Wie du deine Buchhaltungskanzlei verzehnfachst

0:00Which is a testament to how (censored) firms are marketing and positioning or working on a man working on it. Right. Right. Alex Hormozi just told us the secrets to how to grow and scale an accounting firm that you love. And guess what? It's not actually in these books. It's inside of this interview. And if you love what he has to share, do me a favor. Like the video. Subscribe to the channel, Drop a comment down below, and I hope you love what Alex has to share about how to create a $100 billion accounting firm. My first question here is you are incredibly committed to education and self-improvement. How do you select what you will pursue for education? There are so many possible topics. So what process do you go through to select what you're going to be educating yourself on? And how do you also select potentially someone to educate you on that topic? Yeah, so we do everything off the theory constraints that I would start, which is basically that a system will grow until it's contract, until it's limit. So it's kind of like the idea that the weakest link, right? So it's finding with the weakest link in the chain is or the constraint of the system is so that we can do constrain it and then grow to the next natural constraint. And so it's a very simplistic look, but it's extremely effective because it just cuts down all the noise into like, if I had to pick one thing, that's the big limitation of this business, what would it be?

1:21And so then we just get laser laser focused on solving that. What problem? Solve that problem, and then we move on to the next constraint. And if we solve that problem and the business doesn't grow, then we then we pick the wrong straight. And so sometimes the constraint is your ability to judge what the good train is, right? Which is why, you know, wisdom is one of the hardest things to earn, which comes from experience, right. Is that you're able to, you know, recognize patterns. And so for me right now, to add to the other question, just like, you know, what am I what am I? Well, I'll tell you, I'm focused on learning about brand stuff right now. So brand is my big topic that I've been diving really deep on brand and media and I'll probably write a book on brand just from the findings that I have because I don't think there's many good books on brand because you can I could read you 20 different definitions of brand and branding, and they all sound like cockamamie.

2:07And so coming up with an operationalized version of what that means, so that can actually be useful. And that's and I try to learn the stuff so that I can use it and then whatever I learn, I just, you know, ask for it. Because branding for me, despite being now code known for this or like an organic content guide, I only did this two years. Like this is brand new to me. Like I, you know, I have way more experience on the outside. That's what I did the last decade. And I you know, people got to see a tiny taste of that when I was launching book. But like I'm still learning this game a lot. And so anyways that's that's the big thing is finding out what the history of the business is and if you need to chunk all the way up, it's if you want to grow a business you have to sell more clients or make them worth more or decrease risk. Those are those are the things that are going to grow the value of a company. And so just simply asking the question, like, why do we not have ten times more customers or why we're not making more money and then figuring out what the answer to that question is oftentimes is the constraint makes a lot of sense. And just because you're saying, hey, I'm currently educating myself on on branding and that's fresh for you, what would you say is like a major takeaway in terms of education for the topic of branding that new? You're just like, I wish I would have maybe known this. And I started to try to learn about this two years ago. I might go on a I it's it's like a Pandora's box. If I start talking about it, it might be like 10 minutes. So I mean, I can I can riff on it, but like, buckle in the audience.

3:38All right, so here's the deal. So if we look at the origins of what a brand is, right? Where do brands come from? Brand comes from brand, right? That was the original use of a brand. And so why would you brand cow? Because you want to change the behavior of people who look at the cattle. So if you have a cattle that doesn't have a brand in the cattle that does, the people are looking at it will behave differently. If the cow doesn't have a brand, I might take the cow for myself or I might kill her, I might eat it, I might do whatever. But if the cow has a brand on it and I know the guy, I might return the cow to him. Right? So it changes what I do. All right, that's important point.

4:11So the point of a brand is to change or elicit a desired behavior in the white percentage of your target audience right now. How do you do that? You do that by making associations between something they don't know your brand. In the beginning with something that they do know that is positive or rewarding, if that's what you want, right? And so the index is a 4x4 work box. What brand really is. So you've got the strength of the brand, which is two away. And so you have the, the, the directions you've got away from and towards and they've got strength so very high and very low. So, you know, if you have a really weak thing that's away from, it's like I kind of don't like this thing, you know, slow wi fi, you know, the bad breath. On the flip side, you might have a political party which, depending on the audience, might be super strong and away from or towards right now. Taylor Swift, for example, would be some of the I would say is a very strong brand and towards there's not a lot of people who really hate Taylor Swift and a lot of people really love Taylor Swift. Right? So it's positive and it's strong, right? Somebody like Ray Romano, if you heard the you know, or like Tim Allen from the old sitcom days might be someone who is positive. But we like a lot of people, know who he is. Am I going to show up to his event? Probably not. Yeah. And so the idea is that in order to build a brand, we simply pair things that people know, things that they don't know, The things they don't know is our logo, our tagline, our company with things that they do know and think are positive. And so if you were to think about the brand as a bouquet of flowers, it's like having many flowers in a bouquet. And so if I were to break the bouquet and spread all the flowers, there is no bouquet. But simply by gathering together, by making associations, I create something new. And that bundle of associations is the brand. Now, if I were to break one of the flowers or make it rotten, it would affect the appearance of the entire brand.

6:06And so that's why if you make a single mistake, a Dylan Mulvaney move for Bud Light, you can affect the entire rate. If I get a DUI or somebody, you know, gets accused of doing some sort of terrible, heinous act. Right. It affects the entire brand. Are Kelly bad brand now? Right. Despite all of the positive the one broken rose, the one rotten flower affects the entire outbreak. And so we have to be very deliberate about what associations we want to make with our own brand so that we can continue to positively associate ourselves. And the point of the brand is that we get a desired action or behavior from a specific audience. Because if I bring up Trump right for half the audience, they're going to be might be inclined towards the other half. I might be inclined to say, Now that's okay, because sometimes you don't need to sell the entire world and you can have that's why niches and and picking audience is okay you might and the idea of growing the brand a lot of times is that you sacrifice some audience for other audience. So like when I was starting making content, I did it in my closet, right? And there were some hardcore people in the OG, most immediate days. They're like, I appreciate you. They were like, Man, I miss the closet videos right now. I might have lost some of those people when we started making a little bit more polished videos, some people not right. And so what we did was I treated I treated losing some audience to gain more. And so when you were making your brand move, you're basically always making a bet that you will gain more of your desired audience than you lose by making a change. And so you can approximate or slowly move a brand over time by making more associations in one direction and fewer associations in the other. And so that's how you can move a brand over time. But White made a wrong bet they saw it. And maybe this is just corporate groupthink, right? That if they made an association bill Mulvaney, that they were going to get more people to buy their beer. I mean, fundamentally, that's the only reason you would do it, is you believe that long to get more people to buy your beer. The problem was that wasn't true. Now, the interesting thing is that there probably are people who were a big fan of that movie. It's just that there were more people who weren't. They were far away, you know, or people who were not a fan of that movie. And so that became an away from association. Makes makes great sense. And so that is what I am trying to encapsulate and put together into how to brand, because now that I feel like I understand it a little bit, I see it as in my opinion, you know, it's kind of like Neo is a matrix when he's talking to Morpheus and says, So are you telling me that I can dodge bullets? And Morpheus says, Well, when you're ready, you won't have to. And so we learn all these tactics about sales and marketing and short rates and Crowe hacks and all that. But if you have a brand, if you see The Matrix, everyone shows up to your calls. No one has price objections, Everyone is excited and refers their friends. It just takes longer to make associations because fundamentally all branding is is teaching.

9:14You're teaching someone to do something. You want them to behave a certain way and you have this red red card. And when you see red, it means stop. It's all we're doing. So green lights have strong associate strong brands. They're positive. Everyone loves green lights, right? Look, it's a simple thing. Just knowing owns it. But green lights are a great, positive association. It's a great brand, right? And so that's that's the idea of what I'm what I'm kind of diving more into. And I see it as the ultimate chico for business. It just takes a long time to do. And most people are patient. You're telling me I can dodge business problems? I'm telling you that once you have a brand, they become irrelevant. When you're ready, you all have to write. Fantastic. Thank you for that response. You talk about deleting problems as your favorite way of solving them. Yes. How do you decide what's the lead ball versus what's not? Because I can imagine the the person who really loves that strategy doing nothing and just deleting all problems. So how do you prioritize a problem worth solving versus a problem that is valuable? What's just percentage likelihood of impact? How do you measure that? Like, how do you so it's going back to yes, choking all the way up to like, will this cost me number of sales like sales velocity? Will this decrease the lifetime value of customers and will this increase or decrease the likelihood that whatever I'm doing right now continues to occur in the future? And so those are kind of the three variables. So when you're looking at so we're trying to value a company, right? We look at what's the sales velocity, how many customers they sell, what's the lifetime value of every customer, Because then you can extrapolate what their run rate is going to be at at scale at max unless we change something. And then you divide that by risk, which is how likely is it that there's going to be an outside of bet that's going to change this thing from continuing to occur, this box of making money? How likely is that they will it will continue to grow or at least stay the same. And so if I have a problem, I have to be able to track it back to one of those three things. If it doesn't really track one of those three things, or there's another problem that has a much higher likely to impact in terms of it's higher likely and it has a greater effect size, then I'm going to prioritize that. It's just that oftentimes if someone's like, Man, I really think we should change the colors on the site. I would just say like, what's the likelihood? Like I had been notorious for having ugly sites my entire career, but I also just have never like and you can make pretty weak associations. And I think there's there's an argument there. But what's the likelihood that it's going to affect how many companies do a deal with us? It hasn't up to this point. And so is it a constraint of the business?No. Is there is it something that I can improve? Absolutely. There's also 100 other things I could I could also send were emails, which I don't do like. There's lots of things I could do, but what are the few things or the one thing that matters most, which then ladders back up to what is the of the business makes perfect sense. In other words, it's elimination of the least. I want to use term valuable, but we're eliminating the things that provide the least return back to the business by simply walking through what's the return going to be if I actually take the time to solve this problem? If you think about capitalism as a term, I mean, it's allocation of resources. And so the job of the CEO, you have limited resources, limited time, you limited human capital, you limited financial gap, and you have to simply be an allocator resources. So you basically every single day are making bets on where do I get the best return. And there's just a lot of bets are just not worth making very well send how do you establish a premium price point for your products or services because I completely agree. I, I love of all the parts and hundred million dollar bills I love all. But when you talk about the what happens when you use price, how emotional investment goes up, you know all the things that come from a loan from like people buying at a higher price point. But there there's some balance to that in the sense that like if I look at the highest priced competitor in my market and I want up them and then they want to me potentially like is there ever a point in which we just say like we're price premium enough or do we always have to go for the top? Like how do you make the determination of premium? So there's so there's, there's let's see there's four one to I'm going to see if I'm going to mess us up, but I hope I don't. There's basically four positions in the market. You have luxury all the way at the top, which is technically a Veblen good, which basically which means when I increase the price, demand goes up. And that's because there's an association with the price that makes it more valuable. So the fact that everyone knows how expensive it is affects the value that I get, that I get from it. The fact that everyone knows the Rolex is 100 grand, the one that I'm wearing, whatever that I actually it makes the Rolex more valuable. So it becomes a virtuous cycle, which is why LVMH is one of most valuable companies in the world. Then you have premium, which is basically the above average. So it's there. You have to pair utility with the premium in luxury. The price that the extra price tag is is the value. Whereas with premium like BMW is premium, they're not luxury, they're a little bit better at a lot of stuff. And so you pay a premium because it is a little but they use better materials, it breaks less, whatever, right. And so then you have your, you know, your mid-tier, your your run of the mill, your commoditized space, which sucks.

14:51And then you add your low cost layers, which they make their entire business on, how can I drive efficiencies in operations at all levels of the business so that I can be the lowest priced person in the marketplace, right. And still make a profit? And so the two to wrap to your question of like when is enough enough? Right. The the key indicator for me and most of this like that quote, hard to get you're not luxury goods. The fact that it's expensive is not the reason that people want to buy it. Right. It's so it's actually technically a premium. Right. And so you want to price it. And my views on pricing have have have evolved over time. I'm a little bit less extreme about the I'm more extreme about the price, the value discrepancy than anything else. And a lot of people get into trouble because they raise the price so much that it is it's just an excess of the value they provide. And so then they actually create a negative experience. Like if Chipotle were $50, people would probably not like, even though the product is really good, but at $50 hour up. And so the reasonable is so viral, you know, I mean, it's like the price to buy discrepancy is so good that they tell their friends. Right. And so that's where this kind of marriage of how can I just short circuit people's brains revalue value perspective, which is what I what I try to do with the books in the courses so that it becomes viral on its own. And then my cost to acquire customers is zero. And so then everything after that is just great. And so that's what we try to play with when we're like the three or the four variables when you're using this is you've got the price, the value at the top, which is what they get right? The price is what they pay. You've got your cost of goods to deliver and then you have your profit left out. And so it's playing with those four variables so that you can maximize the amount of absolute profit that the company makes. It's more than not, pricing high has become shorthand. And where I think people get a lot of benefit from the offers book is that when you price higher, you automatically weed out customers. And I think many times that is the real reason that a lot of people's businesses grow from that price. Now obviously there's more profit, there's you have excess things that you can that you can deliver on, but a lot of people don't actually take that excess money to create a better experience. They do a gotcha and then they never get anything from that customer again. And so that's the wrong way to use it. But if I had to think like, okay, what are the reasons that, you know, a company might be successful, the Destroyer Premium is that they actually reinvest the, the, the premium price into a superior product. And they are very clear about the avatar that they go after and what the quantitative requirements are that are black and white, that they know from looking at their best customers, their top 20, top 5% of customers, and then saying, we're only going to cater to these customers in the future because the likely that we can give them a great outcome is higher. And then that can create, you know, you can merit or earn the premium that you have because you have data that supports that. If you are this type of person can get you this type. We're going to jump back to the interview with Alex in just one second. But if you are an entrepreneur or accountant and you're looking down at least $100,000 to your firm in the next 12 months, we'd love for you to apply for our Create Your Dream Firm program, where we give you the systems and support that you need to be able to build your dream firm faster than you ever thought possible. So again, link in the description down below. Click that. If you are not from an accountant, you love Alex from Jose, you want to grow by six figures in the next 12 months. We are looking to have the opportunity to speak with you and please enjoy the rest of the interview. What financial metrics do you pay the most attention to for your portfolio companies and how often do you check them? I ask because our dream client profiles accounting firms, and I know they're very curious to know what your thoughts are on the finance side and the regularity with which you're looking at them and specifically what you're looking for. For me personally, like of I'm like, what do I mean, I, I'm super, super back of napkin. So I'm kind of I subscribe to the Charlie Meter worm of it.

19:00Like if you can't tell from looking at one page that it's up, but it's just like, what are the, you know, how many units are being sold? What's lifetime gross profit per customer? What are the, you know, what are the acquisition channels that we're using? Like how do we actually convert, you know, eyeballs into customers and what does the leadership team look like? And so if I have a good feeling for, okay, this is this is where they get their customers, this is how many customers they sell per month, this is what the lifetime, you know, gross lifetime gross profit per customer is. And this is what the leadership team looks like. I get a pretty good idea of where I think the company's going to go, what what levers we can potentially improve in the business to make it more valuable. Now, I would include in that are a calculation from us for free cash flow. What is the ideal experience with an accounting firm look like to you? And I ask because one of the things that stuck with me is you said you've never done your own books. Like you always consider that something that was delegated was important to delegate. You've also referenced bringing, I believe, accountants in-house, kind of going back and forth between outsource and in-house. So what does that ideal relationship look like to you now? And maybe what did that ideal relationship look like when you were going through your first, you know, seven figure and eight figure company? Yeah.

20:19So I think that a lot of professional services should look at wi fi for inspiration. You're like, what does that intimate wi fi you don't you don't want to like clap when the wi fi is working. You just notice when it doesn't. And so you just want it to be in the background. You just want it to work, right? So a lot of companies are like that. Like there's a lot of services that people think they need to like over, you know, communicate stuff on. Like I just want the financials to be accurate. I want them to be able that's it. Like, it's not like simple to say, harder to do, right? I just want them to be accurate. I want them to be timely and I want things broken down in a way that allows me to make business decisions. And that's where, like, I think that the top tier of accountants transform into fractional CFO and CFO kind of integrals where they actually help you use this data to make informed decisions about it. So I think that's where you get the like for everyone who's listening this from accounting firm perspective, it's like if you can if you can get out of the commoditized service of bookkeeping essentially, right? I mean, if you were to ask more business owners, what's the difference in accounting bookkeeping, I guarantee you most of them would have no idea. Right. And so which is which is a testament to how accounting firms are marketing and positioning or working on a man working on it. Right. Right. So the idea is, is there a way that I can translate what we do into how it would affect a business life? So I'll tell you a little story because I think this might be really relevant. This will be really relevant for you guys. So one of our portfolio companies has had a ton of growth three years. They went from one location to I think we're at 38 locations now. Right. Also funded off cashflow. All right.

22:04So really, really tremendous growth in three years and it's composting so it's growing faster and faster. And when we were at about 30 locations, we were stuck at 30 locations for like two quarters. And so I got on the phone with the CEO and he was like, Dude, I just I just feel like I don't know how many locations I can open based on cash flow. And because they had their receivables were a little bit extended, things like that. Right. And so I, I shook the screen for a second there. I was like, I need you to freeze frame this feeling you have right now. It's like, okay. I was like, Think about this feeling. Yeah, I was like, What you are feeling is finance as the constraint of your business. You do not have a finance function that is operationalized in like you do not like.

22:48You are underdeveloped in the finance market. You have a bookkeeper who's not that good. And so as soon as like I could see, it just clicked. I was like, That is the rate of the business. Until we get the finance function in, you're going to just be operating blind. And then once you know we have this much cash flow, we can open two locations a month or three locations a month and you can be more aggressive with everything else because you're confident that you're not bankrupting the company accidentally on your own. Right. And so I would say if you if I were an accounting firm, I would try and pinpoint the problems and relate them to how it's going to affect growth in the business, Like, how is the constraint so that you can talk in the language that a business owners can understand, like they just how many I bet you like I could see everyone's hands. How many people in your audience, all the business addresses go to the right, go to the bottom and say, So we made more money this month. Great. Like they look like it and they'll look if something feels off. Like they only look back if there's if the number was low, were arbitrarily high, that's it. And so I think adding that level of strategy of like by the way, I think this is a little fat compared to other companies that we're looking at. This is a little bit under compare to other companies. We're looking at. And this might be an area of opportunity, little things like that that actually add value to the business. If I were somebody who was in charge of what's read, you switched firms over the years. Has there been errors? Have there been just growth, constrain? Have you like what has been some of the the driving reasons to go from one firm to another to bring something in-house? In other words, what's the inverse of the WI fi, right? Like, has there been like when the wi fi went off, we were like, this is a problem. Like what? What were some of those indicators for you? I haven't switched many times, honestly. What I saw here as the chesterfield you are, if I had to guess a lot of people bouncing around between firms.

24:49Yeah. No. And you know, to be honest with you, there's like, I think there's two levels, right? Yeah. Like accounting. And then you have, like, strategy, right? And so I definitely want like, I mean, I'm always looking for really brilliant, like tax strategists more than execution because the execution, you know, I mean, like, anyone can just execute the stuff and then sign off on it as long as it's, you know, above or it's really I just want someone to take care of to take a closer look. Right. But we've I've had a CFO in House for the last six years and so I'm I'm honestly I trust that person to a large degree and Leila double checks so I, I honestly don't like I'm I'm actually astonishingly removed to the point of abnegation. It had to be when it comes to buy it like I am that business owner who just looks at every cashflow and I'm fine. So this question is more related to capital allocation. We talked earlier about how to constrain her business's resources. So for every dollar that a company makes, how are you typically thinking through reallocation of that dollar to go and get the next dollar or $3 or what do you how do you normally working through that in terms of percentages? So I think of this as a Lilly individualistic problem to solve. So because it actually ladders up to risk. So it's how much risk are you willing to incur or are you comfortable with as the owner of the business? Because if you're a small business owner or even a medium business owner, typically the vast majority of your net worth is in this one stock and continuing to double down and double down and double down on that stock can yield some of the highest returns out there. But it also is risky because I have lost everything twice, and so I've learned from some of those scars. And so with like our portfolio companies, for example, I will typically will do one of two things. So we will either determine like a one third, one third, one third type set up, or it's like one third will take out a free cash flow. We'll take its distributions one third will contribute back into company reserves and then one third will go into growth for like new locations or new equipment, whatever it is.

27:08So that is that is a really typical way that we will we will do that. And that is more rule of thumb than it is rule of law. The other way is something that I call the benchmark, and this is probably more common with the businesses that we have, low cap that have low CapEx. And so there we say, okay, what is our watermark for how much cash we in the bank in time to run the business and then everything above that we distribute because we don't require capital to grow the business. So like an accounting firm, oftentimes I would put in that bucket like it doesn't actually require capital. Not really. I mean if you're like, yeah, it does is I would not compare to manufacturing. So like, no, but it's like there's, you know, there's levels here. But in reality the a lot of reason I've liked professional services and even consumer services for a long time is that they are super CapEx like now they're operationally heavy in terms of complexity, but the actual like they're free cash is great from those businesses. Like you pay your payroll in profits, profit it, and then when you bring someone in, they should be able to increase billable hours or, you know, increase the amount of income you make and you immediately can pay for that same thing out of sales guy in and they should pay for themselves almost immediately. So like that's that's usually I'd say like when we have more capital intensive businesses, I usually do one third, one third, third. That is not a rule of law. It is based. Now, there are some companies that we have. They're like, I don't want to take distributions. I want to keep opening locations. And I'd say like, you understand that, like we could lose everything. Something could happen as long as you're comfortable going, as you're like, I would be fine. You will not. So I let them make that call because it's it's they're like with with the professional services, low CapEx, high cash flow businesses, we typically just drop draw a line. And so everything else we take I'd like to get this answer in less than 60 seconds because I know we got to go and I want to be respectful of your time. This has been incredibly informative.

29:02How much of a skill should you develop or how much should you educate yourself before hiring for it? So, for example, like, do I need to be a sales manager before hiring or sales management? Yeah, one of the I mean, what you what you hit at is one of the hardest parts of business because you have to you need to make an informed decision without context, which is why being an entrepreneur are you into becoming a jack of all trades so that you can have enough context to make at least an informed decision? And so I'm going to steal a playbook out of it's wrong shoulder.

29:37There we go out of Leila's book here, and I'll give you my tactic on this, which is you want to interview for people who are sales managers and you don't want to hire anyone for a little bit, which sounds tough. But what you want to do is you basically want to interview for information. Now, if you meet a gold star, that's amazing, but you want to talk to people if you know more about it than they do and they should be teaching you. And once you talk to ten, 20 people, they're basically like expert interviews for what it should look like. And so then you get a very good idea of what the role should look like after listening to people. And you'll get an understanding of the level of nuance. And I'll give you this one little tidbit that is super powerful when it comes to judging skill. The quality and quantity of data that someone chooses to collect around their particular department is almost directly proportional to their skill. And so, for example, I have lots of marketers who were like, I'm going to make my products amazing. And I say, Cool, tell me your metric. So I was like, What's time to value, right? What are the key activation points? Like what's churn, right? Like just some of these metrics and they're like, Well, did our refund rates really look right? But I'm like, okay. I was like, Well, what about the marketing side? They're like, Well, CPMs are this. This is our click through rate. This is our you know, this is our conversion on the page. This is our percentage that's scheduled as a percentage to show this is percentage of break. This percentage like they go through all this stuff and I'm like, right. So I can see very clearly that you're a better marketer than you are product. And so simply getting an idea of the quality and quantity of the data that someone collects around their department, we'll get like when we hired our director people, it was the first time that I had someone actually tell me metrics I'd never heard of and I was like, These are lady. She's to go, this has been absolutely amazing. I have one last question and it will take less than 10 seconds to answer, I promise. Esca two PA remo false in the demo Premier League. Okay, My wife is French.

31:33She's bounced around here. I don't know. Well, but what part of France are your is your mother from originally? No, my mother at a Parisian mobile is a crappy. I'll you being so this is your blog If you are ever in France it would be an honor to take you and Leila out to dinner. Alex.

31:58Thank you so much, man. It's been an absolute pleasure. Have a wonderful rest of your day, and please keep changing the game. Thank you. Tyler, Talk soon, man.