Building Your Future Firm with Ryan Lazanis

Hello, and welcome to the Big Four Transparency podcast. I'm joined today by Ryan Lizanis, the founder of FutureFirm and the former founder of ZenAccounting, which has now exited at a multi seven-figure valuation. Thanks for joining the podcast, Ryan. Thank you very much, Dominic. Thanks for having me. Yeah, my pleasure. It's nice to have a fellow Canadian on here. It was very unusual for me. I think I've had maybe one other person from Canada, so it's good to get some representation on here as well. Always, always happy to connect with my fellow Canadians. Perfect. Almost could have done this in person. If I if I'd planned a little bit more ahead, I could have probably made the trip down to Montreal. I don't know if I've done it in person one before, but I'd be more than happy to welcome you. If there's ever a follow up, I might have to make the trip down. That's good. Awesome. Well, so to kick things off, I've been following FutureFirm for quite some time. I've just been kind of very curious about what that's about. But for the for the audience, why don't we just share kind of a quick summary of what FutureFirm is? So FutureFirm is a media company that provides tactical and strategic ways for firms to improve their their work-life balance, to create a more systematized, more streamlined accounting firm for themselves. So we have a lot of free content in the form of podcasts, blog, newsletter that I send to almost 10,000 firm leaders globally. Within FutureFirm, there's also FutureFirm Accelerate, which is our online coaching program. We have over 700 successful students from around the globe that are looking for quick help when it comes to systematizing their firm so that they can earn more work-lifes, go on vacation without having to worry, reduce their workload so they get access to self-paced training, the system basically to scaling their firm while reducing their workload in the form of self-paced training. They get access to an online community of modern firm owners that they can tap into to share best practices, and they get access to coaching, templates, workshops and all kinds of resources to help accelerate their results. And right on. So that's I mean, that's obviously a really good kind of answer to a lot of the issues that we discuss here where, you know, I've had a lot of discussions with folks around some of what's behind the scenes of this talent pipeline crisis. And my own opinion, as well as that shared by a lot of guests so far, has been that like the carrot, the reward at the end of developing your career in public accounting is no longer appealing to young folks because they don't necessarily want the lifestyle that they see their partner like that. They see partners at their firms having where they're constantly stressed out, always working at things, always working in the business rather on the business. And so, yeah, this, I mean, seems like a solution to a lot of that. What's kind of one of the most common pitfalls you come across with firm owners who are like really stuck and just can't kind of get out of having to do all that client work? I think the starting point is really making sure we have a good packaging and pricing strategy. That's the foundation of it all, because if we have a bad packaging strategy and we're, you know, doing a million different things for a million different clients in a million different ways, it's impossible to standardize and systematize your firm. And if we're undercutting ourselves and bringing in clients at poor price points, we're spreading ourselves too thin, we're doing too much for too little, and we're not bringing in the appropriate margin to add the capacity, the high quality capacity we need to take work off our shoulders. So it really all like the busiest firms that I encounter. The first question I ask is, how many clients do you have? How much do you charge on average and what's typically included in that price? And almost in all cases, they are undercutting themselves and that's what's causing a lot of these issues. So it's really stemming from the foundation of it all. Yeah, that makes sense. What do you what do you think is kind of at the core of that? I've heard a lot of people mention like there's a certain personality of people who are in accounting, which is obviously an overgeneralization, but who might be really averse to confrontation. Yeah. Do you think that that's kind of what's at the core of that? I think that's definitely part of it. I also think that we've never been trained in sales and we've never been trained in pricing. You know, I was one of those people as well. You know, my first packages that I released in Zen Accounting, I was very proud of. I had launched a three tiered offering, gold, silver and bronze packages at a time when nobody was doing it advertised on my website. People were able to sign up for these packages with their credit card without even speaking to anyone. This was over 10 years ago. But, you know, the packages were like 150 bucks a month for an all inclusive service. So I understand where people come from, because. We just don't know, we just don't under we've never been taught how to do it, and we want to get business through the door, so one of the easiest ways is just to undercut our price. So, you know, we've just never been trained, but with the right tactics, like even if you are a little bit more reserved or not confrontational or introverted, which I would consider myself in that category as well, I can play that extrovert card, but I'm certainly very much a shy introvert. So so I understand what a lot of accountants are going through, even with with the right tactics and strategies in place, there's a way to do it in a non confrontational way. Interesting. And like what what usually is kind of like the first piece of advice on that is it just sort of have conversations with people and explain that like you need to sort of. You know, run a business that that makes sense, and so therefore these are the prices or is there kind of like a like a method to it, because I've also heard a lot of people sort of in entrepreneurship and this is how I kind of managed pricing back in my day of like I used to kind of take on a couple of tax clients. And even before that, I ran a DJ business. And basically what I would do is I would just promise myself that every time I would quote someone, I would go, you know, 50 or 100 dollars higher until I started until I got two nos in a row. Right. And that's obviously a very, very elementary way of doing things. But I'm curious, kind of like what is a smarter way of doing that? Well, really good pricing and sales comes down to understanding the human components, understanding the person that you're speaking with. And I'm not going to say like overnight you're going to become an expert. There are some hacks and there's some tricks and there's some tips, but it's it's a never ending process of improving and understanding why is this person coming to me? What do they really need help with? What are the challenges and pain points? What are they really bothered with right now? You know, too often when accountants are going through that sales conversation, they're thinking about, OK, what's my scope? How many transactions do I need to reconcile? How many bank accounts am I dealing with? Do I need to do a tax return? They're purely thinking in terms of scope. And then they're just putting out a calculation out. You know, how long is this going to take me? And this is what it costs. And that doesn't make sense for your client. What makes sense is, you know, are they going to reduce my anxiety? And what is that then worth if my anxiety is eliminated when it comes to my finances, as an example? So by understanding the human element, we can kind of put ourselves in their shoes. But the second thing over and over and above that is I'm a big proponent of three tiered pricing, because with three tiered pricing, we don't have to be scared of aiming very high on two of the three packages. And if you do it properly, most clients are going to take your middle package. So you can provide a very conservative price on your bronze package and not be too concerned about overpricing yourself and losing the potential deal. But if you aim high on your silver and very high on your gold, that's an easy unlock to moving yourself upstream. OK, interesting. I love that. That's that's great. And I mean, I assume that this was kind of a big unlock for you at Zen, right? Like for this to kind of be a focal point for you, it seems like that was probably like a pretty big driving force. Well, once I got over the hundred and fifty dollar per month price point and understood that I couldn't keep doing that, I had to educate myself on price theory. So there was an education process that I had to go through. One of the reasons why I started FutureFirm is so I could it was the resource I wish I always had. I had to go through a very lengthy trial and error education process for pricing and sales and marketing and recruitment and retention. You know, so I had to go through that process, which took years. Interesting. And what makes FutureFirm unique? Because I know there are a lot of other kind of communities to help support people who are running firms, and each of them usually has like something that sets it apart and will kind of bring people to choose that one over some of the other ones. So, yeah, I'm curious to know what that is for FutureFirm. I think, you know, it was created by myself who took one of the first cloud firms in North America from scratch to acquisition. So I saw the full lifecycle. I saw what went well, what didn't go well. And I think, you know, me being a systems thinker, I was able to determine the system that allowed me to take that firm from scratch to acquisition without working crazy hours, without working nights and weekends and all that stuff, and distill it into a step-by-step system that others could follow to avoid those common pitfalls and create a firm that gives them a great lifestyle. Because the overarching theme is really, sure, we want to help you scale and be financially independent. But more than that, we want to liberate your time and help you spend more time on vacation. So we pair that system and that training and give you, you know, bite-sized content to help you implement quickly. We pair it with community, a community of modern firm owners, and we pair it with coaching. So you're guided in terms of how to implement, what to implement, when to implement, and you're paired with a community. OK, so there's both kind of like that, yeah, course teaching element as well as like the community element. Correct. So just for people to be able to see themselves in that situation, like what are some of the best like end states that you've seen from people who've implemented these systems? Like what is like absolute success look like in terms of someone who's been through this course? People that go from wanting to quit to running a firm that they look forward to waking up to in the morning, that lets them, you know, have a normal work week where they could spend time with their kids. People that could, you know, significantly reduce their workload, we're talking about like 50 percent, and take vacations without having to worry much. People that can go away on vacation during a typical busy season. You know, the things that most firm owners aren't able to realize, you know, we're seeing these kind of results in the program. OK, excellent. And then kind of going back to when you were running a firm, what was it that made you decide that it was time for you to sell? It was one of the hardest decisions of my life. So my father was an entrepreneur and he had a print shop and he had a print shop from, you know, for as far as I could back as I could remember, and he ran it all the way until the print business completely went bust. OK, so I saw the ups, the downs, everything in between, and I kind of felt like I was always going to start my own business from a young age. And seeing my father have his business for so long, I just thought that I would start a firm or a business of my own and I would run it until the very end. So I never thought about selling or going through that process. But as an early cloud firm, you know, a couple of years in, there was a number of others that wanted to get into the space, larger firms, mid-sized firms. And I started getting approached. Hey, do you want to partner? Do you want to merge? Would you want to look to get acquired? You know, I saw all sorts of different possibilities that were presenting themselves to me. The business was going well. The business was growing. The business was profitable. The struggle was, what do I want to do? Do I want to just continue? Do I want to take one of these opportunities where they're flashing some money in my face and like a really good job off the back of it? Or, you know, what was being pitched as a really good job? And, you know, I really was stuck. I really had no clue what I wanted to do. And eventually, you know, after doing like all kinds of pro cons list and trying to score the different options and really just going into circles, driving my wife crazy, what I settled on was taking a step back and clarifying my purpose, clarifying what my ideal life looked like and what I would be doing on a day-to-day basis and what that purpose looked like. And when I started Zen Accounting, one of the reasons why I started it as an online firm at a time when that kind of model didn't exist is because I was frustrated with our accounting profession. I was frustrated by the lack of progress. I was especially frustrated and still am to this day with our professional body, who's not doing nearly enough to advance, you know, the, you know, we pay these membership fees to our professional body. And in return, I don't think we're getting the support that we need as firm owners, as members. So I wanted to be, I wanted to play a role in helping reshape what it meant to run an accounting firm, a modern accounting firm. That's kind of why I started Zen Accounting the way it was. And when I clarified that what I really wanted to do was help advance the profession, help modernize it, help others like myself, that's when it became very easy decision to actually sell the firm. And I got a really good offer. I had, you know, I had terms that I was happy with that would allow me to do exactly what I wanted to do next. I was very clear in the early stages that I wanted to, even before, you know, the acquisition took place, I knew I wanted to start a future firm to help other firms. So that's really what it came down to was just what I was passionate about. I love that. I feel like knowing what's next is very important. Like, I consumed, you know, in trying to kind of come up with my own sort of business and entrepreneurial journey, I consumed a lot of content on, you know, other people's journeys and stuff like that. And a common thing is that a lot of people after exiting, they feel kind of lost. They have a lack of purpose. A lot of them actually get depressed, which, you know, the world's smallest violin plays, because nobody feels bad for them after having kind of cashed in. But like, a lot of people really truly do feel lost. So I imagine having that next step plan was probably... I think that was very helpful. I mean, it was a big risk, because I had something, a sure thing, and I was going to absolute scratch. And I had no clue if it was going to work. I wanted to launch online courses for accountants, accounting firms. And nobody was really doing that. I don't know if there was anyone I was able to model myself after. And some of the feedback I was getting from others was like, nobody wants to consume content that way when it comes to building a firm. So I was really jumping into the unknown again, just like I did with Zen Accounting, starting an online firm at a time when people weren't interacting like this. And people saying it would never work. I was kind of doing the same thing over again. So yeah, so anyway, it worked out. So I'm happy about it. Interesting. And so I was kind of stalking your profile before our conversation here. And it looks like you had like, like a one year maybe earn out agreement to kind of bridge that acquisition. I'm curious, I guess, on two fronts. A, is that typical for someone who's being acquired in the accounting space? And should people who are potentially exploring a sale expect that to be the case? And B, I'm kind of curious to know, like, what does that period of time even look like? I'd say it was not the most pleasant period of time. I had to be honest. But I think, I mean, the ideal for a seller is no, no earn out, no transition period. But it could make sense. And I won't divulge the details of it. But it could make sense. And it could be interesting if there's an additional upside provided based on certain hitting certain targets. The problem with an earn out period is that you lose control. So the control is now in the hands of the buyer. And, you know, you're going to have to maybe fight for certain things that you think are right to help you achieve where you want to be going and where you want to help the firm go. Because you want to see continuity with the firm. You want to see, you know, there's good clients, there's good people at the firm. You want to leave it in good hands. So those are some of the things on mine. But a one year earn out is, I would say, a pretty good earn out period. Because I'm seeing a lot of firms that get approached with three year earn out periods, five year earn out periods. A lot of the larger firms are going to require that. So I was getting approached by some of the larger firms out there. And they were requiring crazy earn out periods. So the ideal for the seller is no earn out period. If you can negotiate some upside during the earn out, that's great. I would never go more than a one year earn out period because it's going to get super messy. You'll lose total control, especially if it's tied to any upside. I mean, you've lost all control. Yeah, I could see it like a multi year earn out being very difficult. In tech, yeah, I know like three to five is pretty standard. I think like four, you see a lot. But in tech, usually it's like maybe you have a small app and it got acquired by this giant behemoth. Instead, now someone else is driving essentially your ship, right? So that's probably very difficult to do. And so without necessarily getting into the dollar figures of your acquisition, but having been through that and kind of seeing the market today, what's sort of like a revenue multiple that people could be shooting for? So I've spoken with Patrick Dichter about this as well, and he's acquired a number of firms. But I'm curious for kind of your take on that and what some of the factors are that will influence the valuation multiples. Yeah, I like what Patrick's doing. I'd be curious to hear what his valuations are. But I mean, we're still seeing standard valuations in the one times revenue, but we are seeing them inch up. I think we had a firm go through our Future Firm Accelerate program. We have a case study on this. I believe he's like a two times revenue or something like that. So I mean, we are seeing those types of valuations. They're not typical. But I think like a premium is like a 1.3, a 1.4, 1.5. That would be a pretty comfortable evaluation, I'd say. We can go higher. I think you're going to have to have some very interesting properties for your firm to go higher than that. And I guess a lot of factors that would influence that would probably be like your gross margin, how good is your pricing, I guess. Like what is your profitability, the growth, the marketing engine that you have in place, the quality of the team, how well diversified the clients are. Do you have one big client that accounts for your revenues? Are you niched? Those are typically going for higher multiples. There's things of that nature that go into it. Do you have good technology in place, any proprietary tools or technology to help automate the business more? Things like that. So if we want to be getting the two times multiple, we're going to be having to do something pretty special. Okay, interesting. And with so many very large buyers in the space, I imagine that probably naturally helps things go up a little bit. But do you think that maybe accounting firms have been an undervalued asset for quite a while? I mean, a one-times revenue is pretty much as low as it gets for any kind of business. And there's a lot of accounting firms that would go below one-times revenue. So I'm not a valuation expert. I don't know. I mean, we talked about private equity a bit before we started recording. And yeah, they're making big investments. Why is private equity making big investments in the space and some of the top firms out there? Because they see a return on investment possible, probably because they're undervalued at the moment and there's disruption possibilities. Interesting. A bit of a more kind of broad question about the industry, but is there something you're most excited about in the accounting space? That's a good question. I mean, the easy answer is AI. But truthfully, I don't know if AI excites me or scares me. It kind of does both at once. I'm not sure what that model is going to look like in the future. So it's something that I am interested in. I wouldn't say it necessarily excites me, though. What does excite me is like what excites me most is, I think, seeing the shift in terms of how people are wanting to run a firm these days. Like they're running it more like a business. They're not running it like that traditional model that's driving people into the ground. And maybe I'm in a bubble. Maybe this is just me in a bubble. But seeing what people want out of their firm these days, that's kind of what excites me. So I feel like we're going through a shift between a shift in business model from something that was incredibly archaic, which provided a terrible experience for the team, for the owners, for the clients into something that's much more pleasant and something that gives people great lives. Interesting. Yeah, I agree with that for sure. And then one thing you mentioned earlier that I actually really want to circle back on and, you know, we can decide how deep down this avenue we want to go without getting in trouble. But you mentioned you felt the need to kind of help drive the industry forward and that the professional bodies were maybe not doing enough. You know, if you were if you were running CPA Canada or Ontario or the AICPA or whatever, what are a couple of things that you think they need to be doing differently? Oh, where do we start? I just see zero support for the small firm owner. Zero. Absolutely nothing. I see more bureaucracy. I see things that probably might make sense for the large firms. I see I don't see anything they're doing to make any small firm owners life any easier whatsoever. I don't see any support they're providing. I just don't understand why we're not getting more help, why everything is becoming more difficult. You know, we have the demerger of CPA Quebec and CPA Canada and I think CPA Ontario. Who even knows what's going on with that? Like, you know, I get these messages every so often and, you know, we're caught in the middle of I just see zero support. I see just bureaucracy. I see waste. You know, I see a lack of trying to engage with those that want to help. And it's incredibly frustrating. And the numbers prove it. Less people want to become CPAs. The numbers demonstrate everything. So I don't think they're doing a good job at all. Yeah, yeah, I agree. And I think that there's kind of a bit of a lack of looking out for the individuals as well. Like, Big Four transparency should have been something that CPA has been offering, right? Like, I got so frustrated that I left public accounting because I mean, compensation was too low. But also, like, I didn't have clarity on what it could have been in the future. And it was incredibly difficult for me to find out. And so that's kind of where I called it quits. And then I went and kind of scratched my own itch and I built that. But like, just the other day, I received an email from CPA Ontario. And it was like, how much are CPAs making? And it was like, it was a mess. It was all over the place. And I'm like, got it. guys, like, like, give me a call. You know, like, it's like, you're the huge professional body, you're collecting all of these dues, you have access, you so much more access than like I would. And yet, like, I feel like I'm kind of the one who has to build this tool for individuals. Which is, you know, is it's a little bit ridiculous. Meanwhile, I continue to pay my dues, right? I don't disagree. And look, I don't want to throw everybody under the bus, because there are some good people there. There are some good people I've interacted with. But, you know, there's been a lack of there's been a lack of they're not looking for feedback, you know, so they're kind of in their own bubble. And just, I don't see like, should be getting more feedback from people like us or others out there that are that have the same kind of sentiment that aren't happy with how things are going so that, you know, we can all improve. But there's just been a lack of wanting to seek feedback from others. Yeah. Yeah, no, I'm very curious to see where this, like the pipeline, Talent Pipeline Advisory Team from the AICPA, like what they come out with. Because, you know, a lot of responses are people saying, like, hey, we're working too much for too little, mostly emphasis on we're working too much. But then I was listening to Blake Oliver's podcast. And I think he mentioned something about like how the AICPA lobbied against overtime mandatory for accounting professionals. And it's like, well, you know, I don't know if overtime's the answer, like it probably isn't. But like, either way, it's like, there's a little bit of a mismatch there, between what they're saying and what and what's happened, just truly unfortunate. So, yeah. So yeah, I don't hide my feelings about that. Yeah. And I mean, I think it's important that people not either, right? Like, I try not to same thing, I try not to call out people like unnecessarily. But at the same time, it is like people do need to kind of speak up about what they expect from these bodies. Because, you know, with a lack of feedback, it's, they probably wouldn't even know either. So look, from a maybe I shouldn't make so much noise, because from a business standpoint, it's good for me. So maybe I shouldn't say anything. Very true. Very true. Very true. I guess me too, because they could probably just delete me and make their own, make their own thing. So yeah, I'll, we'll move on to the next topic. One question I like to kind of ask all guests, and I'm very curious, for your take on it as well, because you've, you've been in a firm, you've had a very brief stint in industry from what I see, and then kind of launched your own firm, and now are advising firms. So for like a young CPA entering into the profession, I'm very curious to hear what your advice would be just for someone looking to make the most of it and be able to have like a good career, either as a CPA, or just, you know, any kind of accounting professional. Yeah, I do get these LinkedIn messages from time to time where people just out of the blue email me they're going through CPA program or looking to be maybe become a CPA. And they're truthfully a lot of them are concerned because they're not sure they're convinced there's a future there. But I think my advice is always, you know, especially when we're younger in our careers, just to try different things, because you don't know what you like. So try working in a firm, try working in a company, try working in industry, like, try and see, try working in different departments or different, you know, you know, different roles and, and just see, you know, you're going to naturally gravitate to the thing that you like best. You know, so that was for me, like, I was working in a firm for five years, a small firm, and it was time to, you know, work in industry. And I hated it. I hated the routine and repetitiveness of it all. And, you know, it was it was soul sucking work. And that really forced me to want to be in control of my own destiny. And I only had experience, you know, I had basic experience in accounting. You know, I had five years of accounting experience, which is not a ton. But I could kind of put together financial statements and do some month ends and do some bookkeeping and do some tax returns. And that that's not what I was passionate about. But that's where I had my experience. And that's what led me to create my firm, but with a different spin on it. So I think it's just like trying different things and just jumping in and see where it leads you. And it's very possible that when I started my firm, I maybe wouldn't have been good at it, or I wouldn't have liked it or it wouldn't have worked out. And I would have had to try something else. So I think it's about, you know, I started my first business in my 20s. So still, I had a chance to didn't work out try different things. So I think that's really just what it's about. I don't think there's anything more than that than we that we can do. Yeah, I think that's very sound advice. And then I guess one last question where you mentioned that you weren't necessarily passionate about like the accounting. That's tricky as someone who like goes into an accounting firm. And how long would you say it took until you kind of went from being mostly an accountant at that firm to being like an entrepreneur operating a business? Very quickly, I'll tell you why. Because my best kept secret, or maybe not that much of a secret for those that know me is I'm a really, really bad accountant. Okay, I cannot reconcile things. I'm bad at Excel, my brain like it shuts down when I'm trying to reconcile something. So I needed to pull myself out of there as fast as humanly possible on the client and accountant side of things. Plus, I hated doing that stuff. So within six months, I mean, not to say I was fully removed 100% from accounting, but my first hire was, you know, an experienced CPA. Okay. Is that what you'd recommend as a first hire? Like someone who's who's like, really quite knowledgeable? Or does it depend, I guess, maybe on your own skill set? I think it like I think one of the big traps. So if we're talking about traps is hiring two junior in the early days, because you hire a junior, and then okay, like, let's say it's just you, you're doing all the work, you get busy, okay, I need to hire someone, then you bring on a junior, okay, it's still manageable, because maybe I got 50 clients now, whatever it is, I can still deal with everything I can train, I can deal with the clients, I could deal with some of the sales. Okay, I'll hire another junior. Now I'm tripling the amount of clients I have. Now it's all coming up to me, maybe I'll hire another, you know, I mean, so like, you need someone that can buffer you and the clients, if all the client stuff is coming to you all the complicated stuff, all the issues, all the problems, then we're just multiplying that with every junior that you add. So you need a senior earlier than than most people think. Mm hmm. Okay, that makes a lot of sense. And I mean, I have, I have some people I've spoken with recently who are kind of looking at their first hires. So I hope that they kind of give this a listen and hear about that. Because I think it's like, it's probably incredibly scary, right? Like you're not responsible for someone like, you've probably tripled your your expenses and your business at that point, like when you go from zero to one. So thank you for providing advice on that. And thank you for joining me on the podcast. Well, thanks for inviting me, Dominic. I really appreciate it. Yeah, my pleasure. And if you like what Ryan has to share, if you're kind of curious how to kind of operate your firm or how to operate a firm in general, more effectively, and in a way that will make you want to be part of it, I'll make sure to link the newsletter, you can kind of get insights from Ryan and future firm twice a week. And I'll make sure to kind of link all of your socials as well. Thank you very much, Ryan. Thanks, Dominic. Appreciate it.