This is podcast five of five of the ACCA strategy series.
What do you do to make sure you build a successful strategy for your accountancy firm?
Well, you've got to both recognise, acknowledge and respond to the inevitable trends that are impacting on your firm, on the profession and perhaps also on your customers too.
It's not just about responding to the changes... it's also about building strategy on the things that are stable in time.
In this podcast, you'll hear from Emily Inman and Stephen Pell, two owners of two different firms in two different niche markets talking about their insights and knowledge about the three things stable in time.
You'll hear them discuss the inevitable trends facing their niche, as well as the inevitable trends that are facing the accountancy profession.
I hope you enjoy the podcast.
"This foundational strategic principle is something that doesn't shift, it is solid, no matter what happens in the accounting industry or the niche that you're operating in.
"It creates a stability - like having specific pillars that hold up what you're doing.
"I think that's an outstanding way to sort of think about it. "
Connect with Stephen
Connect with Emily
Connect with Paul
Paul Shrimpling: [00:00:00] This is podcast five of five of the ACCA Strategy Series. Welcome to the Humanise 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.
Stephen Pell: [00:00:25] This foundational strategic principle that, you know, something that doesn't shift. It’s something that is solid, no matter what happens in the industry or what happens in the accounting industry and the niche that you're operating in, and having something – it’s like having three pillars, or four pillars, that hold up what you're doing. I think that's an outstanding way to think about it.
Paul Shrimpling: [00:00:50] What do you do to make sure you build a successful strategy for your accountancy firm? Well, you've got to both recognize, acknowledge and respond to the inevitable trends that are impacting on your firm, on the profession and perhaps even on your customers too. But it's not just about responding to the changes, it’s also about building strategy on the things that are stable in time. On this podcast, you'll hear from Emily Inman and Stephen Pell, two owners of two different firms in two different niche markets, talking about their insights, their knowledge about the three things stable in time and the inevitable trends facing their niche, as well as the inevitable trends that are facing the accountancy profession.
Let's go to the interview now.
Emily Inman: [00:01:44] So, I'm Emily Inman. My firm is called Zynct. We're quite new. We started April 2019. And we're still quite small. There's four of us. And we're growing quite fast, which has been good. And we focus on construction, predominantly firms from 1 million to 10 million turnover.
Paul Shrimpling: [00:02:08] Right. So, what was it that prompted you to focus in on construction, Emily? Was that from the get-go or has that happened naturally? Or was it, you know, did you set out to be very much in the construction industry?
Emily Inman: [00:02:19] So it came about through a marketing niche, as advised by a famous accounting marketing advisor.
But it's something that had been in the back of my mind anyway, because when I used to manage a previous practice, I just felt that we were very busy keeping on top of everything. And it was very difficult to do, so it was something that I had already considered. And it just felt the natural thing to do.
And also, in my local area, half the businesses are construction businesses.
Paul Shrimpling: [00:02:55] So it was a natural thing to do, given where you're located. Where are you, Emily? Where, exactly?
Emily Inman: [00:03:03] So, we're on the border of east London and Essex.
Yeah, so it just seemed the natural thing to do. Also, I felt that they have a lot of compliance, so they have CIS and all sorts of things.
And now there's that reverse charge. And quite often for accountants, they weren't their preferred choice of client. I heard that, so, you know, my partner that I used to work for, he didn't want to take them on at all. So I just felt, they've kind of had a lot of requirements and not a lot of support.
Paul Shrimpling: [00:03:37] Right. And even if they were supported, maybe reluctantly, which is if you're actively marketing into that sector, would give you a big advantage, wouldn't it? So how many construction clients have you now got then? Two years in, I guess.
Emily Inman: [00:03:50] Yeah. So we've got about a hundred, various sizes. So some of them are quite big jobs that we have a full-time person on, and others you know, a bit smaller and growing.
Paul Shrimpling: [00:04:05] Brilliant. So started 2019, four people, a hundred clients specific to the construction sector. Fantastic. Stephen, do you want to give us a little bit of background on your firm, please?
Stephen Pell: [00:04:15] Yeah. So I'm a co-founder in a business called Iconac. Its previous incarnation was Pell Artists, which is the firm that I set up in summer 2015, and started it with zero clients and a big idea and a big dream. And I decided right from the get-go to specialize in working with music artists. I had experienced working in the music industry and I'd been in bands before, and it kind of felt like I knew what I was talking about when it came to connecting with people in the industry.
And fast forward five years, we grew to a team of about six people. We were headquartered in London. And at the start of this year, we merged with a firm based out in New York, a bit of a similar size. So Iconac is now, you know, we're very US/UK focused in, you know, as part of our strategic development, that global positioning was really important for us.
But that's basically, we're now a team of, what are we, 12 people. Together, working remotely. And I guess we, you know, we kind of say that we have a presence in LA, New York and London. And yet, our clients, we provide very specific accounting solutions to people in the music industry, the entertainment industry, a bit more widely now, so, in film and TV. And it's mainly the creative personalities that we love to work with. And I suppose we kind of see ourselves as a niche within a niche when it comes to it, because we, you know, the entertainment industry is huge and we only occupy a very tiny part of that, representing the people and the personalities that drive the creativity within that.
And we kind of feel that our knowledge runs very deep working with them and we speak the same language. But what's, I suppose, a little bit different and what I love about what we do, is our service is business management driven, and that's a very US-centric model, which is, basically, we take care of things for you, whatever they look like from a financial perspective. And it's very different to how I was taught to be an accountant and how to deal with things from a trained and methodical perspective – it’s a little more rustic. And it basically means that we have to mandate a stack of services in what we do. So we have to mandate things like bookkeeping and we have to mandate things like …
Paul Shrimpling: [00:06:56] What do you mean when you say you have to mandate? What exactly do you mean?
Stephen Pell: [00:06:59] They have to have it, so we can't deliver our service...
Paul Shrimpling: So you insist they have it?
Stephen Pell: [00:07:06] And it means that basically they, you know, we can't deliver the outcome that they need unless we deliver a certain set of services to them. But obviously we can't explain it in that way. They have very specific needs, our clients. They struggle to understand finances. They need someone to coach and mentor them a bit more than perhaps the, you know, the usual business owners that I trained working with.
They're creative. They're very passionate. They're quite disorganized. They like to travel. They're spontaneous. They're aloof. They're laid back.
Paul Shrimpling: The polar opposite to being an accountant then.
Stephen Pell: [00:07:45] Yes. And we’ve had to create something that caters to that. And actually, all the stuff that we want to do as accountants, like KPI reporting and all the kind of cool stuff, it doesn't mean anything to them and it's just, you know, we have to go back to basics and deliver well on that. And that's kind of the foundation to what we do.
Paul Shrimpling: [00:08:02] Which is for me, Stephen… you know, this podcast series, Humanize The Numbers is, you know, there's probably no one working harder at humanizing the numbers than accountants like you, who are serving that creative edge of the industries.
Would you take issue with that, Emily? Do you think there are similar things at play when working with construction clients, i.e., in terms of that they don't know what they're doing as far as numbers are concerned, but they do around the building site, or am I jumping to…
Emily Inman: [00:08:32] It's usually the opposite.
They're quite astute on these things and they have to control their projects very tightly. Every time I look at it, I'm always amazed at how much goes into one project – the amount of different trades, the amount of different materials, all these components and all different professionals.
And they have to manage and juggle lots of balls at the same time. And you know, where they have long projects that they work on, their budgets are set, their price is set and they have to really control their costs, otherwise it directly impacts their profit margin. So actually, mine are quite on the ball, and typically quite organized because they are juggling a lot of different elements.
Paul Shrimpling: [00:09:21] So they respond quite well to the clarity around KPIs, to take, you know, the, the polar opposite view to Stephen there.
Emily Inman: [00:09:29] Yeah, so I guess their KPIs are pretty much set in advance once they've won their contract because it's, you know, predetermined, the profit margin that they're going to recover from that project. So it's making sure, really, from that point on, it's cost control. And, as well, they have problems with getting payments in, stage payments and things like that.
And they have to apply, especially with subcontractors, they have to apply, and the quantity surveyors might not sign off that amount of work. So it's kind of keeping track, keeping track of a lot of things.
Paul Shrimpling: [00:10:04] So I think if we were to set out to have almost two polar opposite perspectives, the music industry and the construction industry would have probably been as good as we could get. So that makes this conversation, this podcast, really quite valuable, hopefully. So we're here to talk strategy and being successful at strategically driving our firms, your firm, Stephen, Emily, yours, and me, mine. And whoever's listening to this, they're going to be wanting to go, what is this strategy thing about? Now we've already covered in this series the big picture stuff around personal goals, purpose, vision, and the longer term perspective, and the more human elements around behavioural values and standards and connecting those values and purpose with all the stakeholders of the business.
You know, the team, the clients, maybe the community, and, obviously, the business owners too. We are now going to have this conversation around…if we, if you, if we all ignore the trends that are facing our industry… now, your industry, Steve and Emily, is accountancy. But I want to just park that for a minute and just see if I can get you to climb into the shoes of your clients and walk in their shoes around the… what are the key trends that are impacting on the construction industry, Emily? And the same, Stephen, what are the key trends that are impacting on the music industry? So Emily, we'll get you to kick off first and, you know, we may stutter and stall around this conversation, but it'll open up as we get into it.
What are your first thoughts on that, Emily? What are the key trends that the construction industry are having to deal with now?
Emily Inman: [00:11:55] So, in terms of their financial impact, I would say there's increased regulation on the main contractors to become responsible for the behaviour of their subcontractors.
So, this is part of why they've brought in the first charge, because they're pushing their compliance onto the main contractors and the CIS and that kind of thing. So that's the kind of regulatory, financial trend we're seeing. Profit margins on the whole in the industry are squeezing, and that's due to increased costs of labour and increased cost of materials, especially over the last year or two where we've had Brexit and the pandemic. During the pandemic, we saw an increased cost of timber and other materials, so that squeezed the profits. Brexit, and the pandemic as well, has also decreased labour supply, so that pushes the price of labour up as well.
So those things have been definitely a trend over the last year, 18 months.
Paul Shrimpling: [00:13:05] And if I asked you to take a longer-term perspective, so if we were to walk forward, say five years, what things do you think are going to come to be brought to bear on the construction industry with that longer-term view?
What are your thoughts on that?
Emily Inman: [00:13:20] Well, I think there's a big push for environmentally friendly solutions. And we're seeing that with some of our clients now where they're investing money to improve their construction processes so they're more environmentally friendly. And so that would be a big trend. And obviously there's incentives there for them to do that.
Paul Shrimpling: [00:13:43] Is there? Okay. What, are these government incentives?
Emily Inman: [00:13:46] Yeah, so there's all the R&D tax incentives. There's also lower VAT rates and things like that on the energy efficiency materials. So I think we'll see a lot more of that.
I do get a lot more inquiries from people who are taking on eco builds and things like that.
Paul Shrimpling: [00:14:09] Right. So there's a big trend, a macro trend, if you will, on environment. What else?
Emily Inman: [00:14:18] So, yeah, so again, an increased trend on compliance of main contractors.
There's been a couple of scary VAT cases with main contractors being held responsible for the VAT behaviour of their subcontractors and losing out significant amounts of money because they can't recover the input VAT and things like that. So we're seeing a lot more increased compliance and that being pushed on, which I think is probably quite a good thing, and it will be once they've got kind of used to it. So yeah, I think that trend will continue to increase.
Paul Shrimpling: [00:15:02] Right. And presumably then that's changing the cultural relationship between subcontractors and, and the main contractor, Emily. What's happening in terms of the way people are working together?
Is there any sense that, you know, the relationship management of things is trending in a particular way? And I know that's a bit of a vague question, I'm just trying, I'm hunting for... because I don't know the sector at all. I was just wondering if there's anything afoot there.
Emily Inman: [00:15:27] I wouldn't have said so, necessarily, because they are quite astute and they do, you know, the main contractor will use quantity surveyors to check the value of the work done to date and things like that.
Yeah, I think they’re quite on that already. I don't see that will change anymore because they are already very astute in those areas. I think they would tend to work quite closely together. And there doesn't seem to be any problems there. I can't really envision any more trends in that kind of respect.
Paul Shrimpling: [00:15:59] Presumably that labour supply piece is going to continue to be an issue for the, not just the short term, the long-term because of Brexit.
And therefore they're going to have to factor that into what's involved in building costs going forward. So there's going to be a cost up pressure, is there not, in the in the sector, or have I misunderstood that.
Emily Inman: [00:16:19] No, that's what I would expect. And I think we've seen a price increase there already and, you know, it probably would continue to increase.
Paul Shrimpling: [00:16:31] But you mentioned earlier, there's actual price pressure from the customer down. So we've got cost pressure up and price pressure from the top. Where's the give on this, what are you seeing as that's going to enable your clients to continue to be successful in what they're doing?
Something's got to give there, some way, somehow isn't there?
Emily Inman: [00:16:55] Yeah, so I guess it's, you know, it's the tendering process, isn't it, that they go through and in a way that kind of drives the prices down. There's also big issues with retentions and a main contract is holding onto retentions. And I know the government are looking to try and change that.
So they're aiming to remove all retentions by 2025. So I think that will be really positive. Because, you're right, there is a pinch point and that often falls onto the subcontractor, and they are a lot of risk. And especially if you know that they're paying out a lot of labour and material costs upfront, before they get the stage payments coming through, and they can't be certain on the amounts and when they're going to come in. So it does put a lot of risk on their shoulders, and with the retentions as well…,
Paul Shrimpling: [00:17:53] Sorry, Emily, would you just explain, what do you mean by retentions?
Emily Inman: [00:17:57] So, main contractors, when they work with a specialist subcontractor will often withhold a percentage. It's normally agreed in the contract at the beginning, but it's usually around 5%. And they will hold that of every application for payment. So usually the process is they'll apply for their payments on a regular basis, monthly or quarterly or whatever the agreement is.
And the main contractors will withhold that 5% retention, plus they will have their quantity surveyor assess the value of the work done to date. So then there might be an amount withheld for that as well, if they don't agree the value of work done to date. And then retentions are held across the length of a project, which could be years.
And then they have to, you know, kind of apply to get that retention back. And those retention payments are quite difficult because, where the profit margins are tight anyway, and they've got cashflow from spending it all up front, it can get, it can become tight and it does cause firms to go under.
So that's why the government are getting involved to try and remove the retention piece.
Paul Shrimpling: [00:19:07] Right. So it's interesting to see, we're looking at that sector, your sector, your niche strategically, we're having a trends conversation, but what it's doing is signposting the core challenges in the sector. And if they, you know, if they're getting progressively worse and your clients don't tackle them, then essentially their world's going to get tougher and tougher if just from a profit margin perspective.
And what you've done brilliantly there, Emily, is just signpost the impact of, right, let's look at the key trends and the impact it's going to have on that business, that construction business, which will by definition point to both internal and external challenges, which is another part of the strategic mix.
Because if you build strategy and it doesn't deal with the difficulties that you're going to face, then it's just ivory tower strategy, which isn't worth anything to anybody, is it? Thank you very much, Emily, that was brilliant. So, Stephen, what's…let's have a look at the key trends facing the music industry, which has been in profound flux for a long time.
I know this because one of my oldest friends is the leader of a record company and I've got two sons who are actually performers. So this one's close to my heart. So what trends are you seeing in the sector that you served for the last…?
Stephen Pell: [00:20:21] Well, I mean, certainly, when I first started, when I set up my firm, there was a real confidence in a recovery happening, with the streaming platforms launching. And there was a real feeling that things are moving in the right direction and they did. And actually, in line with that, the live music industry just grew and grew and grew over the past five years and would have continued to do so if it hadn't been for obviously…
Paul Shrimpling: A little virus.
Stephen Pell: Yeah. And so obviously I, you know, I've got no doubt that that will come back. And actually what I'm seeing now is that all of the, not all of them, but a lot of the contracts that were in place a year ago are actually now still being honoured, and the artists are getting those back.
And actually they're trying to get more shows in to make up for lost time. So there is a bit of a bounce back, but what happening or what that's creating is there's more artists now than there was for the amount of shows that are available, and so that's create creating downward pressure on the prices, in their show fees and the contracts.
Which is obviously having a knock-on effect to the income, the profits, they thought they were going to be earning. And so the, you know, there's a bit more power in the hands of the agents rather than the artists, when it comes to negotiation, the deals around the live performance fees, for example.
But I've got no doubt that over the next few years, that will even itself, settle itself down, even itself out, and will be back and the festivals will be back and the music industry will be booming again. And that's obviously critical to what we do as well. We support the live music industry and the business management around that is very much wrapped into our service.
Another key trend that I've noticed over the past five years since the launch of the streaming services, it's meant that artists, there's more artists now that can self release because the barriers to entry to the market are reduced. It doesn't cost much to record and release.
There’s all these aggregators and platforms out there that you just pay a flat fee and you can release your music. And suddenly you're getting these artists that are becoming overnight superstars from what they're doing on YouTube or TikTok. And they're not signed to a record label, they've got nothing behind them.
They're just, you know, making music in their bedroom. And they’ve suddenly got careers and a million pounds in their bank account and this is happening to more and more artists,
Paul Shrimpling: [00:22:59] Isn't that a rarity? Is that the exception that proves the rule that most aren't?
Stephen Pell: [00:23:03] Yes. But then if you look at the trend, there's more artists making a living, I suppose, now from their music. And they have the ability to, because they don't have the cost of the overheads. They're not signed into record deals, which give them an advance that then take away their future earning power.
And so they can last longer, they can then reinvest in their music and they've got careers so that they can then build on it. And then they've got more bargaining power when it comes to signing a record deal. So that's only something that's really been made possible in the last five years or so because of the fact that these streaming services have popped up and put money back into their pockets.
Paul Shrimpling: [00:23:42] You touched on… there's a power shift from artists to agent. There’s, you know, if I understand the sector, there's been a…you've got the massive, three massive record labels, you know, Sony, UMG, I don't know what the other one is. Are we going from this big macro industry to one which has got lots and lots and lots of more different independent… You know, there's always been independent labels...Is that a trend that's building or am I just a bit of an old fuddy-duddy talking about an old industry, as opposed to what's going on in TikTok in the social media channels?
Stephen Pell: [00:24:20] No, you're quite right. There are a lot more, I mean, from my perspective, there are a lot of independent record labels that are starting up because it's so easy to do so now. It's almost, you know, you just plug into something and all that you have to do is the marketing.
And if you've got the network and the assets, then you're a record label. That's it. So it's very easy to take it to market now. But actually what I'm seeing is that these artists are the record labels themselves. So they're not releasing other people. They are the record label. And that's what we're kind of seeing, this ecosystem of the cottage industry of being a creator and creating these digital assets, which can scale very quickly and can transcend international boundaries and you can find yourself six months later ending up on a worldwide tour.
So it happens so, so quickly. And that's perhaps a challenge that I think I… you know, I wasn't around in the sixties and seventies when the industry was old school, but you know, careers, from what I've seen…In fact, I was talking to my business partner the other day about some of the fees. I think one client, we charged $300 a year and now I think it's, I think we’re charging like $10,000 a month, for the same client, and it's just because of the trajectory of that particular client, and that's within a couple of years.
So that's made possible by these changes. And I think that's only going to, with technology and the speed of change and being able to get data into people's hands and the speed with which that happens, you know, the speed at which you can get a song played from Spotify, and from that song, then being paid and put into the client's bank account. You know, the major record labels and all these technology companies are doing their best to out-compete each other to get that done as quick as possible. And that's the change that's driving the music industry – who can beat, who can pay the quickest and who can be the most artist friendly.
And then that creates challenges for us as accountants, of course, because we need to be able to map that, and we need to be able to aggregate that and we need to report that back and verify it, make sure it's correct. And the other thing to add onto that, with the digital changes in the music industry, particularly to artists, is cryptocurrency and NFTs and how it's such a huge part that it is now playing. And this is only something that's really happened in the last few months. But our clients are now…there's two separate things here, but they would have been awarded cryptocurrency for going onto a platform, like a version of Spotify in the early days.
And now it's worth huge amounts of money that they got free, you know. And now they're dealing with these kinds of currencies and they're trading assets through these kinds of things as well. So this is a huge shift.
Paul Shrimpling: [00:27:15]. It’s a good word shift, because there’s the trend, but you say, shift, and it's like, actually we're in a completely different world once it has shifted.
Stephen Pell: [00:27:24] Because I think with the trend, you can map it and you can see it. Yeah. But this happened, I mean, you know, pretty much over the last few weeks or months. And it's kind of just hit, it's just hit us in the face and you know, we need to work out how we deal with it.
Paul Shrimpling: [00:27:37] You need to be right on top of that.
Emily, have you seen anything in and around the cryptocurrencies in the construction market or is that just a no show in your sector?
Emily Inman: Not for us yet, no.
Paul Shrimpling: All right. So there's something that's showing up in the general media, but then it's having an impact on the music industry, which is, to use your language, Stephen, is more of a cottage industry, but all of a sudden cryptocurrencies are showing up in that world as opposed to the construction industry where there's big money projects and it's not showing it's facia in that sector. That's interesting. Okay. So, we've had two conversations there just in 10 minutes or so, 15 minutes each, around the key trends in those sectors, which, if people in those respective sectors, the construction sector and the music sector, ignore them, then common sense says that they're going to be on a rocky road to ruin, aren't they? It’s just, you know, black and white as that. So, as to accountancy firms, what do you think the key trends are facing the accountancy profession, that we've got to be aware of and be reflected in our strategy for our firm?
This is known as a pregnant pause and tumbleweed.
We can analyse another industry, but now let's look at ours or yours.
Emily Inman: [00:29:01] I think it's quite an exciting time in our industry at the moment. I think the technology, now it's standard. It enables us to work with clients, you know, wherever they are.
So that means that we can work with clients who are more matched to us and our business, which helps us to work with construction firms all over the UK, not just in the local area, like when we started out. So that's, I think, is going to be a really interesting trend because I think it will allow accountants to work really closely with their clients.
And the pandemic as well has helped us. We've always been a virtual practice. We've never had a central office. But before the pandemic, you know, zoom was… we had to kind of tell people how to use it and hope that they would and encourage them. But now it's standard. So it means that we can…now our clients say to us, let’s just jump on a quick zoom.
And it means that we can really get involved with the problems that they're having, that they might have an emergency, quite often cashflow related, and we can just jump in and work with them. So it means that, I feel that we can get a lot closer to their business and really support them more, give them what they need in that respect.
So I think it'll be really interesting to see what people do with that, what other accountants do,
Paul Shrimpling: [00:30:26] Yeah, it's absolutely right, isn't it, if you're in a niche in something like construction and geography would have been, if we walk back five years, would have been a big issue. And that's got less and less over the last five years, but in the last 12 months, it's, not vanished because it never does completely vanish, but it's mostly vanished.
So you're able to deal with a construction firm in the UK and Scotland, just as well as one in Wales, just as well as one in east London. So, yeah, that's a shift rather as opposed to a trend, but it's a shift that firms will either respond to, or they won't respond to.
And it's interesting, I'm having lots of conversations with lots of firms about what are you doing to make sure that you've got eyeball to eyeball contact, not mobile to mobile, eyeball to eyeball contact, because, like you say, you get much closer to your clients that way. And if they've got a thorny problem, they want to see you.
They don't want to just talk to you. And therefore you diminish the miles apart because you are eyeball to eyeball. So technology, yes, connected with the pandemic equals zoom as a standard and most people can use it. Even my 82 year old mother can use it. If she watches this, she'll kill me for saying that.
My dad's just about mastered it, but he's still struggling. So there's that… are we doing local, are we doing national, are we doing international…maybe there's ways and means that's trending so we can be relevant to any construction business, anywhere in the world, maybe even, Emily. Stephen, what are your thoughts?
What do you think is trending in our, your profession?
Stephen Pell: [00:32:04] I would echo what Emily said and say technology is driving our habits in how we’re working. It's the fact that, you know, the transactions pop up that need reconciling every day makes you do them every day or makes you want to do them every day and keep things up to date.
And it's his driving habits that perhaps we didn't have a few years ago when you didn't have the technology driving this and making things a lot easier and it's changing the way that we do things. It's changing our rhythms. It’s changing how we map out our processes, how we think about which order certain processes go. It probably changes what we call our services as well.
Like, what is bookkeeping now? Actually, it's a combination of many different processes into one. It's not just, you know…. there's the reconciling aspect of it. And then there's the transaction matching and the month end close and, you know, there's different parts to it and we kind of think about it differently. And so there's a technology that's driving that and I suppose as well that, I guess the other trends, which is probably happening in our firm is that now we're pretty much settled on the fact that we are a remote firm. Or a hundred percent cloud remote.
I mean, it's not something that's happened overnight. It was intentional for us to be that but it has kind of been forced through the pandemic. And I think that's going to be the same as a general trend perhaps for a lot of firms. But you know, now they've experienced the working from home and they've had to make sure that it works and that, you know, actually what we found is that we're more productive.
Well, we're doing things better. Our communication is a lot better. We make more of an effort to make sure that we are speaking with each other and doing things in the way that we need to do. Obviously, you know, we miss out on certain things by doing that, but yeah, it’s certainly a trend that we've risen to the challenge to try and meet.
I guess the other thing I would say trend wise is that things seem to be getting, it's probably something that every generation will say, more and more complicated. You know, the legislation, there's always a layer of legislation that gets added on to something. We've had the Coronavirus, you know, there's going to be, that's a whole layer of things that has been added onto something that wasn't there before and that's got huge consequences for all future legislation that's going to be rolled out as a result. And you know, same with the complexity thread – technology brings that level of complexity, and our clients, they don't really care about the technology.
They care about the outcome. We care about the technology, because that makes our job easier. And it's a trend for us, but I think we've got to not lose sight of what's important. And we can get easily distracted and I'm very guilty of that. You know, I think we're going back strategically and pulling apart everything that we thought works and actually putting it back in, streamlining it and making things more simple and just delivering an outcome rather than something that looks like what we should be doing.
Paul Shrimpling: [00:35:35] That's interesting. Cause there is a tendency, and if you look at virtually every website of every accountancy firm, with a few exceptions, you'll see a list of services, you won't see a list of outputs. You'll see a list of services which is connected to the technology that you using, as opposed to actually, we're here to resolve certain issues, deliver certain deliverables, outputs and getting a focus on that. But I guess it's strategically, because this is a strategy conversation, you go, oh, right, what is it you use to drive a sense as to what you're here to do? Why are you here? Well, I'm here to deliver a certain set of outputs, but to whom? And, for you two, that's relatively easy because you've got a real crystal niche oriented view of your client base. If I asked you, well, who are you selling to?
You know, it doesn’t take you 30 seconds to give me a really crystal picture as to who you're serving. You look to a general practice and they've got much harder job to do on that. You know, what's interesting is right at the beginning of the pandemic, about five weeks, six weeks into the first lockdown, I spoke to someone I've worked with for a number of years, actually now a good friend, accountancy firm. Their niche was the hospitality sector.
Not a good niche from an accountant's perspective because it essentially shut down. And he was, he went pretty dark really quick and made loads of decisions because it was, you know, in inverted commas, a disaster. So there are downsides to the niche piece, depending on who knows what might happen out there, like the pandemic.
If you can actually say, like a pandemic, I don't know if that's actually makes any sense to anybody. But your output comment though, I think, and I guess the question I'm driving to, Stephen, is how do you determine what those outputs are, to make sure you’re on track?
Stephen Pell: [00:37:38] Yeah. So I suppose it's outputs and outcomes.
It's making sure that you know, we know very well what keeps our clients awake at night. We know exactly when, we know exactly how we need to communicate to them, to be able to give them that peace of mind and to give them that reassurance.
We know how often we should be contacting them so that they don't feel anxious. We know when to be proactive when to take a step back, when to step in. But it's also, how much handholding do they need? And, you know, the way that we deliver our service to, for it to be scalable, we obviously have to deliver outcomes. We basically have three options and they're basically three levels of outcome. Do you want us to take care of everything? This is the top price. Yeah, we can do it. We'll check in, you know, once a week or once a month. We've got your back, don’t worry about it. This is premium.
Then the second outcome is okay, well, I need to know a bit more about what's going on. I need to feel, you know, I'm going through a bit of a tough time, you know, I need this information this regularly. Can we check in this often? You know, I'm willing to do a little bit. For that, you know, I don't mind going in and, you know, not doing as often, for example, but I still don't need…
And then the next one is the base level, being the light one, being that, you know, we'll…unless we do your bookkeeping, so that drives your tax because we want to make sure that the taxes are covered, that you're never gonna miss a tax payment and everything's filed properly, that you've got enough money in your rainy day fund (is what we call it). Or, you know, now might as well be the pandemic fund…
Paul Shrimpling: I much prefer the rainy day fund.
Stephen Pell: Yeah, so do I. And also just making sure that we've sorted out the compensation strategy. Really, they're the three things that are most important to our clients. And it's, we deliver outcomes based on those and how much handholding they need.
Paul Shrimpling: [00:39:57] Okay. There's something I want to share, which is connected with the three things stable in time, which is the flip side to the inevitable trends, the things that are changing. There are some things that are really stable, but before we dive into that, Emily, I just want to talk about this outputs, this outcomes thing, you know, the outcomes focus.
What is it that signposts for you what outcomes you're looking to deliver for your niche construction sector clients?
Emily Inman: [00:40:22] So I guess we're looking to make their processes easier because they are really complicated. Their bookkeeping is really complicated because they have purchase orders and lots of components and lots of suppliers and lots of labour and payroll and subby runs and the CIS. It's all really complicated and a lot going on. So we were trying to automate as much of that can be automated, but also to service it at the same time so that it all goes smoothly and everything's done properly. Cause obviously if you just leave it to automation, that's great, but it's not all going to come out right at the other end.
So that's our focus. So that all goes through, for our bigger clients that goes through daily. So that the reporting and the numbers are available daily. So if hard decisions, quick decisions, need to be made, they can be made. And that also all feeds through into the cashflow. Cashflow in industry is tight.
So cashflow, I guess, is the main focus. So it's making sure everything is up-to-date and properly done so that the right decisions can be made. So that's probably about our key output. And then also…
Paul Shrimpling: [00:41:41] It sounds very different to Stephen’s, doesn’t it? Does sound very different, which you'd expect in two very polar opposite sectors. Go on, Emily, sorry I interrupted.
Emily Inman: [00:41:48] Yeah, I guess it's a bit more process driven because of the volumes involved and the amount of matching involved and things like that. But I was just going to say the other outcome is to be close with the business owners. Cause they don't often know what it is they need and might not even ask. So, as long as we're having those regular conversations about things, things come up and we've normally got a solution or can do a workaround for something. Because although they're all in the same industry, they're very different, very different requirements.
They might have different divisions doing different things and be set up in different ways. So it is quite unique to each of our clients, really.
Paul Shrimpling: [00:42:33] And so what I've just heard you both say, though, there, is what we need to do is get close and stay close depending on how close the client wants us to get.
And then if we connect that with the zoom thing, the eyeball to eyeball, but it means we can do it more regularly without having to spend too much time on the tube and trains and planes and cars. That's interesting. So let me share the flip side to the inevitable trends. So far, we've had this conversation about things are trending, from five years ago, from a year ago, the pandemic, Brexit and all the technology, political, economic, environmental trends impacting on our sectors in slightly different ways.
So strategy doesn't work unless it reflects and responds and embraces those trends. Naturally. But I want to signpost a conversation that a journalist had with Jeff Bezos. So Jeff Bezos, you know, founder and head of Amazon, and this journalist asked Jeff Bezos, so, go on, Jeff, what’s going to change over the next five, 10 years? And he responded with, well, it's interesting, everybody wants to know what's going to change over the next five, 10 years, but nobody wants to know what's going to be stable in time over the next five to 10 years. And at Amazon, we build our strategy on three things stable in time. Which I just thought, you know, proper put a journalist in his pocket.
And for Amazon, what’s stable in time is, and he didn't use these exact words, he said it in a slightly more cryptic way. But essentially he said, look, what’s stable in time for Amazon is our clients love us because we've got this vast collection of product, you know, it's huge, it’s cavernous. So that's number one. They love us because they know they can find anything. I've just been looking for an oil-fired radiator. Well, you know, I just go to Amazon, you know? Well, yeah, but it sells books and CDs, doesn’t it now? Well, it’s streaming services now. Sorry, Stephen, that was me stepping back in time.
So it's vast. Next is they know we'll deliver quickly. They love us because we'll deliver fast. We'll deliver tomorrow. If you're in certain cities, we'll deliver same day. And last but not least, they love us because they know we'll be price competitive. And Amazon are building all of their strategy pieces around…yes, they're reflecting and responding to inevitable trends, but they very much have got themselves anchored to building from the stable platform, which is three things stable in time, which I think, Stephen, in a roundabout way is what you were trying to describe in terms of what keeps clients awake.
Well, if you can deliver outcomes that are connected to that and give them peace of mind, then you're in the right territory and it's… my challenge to you would be, and I'm just going to give you a bit of space to think about it, what do you think in the music industry for you and your firm are the three things stable in time for the music clients? And then, you know, the same to you, Emily, to say yours is process-driven, it's about reducing stress around cash and stress around the complexity, making it easier for them, because you really are tapping into, ah, right, if we can work out what our three things stable in time are, your messaging, your marketing messaging strategically gets crystal clear, which taps into people that fit exactly what you're good at. I think it's a really interesting piece, don't you think, with that Jeff Bezos, three things stable in time?
Stephen let's come to you first. What do you think your three things stable in time are?
Stephen Pell: [00:46:24] So I've scribbled down a couple. I mean, I think the structure and organization will always need to be there for our clients, whatever happens in the industry.
There has to be a solid base. You know, it's almost like you've got this solid foundation and everything else grows and spirals around it. And I think that is why our clients come to us, because they want this foundation.
Paul Shrimpling: What do you mean by a solid foundation?
Stephen Pell: [00:46:52] So, I mean, so they need someone to have their back, someone to keep them financially organized. Someone to make sure that they're collecting all the money that they're owed, that they're paying their suppliers, that they're not getting, you know, that all of their contracts and deals, they've got a numbers person looking over them.
And that they feel secure. I don't think you can be creative without that security. And I think that's what they want when they come to us. They want to not have to think about it. And whatever is happening in the world that, I think that, I mean, that's probably part of, you know, of Maslow's hierarchy of human needs is that you, you need to have that, to be able to build the rest of your career.
So I think that, for us, would have to be foundational in what we offer.
Paul Shrimpling: [00:47:45] It’s interesting that you point to that emotional payoff. And I think that Jeff Bezos doesn't talk about it in the interview, but he actually is pointing to an emotional payoff, not just a tangible, functional, financial payoff. You know, I go to Amazon because I just know it'll be the right price, it'll get delivered and chances are it will be in stock. Very good. Emily, what are you thinking your three things stable in time would be for your specific niche?
Emily Inman: [00:48:14] So it is very similar to Stephen actually, and actually our strapline is building solid financial foundations for construction businesses.
That is our strap line. But I think that is the beauty of niche in a way, is the stability. Cause with the niche you've made a commitment to your industry, so they're getting the kind of stability from knowing that you're committed to the industry and they know before they talk to you that you're going to understand their issues and what they're facing and the industry. So kind of gives that kind of security. I think as well, and particularly as construction businesses start to grow, they get to a point where they're starting to feel like they're losing control of some of the financials, especially when they get to the point of recruiting a full-time bookkeeper, or a couple of people to do that kind of thing. Then they can kind of feel that they're losing control over the situation. And my niche are that kind of type of people that like to have that control and also they have to, because as I said before, the projects are very complex and full of different elements.
So as they grow, they can start to feel that they're losing that control, if they've got one person who’s sat there kind of holding all the financials, and they've got to ask for this report and ask for that report and then that person's busy, and that kind of thing. So. I guess that's what we help them to do is to open that up. So moving it so that the information is available and they're not relying on that one person who's hoarding it. It becomes a bit more transparent. And the third one is transparency. The directors, they want to, you know, they're always going to need to know what's going on with their financials and need good insights there.
I think those things are never going to change.
Paul Shrimpling: [00:50:07] So I've got that sense of control of which availability is a part of. That, you know, understanding and knowledge, you understand them cause you’re committed to them and the knowledge is there at their disposal whenever they want it.
And then that sense of security, certainty, stability. Which sound like three aces in the pack, don’t you think, in terms of… and it's, if you’re making the most of those messages around those three things stable in time, like Amazon does, maybe you'll experience the growth that they've experienced, who knows.
And Stephen, I find it fascinating that…. you know your sector really well, so you’re talking solid foundation and I go, what does that mean? And so it's actually work on getting the way you communicate the three things stable in time right. You know, that takes some….You sort of know what it is, but are you communicating it in the right way, using the right words in the right order to actually make sure you get to your… cause your clients, Stephen, are a particular personality with that creative bent and so on. Are we using accountancy language to talk to them or are we using creative language to talk to them?
Stephen Pell: [00:51:24] We're absolutely not using accounting language to talk to them. I think most of these conversations, you know, some of the most interesting ones I've had, I mean, I’m fortunate enough to get invited to go to shows and hang out backstage and do all the cool stuff that you would expect.
But some of the interesting conversations happen then. And some of the anxieties do come out. And I think that's the point where you nurture what you say, or you tailor what you say, depending on, you know, what it is, but it's all of those things. Those foundations seem to be inherent in pretty much every single conversation.
But you have to reword them slightly differently, depending on who you're talking to and the scenario and the situation, which is…and you’re right, there's something that can be done with the marketing message and that is the key to this. But the way that I found it and the success I've had is in those conversations and wrapping them around the conversation and actually connecting.
But you know, that's not to say that there's a strategy to be had with getting a more broader message out there to, you know, to scale something up. But I found the best success connecting.
Paul Shrimpling: [00:52:35] I'm guessing a lot of your new work comes through referrals and recommendations as opposed to any other form of model, really, because of the nature of the beast.
And I'm certain that will play a role in your business as well, Emily, but it's…what I find fascinating is you just finished with that, you know, it's about us connecting with our customers in the right way, which was very much, you know, Emily's point earlier about… Now everyone uses zoom, we can connect, we can get closer, easier, faster, and more often. And it's that the client knows we understand, we appreciate the stuff they have to shovel on a daily or weekly or monthly basis, you know, whether it be the, the cash pieces in your sector, Emily and the uncertainty, and that desire for a sense of security.
But actually what's interesting here is, Emily, you use the words security and stability and certainty just as Stephen did. And I've been arguing for 18 years that one of the fundamental payoffs of working with a good accountancy firm is that I, as a business owner, feel that sense of certainty and confidence in the future of me and my business.
And I think that is a cornerstone for potentially every accountancy firm, irrelevant and irrespective of niche, or if they're a broad, multi-sector, a general practice. Well I've thoroughly enjoyed this conversation. I've got one last question for both of you. Of everything we've covered, and you've listened to each other, if there was one thing that stands out of value for you and your firm, based on what we've covered on this call today, what would it be? What's stood out that you think you could, should be doing a little bit more with that? What's been of most value? Stephen?
Stephen Pell: [00:54:22] I would say this foundational strategic principle that, you know, something that doesn't shift.
It's something that is solid no matter what happens in the industry or what happens the accounting industry and the niche that you're operating in, and having something, you know, like having three pillars, four pillars that hold up what you're doing.
I think that's an outstanding way to think about it. And I think that's quite…
Paul Shrimpling: [00:54:54] Okay, can you see how micro 1% improvements of your messaging around those three things stable in time, you know, just having a recheck every quarter or more often, if you want, is a way of just, you know, layering and fine tuning that messaging and reasserting the fact that actually we have got the right three things stable in time. Cause who knows, with what the way things change that, you know, a pandemic can shift them maybe. Emily, what are your thoughts? What's been of most value to you and your firm from this conversation today?
Emily Inman: [00:55:21] There's lots of things, but I think it's always, I think we can get so busy and caught up in our own strategy and our client's strategy that we quite often, or I do anyway, forget to step back and look at the whole bigger strategy.
You know, of course, we all have over the pandemic. Because, you know, it changed everything overnight, didn't it? All the business plans were getting changed and…
Paul Shrimpling: Thrown out of the window.
Emily Inman: Yeah, absolutely. And new ones coming through and things like that. But I think it's always good to, you know, remember to think of all those things and think in a broader term of what can impact.
Cause you're right, there are trends impacting our own industry, our client's industry and they all merge and combine and produce something unique each time. So yes, it's good to sit and reflect on those things, I think.
Paul Shrimpling: [00:56:14] And that is the power of, in one sense, of strategy, is it is a reflection piece.
In a later one of this series, we're going to talk very deliberately about how do you get to a place where… you've worked out your strategy, you've got all the elements mapped out and then you go, right, but what do we do to turn that into something real for our firm and that'll be…right, what's our priority this quarter? And we'll do more work on that in another session with another accountant or two. But folks, really appreciate you taking time out and sharing openly and candidly insights into your industry sectors, your firms, and it's been really insightful. Thank you very, very much.
Stephen Pell/Emily Inman: Thank you.
Paul Shrimpling: You'll find more valuable discussions with the leaders of ambitious accounting firms at HumaniseTheNumbers.online. Go to the show notes for this podcast and click the link to get access to the full series on strategy for accountants. You can also sign up to be notified each time a new podcast is made available.
Key trends that impact the construction industry
Key trends facing the music industry
The value of eye to eye
Outputs vs services
3 things stable in time
Choosing how to communicate
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