Scaling a Business Through Effective Tax Management with John Briggs

0:00There was a lot of like client communication stuff was simple as like, hey, can you give me a copy of this? which is a lot of admin stuff. Or, hey, client, can you get, I still need this. So simple follow-up things, which now we can build automations around, which we have done with our Salesforce. It's like, client still owes us this information. The system sees this client still owes us the information. So now it can automate an email saying, hey, Bob, we still need your W-2. Bob, we still need this K-1. And no human labor cost is actually going into that reminder now that we have it set up.

0:40Hey, everybody. Roland Frazier here with another episode of Business Lunch. And I am very excited to bring on not only a brilliant guest that I think is going to drop a lot of knowledge for you guys, but also one of my business partners. And his name is John Briggs. And John's got a company called Insight Packs that does all kinds of cool things. John, how are you doing, man? I'm doing well. Thanks for having me. Thanks for being here. And we even overcame the unplug it and plug it back in to make it work a computer challenges that we had at the beginning of this. We're geniuses. Pro tip for everybody, unplug it and plug it back in.

1:18Would you give a little bit about your background and insight tax and then we can dive in? Yeah. So I'm married, four kids, Got my master's degree in tax from BYU. And it's interesting. Most universities kind of teach you to become a cog in the wheel of the bigger companies, which makes sense because the bigger companies actually pay the universities to help with their recruiting efforts. And so that's fine. But then through my own experience as an accountant, I realized this whole idea of job security in the form of being a W-2 owner, a bit of a farce. And so - I don't get it. How did that ever get sold?

2:01It's like, you've got one client, your employer, if that client is unhappy with you and fires you, you're screwed compared to, let's say you only have 10 clients. And one of those 10 clients as an entrepreneur lets you go, you still got 90 % of your, you know, it's like, how is that secure? Working up unemployed every day is a little bit more secure than, I mean, I worked for a company that did 30 million in revenue and declared bankruptcy the same year and the company went kaput. 30 million in revenue and a lot of people were out of jobs. So, um, I learned through the trial of, uh, you know, hard knocks that I think owning a business made more sense.

2:40And so, uh, we just kind of started off. I came in, was coming from a situation where I just needed to put food on the table to support my family, working in a windowless office lovely times getting to know the janitorial staff that came around at 2 a.m 3 a.m in the morning and then from there you know my inability to say no my desire to provide an experience for accountants it was very different than the kind of like just squeeze every ounce of soul out of people like most of the companies do I wanted them to enjoy life too and build them a culture that could do that. And so it kind of grew from there.

3:21So just me to now we have 215-ish team members. We do have remote team members across the country, but we have two physical locations here in Utah. Okay. And just because I don't think it's completely clear. So what was your vision when you were saying, I just need to put food on the table? So that company goes under, you're out there. What happens next in that entrepreneurial journey? Yeah. So unfortunately, that wasn't enough of a pain moment for me. So I went from working for that company to joining my neighbor's accounting firm. And within a couple of weeks of me being there, I thought he was rewarding me for hard work.

4:03He said, you know what? Let me give you two and a half percent ownership of the company. Let me just make you a partner because I think you're going to provide a lot of value. Come to find out, I think it had more to do with the fact that if you don't have money and the company goes under, you have to pay your employees. You don't have to pay partners. Oh, my goodness. So this is a neighbor who it turns out not to be much of a friend. Yeah, it wasn't. Yeah, it wasn't great. I won't go into all the details there, but he and his mom, who were the majority shareholders of this firm, were doing things outside of the tax world, making a lot of money that way, but then also using the business as a personal piggy bank.

4:46And so I ended up working for them for six months and received a total of$2 ,500 in compensation. Because as partners, you know. I mean, in fairness, that's a few hundred dollars a month. So, you know. Yeah. Yeah, it worked out to be about three cents an hour, I think, something like that.

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7:25And so you thought maybe you could do better. I thought literally it couldn't be worse. I don't even know if I was arrogant enough to think, you know, maybe I could do better. It's like, but it couldn't be worse. I mean, working for six months. It's funny when I came home and asked my, or told my wife, I think I just need to leave. She's like, it's about freaking time. Cause she's like, you've been miserable. So, so then rather than get another job, you said, I'm going to do my own thing. Yeah. After, after those two experiences, which were the two in a row, I'm like, it literally, I just, let me just do this myself.

8:00Cause it can't get any worse. Like I'm already not putting food on the table. I'm already not making money. And I went from a bad situation with this company that declared bankruptcy to now this firm that was being poorly run. Like, yeah, let's just go out on my own. So was the initial idea to open an accountancy or a tax practice or to do the thing that you ultimately ended up doing, which we haven't explained to people yet, but I want to, but not until we get. Yeah. So I had worked with Deloitte prior, So I had some tax experience. I had a master's degree in tax at that point. And I enjoyed it.

8:36I enjoyed the game of being able to look at all the different rules, going through the tax return and saying, wow, you know, if we claim this year as an itemized deduction, it's a little bit different than if we claim it here as a business expense and your outcome. Like, I loved that game. So for me, it was, you know, that's a bread and butter thing I can fall back on. Let me just start preparing tax returns. And so, yeah, then my life became your typical accountant until I realized there's got to be a better way. um yeah and then we do that um i was on my own for about a year and a half two years almost and then we hired my first assistant you know the first hire that's always terrifying and then yeah and then from there it's like okay we need this person let's let's hire and yeah so you were kind of going on the traditional trajectory there for a bit right yeah tax mostly a tax practice, right?

9:31Okay. So, and then what happened that made you say, I think that, I think I can grow differently that led you to where you are now? It was kind of one of those moments where you finally, things were going well enough that I could pause for a second and reflect on kind of the bad experience that Deloitte taught, which it happens to be the same model that the smaller accounting firm I worked for followed which happened to be as I'm now networking more and meeting other accountants that they're going through and uh you know memories of my wife when uh we first started off kind of having her annual breakdowns during tax season like you know I'm a single mother it's like you're not I'm supporting you, but you know, it hurt because she was during tax season.

10:25She was a single parent. Yeah, absolutely. And, uh, you know, those, so all those things kind of combined to one of these moments where you're just saying there's like, you know what, I know there's gotta be a better way. I, I know that we can help accountants have a great environment. I think the company can be profitable and we don't have to work 70 to 80 hours a week. Uh, and so then from there, we, Yeah, we start evolving into what can we do to make sure accountants don't have to work so many hours, but we still get the job done. Okay. What did you come up with? Well, come to find out, it's interesting.

11:02I actually just had this realization the other day as I was putting my own thoughts on paper. So as a CPA, you have to get CE, continuing education credits. you know almost all of those focus on how to be smarter at being the tax person and over the years i've noticed not very many if any actually focus on how do you become a better operator and uh being smarter at taxes does not help reduce the hours that you work but being smarter with processes, turns out there's a high correlation. If you can improve your business operations, efficiencies, systems, then you actually can work less. So it became a matter of what's the big, just focusing on what is the thing in our firm right now that's taking up the most time?

11:56How do we make that more efficient? Cool. We made that more efficient. And almost just from a Lean Six Sigma standpoint, looking at what's the next bottleneck that we can fix. but in this case we were looking at what's the biggest time consumption and is there anything we can do i remember one time we sat down with all of our accountants and at this point they were doing like a lot of the work um and we just lit like everyone let's do like a giant brainstorm dump what are all the tasks you're doing and so then we did uh it's like a spoken wheel of what is it it's an exercise that some consultants use but it's like a hub and spoke modeling out.

12:33So we said, okay, this is Lynn and Lynn, what are you doing? And then we would draw spokes to the length of time that he was spending on the different things. We had a visual and come to find out as we did that with the whole team, about 80 % of their work could be done by someone who has less experience and not even necessarily tax knowledge. So now I can bring in, they're not lesser people. They just are less expensive to the company because their skill set isn't the same. Right. And so we could hire areas there to help free up time so that our accountants could spend time on the highest deliverable possible, which is something as all business owners, we should be looking at anyways for ourselves.

13:15Right. And what, what was that? What, what were like, was there one or two spokes that were particularly long? Um, there was a lot of like client communication stuff was simple as like, Hey, can you give me a copy of this, which is a lot of admin stuff. Or, hey, client, can you get, I still need this. So simple follow-up things, which now we can build automations around, which we have done with our Salesforce. It's like, client still owes us this information. The system sees this client still owes us the information. So now it can automate an email saying, hey, Bob, we still need your W2. Bob, we still need this K1.

13:53And no human labor cost is actually going into that reminder now that we have it set up. That's great. And are you doing anything with like that RPA, the robotic process automation to try to kind of go to the next level and remove the humans and save them from having to do that terrible drudgery? Yeah, yeah. We actually started that about five months ago. Our first project is we're in the final stages of testing it out. And so we're past the beta stage and now like called the hyper care stage. But yeah, we identified in the process of our tax returns, this step. So for us specifically, it's like getting the client to sign authorization to let us file the return.

14:36So in order to do that, we send them a copy of the return. We send them instructions. And just during tax season alone, we calculated, we paid about 65 grand out in human labor costs to do all that. And so now with this robotic process automation, it's going to do all that for us. The computer is going to do it because it's the same steps every single time. And it's going to cost about 12 grand a year. And so we, that's better. It's better. Yeah, it's better. And so with the success, we wanted to try it out with this company to see if they can deliver. Cause as you know, sometimes people promise the moon and can't deliver anything.

15:15They can't even give you a rock. Yeah. And so we're, then we have, we have some other identified that are going to free up even more time, but anytime it's been great. Anytime you look at your process and say like, this is the exact same every single time. Why not take advantage of technology? Yeah, a hundred percent. So one of the things that you found was a big challenge for you, which I think happens to a lot of people is as you scaled, you needed a lot more people. And so really like recruiting the skilled labor accounting people became a challenge. It's one that I hear across the board from marketers, operators, just kind of everything.

15:58But you address that in kind of a cool way. Would you mind sharing that with everybody? Yeah. So there's two prong approach we've taken, I think, with this. One was looking at the volume that was coming in, thanks to our partnership. We knew that we needed a the system, the always be recruiting method became always be hiring method. So first thing, we actually have enough volume that we can justify hiring a full-time recruiter. And we've actually even hired a full-time assistant for her. And we're like, we're still expanding that out. And then the other thing that we did was we looked at where are possible accountants hanging out because of the unique model that we've set up for accountants, which we can get into.

16:42But the idea was, you know, we identified a website that already exists where taxpayers come to it and tax professionals come to it. And we're like, hey, let's see if we can own that. Because now I can start supporting these tax pros and they can realize, oh, there's like maybe a better way to do this. Because that still goes back to, man, how do I change the industry? not like we i want to be significant enough that the deloits will look at us and say huh maybe we can have our team members work 42 hours a week on average during tax season instead of 50 um that's what we've averaged the last three tax seasons and our numbers are not insignificant they're just you know deloitte's a multi-billion dollar uh organization and so uh we look at that And then we say, um, I can influence the people I hire, but now how can I influence more people outside of that?

17:40And so, uh, that's kind of where we went with the recruiting model and it, it's working well. We can still hire a lot more though. And, and you went, I mean, really just over the last, let's say over the last three years from how many people to how many people on the team, the total team. Yeah. So three years ago we were probably at 25 to 30. Okay. Yeah. And now we're 215. So you're 10 X basically. Yeah. In three years. How do you do that and not go crazy, not go broke? Cause I think that's a big challenge that a lot of entrepreneurs are facing is, is I just don't know how to get a team built like that.

18:19Yeah. Um, well I luckily my wife doesn't listen to the podcast because she'd probably say I am going crazy, but probably for other reasons. We have four kids. You guys can imagine. It really came down to systems. Like I knew that in order to scale systems was going to be super critical because I had seen this already. And in any organization, you have steps. It's like, oh, I can operate like this probably to 250 ,000. Well, how do I get to a million? You can't even say, I'm going to bandaid what I currently have to try to get to a million. You actually have to reinvent the way you do it. One of the things three years ago was, which at the time we were probably like a million five, 1.5 in revenue.

19:11What would it take to be a$10 million company? We just started with what would an org chart even look like? and so we looked at what would an org chart guessing what would a 10 million dollar accounting firm with the model that we have look like and then we backtrack into that okay so then as we grow which for the record was very different than what we had like 1.5 versus 10 million you have a new layer of management that you need because it's not feasible like well man how many companies have added min management not thinking about it and then i ended up putting them broke because i didn't actually think through where is this structure taking me and so that that was so many so critical to us because then we could create all of our processes based on we want to be a 10 million dollar company um and did you do that with a consultant just yourself did you get some books about it how did you go about kind of solving yeah i had a consultant help me see what i didn't see for sure okay uh which okay yeah all the different consultants over the years have been so good to me.

20:14And, you know, you kind of outgrow some and you move on to the next one based on the stage of your life. But I'm a firm believer in consultants. Clearly, it's been working well for me. Great ROI for us. And so with that in mind, then now all of our systems, like, well, this software is not going to support us at 10 million because we're likely going to have this many clients and likely this many team members. So what software can we get? And we did that. And then comes along you and the business partnership that we have. And it's like, now it's, what do we look like as a hundred million dollar company?

20:51Because even at 10 million, like 10 million to a hundred million, it's going to be different. And so that's why a year and a half ago, we jumped to Salesforce and like, we've upgraded our systems and we've even up, we've added the recruiting person. That's going to be necessary. We just added a person whose sole job is to basically quality control and train people, which something I get at 1.5 was, would have been a luxury, but now to get to a hundred million is absolutely necessary because we want to move accountants from, I don't know very much. Maybe I have some educational experience to experiential experience.

21:28And how do we get them to that as soon as possible so that we can serve people faster and faster. So I think there's a long answer, but at the end of the day, the way you don't go crazy or go broke is you have to start with your processes. If that doesn't work, like that's the foundation of everything. And, uh, you know, if we hadn't have done that work, when you came along, uh, what you guys have been able to do for us would have probably put us under, but luckily, obviously you saw it. Uh, and, and we believed in it, that the foundation stuff was there so that we were ready to scale when we needed to.

22:03And, and we had, we had tried a couple of partnerships before and we definitely put them on there. So just kind of to summarize, and then I want to get into some tax stuff, but basically from a business generating side, one of the big things that you did was a strategic partnership, which is what we did. So that's a fantastic way to think about blowing up your business really, really fast, blowing it up in a good way so that it doesn't blow up in a bad way. The other side of that was that you created a model that allowed you to get the key people that you need at scale and at speed, which was really the, let me solve the problems that are out there for other key people that are accountants, which is your target market of people you wanted to get more of.

22:55And let me find them faster by hiring a recruiter. Does that sound right? Yep. That's great. Yep. And then how do you not have the wheels fall off, which is what has I've watched happen? Like, because I'm usually on the, on the marketing growth side, if we come into a business and say, we can give you all the business in the world and all the entrepreneurs, every single one of them never had one say, whoa, whoa, whoa, wait a minute. No, that's going to be too fast. They're all like, we can totally handle it. And then you do it and the wheels fall off and it blows up and clients are unhappy and everything.

23:27That did not happen with you because you said in advance, what does the company look like in the future? What does it need to look like to be able to handle that? And then you brought in the resources consultant-wise to kind of create the structure that you needed to do that. So it's really those three things are pretty key. And the business is up, I don't know, how many times in sales and profits at this point from just a few years ago? uh yeah it would it be two three four almost five x that's pretty good and yeah significant numbers before either yeah right and and and you're you you actually have a life right you're able to talk to your four kids know your name and everything they do still know my name uh they even know what i look like i'm not the stranger i still can't get the stupid dog to stop barking every time i come home But, uh, yeah, it's every day.

24:23That's just, you're not that you don't ever solve that problem. Um, so let me jump to, well, actually, do you have any resources about like that? As far as if people were interested in, you know, what's the story of, of how you grow and how you grew your business and that kind of stuff? Yeah, actually, I do. It's, uh, I wrote a book that I published in January called the 3.3 rule. And, um, I, I not only share my story in it, but I also talk about, I identified what were all the things that I did. And, you know, sometimes we end up focusing on fixing the causes of problems, not the root of the cause.

25:04I kind of identified, um, there's like 11 things for small businesses, specifically firms like, uh, you know, here are 11 things that if you focus on these 11 things, a lot of the other stuff that you have problems with get fixed as well. And I talk about that in my book, the 3.3 rule. Okay. And is that Amazon? Amazon. Yeah. Okay, great. And then on your podcast, is it more about tax savings or is it the business stuff too? Or what's the most? Yeah. So our podcast insightful podcast is a lot more tax related. Occasionally I have a guest and we'll focus on their expertise, whether that's marketing or operations.

25:45But yeah, a lot of it is, here's what's going on tax-wise or here's some strategies that are still great for people to do that you may not have heard of. Yeah. Okay. So the book is, one more time. The 3.3 Rule. And you can find it on Amazon. 3.3 Rule, Amazon. And the podcast is Insightful Podcast. podcast. Spelled I-N-C-I-T. That's right. To incite a riot because we're aggressive that way with our taxes. I like that. Okay. So now I want to talk about the things that you can do or that people, what are the big things that you would say most of the folks that own businesses that are listening or watching this are doing incorrectly or they're doing and missing significant opportunities based on everything you see?

26:41And let's go individual and business-wise. Yeah. So as a business owner, like all your individual stuff is going to be tied into your business stuff. Like your business is your greatest vehicle to save taxes. you know it's amazing even when I meet some people who've been around for a while like 10 years plus the entity selection that you choose so the LLC partnership C corp like that's a big deal when it comes to taxes and a lot of people don't even set that up the right way so the lowest I think they go to attorneys and they and the attorney's just like yeah we'll get you an LLC or maybe they go the attorney and say hey I'm I hear I need an LLC and they're like okay and they just set it up and there's no conversation about it, which is tragic, right?

27:25Right. Because I mean, the attorney's thinking about liability protection. Yeah. Yeah. And the attorney is not a business person, nor generally a tax or accounting aware or finance aware person. They were told to major in English or poli sci to go to law school. So you're getting your business advice from somebody that's never been in business and doesn't have any training. Yeah. Yeah, exactly. And so, you know, we fix a lot of that. Um, us in our business partnership with prime corporate services, like getting people in the right entity, that alone can save people a ton of money. So that's the first area we look at.

28:01Can you give us some, a little kind of some tips, you know, on that? Yeah. So, you know, LLCs of themselves, according to the IRS, so they, these were, they, they were created in Wyoming back in the seventies. And here we are, what is that? 50 years later, not enough time for the IRS to say, we're going to figure out how to tax these. So even to this day, they say, LLCs don't really exist to us. We're going to make you tax it based on something else that already exists in the code. And so if I am the only owner of that LLC, that's called a single member LLC. And the default tax status is to be filed as a sole proprietor, which means all of my taxable income is subject to self-employment tax, which is 15.3%, which is on top of my current income tax rate.