Paul Shrimpling: 0:05

Welcome to the Humanize the Numbers podcast series Leaders, managers and owners of ambitious accounting firms sharing insights, successes and issues that will challenge you and connect you and your firm to the ways and means of transforming your firm's results.

John Thompson: 0:22

If you narrow that right down to one question, the best question you can ask anybody at the start of a telephone call, at the start of a meeting, is a primarily non-business question. How are you feeling, Paul? And depending on your response, we might spend 10 minutes talking to you about that without getting onto a business-focused agenda, because actually that will massively impact upon the business agenda anyway and you might be having a really bad time and you might say I actually had a really bad day. Well, you then do not skip into the business agenda. You say, oh, what happened? What's going on? Because all these things going on in your personal life, we as professionals fool ourselves if we believe that's not going to impact upon the business world.

Paul Shrimpling: 1:19

How ambitious is ambitious? What about trebling your top-line fees in two years? That would feel ambitious. Well, the conversation we're about to have with John Thompson zeros in on a process, a mechanism, a series of standard operating procedures, changing conversations so that you, your team, your firm can transform your results because of a deeper relationship with each and every one of your SME clients. Let's dive into that conversation with John now.

John Thompson: 1:59

Hi there, paul. Great to see you. I hope there's lots of listeners to the podcast. As you know, my name is John Thompson. How can I describe myself? I've been qualified since 1992 as a chartered accountant, so that obviously makes me an FCA, because I'm old enough to be an FCA. Have been a partner in a top 10 firm. Have been a business development director in a regional practice. We tripled in size in two years. I can tell you how we did that later. Also worked outside the profession in big corporate leisure world for five years and have been FD of an M&E contractor in construction for five years. Currently chief exec of Wisdom in Practice Group, best known for working with accountancy practices who want to generate loads of extra fees out of the advisory space Brilliant.

Paul Shrimpling: 2:55

And what's going on in John's personal space? A bit about you as a human being.

John Thompson: 3:02

Oh, in my personal space as I say I'm going on a bit about you as a universal space. I was the same going on a bit now. So, uh, three grown-up kids, uh, six grandchildren, uh, no spare money and no spare time right.

Paul Shrimpling: 3:13

Okay, so let's assume you're using it is in exactly the way that you would want to. It's a real pleasure having you on the uh on the podcast, john John, thanks for joining us. So broad experience, industry practice, practice, development, advisory space.

John Thompson: 3:35

What does the phrase humanise the numbers mean to you. It's a derivative of something I've always believed, paul, and that is that actually the numbers only tell part of the story and it's actually what numbers mean to the individual clients, the individual business owners, in terms of them being individuals, them being human. Simple example, paul client number one's got a million quid in his bank account. He's delighted, he's over the moon, he's so happy. Client number two's got a million quid in their bank account. They're miserable. The numbers mean different things to different people and therefore we need to understand the mindset of the individuals, the human circumstances of the individuals and what their numbers mean to them, because you cannot judge things by purely numbers alone.

Paul Shrimpling: 4:29

Right, ok. Ok, so it's the perception, interpretation, meaning behind the numbers. That's the key here, ok, so why is that important to managers, leaders, owners of accounting firms?

John Thompson: 4:43

If we don't understand what's going on in the client's mind, we don't understand their personal circumstances, we don't understand what their current numbers mean to them and what they'd like their future numbers to be and what those future numbers would enable them to do in their personal world, it is really difficult to give good advice world, it is really difficult to give good advice.

Paul Shrimpling: 5:11

Okay, so, without an appreciation of what a an individual I'm using that word uh, uh, full-blooded, because there's the individuals, their team, and individuals their clients. Now, I guess they were going to focus very much in the client space, but I think the same principle applies't it to a team member as it does a client. Do we understand them well enough? Do we understand what they want for their future well enough? Determines how well we're going to get connected, how well we can challenge their decisions, their actions, their behaviours, support what they're doing in order to achieve what they want. So how do accountants put that to good use then, john, if they're going okay, I get that I need to zero in on the future of the people in my business life. How do we put that to work?

John Thompson: 5:57

Well, in terms of clients, we need to do what maybe we used to do, and that is, we need to do what maybe we used to do, and that is we need to actually sit down and talk to them and have conversations and, I would argue, structured conversations so that we've got some sort of leverage in the practice, we've got some sort of consistency, we've got quality control in order to actually make sure we do understand them. We've got to build that into our day-to-day way we run our practice.

Paul Shrimpling: 6:31

So it's got to become part of the Part of what we do. Yeah, just normal, automatic, habitual, automatic, systematic, right? So how do? I was going to ask a how question, but let's go to. Why should firms bother with this when there's plenty of work on audit, there's plenty of work on management accounts, on annual accounts, on ITSA, on lots of work to do, why should we bother in this space?

John Thompson: 7:01

As most business decisions end up being Paul, it's good risk management and it makes you more money. So, starting with making more money, the better you understand your client, the better you're able to identify potential services that would benefit them and obviously, the fees generated would benefit you. It's also a fantastic differentiator to win new business because unfortunately, a proportion of our profession don't do this hardly at all. The other side on the good risk management is, without wanting to scare somebody too much, that you don't want to get a PI insurance claim and the client turn around and say, well, they didn't ask me these questions and therefore that's why we've ended up where we are are.

Paul Shrimpling: 7:46

So you need to know as much as possible about your clients okay, so it's taken the kyc know, your client piece, onto a completely different level, which yeah, which where kyc should be I agree, I agree, I agree. Um there's than it being a box ticking exercise could be should be.

John Thompson: 8:07

Currently it's Mickey Mouse, isn't it?

Paul Shrimpling: 8:10

It's underrated, I think, as a focus area and it's clear to me, john, and your experience is almost certainly going to be similar is look at the firms who have got a very high average fee. Let's just exclude audit, just just to take all day at the back. The action go right. What does a high average fee look like? Well, just been listening to a previous podcast with Andrew, andrew Botham, who ran a practice. He sold it six, seven years ago.

Paul Shrimpling: 8:41

When I was working with Andrew, maybe ten years ago, he had an average fee of about 14 000 pounds. That's not index link, that's back then. Uh, non-audit, because he was really good at the kyc. He was really good at getting to know the goals and the challenges of the firms that the businesses that he worked with and was able to monetize that. So it reflected on the fees and the profitability of the firm. I'll look at Luke, I look at Alistair, I look at you know, poor, I don't know doesn't two dozen, three dozen other firms and look at average fees of 12k, 30k, 35k, because they're zeroing in on a much deeper 35k, because they're zeroing in on a much deeper understanding, much deeper relationship with their clients, which is a completely different skill to the deliver accountancy, deliver management accounts, deliver, payroll deliver, and so on. Um, how does your experience, uh, resonate with that?

John Thompson: 9:41

I think, um, there's a, a number of firms at the moment who, um, and I can think of two in particular obviously won't name them, but are actively shedding audits to give them more capacity to do what some people call advisory, but I would just call common sense look after your clients yeah, yeah, yeah uh, and they have done the number crunching, and one in particular, which is quite a chunky firm, is in two years they expect to get rid of a million pounds worth of audit and they think by replacing that with only 750,000 worth of what they call consultancy and advisory, they'll actually make more money from 750,000 worth of that than they would for a million awarded.

Paul Shrimpling: 10:30

Right? Well, because they've got fewer people attached to the delivery.

John Thompson: 10:33

Fewer people, fewer training requirements and the ability to have conversations that will create more fees rather than just do the audit Right okay, so that's a big strategic decision for that firm to make, isn't it?

Paul Shrimpling: 10:46

Yeah, so that's connected with well, what are they wanting to do as a firm? Subject to the scale of the firm, it's either focusing in on business goals or focusing in on the personal goals of the owners. I'm now curious as to which is, or if both are, driving that decision.

John Thompson: 11:05

It's a mixture. It's a mixture of both. Part of the sort of extra benefit of that is they are able to and they do work with audit clients of slightly bigger firms who have taken a very hard line and said we cannot do non-audit work on clients we're doing audit on. Now I know that is a little bit of a gray area for some practices, but the higher you got the food chain, so to speak, the more seriously they take that. So they're doing a lot of quote unquote advisory work for clients of bigger audit practices.

Paul Shrimpling: 11:48

All right, that's interesting because there's other people out there. Aren't they who are taking audit work because they either don't want to work on audit fees that are too low for them as a firm, or and don't want to take on the audit work because they're connected with advisory work and therefore, like you say, higher up the food chain, they're less able to do that because they're more under the spotlight.

Speaker 3: 12:13

Yeah.

Paul Shrimpling: 12:15

Right. So what's the? So I can see the material impact, you know. Sacrifice a million quid's worth of audit, gain 750k's worth of let's just call it advisory for the sake of the label, and be more profitable. Um, how do they set about doing that then, john?

John Thompson: 12:31

it's back to what we said just previously. It's about building the systems and processes into the way they operate, um, what you might call sops or standard operating processes. Most practices may have them recorded or may not have them recorded, but they're pretty much aware that if there is a set of accounts needs preparing, there is a process to follow, and they teach people right from day one when they join the practice. This is what you need to do. I mean, in audit, there's an audit program. For instance, in how to complete a tax return, there is a written or unwritten process to do. I mean, in audit, there's an audit program. For instance, in how to complete a tax return, there is a written or unwritten process to follow.

John Thompson: 13:09

So it is not that difficult to build an advisory process. So it becomes every day. So everybody understands. For instance, we go along to a prospecting meeting. What are we going to talk about? Well, if we follow a particular line of inquiry, rather than say, hey, I looked at your accounts and I've spotted some numbers that could be improved, yawn, yawn, yawn, blah, blah, blah, they take a different approach. And so, right from day one, with the new client or the potential new client, they're establishing a different kind of relationship.

Paul Shrimpling: 13:46

I like that line of inquiry out of the police nomenclature. So what line of inquiry are we actually talking about here?

John Thompson: 13:55

Well, most clients in this country, even if they're business clients, are SMEs. So most of the time, those businesses only exist to create wealth for the individuals that own them, to do lots of wonderful things for themselves and for their families and whatever else they choose to do. So an easy starting point is actually to be brave enough to say let's put your accounts in the drawer and let's just talk about you. Let's talk about you and your family. Let's talk about your personal wealth. Let's talk about what you are doing at the minute in your life and what you'd like to do in the future. Great, now let's talk about how the business can actually create the wealth to enable you to do that.

John Thompson: 14:38

And often the clients have never been asked questions like this before. They I wouldn't say struggle, but because they've never been asked questions like this before they. I wouldn't say struggle, but because they've never been asked questions like this before, they haven't maybe thought about it deeply. So you're helping them clarify their own thinking, which is massive value from day one, and you're also giving a really in-depth understanding of what's going on in these people's lives. And then, when you segue back into the business, sometimes the way the numbers are becomes much clearer because you understand that they've got these commitments, if you like, outside of the business, that obviously impact upon the performance of the business.

John Thompson: 15:19

Sometimes that's extremely positive, sometimes it might not be positive. But this sort of marriage of business and personal, I think as a profession we're fooling ourselves, for instance, particularly in SME world, if we believe that the company is the client. It might need to be the client, but in reality the business clients are relevant. It's actually the people who own the business, it's the individual business owners. They are the real client, not the company or the partnership or whatever else they're operating under.

Paul Shrimpling: 15:57

Yeah. Yeah, it might be a limited company and therefore a legal entity, but actually the real conversation with the real people who own that business.

Paul Shrimpling: 16:04

You know, that's my personal experience. Yeah, I talk from stage often about the six accountants I've worked while I've been running the various businesses I've run over the last 30 years and, okay, it's a bit dismissive and I apologize for it, but still mean from the from the bottom of my heart is four of those accountants were, in inverted commas, chocolate teapot accountants, because when it got difficult, when it got challenging for us, they melted away, whereas the, the two who were serious about me and kate and the four kids, were able to influence my thinking, influence my decision making, influencing the actions we therefore took in order to create the stable financial world that we now live in. Um in in at our stage in life and I, without any hesitation, go a lot. Without neil and without rob, um, I wouldn't be where I am.

Paul Shrimpling: 16:56

You know that and therefore, you know recommend them all the time, um, and they, well, one of them took my son out for dinner just before his wedding only a week or so ago. So it's, and he's what and his wife to be. They're that close to us and isn't that something that and again, this is about caricatures. You know, your traditional, what people expect of an accountant are going to find it difficult to get into that personal understanding kyc space. You use the word bravery. Are they brave enough to ask the questions that have got nothing to do with their accounts or their audit and everything to do with who they are as human beings?

Paul Shrimpling: 17:40

isn't that alien to your typical accountant it's only being brave the first time.

John Thompson: 17:48

After that it's just something you do. And also, I think, where we kind of even the accounts that are not doing this at the minute. They're flirting with it because they usually are doing the personal tax affairs, so they're usually having to ask some of these questions anyway as part of their personal tax services. So we're not talking a giant leap here, we're talking a small step and we're actually just pulling together what in reality already exists, but we haven't codified it, we haven't created a system, we haven't almost recognized that this is what we do. And if we talk to 100 accountants, paul, they've all got stories that they've forgotten about where they really, you know, helped someone on a not just on a business level, but on a personal level, and they've forgotten about it. Because we are taught to act a certain way and often you could extend that into our measurement systems and our CRM systems that we don't record this stuff. We sort of just kind of gloss over it, but actually often that is the most powerful experience we have given a client.

Paul Shrimpling: 19:12

This is close to where I'm at from a thinking and challenge perspective.

Paul Shrimpling: 19:19

So if I describe the challenge, you can perhaps shine some light on how we resolve this, john, so, in the world of psychometric profiling whether it's DISC or any other form and there's many, many forms out there they'll ask a whole series of questions and work out the natural mix of your behaviours and the unnatural mix and the stress that might be caused because you're in the wrong role or not because you're in the right role.

Paul Shrimpling: 19:50

Great, I keep repeating this and I've mentioned it on a couple of podcasts before now. Is Peter Thompson, an old mentor of mine, still one of the greatest sales trainers I've ever worked with, says that people won't consistently do who they aren't, but they will consistently do who they are, and lots of accountants and you use the phrase um, I think recognize themselves. This is that this is what you do, is ask these personal questions, whereas if your measurement system in your crm system doesn't clearly show you that this is who you are, you therefore won't consistently be who you are, which is someone who can should get closer to their clients. Am I, um plowing the right furrow here, do you think?

John Thompson: 20:44

no, I, I, I think. I think I can completely understand what you're saying, paul. Um, I think in some of the conversations, for instance, I have with accountants, I, I would, and, and often this is this is part of their defense mechanism they go oh, I'm not sure about this, I'm not sure I can do that.

John Thompson: 21:02

And then you would suggest to them, for instance, that they are naturally changing their behaviours depending upon the environment. They're in every single second of every single day. So they're already doing it. So we're not asking them to do anything they're not already doing. And the example I would give the way they would speak to their grandmother is not the way they would speak to their mother, is not the way they would speak to their wife, is not the way they'd speak to their daughter, and so on. So they're naturally changing their behaviours.

John Thompson: 21:40

And you know, I just said earlier on, I've got six grandchildren. I speak differently to my grandchildren than I do to my kids. Yeah, and you know I'm. It would be extremely embarrassing some of the conversations I have on my grandchildren, but it's natural. You say all sorts of gobbledygook, yeah, and it's natural. And I don't think, oh, I'm not being myself. Myself is this highly professional person? That's just a nonsense.

John Thompson: 22:06

There's a really good friend of mine who is now working. He's got his dream job at Newcastle United in the media department. When he was a young lad, so to speak, he was the son of a church minister Nicest guy in the world. But once he got into the football ground. He was on the barrier leading the singing. Now, different environment, different natural behaviors, inverted commas natural behaviors. People are changing the way they behave all the time, quite naturally. I accept there are extreme circumstances where people will feel stressed out or uncomfortable. You know, you walked in a bar and there was a bar fight going on. You wouldn't feel very comfortable. But 99.9% of the time, every second of every day, you're moving around in the way you behave depending on your environment.

John Thompson: 23:06

So I'm not asking them to be anything they're not already doing. It's just kind of being aware of that. It's just being self-aware of well, I'm already doing this actually. So all I've got to do is just accept that's the way I am. I'm changing all the time.

Paul Shrimpling: 23:22

Yeah, and so if they become, when they become self-aware that I behave differently in different settings, in different environments, maybe they're therefore less resistant to then stepping into the space which is actually. I can go deeper in this KYC space.

Speaker 3: 23:41

Yeah.

Paul Shrimpling: 23:43

Please forgive this brief interruption. John and I have just been talking about mindset, about how you see yourself, how your team see themselves, and whether it feels natural or not for you to ask deeper, more meaningful, more personal questions and open those conversations. And that mindset issue is something to take deadly seriously, and if you want to investigate what it feels like, what it looks like, to have a growth mindset, check out the growth mindset business breakthrough in the show notes. Um, how did they become self-aware, though, in this, john?

John Thompson: 24:21

they to be. They usually need help. They usually need help. Um, you know, even the great sports people have got coaches and those coaches aren't really coaches. They don't teach them out once they get to a certain level. You're not going to teach roger federer to improve his forehand, for instance, but he values the fact that somebody's there just talking to him, listening to his problems, nudging him in the right direction, reminding him of what was really good. Because, again, we as accountants, we forget over time some of the great stuff we do. Now, even ourselves. I might do a support call with a firm and they'll say oh, we haven't really done very much in the advisory space in the last month. And my stock answer is just run me through your diary and there's always stuff they've forgotten about and that's in the last four weeks.

Paul Shrimpling: 25:14

Yeah, yeah. And so that self-awareness is a skill, is it? Or is it one of your SOPs that can help bring it to the fore?

John Thompson: 25:27

It's a combination. It's a combination because, if the so what the sops ideally do is they establish good habits and good behaviors, and it's a little bit like driving a car at some point you just start doing it. You know, you, I'm sure you've experienced it, paul, where you've driven home and thought, blimey, I'm home when you were when you first passed your test. I bet every hundred yards. You are massively concentrating and you are making yourself do the right things yeah, absolutely, and celebrating that you haven't just stuffed it through a fence.

Paul Shrimpling: 26:03

Yeah, so SOPs in the beginning help that. Standing up operating procedures help nurture, help establish the habitual behaviour. Is that in the right setting and natural anyway? It's just we've not yet habitual eyes them, not yet recognizing them and therefore not yet making the most of the opportunity in that space, whereas if we can get the standing operating procedures working well, we stand a better chance of succeeding. Okay, correct, all right. So best SOP on the planet for helping accountants become better at getting deeper around the SME owners goals and challenges? What's the best SOP ever?

John Thompson: 26:57

if you, if you narrow that right down to one question, the best question you can ask anybody at the start of a telephone call, at the start of a meeting, is a primarily non-business question. How are you feeling, paul minutes talking to you about that without getting onto a business focused agenda? Because actually that will massively impact upon the business agenda anyway and you might be having a really bad time and you might say I actually had a really bad day. Well, you then do not skip into the business agenda. You say, oh, what happened? What's going on?

Paul Shrimpling: 27:42

yeah, yeah, because all these things going on in your personal life, we, we, we as professionals fool ourselves if we believe that's not going to impact upon the business world yeah, I can't tell you how many times I'm a huge fan of you know that what you call the business focused agenda, but agenda item one, you know pressing issues or pressing challenges. So you know we've got. Before we get dive into what I think we need to be talking about, tell me what's going on, what's what, what's what's really pressing in on you at the minute the word.

John Thompson: 28:15

The word feeling is so much more powerful than thinking. If you ask someone how they think they dive into analysis and they sort of. If you ask someone how they think they dive into analysis and they sort of go like Joey from Friends and look up and around the ceiling of the room and they have to sort of think and analyse and what you want is gut feel. How are you feeling, paul?

Paul Shrimpling: 28:37

But, john, now we've got these accountants, who aren't necessarily self-aware about being naturally prone to asking simple but deeper, more personal questions, and now we're encouraging them to have a conversation about emotions. That's almost a step beyond the pale, do you not think?

John Thompson: 29:00

Again, I would turn that around and say so. You work late at the office, Paul, pretending you're an accountant from years ago. Yeah, You've got home at 7 o'clock, You're a bit tired, You're a bit worn out. It is likely that your significant other would go what's your day been like? And it's likely you would turn around to your significant that how are you?

Paul Shrimpling: 29:27

you're doing it all the time and yet we have a profession that have been educated, told, cajoled, encouraged to step into this personal human advisory space for decades. You know, starting with ran, if indeed, if ever started, then I would argue I think you would as well that the the the further back you go in the profession, you more you get closer to accountants who were really deep in the lives of their business owner clients. And as the technology's advanced, we've become more almost immune to the fact that actually there are human beings working in a professional service firm dealing with a business owner, an accountant dealing with an individual. It's almost as if that's got diluted because of the obsession with the technology, obsession with getting services out the door. Um, I'm not sure what question I'm driving towards here, but there's. It's almost as if we've lost what we once had. The profession has lost what it once had, which I think you were hinting at earlier on in the discussion.

John Thompson: 30:29

I think technology is a really interesting one, because there are obviously massive benefits to technology, sure. However, most of the benefits are for the accountancy practice. There are less benefits in technology for clients. Yes, because we're back to what we're saying about humanizing the numbers. Now we might be able to get the numbers a bit faster, a bit more accurate, etc. Etc. But we still need to interrogate those numbers, um, to the point of reference of what does the client actually think about them? How do they feel about them? Are they good numbers? Are they bad numbers? Are they giving them what they want? But we're we're a bit obsessed with production and, rather than and and I.

John Thompson: 31:17

It's a really interesting one because there's a um, there's a really good friend of mine's got a successful manufacturing business and, and they are. They are obviously obsessed with production, but what they really offer, which they struggle to sell, is what I would call a design and build service, because customers come to them and say give me 100 of these, and a lot of the time they go back and say's a better way to do that? We could swap out this, we could do this, we could do that, and there's a real design element and then the production slash building takes place and and they, with some of their customers, they have succeeded and actually um educating them and um being able to essentially say look, this is this. They don't call it design and build, but that's essentially what it is, not just production. We as a profession are in danger of just being seen as production people and the.

John Thompson: 32:24

The real danger of that and I know not everybody agrees with this, but the real danger of that and I know not everybody agrees with this, but the real danger of that is production is low skilled and it is more easily replaceable. And you know, if half of what people are predicting with AI comes in place and the numbers of people employed in practices will significantly reduce or it will release people to do other things, my fear is that a proportion too large a proportion of the profession will say we'll cut the headcount. Yeah, because they want to drive their EBITDA up, don't they? Well, I would argue that's short-term profit, it's not long-term profit. But we could talk about this for hours.

Paul Shrimpling: 33:18

Yeah, of course. Yeah, I guess some of this comes back to you know, just to reflect your suggestion that a manager leader of an accounting firm should ask the business owners they're working with questions about what matters most to them, whether it be about the problems and issues that they're experiencing or the future goals that they want to achieve. They need to turn those questions on themselves as well, don't they? You know, what do you want for your firm? What do you want for your people, your family?

Paul Shrimpling: 33:48

your life, which is what you're talking about which then gives a I would suggest a strategic perspective around which you make decisions that's in your best interests as a manager and leader of your firm. Um, I'm just wondering what those best questions would be.

John Thompson: 34:08

It's very similar to what you would ask clients.

John Thompson: 34:14

You've got to ask yourselves those questions.

John Thompson: 34:18

In my past life, mark, I facilitated well over 100 business strategy sessions and the thing I learned very quickly was a business strategy is absolutely useless without bottoming him out the personal situation first, because it's the personal situation which drives the business strategy. So, for instance, there's a friend of mine who I know several years ago spent a lot of time working in the states and ago spent a lot of time working in the States and he made a lot of money working in the States, but it got to the point where he was away from home too much. So the decision is do I spend time at home and give up income? And he decided that was the right thing to do and at a certain point or a certain level we, we can all do that. I mean, we've all had clients sme clients, for instance who maybe have got one super, super customer who is too big because they're too reliant on them and they're going. But this is great, we're making lots and lots of money, but actually if they walk, your business goes.

Paul Shrimpling: 35:39

So what's the trade-off? Yeah, yeah, where's the core business? Where's that risk-reward payoff piece? That is how you want to live your business life and therefore impact on your personal life. But business goals, business strategy drives personal goals. Personal strategy drives business strategy is what you're saying. I agree, wholeheartedly, I do. And so key skills then, john, is it as simple as just asking the obvious dumbass questions that aren't as dumbass as they appear?

John Thompson: 36:28

good car driver is always going to be a good car driver and better than a bad car driver. But if you can build systems and processes, um around that, you're going to give people a better car to drive. So I mean, we all know, don't we, that the cars of today are much safer than the cars of yesteryear and um. So the starting point is let's give you a really nice car, so we're going to make the journey as easy as possible, and but we have to accept, I think, that some people will become, you know, fantastic car drivers, and other people will be not as good. However, as long as they don't crash and they're better than they were, that is progress.

John Thompson: 37:13

Again, our profession. One of the things I think we kind of learn over time is we don't have to have all the answers. We can bring other people to help us. There's loads of small firms use VAT consultancies, use R&D consultancies, et cetera, et cetera. But we can still have these, what I would call these primary conversations and work at a high level about what's really important to the client and how can we help them record that so they can share that with other people, they can educate other people, they can communicate that.

John Thompson: 37:49

And then what you might call the traditional services are the secondary services and that's the stuff we always do the management accounts, the basic tax advice and any sort of advice around that. But there's a sort of third level, a sort of tertiary level, which is stuff we won't do or can't do, but our primary conversations have identified there's a need. So you know there's obvious things. Like you know, you bring a lawyer in to sort the will out, you bring a financial services guy in to sort out certain things. It could be a marketing person, an it person, whatever is. But because we are working at the primary level, we're in control of the relationship. We are doing the most important stuff.

John Thompson: 38:35

Again, our profession. I think sometimes we get excited when we're being clever. So we do a clever piece of tax advice. Client doesn't understand it. You're wasting your time. He doesn't understand it. All he's interested in you saved him money, great, fantastic, love you to death. But the technicalities of it, the read, the stuff that we know is really difficult and we're really amazed that we can do this straight over the head of most clients. The most important thing is the primary level conversations that identify the most important things, the most urgent things, and then we work at a secondary level and we bring in people we know to work at a tertiary level because we won't do it or can't do it it's interesting is that the the client doesn't care about the moving parts, the clever stuff in the tax planning or whichever other service we want to talk about.

Paul Shrimpling: 39:32

They care about the outcome of that which might save them some money but actually and I'm just picking up on your point about how they then feel about that what they're going to do with this extra money and the impact that has on their personal lives. That's, that's the where the real value, you know, it's an emotional payoff. Isn't it not the financial payoff that they care more? About do you agree with that?

John Thompson: 39:58

yeah, it's it. I think the emotional side, which where, again, we are taught from an early age to sort of, if you like, put it away and put it away and not really, you know, focus too much on it it is the most powerful driver. I mean, you know, we've all been shopping and we've got three things on the shopping list and we buy 10 things. We've all done it.

Paul Shrimpling: 40:26

So and we buying for emotional. This, as you can probably tell a frustration of mine, which is let's have more, and you agree with it. So I'm very happy with the way this podcast is going. Uh, more emotional conversations? Yes, have the functional and financial conversations, because the actual value equation, which is made up of emotion, function, financial. The trump card in that hand, if you will, is the emotional payoff. Not so much, don't get me wrong. Functional payoff is pretty strong, financial payoff is also strong, but the trump card is what's the emotional payoff for the business owner?

John Thompson: 41:05

leader payoff of the business owner, leader and and the functional and the financial payoff. They enable the client to do stuff and that's where the emotional payoff comes from, and the emotional payoff is probably several multiples of the functional and financial I agree, john, this is personal and this isn't me showing off.

Paul Shrimpling: 41:28

It's just demonstrating the power of a conversation with Rob. Chartered accountant is, and he asked the question is this your lifetime home? Is this where you want to? You know, is this it? He didn't say it in a dismissive way.

Paul Shrimpling: 41:46

Yes, he didn't say it in a dismissive way, yes, Is it. And Kate and I were like, well, I don't know. That conversation resulted in us not moving from here but actually buying a very nice, modest property out in Portugal, which, literally two days ago, I was sat on the veranda of that property going. How did I end up here? Well, I ended up here because Rob asked me and Kate a couple of simple questions that resulted in some thinking, some decision-making and actions. And every time I visit that property, I can't help but thank Rob by the way, he's also a clever bugger that he is insisted on buying a tree for the garden. So every time I look at this tree that's growing, every time I'm always thinking of him. I don't think he did it for that reason, but it just shows that the emotional joy peace that we have in this little house is thanks to Rob.

John Thompson: 42:44

That's powerful, isn't it? It is, I mean. I think one of the biggest revelations to some business owners is they don't want to sell out. They want to sell out until they reach a certain age because they actually like what they're doing. And this modern approach where everybody wants to build a business and sell it, that's great for some people, but not everybody.

Speaker 3: 43:06

Yeah.

Paul Shrimpling: 43:07

Yeah, so I agree. I was with a three-owner leadership team in an accountancy firm yesterday and they were essentially saying the same thing no, no, we love what we're doing. We love the way this is going. We don't want to be part of a bigger firm as an employee.

John Thompson: 43:26

This is going too well part of a bigger firm as an employee. This is going too well, isn't it interesting, with p everywhere and and and everyone's going oh, p e, p, e, p, and you've got grant. Thornton have basically sold a slice of their business to p? E, and bdo in the states have gone completely the other way. They're saying we're remaining independent. I'm not sure what they call it in the states, but essentially it's a bit of an employee ownership trust. So the employees now own bdo, whereas grand thornton they've got uh, part ownership at least from private equity.

Paul Shrimpling: 44:01

Now, neither's wrong, it's just what people feel is best for them yeah, and then we're back into what is it you want your life to be like yeah, and, and some people are comfortable having a p um investors demanding certain results and behavior.

John Thompson: 44:24

people say I don't want that. I want to feel that you know, if me and my fellow partners, for whatever reason, are not having a great year, fine, we're not going to have a great year every year. As long as we have more good years than bad years, we're fine with that. Yeah, yeah.

Paul Shrimpling: 44:43

It's that you know what is it business owners really want, is the question that's triggered in my head from this conversation and one of the answers and it comes from having worked with and studied Michael Gerber and EME3 Visited and all of that space that it's business freedom. What's your definition of business freedom?

John Thompson: 45:06

Feels like a good question to pose oneself as a practice leader and also, by the way, your business owner clients paul, one of my, one of my little talks, where I get asked to go and speak at things, includes what I tongue-in-cheek called the three songs of life, and one of the songs of life is from those great musical philosophers, the, the Spice Girls. Tell me what you want, what you really, really want.

Speaker 3: 45:33

Yeah.

John Thompson: 45:35

And you know, for those in the audience who are still awake when I'm on stage, I say write that down and ask yourself don't do it now. Tomorrow morning, look in the mirror and ask yourself that what do you want? What do you really, really want?

Paul Shrimpling: 45:52

We can't leave the other two songs hanging, John, if you're opening that one.

John Thompson: 45:59

The other one is you can imagine you pick the songs to fit the message, but Ronan. Keating's Life is a Rollercoaster, right, you've just got to ride it, and sometimes you'll have good years and sometimes you'll have bad years. And as long as you have more ups and downs, fine.

Speaker 3: 46:14

Yeah.

John Thompson: 46:15

And the one that I actually think is possibly the most meaningful for our profession is, again, huge musical philosophers Fun Boy 3 and Banana Roma. It ain't what you do, it's the and Banana Roma. It ain't what you do, it's the way you do it and that's what gets results. And if you think carefully about that and British people are very good at this, because we've all probably experienced you standing at a bar and one of your friends walks in, slaps you on the back and goes how are you doing? You bastard Americans don't understand that, yeah, but if you do it in a nice voice with a big smile on your face, it's fine yeah, if you walk up with several knuckle dusters and a machete and do it, yeah, it's different.

John Thompson: 47:04

So it's not just what you do, it's the way that you do it, and and and. Life is not black and white, it's full of gray areas. And you and back to what we were saying before about natural behaviors. I bet a lot of our people who say, oh, I'm not sure I could ask that question, I'm not sure I could do this, they've probably got friends where they behaved in a flippant manner, and it's natural yeah, I was researching and writing a piece recently on.

Paul Shrimpling: 47:33

You know how language develops. You know from childhood, all the way through, and there was a line in the research which goes everyone learns how to communicate until they stop learning how to communicate yeah, yeah and uh, you know, it's like in my world, the way, the way I'm wired, you know, every day is a learning day.

Paul Shrimpling: 47:54

There's always, which is why I love running the podcast, because it's like, oh, there's got to be several insights from today. Um, there's always something that can just shift, not what we do, but how we do it. Just to pick up on the fun boy three banana, which and, by the way, it's probably one of my most quoted references, because it is it ain't what you do, it is how you do it. The way that you do it, you've got to finish the line up and you get the results. You can't not use the words.

John Thompson: 48:21

Paul, we've all probably written or received awful emails from people and the message is correct and we understand the message, but the way it's written is awful, yeah I agree and and, by the way, they should have picked up the phone and had a conversation rather than written it in a chuffed email shouldn't they.

Paul Shrimpling: 48:43

yeah, you know, I don't know if this frustrates you, but, but you know, the default communication tool of the profession has turned into email and actually and I get this complaint all the time from business leaders we can't get our people to pick up the phone. We're finding it difficult, post-covid, to get people to get back into a room with clients in their premises. You know, I don't know if you're experiencing, you know, similar frustrations or struggles and if you are, what, what, what, what, what a firm's doing to overcome that?

John Thompson: 49:13

because the deeper, the stronger the relationship, the more likely they're going to stay as a loyal client and the more likely they're going to recommend and refer you it's um, it's an interesting one where maybe it's another standard operating process needs to be put in place and discussed with the team and explain to them why this is important. You know Zoom and Teams and Google Meets, et cetera. They're great. They're great, but you can't beat sitting around a table having a cup of coffee, sharing a biscuit and just looking at the body language and just picking up what's going on.

Paul Shrimpling: 50:04

Do you think there's a generational level of resistance to that younger than there is older, or is that just where we're at? There is a general resistance and therefore we have to take it into our leadership hands and build standing operating processes, backed up by our crm and measurement processes, that make it crystal clear what's expected of people. Given that we are a relationship business in the world of accountancy, what are your thoughts? Relational? Um does it matter, and let's just zero in on what we have to do about it there's an it.

John Thompson: 50:36

Well, kpis are a really interesting topic because what most people think are kpis are not really kpis. They're key performance measurements rather than KPIs. And behind the measurement one, two, three levels back is one or two single actions, which are the core indicators, and I'm aware of a very small number of practices that do this. But one of the KPIs is how many clients have you spoken to on the phone this week? And it's actually as simple as that, because extrapolate that forward. You're probably going to lose less clients. You're probably going to be given more introductions to potential new clients from that single action. And it's amazing how many people can't do it. Even if you said you must make one phone call a day to a client and just say hey, paul, how are you doing? And I don't know what the percentage would be, but I'm guessing there would be a percentage where you'd go. I'm glad you rang. I was just thinking about giving you a ring about A, b and C.

Paul Shrimpling: 52:08

Yeah, I was in conversation with people listening to this might know Chris Downing, who's at Sage, was with a good accounting firm before he was at Sage and, like you've just said, there I've suggested more phone calls, more meetings with clients typically results in more loyal clients, more work, more referrals.

Paul Shrimpling: 52:33

Haven't necessarily got a bank of evidence to prove that, but I have yet to come across a partner leader of an accounting firm, who doesn't say it's funny how the more meetings I have, the more work I get. There's a direct correlation. I share this with Chris and he said in 2008, in a conversation I had with him only a couple of weeks ago, I said I went back into the firm and I looked at our CRM and ropey as the data might have been looked at, the KPIs and as challenged as that might be or unclear checked people's diaries. But I did a granular, you know, exercise in. Is this right? And he says without any shadow of a doubt, the people who had more phone calls and more meetings with clients had a faster growing portfolio than the ones that didn't category but undeniable back in the day back in the day, I'm sure, when we were training.

John Thompson: 53:28

It's not such a big thing now and I can understand that with the way business is conducted now and also with COVID et cetera. But business lunches a lot of the team thought that was a perk. And they didn't. Maybe it wasn't communicated to them properly, but it wasn't. Until they got a bit more senior they realized it wasn't a perk because my old, my old boss slash mentor. He said to me john, you're pretty good at bringing in work. Yeah, and I go yeah, he's right. If you're not having two lunches a week, I want to know why. And that was the standard, and actually it was a bit like yourself. Could I 100% prove it on a spreadsheet? No, but if I did two lunches a week, we got more work. If I was on holiday and those lunches didn't happen, guess what?

Paul Shrimpling: 54:30

There was a bit of a drop it's a powerful KPI number of calls, number of meetings, number of lunches. It's a relationship KPI people forget what CRM means, paul.

John Thompson: 54:45

These days it's more like to be a coffee.

Paul Shrimpling: 54:48

No one wants a two hour lunch anymore they've got to go to the gym to work it off, haven't they?

John Thompson: 54:54

but now it's coffee a 30 minute coffee.

Paul Shrimpling: 54:57

Now I get that. So, John, you hindered right at the start of this conversation about the fact you'd worked in a regional firm and you three times the fees in two years, did you say?

John Thompson: 55:09

Yeah, in two years we tripled the top line.

Paul Shrimpling: 55:11

Right, so what was going on there?

John Thompson: 55:17

We and you may have sort of heard of this we, the firm was called harris walters, a managing partner's guy called richard walters who was the guy who said to me you've got to go out for lunch twice a week, john. Otherwise I want to know why. Yeah, and we um targeted clients of bigger firms, not not giant firms, but firms bigger than us. We thought so.

John Thompson: 55:38

They're a bit bigger than us, so their average spend for that client's going to be better than we've got. Let's target them, yeah. And we essentially went along to them and we organized meetings and and we it sounds crazy all we just said was what's your plans? Tell us what your plans are. Yeah, that, don't want to see your accounts, just Tell us what your plans are. Yeah, don't want to see your accounts, just tell us what your plans are. And then we offered them. We said right, come away and spend a day with us. Don't have to pay us anything, just spend a day with us.

John Thompson: 56:10

And the feedback from that was we helped them put together a high level strategy for themselves and for their business. And the feedback we always got was my accountant never does anything like this with me. My accountant never asks me these questions. My accountant actually doesn't really understand me or my business. My accountant couldn't even tell me my wife, my wife's name. My accountant doesn't even know that I'm part investor in an office block of a development in tenerife, um, because nothing's ever been remitted. So why does he need to know? And and so on. And therefore we just naturally acquired these people and we got, and there was won't name names, but there was one big local firm got really, really annoyed with this and I just thought well, that's just tough cookie, mate. You know, if you knew the things that your clients who are now our clients had us about you, you'd be shocked yeah, yeah.

Paul Shrimpling: 57:19

You earn the right to the results you get, don't you whether they're good?

John Thompson: 57:23

or bad, yeah, and and we probably. Um, like I say, we, we tripled the top line and the split on fees was probably probably compliance, about 60, what would now be called advisory, about 40%.

Paul Shrimpling: 57:42

Brilliant. I remember working with firms who were using the Harris-Walters toolkit.

Paul Shrimpling: 57:47

John going back 20 years Fascinating. So one of the and I know we're sort of relatively short of time now, but this is my penultimate question Scaling advisory is I get pushback all the time from the leaders. So I might have a leader in a firm who's and I was talking to two literally in the last two days who are actually you know, they've cracked this have more conversations with more business owners about more personal stuff more often and all of a sudden they see the transformation in the relationship, transformation in their willingness to buy extra services and want to talk about the stuff that really matters to them. But they can't get the team to do it. We can't scale and leverage this, but they can't get the team to do it. We can't scale and leverage this. We can't. You know, um, no matter what the sops are, no matter what uh, we've tried, we're just not. We've failed miserably in getting others to do this. What's the solution there, john, do you think?

John Thompson: 58:51

well, I think, um, it'd be interesting to know what their sops are. I think, a little bit like anything, you've got to be realistic on your timescales. This is not going to be switching a light on and off. You're going to have to develop this over, I'd say. I'd think it's a three-year plan, and three years in the modern business world is deemed to be a be huge, long period of time, whereas it's not really. No, um, and the other thing you've got to do, you've got to put your measurement. You've got to align your management system measurement system, sorry with what you're trying to do. And you've also and I'll use the word brave again you've got to align your reward systems with what you're trying to do. Because, if you really believe, you've got to align your reward systems with what you're trying to do, because if you really believe this, you've got to actually make it happen. And there's other things which need to be done as well is, and that is, you can't. You've got to be brave enough. Again, I'm using the word brave. You cannot see this as being something that sits alongside what you've got to be brave enough. Again, I'm using the word brave. You cannot see this as being something that sits alongside what you've got. It's got to be integrated, it's got to be part of what we do and the phrase that, I think, is the challenge to our profession, which is interesting because I think most clients would absolutely agree with this Put yourself in your client's shoes and everything's advisory.

John Thompson: 1:00:25

Because if you go back to that little model I explained of the primary, the secondary and the tertiary, where do you put audit? Audit's a secondary service. Accounts prep is a secondary service. Tax return preps our secondary services, and it's all driven by the primary conversations. Because the example I would give is I could come along to an accountant who doesn't know me from anywhere and and they're going to have a conversation with me and they're going to ask me stuff like so what are you trying to do? Where did you come from, etc. Etc. Etc.

John Thompson: 1:00:57

And at some point, particularly if I'm a startup that you know existing structures don't exist, they're going to say well, it seems to me, john, that the best thing for you to be to have a limited company. Don't worry, to begin with you won't need an audit, it'll be as simple, what we call a cast job, but you'll also need this doing and that doing and this doing, and I'm going yeah, yeah, yeah. And if I'm not an accountant, you're advising me. This is an advisory service. We're talking about my future, we're talking about what's important to me and you're helping me clarify my thinking. You're helping me put together what you might call a bit of a plan. Look, you know, I want to achieve these things and this is how we're going to do it and this is the support you're going to give me. So one day, if I had a magic wand, paul, I'd say look, this compliance versus advisory thing is a complete red herring. We're just looking after our clients. We're just helping our clients build the wealth and the lives they want.

John Thompson: 1:02:00

And I accept, in PLC world it's different, but there's still elements of PLC world which this is applicable to, because the chief exec has got his personal agenda, whether we like it or not. The FD's got his personal agenda, whether we like it or not, and yeah, he's got certain he's got his personal agenda, whether we like it or not. And yeah, he's got certain he's got more regulations to deal with, but he's still going to make sure he hits his bonus, he's still going to make sure he gets his share options, etc. Etc. And that's still going to enable him to buy a nice place in portugal, to go on a nice holiday, to wherever, to put the ridiculous, huge, monstrous kitchen in that his wife wants. So it's always the personal side.

John Thompson: 1:02:47

But the big stumbling block is we are obsessed with compliance. I hate the word compliance, I hate it, terrible word. And they use it in other other professions as well, and they, etc. And when you're working in a manufacturing business on the shop floor and there's certain regulations you've got to follow, etc. You do not say I'm compliant, it's just not there.

John Thompson: 1:03:15

So we've got to put ourselves in our client's shoes and we've got to say look, you know what's going on in these guys' minds. They're not differentiating between the preparation of a tax return and a piece of tax advice that saves them 20 grand. They're just saying you're my tax advisor, aren't you? Isn't that what you do, isn't it? Yeah, love that. So our, our profession is. In many other industries they are much more custom I mean, our profession would hate this but they are much more customer focused than we are. We we are some of us are too obsessed with. It's all about the compliance, it's all about the regulation and we've got to cross this T and dot this. I Well, hang on, yes, but the client doesn't care about that. The client wants to know that they are doing better by working with you.

Paul Shrimpling: 1:04:15

And if they're not and I would argue John and some people might be listening to this going well, yeah, we get that about compliance. I would then say, well, if you're not compliance obsessed, you probably uh, get the job finished obsessed. Get the tax return done, get the serve, get the accounts job done, get the vat out, get the you, you service line. You're still in your secondary tier that you referenced. And if your obsession is there, you're in volume land. You're not in. Get close to your client land, which is almost certainly the route you want to reduce in the volume of work and the stress levels and up the level of interest, enjoyment, pride and value and secure the future of interest, enjoyment, pride and value and secure the future of your firm because you're closer to the personal lives, the personal wealth.

John Thompson: 1:05:03

There's a really interesting task force I'm sure you've come across before where you could speak to a managing partner and you could say pick a client, any client and they choose a client. They say tell me about them. And too many accountants will say, oh well, they're a december year end and you think I don't care what the year end is, we can move the year end, tell me about them. And if they turn around and some of them do to be fair, and say, well, actually they're a um, they're a business that works in this sector and it's owned by two brothers and a cousin and and I'm thinking hallelujah, they're talking about the client, not about whether a december year end, because that's about the practice. Well, it's a december year end, so we've got to do the stock taking early december or end of november and we've got to do this and that and that's all about the accountant, it's not about the client yeah, that's back to your point that not not as client-centric as they could should be.

John Thompson: 1:06:02

And and by client, based on this conversation, john, you're suggesting it's the human being leading and managing owning that SME it's the people, because the, because the businesses could come and go, but those, hopefully, those people would be around for 70, 80, 90 years.

Paul Shrimpling: 1:06:19

Yeah, in one generation or another. So, of everything we've covered, john, last question of everything we've covered, we've got managers and leaders of accounting firms listening into this. If there was one thing they could should do more of better of one thing based on our conversation today, what would you anchor them to? What would you go? Look, if you're going to make something of this podcast, do something with it, take decisions and action off the back of it. What one thing would you have them do?

John Thompson: 1:06:46

Well, I'd suggest two things. One thing is, put yourself in your client's shoes and everything's advisory and start to switch the culture of your practice to be that way and I appreciate that might be a bit daunting for a lot of people, but the number one simple thing they could do is think about your team, and obviously you might not want to ask trainees to do this, but there's a certain level where you can ask them to do this and pick a number. I want you to ring three clients a week, one client a day. Just ask them how they are and record the responses, because it is likely we will find out things we never knew which will either protect the client relationship or enable us to actually provide them with services they've never had before.

Paul Shrimpling: 1:07:54

And, just to mirror something you said right at the beginning probably reduce the risk profile of your firm because you're closer to your clients and therefore, yeah, absolutely All sorts of upsides benefits come from that. John, I can't thank you enough for taking time out just before you disappear on holiday. Hopefully you enjoy this as much as I have Really appreciate you being so open, candid and up for sharing key insights in that how do we build a more human practice? Thank you very much.

John Thompson: 1:08:28

Thanks, Paul.

Paul Shrimpling: 1:08:35

In this conversation with John Thompson, we've talked about standard operating procedures. We've talked about how you change the culture of your firm so that you're building new service lines stronger, better, more valuable service lines that deliver greater fees and greater profits to fees and greater profits. We're talking about changing your view of yourself and your firm so that you naturally see yourselves as an advisory firm, a firm that delivers significant value to your existing clients, so that they want to stay with you and want to recommend you and want to buy more services. Essentially, what I'm describing here is the Accountants Growth Academy a series of workshop sessions and follow up, support and accountability that helps you influence change, take different decisions, follow through on actions that delivers the results you want for your firm. If you want to find out more about the Growth Academy, go to the show notes and check out the link that you'll find there.

Paul Shrimpling: 1:09:37

More about the Growth Academy go to the show notes and check out the link that you'll find there. You'll find more valuable discussions with the leaders of ambitious accounting firms. At humanizethenumbersonline, you can also sign up to be notified each time a new podcast is made available. You're about to hear a short excerpt from a podcast discussion with russell watkins about lean process kaizen how to improve the results of your firm. If you like what you hear and you want to get to the full podcast, go to your favorite podcast platform or go to humanize the numbers dot online. There's a fellow called fujioio Cho.

Speaker 3: 1:10:17

He was summarizing how he wanted people to behave in their business and he said go see, ask. Why show respect? So go see means don't assume what you're told. Don't just look at your numbers. Go and look at what's actually happening and go and talk to the people who are doing the work, and that can be an office or a shop floor, it could be anywhere. Let's go see, ask.

Speaker 3: 1:10:39

Why is not ask who made this error? It is, why do we think this happened in the first place? Or why is this such a difficult thing to do? And that takes you towards the problem solving five.

Speaker 3: 1:10:51

Why's get into the root cause and then show respect is be clear that in a manufacturing plant, the people who truly add value are those who are putting stuff together. The rest of us are just here to support that, and so, for example, it becomes really interesting when you talk about an accountancy or a firm of lawyers, because nothing is made except the definition of value is very clear for me. So in a manufacturing plant, the definition of value is something that transforms the product towards what the customer wants physical transformation. In an accountancy firm or this engineering services firm, I define it as you are anytime you pass on usable information. Usable information for the next step in our process that delivers something for the customer, because accountants and all other financial services, for example, they are full of unclear processes with necessary, unnecessary steps and multiple rework loops the kind of things I was talking about earlier.