, that’s exactly the stance that they take with timesheets. It’s not an issue of, you know, sitting down with Bill or sitting down with employee Sally and talking about utilization and realization and, you know, expected billable hours, it’s not an issue of that. It’s an issue of, we’re going to work with you as an employee to show you the value of this, not use it as a billy club, but we’re going to show you the value of this to effectively be able to run a P&L off your desk, so to speak, and become as efficient as possible.

Correct.

And I think that is—that’s kind of the the stance that most firm leaders like you are taking, versus an old school mindset of we’re doing timesheets, and we’re billing off timesheets, and I need 65 billable hours from you type mindsets.

Well, and I think, so if you don’t have the timesheets—so for example, let’s say you had a team that the margin just isn’t strong, and they’re managing twelve clients. Without timesheet data, it’s very hard to know like what’s causing the issue because you’re like, well, which client is it? Like, where’s the problem? And so a metric we run that I would recommend is average hourly rate. We look at that on a per client basis every month. So I can say, okay, like, so for John’s business, we’re charging him 10,000 a month, and how many hours did we spend as a firm? And it’s a really easy way to get like a quick flag, because you’ll see something you’re like, you know, fifty bucks, what’s happening over here? And then it’s sometimes it’s like, oh, we have this project, we haven’t billed for it yet or got missed, or, you know, but it’s a really easy litmus test to see like, are we on track? Is there a client that we need to address, like some pricing scope, like, you know, scope, creep, and all that, that everyone is, you know, I’m sure very well versed in managing. But it’s like, what’s happening over here?

But if you don’t have timesheet info, you can’t see it. And especially in a remote environment, I mean, so I’d be to see like, oh, this person’s team is, you know, really unprofitable, but I can’t see it on a client basis, I can’t see it on a project or scope basis. So we try to look at average hourly rate by team, by client and by service line. So we can understand, like, and we have targets, like our tax services should generally be higher, more technical skill, our consulting services should be higher, our system implementation should be higher, our outsourced basic accounting, blocking and tackling, we have a different target there. And so we can kind of see on a client basis, like when we have an issue, that we need to just kind of realign expectations, or change your scope or change the fee. So that’s really what we’re using it for.

And we do have utilization targets, as a firm, but a lot of that, too, is to make sure everyone has enough budgeted work. Because if you have someone you’re wanting them to be 70, 80% billable, but they’ve only been budgeted at 50%, or maybe you don’t have enough client work for them in the fixed fee environment, you want to make sure they’re assigned enough work to set them up for success. And that’s another thing where we have budgets and all of our tasks, and we have budgets by person. So I can run a report now for June and see by person the workload that they have budgeted for them for June. And I can also see if someone’s over budget, like my gosh, like, why is this person budgeted that much like we need to get help there. And we can see it now for the next month. At the end of the month, we’re always going through the projects for the following month and making sure our budgets are up to date. And that we can we can actually run financial centers like capacity planning report. So we can see like, who has capacity, who doesn’t, who’s overloaded, how can we help? Those kinds of things.

So a lot of it’s really about trying to manage workload in a way that sets everyone up for success, versus like, a stick, you know, it’s not intended to be a stick. And I’m sure it feels like that sometimes to the team to like, we try to explain the why. But I think timesheets are just one of those things always feel a little bit painful. But I tell people, you know, honestly, we’re selling services in time for living, like, that’s what we’re in the business of, we have to track it, we have to manage it. It just you know, that’s being a good steward of the company is knowing where we’re spending time and how we’re spending it and making sure we’re, you know, being efficient, those kinds of things. So, I think the team understands, like, they’re amazing and wonderful, like they get it. It’s just part of the game.

I think I think you’re right, I think it’s part of it’s just part of the business. And it’s it’s incumbent upon you as a leader to be able to explain to them the value in that and then get on board. And you’re always gonna have people that don’t necessarily want to jump on board with that doesn’t mean they bucked the system, they just don’t jump on board with it.

You know, one of the things that you touched on a minute ago was the 2,200 hours with your employees. And, you know, I’ve said for years that when we get on the phone with a potential recruit in the public accounting space, if you can net the conversation down to one simple phrase, it typically starts with I hate what I do, I hate where I do it, get me out of public accounting. And when we spend time digging into that statement, and talking to people, really where we end up is, I love what I do, I just hate where I do it. Find me someplace where I can do the things I love, and get rid of the stuff that just sucks my life out of me: Hours, typically, work-life balance, and I would love to stay in this industry. How do you guys more effectively run and manage your business at that 2,200 hour level, so that you can confidently look at people in the eye and say, Hey, you are going to have a life outside of this place. You’re not going to be working 55, 65, 75, 85 hours like you would be down the street?

Well, I’m going back to the timesheet conversation is, you know, people are budgeted and assigned hours and we manage it to that level very actively. So we know what hours people are budgeted, we’re looking at it constantly. We also have like our model hours that a lot of firms have like okay, so 2,200 hours a year, this is kind of how it breaks out between your PTO and your training, and this is how much you should be targeting per week and then we report out on it every month. We send it up to the team so they can see kind of where they’re at in the year. And yes, people take vacation or you have holidays and our kind of fiscal year for performance reviews and whatnot starts October 1. So we’re always going right into holidays, people are always like feeling behind going into like January. So no one takes more time off in November, December. But we’re like once January through March comes, they’re like right back on track.

So we report on that every month, so everyone kind of knows where they are. And then sometimes if someone doesn’t have enough work assigned to them, it’s a good opportunity for us to figure out how to like get them busy and, and those kinds of things. So I would say it’s very much just a huge part of how we manage. And then for new hires that come in, we show them like that grid and the work expectations and how it’s split. And we walk them through, like how we manage that. And honestly, I don’t think—a lot of accountants, in my belief, is that people want to do great work, like you want to give people the benefit of the doubt. Most professionals in public accounting love client service, and they want to serve others is like, why they’re in that business. And they also want to learn and see new things. And so if someone wants to coast along and do you kind of an in house, corporate type gig and have an easy job, like this is not the place for them. And we’re very honest and interview about that.

And so we have a wonderful controller, we kind of joke about it now, because I try to give like the like, don’t come work here speech at the beginning, because it’s like, it’s very fast paced, we’re high accountability, you can’t hide, we have billable targets, we have short turnaround times for client, like response times, like we want to have our client service be the best. And so we’re trying to recruit people that want to work super hard, for like that 40 to 45 hour window. There’s not a lot of like, internet surfing time, like we are in client service. It’s busy, it’s fast paced, but the big but is but we are committed to making this an environment where you will have time to spend with your families, you have flexible time with your schedule, so you can be at your kids things, we will work with you on those things, we manage you to this 2,200 hour work we very proactively, because we believe that family matters, and that people should be first. But part of that people first is also that you’re carrying your weight and you’re supporting your team and that you’re serving your clients really well, right?

I don’t come into the interview trying to sell on like, pure work-life balance. Because I think sometimes people hear work life balance, and they hear like easy, or they hear like slow paced. But you know, we work a hard 40, it’s like, I mean, we’re busy. And so it’s for people that want like, the high intensity learning environment of a public accounting, but they want to do it, you know, 40 to 45 hours a week. That’s really who we’re trying to find. And we, we’re very candid, and we’re honest, and interview process, which I think is really important. It does you no good if you sell somebody on something, and then they get there, and that’s not the reality of what it really is, you know. And we always tell people, if you want to come work with A players, and you want to work really hard, and do meaningful work and have somebody that cares about helping you manage your work life balance, but you like the hustle of public accounting, like this is the place for you. But if you’re wanting to coast or have something easy, like you should opt out now, because you will not like it here.

So we don’t do like a big sales pitch related interview process. If anything, it’s almost like the opposite. Like, you know, you want people to have their eyes wide open. And the thing is the A players like they like that kind of environment, like that’s what they want. And some people think they want that and they get here and they’re like, oh, that’s uncomfortable, because it’s hard. And I have a lot of emails. And it’s like, that’s public accounting, and it’s not for everyone. And I think that’s okay, too. I don’t think the goal is to make public accounting for everyone. It’s not, it’s a rewarding, very challenging, you know, career choice. And it’s not for everybody. And so anyhow, that’s kind of how I feel about it.

I’ve always said that, you know, we’ve got a structured follow up process with people after we place them in a new position. And I’ve always told people, I would much rather follow up with you, you know, five days, two weeks, three months into a position, and have you say, it’s not as bad as you said it was going to be, versus, hey, we need to talk after hours. And I think that’s the best way to handle it, is lay all the cards on the table paint that worst case scenario picture so that people have an idea of what it is they’re stepping into, because I would venture a guess, based on all that we talked about your worst case? Well, I don’t need to venture a guess—it’s the space that we play in—your worst case is nowhere close to the absolute worst case down the street with probably 80% of firms. It’s just a matter of finding the right person that wants to entertain that.

We talked about you know, we will have fires and we will have times where you have to log in at night, or we have something on the weekend that comes up but it’s very rare that that happens. And the other side of it is that you have our full support with setting client boundaries, so that, because, a client-manufactured fire doesn’t mean that it’s like an actual fire, like if payroll doesn’t get run, like that’s an actual fire, like we need to stay up fixing it. But somebody being disorganized or just wanting something today, like you will have leadership’s full support and setting those client boundaries.

And I think sometimes too, like, as owners, like saying no to clients, and putting boundaries in place is really scary. But what I’ve learned over time is like to truly love my team is to try and help set boundaries with clients. And it’s something that I’m still working on. Like those conversations are really hard for me. I don’t like calling clients and realigning boundaries, because they’re being unrealistic with my team, you know? But we owe it to our team to set those boundaries. And that all starts like the sales process. Like we tell them like emails, we strive for 24 hour response time to acknowledge that we’ve got it—that does not mean we will fix your issue in 24 hours, but we’ll say hey, like, I can get to it by Friday, or hey, I can get to by whenever. And we tell the team if it’s not a fire and a client’s like, oh, can you send this to me today? It’s totally fine to say, well, you know, I have plans with my family tonight. But can I send it to you by tomorrow? And you know what? If they say no, then let’s have that conversation and figure out how we can help you. But we don’t have to just take what comes and say yes to everything. Like that’s not what client service is.

Yep, completely agree.

Because then the clients feeling like, oh, I was gonna have this like custom, bespoke, somebody on call. And you’re like, where did you get this feeling from. And it’s supposed to be a mutually beneficial relationship between like, our firm and them. And I think some of the old school is like, well, you should be grateful to have us as a client, and you’re so lucky to have us as a client. And while yes, we love our clients, but it’s really this, like, three legged stool of like the clients or team and what’s best for the firm. And I think the days of firms taking on high maintenance clients that are hard to work with, is coming to an end too, because I think CPAs are starting to understand the value that they bring in, they’re like, wow, like, I don’t need to work with clients that are rude, and disorganized and won’t give me the information that I need. And wow, like that really, is nice to work with clients that value us and will follow like our process.

And so I think that it’s empowering—like, you can build the firm that you want, you know? And my favorite quote is from there’s a Boundaries for Leaders book, and it’s Henry Cloud, which is, you know, he’s amazing and wonderful, but it’s Boundaries for Leaders. But he says that in your business, you either get what you create, or what you allow. And for me that just like, hit me with a two by four. Because if you allow clients to treat your team in a certain way, or you allow them to call you after hours, or you allow them to create fires for you, that’s a learned behavior. And so to be disciplined to say, well, thank you for sending this request at 6pm, but I’ll be happy to get it to you, you know, tomorrow morning, or like—you can say that. And so some of it’s just us empowering our team. And that’s how people stay too. Like, nobody wants to just be burned out and just taking requests and not able to prioritize and have no support, you know. So I think it’s all related. And it really comes down to an owner that has to have a clear vision and be willing to set boundaries and support their team.

I completely agree. And I think it’s something that’s critical. There was a survey that was done going into tax season this year by the I think it was a Center for Accounting Transformation. And it was a simple question of, as you head into busy season, tell us your stress levels. And this was going into busy season. And 27% said severe, 58% said moderate. So you got 85% of the people in public accounting that, going into busy season, are already fretting about what they’re going to engage with. And I think a lot of that comes from leadership and ability to put a block there and protect people. That’s a tough thing to do. So I commend you guys for absolutely doing that.

I mean, Shannon, you and Jonathan and the rest of your team have obviously built a great firm in the Central Texas market. If someone is interested in learning more about the firm from a prospective employment situation, or if there’s someone that’s a firm leader that’s looking to pivot and do some of the things different than they’re doing today, more along the lines of what you guys have done in building your firm, what is the best way for someone to get a hold of you to pick your brain, or talk to you about an opportunity with your firm?

Sure, like they can email me directly—like I feel very strongly about this. And I love just collaborating with other firm leaders. It’s just awesome. Because I think that our profession is changing and it’s a really exciting thing to be a part of. I think we’re kind of like getting up to speed if you will, and, and so anyways, I would love to they can just email me directly, so my email is Shannon.Badger@BadgerCPA.com. That’s pretty easy to remember. But I’d be happy to hop on a call with really anybody just to talk through.

And I’ve been in the overwhelm—like I’ve seen it. Another big thing is really identifying who your ideal client is and trying to stay focused there. Because, you know, the more consistent you can be with your client base and your service offerings, the more you can scale and train and delegate. And so we have not arrived yet, by any means we’re still working on a lot of these things ourselves, I don’t want to make it sound like we figured all the things out. And even like our team will say, it’s like, we’re still learning too, like the hours management and career path and budget management and all these things. It’s challenges that we all have. But you just have to try to get a little bit better every quarter. Like every quarter pick, like what’s like the one thing that if I worked on it this quarter, it would make other things unnecessary or faster. You know? And just do like one material thing per quarter, maybe that’s this quarter, I’m going to come up with my packages. This quarter, I’m going to maybe fire some clients that are really hard to work with and low margin, you know? This quarter, we’re going to, you know, tackle workflow systems and budgets. And so that’s just my encouragement is just a little bit of time, you know?

Yep. Shannon, I want to say thanks for spending some time with us here today. And we appreciate everyone that’s invested a little bit of time learning something about Badger CPA and Shannon. If you like what you’ve heard, take a minute, give us a review or a rating on the platform of your choosing. You can also hit the subscribe button to be in the loop on all future episodes that are coming on CPA Life. Until then, thank you for spending some time with us today on another episode of CPA Life.

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From Startup to Scale-Up: Achieving Sustainable Growth with Shannon Badger

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