Navigating the Public Accounting Journey with Wade Runge

Hello, and welcome to the Big Four Transparency podcast. I'm joined today by Wade Runge, the director at Portie Brown and someone I also have met recently at the Bridging the Gap conference. Thanks for joining me on the pod, Wade. Yeah, thanks for inviting me, Dom. Yeah, my pleasure. We had a conversation kind of before this about your career, and you have had a very interesting career path. So would you be able to just kind of quickly walk us through your career to date and how you ended up kind of where you are today? Sure. Sure. Yeah, when I started, I did not want to go into public accounting. I was going to work at a hospital, do hospital accounting for my entire career. And it just so happened that the accounting manager thought that taking the CPA exam would further her career. And I had recently graduated, so she asked me if I would study with her and take the exam with her. And I did and ended up passing it the first time. I always tell people the reason for that is because I got married a month after the exam. And if I hadn't passed it, taking it the first time because I was exempted from all the wedding planning, that I would never hear the end of it. Oh, yeah, you'd be in big trouble. Yeah, exactly. So I passed the exam and then decided, you know, maybe public accounting might not be too bad. I chose a small firm that was a ways away, hard for me to get to, but it was one that I was able to get a job at. And at the end of the three-month probationary period, for various different reasons, I decided I didn't want to stay there. And so I looked at, you know, the phone book and found a place that was, you know, closer to where I was living at the time and started to work there. And I ended up working for a guy named Dave Bungie, which, you know, I've told the story and I'm not going to tell it here about how a Bungie and a Rungie came to work together, you know. So I started working for Dave in December of 1987. And a few years later, we were building our house, so I actually left public accounting, went back to the hospital that I was at while we were building our house. And I was working per diem for Dave through a tax season shortly after we built our house. And in that fall, Dave asked me if I would be willing to come on as a minority partner in the firm. He had a couple of other options he was evaluating, and this one was probably the lesser of the three evils, I suppose, because he would be able to remain in control of the firm that way. And so I did. I was not even 30 yet, and I was a minority partner in a small accounting firm, which Yeah, great. Except for about the first five years, I didn't have a freaking clue what I was doing, you know. But it was a great experience for me. He was tremendous. Dave was tremendous for my career. He and I were partners for 24 years, and it was about the time he was getting ready to retire. We had brought on a third partner at that point. And we sat down at our annual partners retreat, and he said, OK, guys, five years from now, I'm going to be out. And we went, oh, expletive deleted. How are we going to do this? We're going to have to replace his billings. He was the rainmaker for the firm. We're going to have to do all of that stuff. And he mentioned that Forty Brown had expressed some interest in talking to us about acquiring us. And so we said, all right, fine. Let's look at that. Let's do that. And that was in August of 2015, 2016. And by October 31st of that year, we had completed that merger. Oh, wow. Yeah. So it was a very short period of time to go through there. So we came on with Forty and have been working there as a director. And Forty Brown director is somebody that was a partner in a previous firm and is not a partner in the current at Forty, which was fine with me. I was not quite ready to retire, but I knew I was on the backside of my career. And so the fact that I wasn't going to be a partner at Forty was perfectly fine with me. Interesting. Yeah. And that was and that was what, almost eight, nine years ago now. Yeah. So there's lots that I want to dig in to there. The first thing being, how do you think that receiving equity so early in your career ended up shaping your career? And like, how did that influence your experience at that firm? Yeah. Well, I guess I would say, first of all, it kept me in public accounting. It was one of those things that for me, it was a security thing. Like I said, I didn't have a freaking clue what I was doing the first couple of years as a partner. I knew what I was doing from an accounting standpoint, but had no idea. And it provided me a bit of a security blanket that I knew I couldn't just be fired one day. But beyond that, it really allowed me, I think, to learn a lot of different aspects of the accounting profession. I think that's really served me well. I've been able to utilize that when talking to clients, because I've been part of management of a firm. I've been part of management of a company, have worked in helping shape the direction of the company. Even though I was purely a minority shareholder, we all did things collaboratively. Dave was very responsive to my opinion on things. So I got to learn a lot of different areas that somebody that goes into big four, I assume, because I've never been in big four, that I wasn't stuck doing bank recs for six months. I was doing all sorts of things. Even before I became a partner, I was doing a bunch of other stuff. But after becoming a partner, I learned a lot about just the management of a business and an accounting firm. I think that's really been good for me. Yeah. And I think at that point, you end up with a vested interest in the firm's performance. So instead of whatever, you find yourself spending too much time on administrative tasks. Instead of just being like, hey, why won't you hire me an admin assistant or an executive assistant or something? It actually becomes a real thought process of, okay, can I get more done profitably using an executive assistant, handing off some of this work, and then learning to leverage my time a little bit better? I think it completely changes the dynamic of some of those asks. For what it's worth, I wholeheartedly think that the answer to that question is often yes, but I think it's a little bit difficult to do. I think that that entirely changes the dynamic. And for myself, I found myself getting really frustrated by a lot of things where even if I just had some sort of stock option plan, and I was at a big four firm, so at that point, it kind of feels too big to be necessarily influenced by my individual actions. But I do think that I would have viewed a lot of things differently as an employee there. I think another thing that was different about... We were a small firm, right? We had no more... I think at our largest, we had nine or 10 employees total, including us. And we had three offices. I always say three and a half because Dave had a vacation home up in Southern Wisconsin. We're in Northern Illinois. And so, we had an office up there that he would go to when he would go to his condo. So that was kind of the half office that we had. And so, I basically managed one of the offices. And we didn't have a ton of staff, so I had to figure out ways to do it on my own. There were lots of times where I was the only one in the office, so I was having to do it all. But to your point about, geez, could I do more if I had an admin? Yeah, perhaps. But there's the cost of that and those types of things. So it's always a balancing act, for sure, especially with a very small firm. But we made it work. It worked just fine for us. Interesting. And you mentioned earlier when we were speaking how one of the biggest learning curves when you move from this small private practice to Portie Brown was that essentially your billing rate increased very substantially all of a sudden to your clients, right? Yep. So to avoid write-offs, you kind of had to learn how to leverage your time a little bit more. And I'm curious to know what some of those learnings or what some of those concrete things that you had to do differently were. Yeah. To be fair, I'm still trying to figure out how to avoid write-offs because my client base was relatively small compared to the average client here at Portie Brown. But to answer your question, it was a lot more in delegation. I used to always say, hey, I have people now. I didn't have to do it all myself, which is great because we now have experts in things that I would have to have learned how to do on my own at our former firm. But the downside to that is I had to let go. I had to delegate things. And it was tough for me. It was tough for my clients because for 20-some years, I was the guy. I was doing most everything. And I'm not that anymore. And so it's a matter of getting them used to that and getting me used to it, too. Because old dogs, new tricks. So it's been a learning curve trying to get to that. I'm still working on it. Mm-hmm. Interesting. A little bit of a tangent here, but I actually noticed today when I was pulling where you had worked and some information like that, I noticed that you were Wade Runge, CPA, CVA. That's not a designation that we see a ton, but I had actually a number of years ago, I think it's a CBV here in Canada, but I had looked into valuations as a very interesting cross-designation. I just kind of never made the jump. I would love to hear how having that cross-designation has served you throughout your career. Sure. I think that was one of the things that made the small firm that we were at unique. I was the valuation guy, certified valuation analyst. One of the other partners was a tax guy. So he was very big into tax and state tax and things like that. And our managing partner was very big into advisory, business advisory, cash flow, increasing business value, things like that. So we always talked about it as a three-legged stool. And I think that's one of the things that actually drew Portie to us was the fact that that's kind of how we were developing our firm, was looking at those things. And so I think one of the other things about valuation in and of itself is it's advisory to a certain extent, at least that's the fun part of it, is the advisory piece of it. So it's utilizing accounting and tax and those things that we do every day, but it's then also being able to say, how can we better increase the value of your company? Or what are some of the things that we can do to make you more attractive to a potential buyer? Those types of things. So there's a lot to it rather than just the calculation of value. One of the things that any evaluator will tell you is that it's both science and art, because there's a lot of areas in there that are subjective. And so you learn to develop those opinions and back those opinions. And it's interesting, I can't stand testifying. I don't like doing it. I don't want to do it. And so from that standpoint, I am not the big expert witness type person. But you still have to be willing to do that if you have to. Most of the valuations we do are tax related. And so those could end up in tax court at some point. Maybe I do have to testify somewhere. But I don't do divorce valuations and things because I just don't like testifying. Yeah, no, that's nice that you get to choose, right? And that because you're not only a CVA or CPA as well, you can probably sort of really pick and choose and carve out the areas of that that you find interesting. Yeah. Was that was that useful to yourself slash your partners during the sale of your own firm? Like, was that able to help you sort of shape some of some of your actions around the sale of your own firm? A little bit. I think that with that, it was we were being acquired, right? So we didn't have a ton of say in that. And accounting firms have pretty set rules of thumb for what the sale prices of things are. But I would say leading up to it, trying to look and make sure that we're doing things as best we could to, you know, to make us more saleable. You know, it did. It did help from that standpoint. But as I said, it was a really short period of time in the negotiation, you know. So yeah. And honestly, there was very little we had to negotiate out with Forty Brown. They gave us a really nice offer to start with, and it went very smoothly. So nice. And I'm sure that creates a lot of goodwill when you're then working there afterwards, right? So that's probably the right move to take for them. What are those rules of thumb like kind of nowadays for the sale of a firm? I'm not sure if you're still on top of that, but I'm always curious to hear. Yeah, I wouldn't say that I'm on top of it now. I think I don't know that they've changed dramatically. You know, there might be others out there that might differ, you know. But it seems to me that, you know, they're all based upon a multiple of revenue, which is different than most businesses, right? You don't usually sell a firm or sell or buy a company based upon a multiple of revenue. But they're generally, I don't know, between 0.95 and 1.25. You know, maybe more or less, depending upon the specific services that you offer, how much of it is, you know, not commodity-based, how much of it is advisory-based, tends to increase that value a little bit more. And then there's, you know, so there's fair market value, and then there's synergistic value, right? So if you've got some of those things, you know, and that's why the multiples could be much higher, not much higher, could be higher. You know, there might be certain things that a particular acquiring firm is just absolutely looking to get into that they don't currently offer that the firm that's being acquired as. You know, so there are any number of synergies that can affect that. But I would say that, you know, that's a general range. Okay, interesting. There may be comments that you'll get from this podcast that'll tell you different. No, I like to ask different people's opinions and stuff like that. It definitely does converge around the like 1 to 1.5, I hear. But different people have different takes. And, you know, naturally, people gravitate to what they know. So a lot of people will go, oh, it depends on the tech enablement. But like, they're a super large advocate for tech enablement at firms, right? So it's like, everyone views it from their own lens. And it's not even done intentionally. I think it's just because that's what you're so focused on. That's what you think, right? So I really like to hear from as many people as possible. I find that very interesting. So shifting gears a little bit to Portie Brown itself. It does not take a ton of Googling until you start to come across one of the many awards that they've won in the last little while. Most of them around being the best place to work in Illinois, or just in general on accounting today. I think it was one of the best places to work for. I'm curious what you think that Portie Brown does differently that sort of sets it apart from other accounting firms from the employee perspective. I think a lot of it has to do. And by the way, Portie Brown, number one in the state of Illinois, best place to work this year. I just need to plug that for our marketing department. But I think a lot of that has to do with just how we treat our employees. How the employees are, and I keep saying are, right? Like I'm one of the owners, and I'm not. But that's kind of the way it feels. And I remember that first coming in to the firm. The entire partner group was nothing but welcoming to me, and my partners, and the others in the firm. And that's, I think, what we try to be. And some of it comes down to some of the more measurable things. Compensation is always part of the issue. Benefits is always part of the issue. But I think, overall, it really comes down to how you treat your people. And I think that Portie does an exceptional job of that. It's kept me in public accounting, because tax season, I can't stand tax. I really can't. But I get to work with these people. I get to share the experiences with them. And the partners here are phenomenal in the way that they treat us. We may talk about this more, but I'm looking to retire in the not-too-distant future. My daughter, and son-in-law, and my grandchildren live out in the Seattle area. And so my wife and I are looking to move from the Chicago area to the Seattle area. And as part of that, I am likely to be in the Seattle area. Part of that, I am likely going to be working remote for Portie Brown, living in the Seattle area, even though our client base is generally in the Illinois, Indiana, Wisconsin region. But Portie has an employee that lives in Hawaii, and she works remote. And so I think it's things like that that people look at, and the employees. And the Best Places to Work surveys that have come out, or I should say the Best Places to Work awards, are largely driven, I don't know what percentage, but are largely driven by employee surveys that are done. And I think it's a testament to, I'm not the only one here that feels that way, obviously, that that's the prevailing thought here at the firm. Well, it's interesting to see the places that are able to maintain that as a scale as well, right? Because I think when it's just your firm, and you launch this thing, and you're dedicated to wanting to keep people happier, I won't say that's easy to do, because obviously, it's not. It's a lot of effort, no matter what. But I think doing that at scale, once you have hundreds of employees, I think is a little bit different. And that's why I'm always curious to know, how did that get preserved by a certain place? But it really does seem like a widespread attitude and decision to put employees first. Another one of the very unique things I heard about was around customer interactions. So you had mentioned at one point, and please correct me if I'm off on some of these details, but basically that staff are going to clients a lot to get sign-off on documents and even some of the tax work and stuff like that, right? We do the work. We do the accounting work whenever possible. We do the accounting work at the client's place of business. That's been a longstanding tradition. The firm is 70-some years old. I don't exactly know. I should know that, but it's over 70. It's getting close to 75, I believe. And that was started with James Forte when he first started the firm. He would take his adding machine and his green bar paper, and he would go out to the client's offices. And that's been a hallmark of the firm. To us, it's more efficient doing that. You can build the time frame in. You've set that time aside with the client's bookkeeper or the client themselves, whoever it is that you need to do that. And so you go out there, you do the accounting work, you have a question, you ask them. You need a piece of paper that's got something there. You ask them, they give it to you. You look at it, and you copy it or whatever you need to do. But you get the answer right away. And I believe it's way more efficient than even the way that our firm used to do it, which was everybody brought everything in. And we had questions. We'd set up our list of questions, and we'd email the client or call the client. And maybe they were there, maybe they weren't. Then you had to wait for them to get back to you. And it tended to delay things. You had to pick things up more often. And doing it this way, the goal doesn't always happen, but the goal is to get the accounting ready for the partner to review it before you leave the office, before you leave the client's office. And as part of that, the accountant sets up the tax preparation. So they will make sure that we're using CCH's system, so they're integrated, so we can integrate from the trial balance into the tax return. And so for smaller non-audit and review clients, especially for smaller ones, we're able to go and the idea is we're able to import the trial balance into the tax return, balance the return, and get some of those things done before we even leave the client's office. What's interesting to me with that is I feel like you, as the preparer, are a lot more bought into the client and the outcomes that there are. Like it's very easy to feel really isolated and removed from the outcomes that you're generating when you're just at home all day in your home office or even in a corporate office for the firm. So this is very unique. I'm sure some people probably view that as an obstacle going, I don't want to be spending my days driving around all over the place. But at the same time, I think it is kind of interesting because you're a lot more connected. into the work you're doing and you get to meet a lot of the people that you otherwise wouldn't. So that's, that's unique. I'm, I'm like kind of torn on it. I, you know, a big part of me loves it. And then a small part of me goes like, ah, it's a lot of traffic maybe. But I find that very, very interesting and unique. Yeah. And so I will say this, it gives, it gives even younger staff. Now first years don't really go out to clients. We do have plenty of them that are in house, uh, you know, in-house clients that for whatever reason we can't, uh, the client doesn't have a place where we could go or, or, you know, they just don't want to do it that way or whatever. So there are plenty of in-house ones that, that first years work on. Um, but that also gets our younger staff out to the client in real world situations and answering questions from the client, you know, getting feedback and, you know, learning that, that small firm I referenced, uh, that I worked for before working with Dave, um, we were told under no circumstances, are you to answer a client's question? Even if you know the answer, the most, you know, you knew, know it dead, dead on, you know, you know, the answer, um, the most we ever want you to say is, well, you should, you know, this is what I believe it is, but you need to ask the, you know, the manager or the partner, uh, for that. And I always thought that was ridiculous. You know, we want to empower the younger staff. Now we don't want them out there, you know, given, you know, patently wrong answers, but, but, you know, and, and the idea is if you don't know the answer, say you don't know the answer, you know, and you know, cause there's nothing wrong with saying, I don't know the answer, but I know where I, I will find out and I will let you know nothing wrong with that at all. Um, and I think that, that going out and, um, and being with clients helps to foster that, you know, we also have young staff presenting at our monthly staff meeting on a regular basis. So they have to get up in front of the firm. Now a lot of them are done virtually, so it's a little easier, but you know, um, but it was, you know, there was, there was a time where we're virtually every young staff person had to get up in front of the, in front of the entire staff in the, in the room that we were in and give a presentation. And, um, so you, you learn, I think that's a good thing. We, they all learn, we all learn to talk to people because I think that's one of the things that they don't teach enough in accounting in, in, you know, in classrooms. Yeah. Yeah, I agree. Um, and I think that there's these like little sneaky things that you learn, like you mentioned previously when we were talking casually that you had kind of a background in performing. Um, and I did too. And it's, it's crazy to say, but like this background helped me be very, very good at like case competitions and university. And then that helped me stand out and kind of get whatever job I wanted out of university and win a bunch of scholarship money and stuff like that. And I do think that that's something that a lot of places are not developing. And the way that you communicate and hold yourself around a client is going to really help you further down your career. Right? I think it matters a little bit less as a staff, but it's a good time to start learning this because who knows, maybe you want to go out on your own and you have to be able to carry yourself with confidence and be able to sell to this client or just in general in your communications, like you want, you know, if you actually really know the answer, you want to deliver it in a way where the client understands that you truly know this, not where they're like, Hmm, right. Maybe I should take that with a grain of salt. Right. So, um, no, I really like that. I think that that developing that is, is truly, truly important. Well, and at Portie as well, um, everybody has a sales mentality, you know, um, Portie has a very, um, generous commission, um, structure for bringing in new clients. And that's for anybody, you know, from admin to partners, you know, partners are more expected that, but, but, you know, admin first year staff, um, new staff, whoever. Um, and, you know, there's, I wish that, that I had had more opportunity, um, as a young staff person to go out and, and do that. You know, I had, I had a fair amount of it, but it was usually in our office, you know, clients would come in to meet with me. And I think I could have learned a lot more about real world situations and dealing with conflict and, you know, all of those other things, you know, just, just getting confidence in talking to people if I had been doing it more. Yeah. I think having a built-in commission plan would have kept me in public accounting. Um, that's, that's what I was passionate about. And, um, our only evaluation metric. And again, it's hard to do at a firm that big I understand was, was the number of billable hours. So not even revenue, right. Like, where I was able to kind of be on a lot of like higher revenue files, but it was like, no, it was, it was literally just the hours and that frustrated me to no end. And so that was a big part of calling it quits. Yeah. Yeah. Um, okay. Well, so before I let you go, I also typically like to ask a question on like your sort of thoughts on the industry. And I think for you, given your unique experience with getting equity as like a minority partner, so young at an accounting firm, I think you're in a really good position to answer this, but what are your thoughts on the people experimenting with different firm models, some of which, which now create the opportunity to create employee stock option plans, right. Where employees as early as staff potentially would have the opportunity to get equity in either a small or a large firm kind of regardless, how do you think that will impact like the employee experience or, you know, retention or just how they feel about their firm in general? Yeah. Well, I can tell you how it affected me. Um, and, and it was, it was tremendously positive. Um, you know, now I was, it wasn't just that I had equity, right. I was part of the management team, you know, cause we were a very small firm, but even, even in a larger firm, if, if you had a real equity or pseudo equity, I mean, there's, there's, um, you know, there are ways to do phantom stock plans and things like that. And I'm, I'm not sure that that's really in an accounting firm that, that, that it works that way, you know, and I, I've not, I haven't worked with any or haven't heard of any, uh, ESOP accounting firms, you know, per se, but I think that, um, from the standpoint of, of getting some equity, um, you do start to think like an owner, you know, so you do start to care a little bit more, not just about what you're doing, but how that affects the greater good of the firm. And I think that that can be nothing but positive. Um, I think that you, the more people that you get thinking that way, um, the more positive it is for whatever company you're talking about, whether it's an accounting firm, a manufacturing company, whatever, it doesn't matter. I think the more people that, that think and act and have ownership, you know, real or, or, you know, pseudo ownership, or just even implied the more that, that they think that way, the more that, that every employee that has that is going to think about the better good or the greater good of, of the company that they work for. And that's gotta be a positive thing. Yeah. Very well said. I agree a hundred percent with what you're saying there. Um, well, thank you so much for joining me, Wade. Thank you for sharing your story and a little bit about what makes Portie Brown unique. Um, I love kind of the insights that we're able to get from some of that and, uh, yeah, thank you so much for, for coming on and sharing your journey. Well, you're welcome. Thanks. Thank you again for, for the opportunity. Um, it was a lot of fun. Yeah.