The Positives of PE & Challenging the Partnership Model with Tim Petrey

Hello, and welcome to the Big Four Transparency podcast. Today I'm joined by Tim Petri, CEO of HD Growth Partners and founder of White Glove Payroll, as well as the Penguin Collective. Welcome to the pod, Tim. Thanks for having me, Dom. Yeah, my pleasure. Founder of quite a few things. That was a long breath to hold me through that intro segment, so we'll touch on those a little bit later. But to start off, HD Growth Partners was actually acquired this year by PE Group Ascend, and I'm a little bit curious to understand how did that happen and what has changed in your day-to-day since the acquisition? So how it happened is an interesting story. We had grown a lot. Our firm has been around for about 15 years. We started with about three or four employees. It was a small book of business, $300,000, $400,000. I was involved in the firm straight out of school. It was basically my first job. I had interned at a regional firm. I started here answering the phones for $9 an hour, supposed to be kind of a temporary situation. Ultimately, I ended up sticking around and really getting along with my original partner and mentor there, and he bestowed upon me the ability to take over our firm at a very young age. So I took over our firm. I took an ownership position when I was 23, and I took over as their managing partner when I was 25 years old. Then grew the firm from three or four employees, a couple of hundred thousand dollars in revenue to about $7 million in revenue with about 70-ish or so employees, and realized if we wanted to keep growing, we were going to need to do something different. So I set out to learn about what was next. I started going to more conferences. I started meeting more people. I just started trying to educate myself about what the natural life cycle is of an accounting firm and what's next. A lot of people were pushing me towards the idea of rolling up into a larger firm, and they thought that that was the best move. Because that's basically what everybody else did. There really weren't many other options. It was, well, this is what we've always done, so you should probably just roll up into another firm. A bunch of those conversations, and I was really disheartened and underwhelmed by what that looked like. So it was funny. It was out of happenstance, actually. One of my favorite conferences, I'll give my buddy Gary a plug here, is Winning Ways in Chicago by Winding River Consulting. Really great operations-focused conference, a lot of great firm leaders. They have a boot camp program that's awesome. I went there for their conference, and it was the second or third year that I had gone. I'm sitting there, actually, I'm sitting with my buddy Chase Berkey from Dark Horse, and we're the only guys wearing hats and looking like unruly millennials in the room. This other young guy walks up to me, and I look at his name tag, and it says White Glove Payroll on it. I said, man, you don't work for White Glove Payroll. I know everyone that works for White Glove Payroll. It was one of the guys that worked for Alpine, which is the PE firm that backs Ascent. He and I immediately hit it off. He was kind of there learning about the industry, and we spent a bunch of time together at that conference, and then subsequently spent a bunch of time together talking after that about how I viewed the industry and what I thought needed to happen. I was really excited by what they were doing, but I just didn't think that we would ever be a fit. I thought that, number one, we were too small, we were a little bit too radical and progressive about how we viewed the world, and it just wasn't going to work. We kept talking, and we kept kind of hashing it out. We talked through some ideas, ultimately they went out and they acquired a few other firms and came back to me a few months later and said, we understand what you want to do, and we want you to be a part of this. We want you to help us build something here, and we want you to help us be a part of something different and progressive. We continued to talk through it, and it really wasn't anything that was on my radar. I didn't think that that was something that would ever fit for us, but I did a lot of soul-searching, had a lot of conversations with a lot of my close friends and other people in the industry, and thought, this is an opportunity not only for us as a firm, but really an opportunity for me to leave a bigger impact in the industry and to maybe make a bigger change than what I could do with my little firm in Youngstown, Ohio. We closed our transaction January 1st of this year and joined the Ascend platform. The first few months of it was a lot of your normal integration stuff, getting used to changing up some processes and systems, and me ultimately never having a boss. I thought I was unemployable. That was a change for me, but something that I leaned into, I've gotten really comfortable with because we've got some really impressive leaders that are part of this organization that I enjoy working with. The biggest transition for me was once we got past tax season, and this was a big transition year for me, transitioning some of my tax work to some of our team members and people that I had hired, I needed to take the role of CEO and no longer just be a managing partner. I had a pretty sizeable book of business that I'm working on, sharing with other new partners and new managers that are coming up in the firm, and really taking that step into a new role as a CEO. It's not an easy transition because there's a lot of unknown around it. I was a very good accountant. I am a very good accountant. I'm a good practitioner. I'm a good advisor. I say that confidently because I built a good book of business, and my clients love me, and I found purpose for many years in doing that. But I've realized that the most impact that I'm going to make is by being the CEO of our organization and developing our team members into better advisors, leaders, and impact creators within our community. That's ultimately been the biggest and most difficult thing for me is just working through that transition. The great part is that there's a dozen or so others that are part of the Ascent platform that are all going through this at the same time. We have a great community of other CEOs that were either managing partners or actively partners in their businesses, so they're making that transition. I do think that it is undoubtedly the right thing for us all to be doing, and it makes it a lot easier when you're doing that together as a group. We're learning quick, and we're making adjustments fast as opposed to when we were doing it on our own little island. So far, it's been a good adventure. Our team's excited about it. There's been a lot of great things that have come out of this, and the future is remarkably bright for what this could turn into. And so you referred to Ascend in there as a platform rather than a private equity group or acquirer or whatever that might be. Why the distinction on calling it a platform? Well, Ascend isn't a private equity group, and that's important to understand, is that Ascend is a business in and of itself. The capital that backs Ascend is obviously primarily private equity, but it may not always be that way. It may eventually use traditional financing or other mechanisms, but Ascend is a business in and of itself, and that is a big differentiation between what we're doing with Ascend versus what other private equity players are doing within the industry, is that Ascend is providing value to regional middle market firms. Ascend is aggregating certain resources behind the scenes, such as your in-house accounting and recruiting and tech innovations and AI investments and learning and development and training and professional development, business development, and all of those things that as a $10 to $50 million firm, you struggle with having the resources to be able to keep up with all of the demands in all of those areas. But if you take a bunch of those $10 to $50 million firms together and you pull your resources together to be able to approach all those things, that's a different end result. So Ascend's mission is to create something very different within our industry. There's nothing to compare this to, quite frankly. You could compare it to an alliance, but it's very different than an alliance because in an alliance, you pay a fee to be a part of an alliance, and whether or not you implement things or do this, that, or the other, it doesn't matter. But within the platform, if my friends in San Antonio need help with something or I need help with something, and I pick up the phone and I call my friends, the CEO in San Antonio at ATKG, and I say, hey, Eric, I need to bounce something off you, he's going to take my call and vice versa. Whereas if I call somebody that's part of an alliance with me, they might, they might not. They have no financial incentive to help me. So there is a lot of value in that resource of community that is a very different approach that no one has ever done in this industry. No one's properly leveraged a community with equity in this way, which is one of the many reasons that this is a very unique, refreshing, and exciting play in the industry. Yeah. So it's like an alliance, but with absolute perfect incentive alignment, right? In a certain way where it's not about getting more fees or getting more of a cut of the products that they're selling to you, because at the end of the day, everyone presumably is holding kind of the same equity, right? And so if everyone holds equity in the same entity, the whole point is to do things that will be value accretive to that entity, rather than having some not quite zero sum game, but like, of, okay, we need to extract more fees, or we need to do this. That's interesting. I like that. Yep. And so as part of this acquisition, like, I would assume that probably everyone ended up with some form of equity to kind of keep you involved from like an interest perspective. And like, were you able to share that with staff who maybe wouldn't have like traditionally received equity under the kind of traditional partnership model? Yeah. So I mean, this is the premise that is very exciting about this model. When you join a private equity backed platform, the only way that you can have non CPAs to own an advisory practice is that you have to go through this alternative practice structure. So the CPA firm needs to stand on its own and the advisory business stands on its own. And you know, as a result, anybody that had, you know, real actual equity in our business, you know, got real actual equity in Ascend. But we also gave away substantial amounts of equity to some of our senior level employees that didn't. Some of them were on the path to receiving equity eventually, but some of them weren't. Some of them were very nontraditional in that sense is that they're not CPAs, they were never going to be CPAs, but they're our leadership team. You know, they're the people that are overseeing and implementing operational change in our business. And they're the people that are making our business great in every way that it is. So we wanted to make sure that those people were receiving some skin in the game in this new adventure that we were going on. We're excited to see, I mean, we had multiple people, you know, late 20s, early 30s that received substantial amounts of equity. You know, that doesn't traditionally happen in our industry. You know, you're not seeing equity until much later in the game. And even the equity that you're normally receiving in a public accounting basically just means that, you know, you have to stay until you're 55. That's what equity, that's what partner model means for most people is like, oh, congratulations, you're a partner and you get equity. But nothing's really going to change until you're 55, because then you get your deferred compensation over the course of the next 10 years when you decide to retire. In this circumstance, that was not the case. We wanted people to be able to get equity right away and see some benefit of that earlier on in their career, rather than having to wait until they were 65 years old to see some benefit of staying in public accounting. Yeah, that's that's like a big piece of like my optimism to a degree, like with private equities involvement in these firms is like, a lot of people kind of view it as like necessarily a bunch of people who are on the partner track or aspired to the partner track or getting the rug pulled out from under them. But in reality, like, so I went from accounting to kind of more private company tech. So I went from, okay, I have 10 or 12 years ahead of me of stuff I don't necessarily like. And like, I had conversations with the managing partner where I was and he's like, I think you're going to be a tremendous senior manager and partner. But he's like, between you and me, you're going to have a hard time as like a manager and a senior. Because I was more kind of the business development guy, I was more process minded. I didn't love the work, like I was fine at it. I'm mostly just because I had tremendous coaching, but like, I was not that guy who was, you know, super happy putting his head down doing all kinds of returns and, you know, the kind of extreme delayed gratification that comes with that model. So that's part of my kind of optimism towards this private equity model potentially working when the private equity group is in it for the right reason, right? So yeah, they won't, they won't all work. I mean, you know, but the way that public accounting has worked for the last, you know, 30, 40, 50 years, isn't going to work in the future. I can promise you that if there's one thing that I can say with certainty is that the traditional partnership model of public accounting will not continue to work, especially it may survive at a very different level at the top, top four, top six. Beyond that in your middle market, your regional firms, it just won't there that people aren't going to drink that Kool-Aid anymore. And mathematically, there's not enough people to do it for it to work, you know, because it ultimately ends up creating the situation where most of these firms are built on the ideology of deferred compensation is the most attractive piece of being a partner. Most, most partners in CPA firms are not real business owners. Okay. It's important to understand that is that most, most partners in CPA firms are not entrepreneurs are not people that have built businesses from the ground up. Most partners in CPA firms are glorified employees. They're just called partners because that's what they call them after a certain period of time. And that's what makes them stay. Um, you know, so most of those people are, are sticking around with the promise that at 55 or 60, I'm going to then receive this large deferred compensation, uh, for the next 10, 15 years, that's based on some formula of my highest earning years. And that's how they're continuing to feed the beast. That's the golden handcuffs. That's how they got people to stay so long. The problem is that you have such a substantial gap between those people in our generation of people is that, you know, those of us that have been in the business for, you know, five to 10 years are looking up and saying, so you're, so you need to tell me that I need to stick around for another 25 years in order for me to see the value of the equity that I have earned. Um, and quite frankly, if, if you're an accountant and you're thinking about doing that, um, a question, how good of an accountant you are, because then you're thinking there's just a 20 years time value of money. What else could you have done in that 20 years? You could have bought and sold 10 different baby boomer businesses in that period of time and made, you know, a lot more money than just sitting around being complacent public accounting industry. So, yeah. And that's a lot of the conversation around, I mean, with, with big four transparency, like doing that calculus was part of why I was like, man, you need a tool that makes sense. Like, I remember sitting down with like some people from my cohort and being like, first of all, I didn't, I didn't understand the numbers of like what a partner made or senior manager made, but I was like, Hey, like, I don't think this like makes sense. And it kind of can, right. But like, it is this like extreme, like you're feeding the beast, feeding the beast. And then hopefully at one point you're on the other side and you benefit from that. Um, but a lot of people don't make it there or will quit after, you know, whatever, several years. And you've kind of, at that point, like from an opportunity cost perspective, you might find yourself a little bit behind. So, um, yeah, I find that really, I'd go as far as say is the number one issue in our industry. And the reason that our industry is in this quote unquote problem, the type, the talent pipeline problem that most firms say that they have, um, is because of lack of transparency. Um, you know, there is no transparency surrounding career pathing at the vast majority of firms. No one has any idea what it takes to become a partner. Like none whatsoever. They're like, I just put your head down kid for another 20 years. And maybe, you know, we'll just keep telling you on the partner track and eventually you'll be a partner. Then you realize once you become a partner, you're like, oh shit, that's, that's not what I thought it was going to be. I thought partner meant like, I make a bunch of money and I don't have to work as much and this, that, and the other. When in reality, the story that like made it all work for me was, uh, I, I had, I had lunch with a gentleman. I don't know. We'll throw any firm names out here. I don't want to throw shade, but it is a substantial firm. Um, what, one of the larger firms in the country, and he explained to me, um, what happens when someone becomes a partner there? Cause I was interested. I said, what does that, how does that work? Like when do you start teaching people about partner and this, that and the other? And they're like, well, we really don't. Um, you know, but like, it's a big deal when somebody becomes a partner, but everybody's surprised when I walk in their office and I ask them for a check for $250,000, when they become a partner. I said, so you mean to tell me that you give somebody a raise to partner and then the next day, you know, approximately whatever you walk into their office and ask them for a check for $250,000 and that's worked. Yeah. And he goes, yeah, it's worked. Look at our firm. We have this huge, ginormous, you know, firm. Uh, and I'm like, you're, you got it. You're, you're shitting me. There's no way that people are falling for that. And he's like, yeah, that's how the industry works. And in that moment, I realized that this was going to come crumbling down. Like there was no way that there's like, there are too many really intelligent people that I have a lot of respect for in our industry that I was like, there's people aren't, people aren't listening to this. People aren't falling for this nonsense. So that lack of transparency is a huge premise of what we've tried to build at our firm to try to ensure that people are staying longer and know what it takes to become a partner and then know what they get at that. Is it worth it? Is the juice worth the squeeze? Because the reason that they don't tell you is because most of the time, the juice isn't worth the squeeze, right? Becoming partner in most of those big firms means that you probably throw your first and or second marriage away. You probably have really poor health. You probably drink a lot or have other really terrible habits. Um, like you're, you're not an active member of your family. You're, you know, you're just not a good contributor to society. Um, as a result of that. And I think that if more people were transparent about it, then people would realize sooner that the juice isn't worth the squeeze and I'm not going to stay in public accounting in this place, but they keep it just kind of dark enough that people stay. Um, and then at a certain point, it's like you're pot committed, right? For the poker players out there, you got too many chips on the table. You can't wake up, walk away from this hand because you are pot committed. Um, and that's the leverage that our industry is used to get people to stay. Yeah. And it is golden handcuffs in a way, right? Where like, once you reach that partner level, like there aren't really any opportunities out there for you where you could go make the same or more money for the most part. Like there's exceptions to that for sure, but it's cool. Like the, uh, the, the data that I collect, like there's a ton of participation from partners, but there's enough that you can kind of see the trend. And it's like job satisfaction from partners is like pretty low and people report hours worked and it actually just kind of like gets worse and worse and worse. And I've, I've had this conversation a lot of times where like, I really think that like a lot of these partners in the traditional firms would benefit from a lifestyle perspective to have, you know, 10 or 20% lower comp that goes to the staff. You reduce turnover, you have more staff, less crap rolls up to you and you get to actually like enjoy making, you know, 600,000 instead of 800,000, but you actually like, you see your wife and kids and, or, you know, that was the premise of our business from the beginning was that was, you know, I, I went and I said, I'm going to go hire great people. And so what I'll, I'll make less money. Yeah. I'm going to work less. I'm still going to make enough money. I live in Youngstown, Ohio. Like it's pretty okay around here. It's not the most expensive place to live, but you know, I just continued to tell my partners, I said, guys, if you, if you want a leader of our firm that is going to put the maximum amount of dollars in your pocket, probably ain't me. But if you want a leader of our firm, that's going to maximize the amount of time that you can spend with your children, I'm your guy. Um, and, and I will try to find that balance where we can hire great people. You can still make a very, very good living and you can still have a life. And if we can balance that, yes, our average partner comp is going to be lower than the average firm. However, the quality of life of our partners is going to be much higher than the traditional firm. So, you know, just, just continuing to press that again, that was done selfishly for me and my family and my kids. Um, I wanted to be there. I wanted to be around for my kids. I mean, I, I didn't, I didn't have parents growing up. I didn't, I didn't have that luxury of having some of those traditional upbringings, you know? So I, I was like, I get one crack at this. I get one chance, I get 18 summers with my kids. Uh, I'm going to enjoy every single one of them and we're going to build that firm that allows for that to happen. Um, and you know, as it turns out, other people kind of dig that and they were like, oh, I could see Tim's actually enjoying his life. Um, maybe when I become a partner, I could do the same and I could build into the same thing. And as a result, you know, it's super low turnover and very high retention rate of our employees. Yeah. It's a, it's no wonders you're good pals with Chase Berkey. Um, you know, for, for listeners, if you're looking for something to add to Q, I would recommend adding that episode up next, but it's a lot of the same ideas and it's cool that you guys went about it in kind of very different ways. But like, I think you guys share a lot of the same ideals and have ended up in a kind of similar place, which is, which is really cool to see. And I've, I've kind of jokingly had this conversation before, but I'm like, Hey, like part of the talent pipeline crisis is like more pictures of partners on jet skis. Like, you know, like, yeah, just, yeah. You know, if, if you got, if you're working at a CPA firm and when you leave, all the partners are still there at night. Uh, they're doing a great job of leading by example. Congratulations. That's, that's wonderful. They're, they're, they're good leaders because they're putting their head down and they're grinding and they're doing the things that they need to do, but they're bad leaders because of the fact that this is what you have to look forward to. The business that you're a part of is creating a circumstance that the best case scenario that you're going to have, you're going to make a shitload of money, but you're not going to get to enjoy it. Um, you know, so, you know, just look around, look up and are those people happy? Do they, do they still have good relationships with their spouses? Do they, do they, you know, are they showing up to the community events with their kids? Do you see them, you know, talking about how they enjoy their weekend with their family or do you just see them at the office? And yeah, yeah. Um, so you mentioned transparency quite a few times and so, um, and I think we share a lot of similar views on the industry. And, um, so, you know, spoiler alert, but you actually ended up investing in big for transparency. So, um, a little context on that, but we actually had a sales call for HD growth partners to kind of work with big for transparency and the compensation solution. And then we have a recruiting solution as well. And kind of at a certain point, you're kind of like, Hey, how closed is this funding round? Um, and I'm very curious. to understand like what was it in that process that kind of made you decide like okay this is something i really believe in this is something i want to invest in so i mean our firm from the beginning uh has been built around the ideology of transparency um and being able to provide that transparency with our team members to me was the key to a lot of the things that we had been able to build and i and i'm adamantly believe that the biggest problem in our industry is a lack of transparency i think that you know if you look at good leaders in the history of this country and you look at good people that have gone through crises and led people through difficult situations they have done so through transparency they've done they've led people through that by being transparent about celebrating the wins acknowledging the failures realizing where there are shortcomings failing forward and figuring it out and getting better right i don't i don't think that much is going to happen in our industry as a result of just trying to do the same thing over and over again so it's time to it's time to crack this bad boy open it's time to be able to see the inner workings and see how the sausage is made and figure out how to make the sausage better um we have a problem in our industry and you know one of the quotes that's always stuck with me is is elon musk i mean dude is full-blown crazy um what i mean when you listen to him he's just a different level of intelligence and he's terrifying and entertaining at the same time but you know he said something that always stuck with me he said you're paid directly in proportion to the difficulty of problem that you solve right and that's been something that has really become a core of how i view not only our industry but how i coach other people within our firm on how to make more money um you know our our staff will come to me and we have a very open relationship i have a staff advisory council that i work with on a regular basis most of my conversations around the competitiveness of our compensation has been around conversations with my team like hey you know what are you hearing other people are paying and and what's it look like at the firm down the street and your buddy works there and ask him what he makes and you know let's let's make sure that you guys are being compensated within market um i i used market compensation to derive our pricing um because you know from my perspective i think that um you know your biggest cost in a cpa firm is obviously labor um it's the most important asset that you have in your firm and if you're not paying people appropriately you're not going to have that asset for long um so always really focused on trying to aggregate that data and have good healthy data to make those decisions and the data that's out there sucks um i just don't i don't like it i don't like the way that it's uh accumulated i don't like the way that it's acquired i don't trust it i don't feel that it's robust enough i don't feel that it factors in things like the amount of hours that you're working the benefits and hybrid or uh remote or in person or geographical you know what do you make in in la and new york versus good old youngstown ohio like that stuff matters right and you know i wanted to be able to have an educated conversation with my staff i wanted to be able to look at my staff in the eyes and say you're being paid fairly period i love to be able to have that confidence to be able to come to the people that are dedicating their time lives energy to working at our firm and building their careers here i i want to be real with them i don't want to lie to them i don't i don't want to say i'm paying you as much as i have to pay you i don't that's not fair that's silly i'm paying you what market rate is and then we are defining the pricing that we charge our clients based on the market rate that we're paying for you what i've always built a business on being fair um i don't i don't want to build a business that's taking advantage of people um i see my clients everywhere i mean i i see my clients and my staff i'm at their weddings i'm at their bar mitzvahs um i'm at their christmas parties i'm at their funerals i see them at the grocery store like we volunteer for the same stuff together um i want people to see me and and know that hey tim tim treated me fair tim tim was valuable to me as an asset tim was valuable to me as a leader um and you know i feel that the only way to do that is to have you know full-blown transparency about what market price really is um so you know rather than doing that via the traditional resources that we had which was you know whatever market study data that's out there that isn't that great and not you know as as um inclusive of all those qualitative measures um that big poor transparency is trying to uh capture um just wasn't that good um so i see a huge opportunity here i think the transparency is a huge part of what the ultimate solution to our problem in our industry is and it's a big problem right so let's come back to the old elon musk quote here it's a big problem therefore uh it it likely will be paid appropriately if we are able to collectively solve some of that problem within big for transparency um you know so mathematically there's potential that it's very good investment um so you know if nothing else as a result of this investment i'm very impressed by you and what you're doing and how you view our industry and you know before i called you i listened to a variety of your podcasts and conversations that you had had with other people in the industry and i felt you got it and that you understood it and and a problem can only truly be solved by someone that understands it right you know they say that if you if you have a problem and you can write it down that you're halfway there right you're halfway there uh you're probably a little bit more than halfway there um so to me that was really exciting to be a part of that um and you know to to potentially make a little mark in our world in our industry by doing something positive that gives people something that allows them to get paid appropriately at their firm and at the same time you know from a firm owner standpoint i think there's a ton of value there too i think that you know the idea of the um uh the the reverse recruiting option eventually and the reverse job board kind of theory and and being able to do that makes a ton of sense for you know the people that are in our industry most people are are introverts in our industry and they don't want to go through interviews and they don't want to go through looking for a new job and they'll stay at a really terrible employer as a result of that like uncomfortableness of going out and looking but if they can just say hey this is the amount of will and this is the amount that if you pay me in these circumstances i'll talk to you i think that you got something special there too um you know so i've not had a ton of success with with professional recruiters uh sorry to any of y'all that are listening uh i just don't love it i don't love the fact that i'm paying you 30 ish percent of first year compensation and don't feel like i'm getting any level of um you know long-term uh commitment from some of those employees now i get that once you get those people in your firm it's your responsibility to keep them um but you know there's only so much you can find out in an interview with somebody um and i your resume is going to look great your compensation level is going to be what it's going to be but like i'm not going to find out if you're good or not until you come start working for me and i see your attitude and i see how you view the world and i see how you handle clients i see how you manage people um so a shake-up is is necessary here and i think that um big four transparency could be a part of that so i'm excited to be a part of it i'm excited to you know lend my input as a as a firm owner as someone that leads a firm as someone that is boots on the ground dealing with these issues on a regular basis and building our strategic plan and doing our budget and talking to my staff and um i feel that you know insight from people like me will make big four transparency that much that much better and that much more impactful because it's not it's not just your perspective dom it's it's your perspective um that you've experienced in the big four and as a staff it's my perspective as someone that owns a firm and it's the it's then indirectly the perspective of my team members that you know will see some of this data and i'll pick their brains about what it means to them um and hopefully via all that various different perspectives we can make something really special at big four it's awesome man i'm like uh i'm like excited to get back to it after this now it's uh you know it's good to hear this type of stuff externally every once in a while you know i i obviously think all the same things otherwise i wouldn't have just left my job for it but um you know it's nice to hear it for sure so i i really appreciate it and i really appreciate your your involvement um i have a couple kind of quick quick things if you have a a few more minutes we're kind of over time here but yeah let's do it um okay so you're involved in a number of things including i mean you know angel investing but we talked about white glove payroll penguin collective um and i'm curious to ask you like at what points in a business does it make sense to be staying laser focused on like the one thing you're doing and it's working and at what point does it make sense to kind of branch into sort of other projects the way you've done um so i'll tell you that the reason that i've gotten involved in a lot of different businesses and that that's about half of them uh that we're talking about now there's another few other businesses that maybe for round two of our our pod yeah i am a very motivated person um i i had a very non-traditional upbringing um i was on my own at a very early age i'm an extremely independent person um i push very hard um and at a certain point uh i i also feel that you know one of the things that that um i've gotten better at as i've grown is that my emotional intelligence has increased um just as much as my regular old book smarts and um you know i realize when i get when i'm in a business and i'm pushing maybe my group of leaders a little bit too far um i need to put that energy somewhere else um i don't want to stop putting that energy out of the universe but i need to put it somewhere else um you know at a certain point in our firm uh i had two new partners at our firm early on this was 2019 we had two new partners and they were making the transition from being you know regular employees to partners and then you know dealing with the demands of someone like me that is a you know very very active individual um they struggled with that a little bit and and i realized quickly i said tim you got to back off a little bit we we need to take a step and just kind of slow down um and at that point in time i said okay well let's branch off into something else um let's let's go try and experiment somewhere else so i actually um did some angel investing for an e-commerce business in the clothing space i invested in a company called youngstown clothing company um and it's a homage-esque uh super high-end cool t-shirts very comfortable high-level artwork um but you know i wanted to learn shopify um and i needed a distraction from not pushing my cpa partners too hard and i needed something else to keep me busy because like my business is not just my business it's probably also my hobby too i really enjoy it i love building things um yeah so you know at a certain point i said okay i'm going to take my time away from there and i'm going to go focus on this and i'm going to build this thing up and i'll my my book of business is kind of on cruise control my staff is built my team is cooking you guys kind of get settled and and when i feel that y'all are ready for me to come back in and throw some gas on it i will um and and you know i i stuck around and and uh you know got involved in that clothing business got involved in uh um promotional products business and insurance business a couple of real estate ventures over about a two-year period of time and um then i came back and got a little bit more aggressive with our growth into the firm um but you know you've got to listen man i mean that's to me the key to doing anything in life is being able to listen um and you know it's not just like listening to your spouse or to your partners or this that or the other and having healthy relationships but you know listen to your business and listen to what it's telling you that it needs from you um and sometimes your business just needs space sometimes you need to go out and see other businesses and how they operate because you get too in the weeds of the business that you're in um so like you know all the things that i learned from building the e-commerce business the clothing business all the things that i learned from building the promotional products business and some of those other ancillary plays i was able to then bring back into the cpa firm when i felt that we were a little bit more appropriately staffed and some of my partners had gotten their footing and we had gone through some other things so um you know to me you just you got to learn to listen to your business and pay attention to know when it's when when you need to back off when you need to give a little bit of space you know sometimes you know to give you a baking or a cooking analogy is that you know you take something out of the oven too early and it's not it's not very good um you know and if you leave it in there for that couple extra minutes it's perfect um so nailing that art is um certainly something i've learned a lot about um it's fun it's exciting but you know you do you do need to pay attention to that part yeah that's cool different stages of life but i like the analogy of like you wanted to learn shopify and you come and so you invested in a business for me it was i was gearing up to potentially apply for a job at shopify way back when because i'm in ottawa where they're based and i was like i'm gonna start a shopify store and you know i did a couple thousand bucks of sales selling silk pocket squares and not a great business uh going into covid um poor market timing but uh i learned so much about it and then i ended up in like a shopify adjacent business and it was crazy how like you know the little bit that i had done actually like propelled me in terms of my understanding of that business it was really cool and i don't know i urge people like if you look at an area and you're curious about and want to learn like get involved it's the easiest way you'll learn by accident right i mean i that's always the way i learned i didn't learn from reading books and then learn like i learned from i like listening podcasts i like talking to other people but like i learned by getting my hands in and making mistakes and failing um and and learning from that and improving the process so like it everybody learns differently i'm not saying that what i did was right for other people but for me it was you know i was self-aware of the way that i learned um and that made the most sense yeah that's cool and then last question i have for you with white glove payroll why like why a payroll business because i don't know i feel like i talked to so many people starting new firms and i don't really see a lot of people starting payroll businesses talking about them but like adp seems to be like rolling them up like there seems to be a lot of interest and like we'll buy out the payroll section of your practice so there's something going on there yeah so i mean the payroll business has been a lot of fun um so payroll business was really my first foray into something that was like truly mine um white glove payroll i found it on my own um as as as a spin off from the cpa firm in support of my all my partners at the time but um we had been doing some payroll for some clients at cpa firm and i acknowledged quickly that it was it was painful it was not it wasn't a service that you should be just dabbling in um there were too many ways to make mistakes um if you weren't super efficient there was no profit in it um but i still felt like boy i mean everybody needs payroll um there must be something here but you know when i was going around and i was talking to other people in the industry like nah don't waste your time man there's not enough money to make doing it it's not worth it and i said well it sure seems like a business that i could i could really create processes around and it would be much much easier to scale a payroll business than a cpa firm because scaling a cpa firm is dependent upon having like partners to manage folks of business whereas scaling a payroll business is much more of a commodity based business right so you know if we were if we found something within the industry that we could solve a big problem there was going to be some money there right so um one of the founders or early investors of paychecks lives down the street from me um and so every year my wife and kids or just my wife and i would go and see his christmas lights um and like it's hard for me to put this in context over a podcast but like his christmas lights are what you would pay to go see um and he does them for free for his little community in salem ohio um and takes up an entire street you know he's he has staff at his house and they take months and months and months to erect all of these christmas lights okay so you can piece this together and assuming that all right you know i may not be that good at math but i understand that you know if you have that many christmas lights you have a fair amount of disposable and or discretionary income there must be some money to make doing payroll um so really kind of came back to the firm and said okay guys there's something here we just need to figure it out so i spent a lot of time again just asking questions and learning and observing and paying attention and asked a lot of my clients like hey are you happy with adp um you know and again i i don't i'm not i'm not here to throw shade at adp okay and or any of so from here on out it's like big box providers right are you happy with your big box provider of payroll and some of them said yes um you know the big box providers of payroll are are very good because the fact that they have the best software they have the best uh you know platform for you to access but ultimately what they have all become is saas based businesses okay they are software as a service business and and i felt that there was an opportunity to create a truly service based business payroll um you know i i got to a point in life where um a really really busy um you know with with the businesses and with my family and i viewed time very differently than most um and and i looked at payroll and i said there's something here that if we can be giving people time back into their business if we can be reducing the amount of time that they're spending on payroll and if we can be be providing them with a truly high level service a luxury service like think you know i bought a merc if you i don't i didn't buy a mercedes-benz but if you go buy a mercedes-benz or you go buy a really high-end car when it needs an oil change they come and pick it up and they bring you a new one um you don't have to drive it through valvoline or whatever like us regular people you know you you you get that level of luxury service and i said people aren't getting that with your big box providers i think that there's a market for a luxury service related to payroll um so you know i went to one of my good friends that owns a little ice cream shop and i said hey i want to do your payroll and i want to do it for like free um i want to just jump in and i want to learn how to do it and i want to build some systems and i want to use you as my guinea pig um and he's like so you're telling me that you're gonna do my payroll for free and he's like you're not gonna screw it up right and uh no man i'm a cpa like we're we're gonna do a great job i i promise you i won't screw up your payroll but like you're not gonna have like this smooth system at first and you're not gonna have the luxuries of working with a big box company um so he said yes and he just kind of allowed us to test on him and then um we started we went all in in terms of our investment of people we hired some really great people to run the business and we we shopped around for some great softwares to run the business um and as i started to see it kind of coming together it was it was a big investment it was well into the six figures the investment in the first couple of years what we were putting into the thing i realized that it was the only business that i owned that that was the easiest to exit to um if i if i ever wanted to sell the thing i could just call adp and paychecks and they'd buy it in a second um so that gave me even more freedom to go all in uh because i said you know now i'm gonna keep i'm gonna invest everything every every dollar that we made in the payroll company went right back into the payroll company for like a decade um and it just became this monster in and of itself and we hired great people and and we were just moving and our clients were loving us and we were adding hr consulting services and our tech got better and this that and the other um and we realized before covid that none of our employees in this business wanted to come to the office um there we we went after a very specific part of the labor market we targeted stay-at-home parents um that were under employees um and so our entire team at whitecliffe payroll is number one decentralized and number two they're there they were otherwise underemployed and people elsewhere um so we have a brilliant group of people that have a tremendous amount of flexibility and autonomy so as a result they treat their clients like gold and as a result we charge appropriately um we're not that much more expensive than your big box providers in some cases we're comparable um but ultimately what they're getting with us is they're getting the chick-fil-a of payroll processing they're getting the disney experience they're getting the you know the the the pleases and thank yous our our payroll folks are called payroll concierges um you know they're not you know you know when you call in and have a problem with our payroll company you don't go to a phone bank you don't go to some generic customer service line yeah you get you get the person you're used to talking to you get you get karen as one of our payroll concierges and karen knows your business and she she understands the problems that you might have and she knows when maybe your submission looks a little bit wonky and maybe somebody didn't clock out or had the wrong kind of hours or this that or the other so we just you know slapped a different level of service on the payroll business and it really took off and people love it and our employees are happy and ultimately see the payroll business is something that um has has no upper bounds um has a basically unlimited growth potential it's a much more scalable business we build a great foundation of systems and processes and and the right right things for training and onboarding and all that fun stuff and it's it's it's been a fun journey to build that business but it's it's really that's kind of my baby um so i'm excited about how it's come together and i'm i'm really excited to see what the next 10 years looks like that business that's cool there's some people i follow like um sean poorey in the more kind of traditional like business world but like he talks a lot about like if you have this business that can employ kind of the alternative workforce and you know like if you can hire a bunch of stay-at-home parents and they're going to be really happy about doing the thing you're doing and they kind of find meaning in in the work that you're giving them he's like the your business is destined for the moon right and i think this was in context of like it was like user testing or something like that but it kind of works here too and i just imagine like you know if you're talking about in some of the lower cost of living states like i'm calling a payroll provider and it's just a bunch of people like from the south with like the warm accents and everything like yeah i'm delighted right like yeah and they're so invested like well because the most people that you're interacting with and and we all do this like and i've gotten like super hyper sensitive to it now it's like you know when i go out to eat um or i'm going somewhere and i'm interacting with a service-based professional and they're like miserable they're like they don't even want to talk to me i'm like why aren't you in the service-based business it just makes me i don't want to spend my money here if i if i have a service-based professional that is mad that they're doing service focused things you know so to me it just seems so simple is like build something where people love their jobs and they're going to give that kind of a warm reception you know and when you call and you call your payroll it's hey how you doing this week and what's going on is that issue resolved that we talked about a couple weeks ago how's your wife how's your kids you know like it's just it's such a refreshing kind of change of pace to the you know the hustle and bustle of our world that's like you know i envision everybody being in like new york city and just keeping their heads down and you know not talking to anyone um it's nice when people are actually kind and enjoy talking to you and you just you feel better about interacting with those kinds of businesses yeah yeah absolutely well i i love everything you're up to tim i i really appreciate you joining me on the pod and you know i'm really grateful for having this conversation and you know having you on board now so uh yeah thanks thanks thanks for joining me and uh thanks for being involved thanks for having me man i'm excited yeah my pleasure all right