Firm Leaders, What’s on Your List?

Gary Shamis Winding River Consulting

In the evolving landscape of the accounting world, firms need to manage growth and shifts in the right way if they are going to survive. Here on the podcast today, we are joined by Gary Shamis, Principal of Winding River Consulting, who shares the wisdom he has acquired in his long and illustrious career as a leader in this space.

Firm leaders will not want to miss the insights Gary shares as we discuss the key issues that should be on the top of every managing partner’s list and best practices for navigating these. Gary shares his thoughts on human capital strategy, the importance of building capacity, and how MPs should be approaching growing in today’s market.

Key Points From This Episode

  • Gary’s background and his career journey.
  • A look at Gary’s ‘What’s on Your List?’ framework for managing partners.
  • The need for firms to prioritize human capital and build their capacity.
  • The biggest and most common mistakes that firms make.
  • Gary comments on the power of outsourcing work as an accounting firm.
  • Creating a better working environment for the millennial workforce and providing a higher level for them to work at.
  • Gary’s thoughts on the most significant barriers to the necessary change and progress for firms.
  • The need for more conversations about diversity and inclusion in the accounting world.
  • Advice for leaders on how to facilitate intentional growth for a firm.
  • The trend toward mergers and acquisitions and the influx of private equity into the accounting sector.
  • Gary’s perspective on using advisory boards to navigate critical initiatives successfully.

Gary Shamis on LinkedIn
Gary Shamis Email
Winding River Consulting
Managing Partner Bootcamp
Building Blocks


[00:00:01] ANNOUNCER: Welcome to Branch Out, a Connection Builder’s podcast. Helping middle-market professionals connect, grow and excel in their careers. Through a series of conversations with leading professionals, we share stories and insights to take your career to the next level. A successful career begins with meaningful connections.

[00:00:22] AD: Hey, everyone. Welcome to Branch Out Podcast. I’m your host, Alex Drost. Today, we are joined by Gary Shamis, Principal of Winding River Consulting, a business advisory services company. Gary shares his 35-plus-year journey growing his CPA firm from less than a quarter of a million in revenue and a dozen employees to a nearly $100 million firm with 600 employees in the eventual merger with BDO. During our conversation, Gary discusses the top concerns that should be on every managing partner’s list in the best practices for addressing these. I hope you all enjoy.

[00:00:56] ANNOUNCER: Connect and grow your network. We are on LinkedIn. Search for Connection Builders.


[00:01:04] AD: Gary, welcome to the Branch Out Podcast, excited to have you here today.

[00:01:07] GS: Thanks, Alex. Happy to be here.

[00:01:09] AD: Maybe we just start off with sharing a little bit about yourself, your career and what you’ve done and where you are today.

[00:01:17] GS: Sure. Thinking maybe it’s best if I work backwards. Let me tell you where I’m at today, and maybe how I got here. Today, I have a boutique consulting firm headquartered outside of Cleveland, Ohio, called Winding River Consulting. We primarily work in the accounting industry. I do a little bit of work in some other industries, former clients of mine in another life and some stuff in the restaurant space, but predominantly in the accounting industry.

What we try and do is we try and help firms with strategy at the highest point possible. We don’t call ourselves people who do execution, but we do a little bit here and there. Sometimes what we’ll do is we’ll source that out to other people. Primarily, we’ll work with accounting firms on what their strategy should be today moving forward. It can be in a whole host of areas. Doing that for about five and a half years. Included with that is we have a course called Managing Partner Bootcamp, which we’re going on our 14th iteration of this. We’ve had about a 120 to be managing partners, or to be senior leaders in accounting firms really all over the world participate.

That’s called Managing Partner boot camp. We do leadership development training, and we do have a couple of other programs that we’re offering. Prior to that, I was the managing partner of a CPA firm for 27 years. I took that firm from predominately a startup to the 37th largest firm in the country. About 575 people doing about a $100 million, and we sold that practice and all related comp practices. We’ve actually sold the accounting firm seven and a half years ago to BDO, which was the largest transaction in their history. Then that was followed up by selling some of our other companies as well.

I spent my career pretty much getting that going and using different strategies to move it forward. Went to BDO after I sold. It was a bad fit. They’re pretty bureaucratic. I was pretty entrepreneurial. I still wanted to continue working and then I launched Winding River Consulting.

[00:03:11] AD: You’ve had a heck of a journey along therein. You and I’ve chatted a few times before and you’re very entrepreneurial. You’re very, it sounds like, and just hearing your story that that’s a little bit of what drives you. I respect that. I think that’s really neat and sometimes rare to see someone that has that drive. I’d love to take our conversation for today is, you told me that you do a presentation, or you have a thought leadership piece you’ve put together that you call What’s on Your List. It’s really around what should managing partners, or what should leaders within the accounting industry be thinking about. Knowing that our audience is more broad than just accounting, but I – we’re going to talk about this today, specifically around accounting, given that that’s where your expertise. Also, if there’s thoughts as we go through this, where it applies to broader professional services, maybe share some of those as well. Does that sound good for today?

[00:03:58] GS: Yeah. I mean, I think pretty much anything, you would be looking at, the accounting is going to be relevant, maybe with a little bit of maneuvering to other industry. I do think it’s pretty much relevant where we’re going to be going. Yeah, this presentation was actually, I did this at the BDO Alliance meeting. I did it in May. It was something new. It was a pivot from some other stuff I have been doing in the past, so I call it What’s on Your List. I think, we probably had about 250 people in the audience. I was basically telling them, “Hey, I’m going to pretend that I’m you guys. What should be really important to be in one of your firms today?” That was really the genesis for this train of thought.

[00:04:34] AD: I like that. Why don’t we jump in? Wherever you want to leave us off with that. Let’s start peeling it back a bit.

[00:04:39] GS: It changes. The list changes. I guess, the priorities on the list change all the time. Today, the one item I think that everybody should have on their list today really relates to have the capacity to do work. It really doesn’t matter what you’re doing if you’re the law firm industry, the insurance industry, or wherever you are in professional services. Everybody’s being challenged in terms of human capital and access to it and pipelines and not enough. Maybe the degree that the human capital that you’re working with is, how successful they are and effective and things like that. It’s a big issue everywhere.

What’s happened to the accounting world for a 100 plus years, it was the same model. The model was, hire younger people, create a pyramid, you make money. The young younger people work out appropriate work, you pay them, you make money off of them, and you work your way up to more senior level, people up to the partner level. That’s how it happened for a 100 years. Now, what you’re finding is because of a whole host of reasons, and it doesn’t really matter what the reasons are, but a whole host of reasons, you just can’t find that quantity, and maybe some of that quality with respect to your human capital.

What are firms going to do? If you’re really thinking that you’re an organization, and you really believe that growth is really important to stimulate the organization, attract quality people, you got to figure out how to keep growing, but you’re going to have this limitation and the limitation is going to be your capacity to do work.

What I’m telling firms or telling managing partners, in the olden days, what you did is your job was to talk to your HR director and say, “I need 20 people. I need seven insurance. These are the kinds of people we need. Work with your staff to determine.” You need tax people, you need audit people. What do you need? Then their role was to fill that. It’s just not like that anymore. You could pass along that order, but most likely that order is not going to be fulfilled.

Firms, I think you have to look very differently at that. I think the managing partner has got to orchestrate a set of situations in order to be successful. The situations are probably the easiest, and the one you would think of the most is just your hiring and retention. That hasn’t changed. That’s still a part of this equation, but it’s one we can’t count on to give us exactly what we need.

If I’m running an organization right now, I want to be sure that the people I have, I’m doing the right things to retain them and all the right kinds of things to stimulate them. Then, what am I doing to be effective in terms of hiring? Because there’s so much competition in order to hire these people. You got to be at your best in terms of that. That’s only a piece of it. Second, what do you have to focus on? I think you have to focus on your process. I’ve always said that organizations are really good to add, again, process the very poor taking things away.

Add something on, because you think it’s appropriate three years later, well, why am I really doing this? Is it really still appropriate today? I think, organizations really have to look at process improvement and how they can be as effective as they can in terms of process. We’re going to throw in there technology. Some of it is just plain, old process. Do we need this step? Can we take more risk here? Then also, certainly, the technology side of what you can do with robotics, and what you can do with artificial intelligence, other ways you can do that, too.

One of the caveats I always say about this is firms most likely are going to go through this process, are going to go through this exercise. What they’re going to do is they’re going to sign the person who built the process to want to go and analyze what’s being done. I think, that’s a huge, huge mistake. I think, you’re much smarter if you could go outside, and that encouraging firms that work, and they may have a managing partner networks of firms where they may work with. Go to somebody who like them, who’s got a firm similar to you and wanted to trade and take your tax lead and have your tax lead going, analyze their practice and have their tax lead, go and analyze your practice.

I think it’s a huge opportunistic business, if somebody wants to go into it, because the best we could see is there’s not a lot of people who do it. Those who do it, I’m not sure how good they are. Maybe they’re good, maybe they’re not, but there’s not enough. Regardless, I mean, that’s something you can be doing is looking to try and just get rid of process. In the accounting world, some of that has to do with risk and how much more risk you’re willing to take. The perfect example I always give is, is kids’ tax returns, accounting firms have to do kids tax returns, because they do the parents’ tax returns.

Usually, those kids’ tax returns are going to go through the exact same process on a very expensive and delicate and difficult return. The reality is why? Can you just ship them out there? Because they’re going to be right most of the time. Things like that, you potentially need to look at. Next is something that’s pretty easy to do, but I think firms are very ineffective doing that and that’s just quality practice management. Are there clients that you have that you should not be servicing anymore? They’re just not a fit anymore.

Somewhat, times that flies against the, I don’t know compensation strategy in firms, because most cases, partners are compensated for their book of business. Why do they want to give up clients, perspective of clients down the road. Those who practice management who are really in these organizations really have to pull that option. Basically, say that, we just have to get rid of clients that aren’t appropriate anymore. Now, that can’t be a hard and fast roll. I think you have to have some degree of sensitivity and logic to what you’re doing. You’re not going to kick out a 1040 from a kid, because it’s not enough money, but the parent is a $200,000 a year client. That’s not a smart thing to do.

Also, you really have to somewhat fight your internal culture, getting rid of clients and who’s not right and who’s not appropriate. That is not hard to do. I remember back when I had my firm, and really in the early days, I used to have this thing called the 10% rule, that was crazy. What would happen was, I’d say, well if I raise my rates 10% and I lose 10% of my clients, what happens is I get the same revenues and I have to work as hard. What happened was, I used to do that and I used to find out, I used to raise by 10%. Most people don’t want to switch accounts. I would lose somebody, but I would not lose 10%. This is the same thing.

You just have to have good practice management. Who’s not a good fit? Who do you need to get rid of? If you want to keep them, what circumstances would you keep them? Then the last component of it, which is really starting to catch fire is using outsourcing. Now, whether it’s domestic, or international, and then you make up your mind on that. That’s become a huge, huge element of accounting firms. When I had my firm 10 or 12 years ago, we worked with SurePrep, and we were doing 10,000 individual returns, and we outsourced a piece of all those 10,000 returns to SurePrep.

In essence, it was almost 20,000 hours. I paid them about $350,000 to do that. Then I had 20,000 less hours of needed people internally. At 17 and a half dollars an hour, it was a breakeven. I probably made money on it. Some of that was really based upon millennial workers and trying to get the low-end work away from them. But just this whole element of outsourcing. How do you factor that into what you’re doing? To me, it’s also, it’s a process and it’s an understanding of how to do that.

Probably the first year, you’re going to do what’s not going to go so well, and maybe the second and the third year, it’s going to go better and you have the right people you’re working with. It’s something, it’s going to take time to really integrate that model into what you’re doing. In the early days, everything was pretty done, was done in Asia, India, being in the bigger provider. What’s happened is now you’re seeing the Philippines being a provider. Then, now what you’re seeing is South America being providers. We’re doing some work with a firm in South Africa, that’s been doing it for a long time, but it’s just opened up maybe a pathway to do while I work in United States.

What is it? Is it tax work, is an auto work? How does this work? That’s becoming a big component. What I’m also seeing too, is I’m also seeing the pandemic has really helped that, because of this whole idea. We wouldn’t think that we can work virtually today, like we had to work. What’s the difference if your colleague is in South Africa, in Johannesburg or Cape Town, versus if they’re two blocks away? I know that really opened up the door to acceptability in terms of that.

Number one on your list is going to be creating this capacity. It’s going to be the conductor of the orchestra with many pieces. It really becomes a senior leadership role, as opposed to just that HR capacity long go and for. That’s the first thing on those.

[00:13:29] ANNOUNCER: This is Branch Out, a Connection Builders Podcast.

[00:13:36] AD: I want to peel back a couple of things in there that I heard you say, I think, are really interesting. Make sure I’m hearing this right. Your point, this is all about capacity. This is all about, at the end of the day, if you’re a service providing firm and in this case, specifically a CPA firm. If you don’t have capacity, you can’t grow. You have to have that capacity. That capacity, as you said, the base of that is really around hiring intention, so around your people. That is what creates that capacity. Some of the additional leverage, of the additional ways to increase that capacity was process improvement, technology, quality practice management, pruning, or trimming clients and outsourcing. I’m obviously saying those at a high level.

What jumps out to me is that to me, in thinking about this, the younger generation workforce, the millennials, or Generation Z now even, when you look at the process improvement, making things more efficient, more effective, more seamless, technology, leveraging the scale that technology can help with, or quality practice management, getting away from those clients that maybe are more work than they’re worth, sometimes that you’ve just held on to for far longer than you should have, or outsourcing some of the lower value add, maybe the work that isn’t as rewarding, I think, and I could be hearing this from.

I think from a younger workforce and building the right people retaining, hiring, finding and keeping the right people, a lot of what you’re describing is also about making your life easier, if you will, or making their job maybe where they’re focusing on higher and better value tasks and in creating a better environment. Is that a fair way to look at it? Or do you think there’s an effect around that?

[00:15:08] GS: Yeah, there is. I would say, and this is something I’ve been talking a lot about over time, and it really has to do with the millennial workforce. Yeah, the millennial workforce is going to be very accepting to this. The challenge is, as many of these firms are stolen by baby boomers, they don’t get this. How am I going to do this? What are my clients are going to think about this? I think, it’s incredibly accepted and understood and really fits well with this younger generation.

Then also, if you look and one of the first things I talk about was your traditional hiring and retaining. If you look at millennials, you look at what a millennial workplace is going to look like, there’s a couple items there that really are benefited by this approach. That is the level of work. They don’t want to do the lowest level. They don’t want to be micromanaged. They want to be able to work at a higher level earlier. I think a lot of this gives play to that, which really could help on the retention and potentially the attraction side of that piece of the equation.

[00:16:05] AD: Yeah, I think that’s interesting. Maybe before we jump on to next on the list, when you talk about this as a whole of this capacity, what do you see as being the biggest barriers? The biggest challenge? I know, you alluded to a little bit of the baby boomers being the general decision makers, but is there – maybe dig into that a little bit more. What gets in the way? What gets hard?

[00:16:22] GS: Well, I think everything that gets away, and I’ve been saying this for years that the biggest problem in the accounting profession, probably the legal profession as well, too, is these firms are still owned and managed by baby boomers, but they’re populated by millennials. I think that is absolutely the biggest problem there. The baby boomers don’t get it.

I in the accounting industry, I’ll tell you, this is a ‘follow me’ industry. If somebody’s doing it, they begin following. If you look at outsourcing, and we were doing it 10 or 12 years ago, we were to sell on the outskirts. We were so ahead of the curve in terms of doing it. At the BDO meeting in May, I think they asked the question, how many firms are going outsourcing? I think it was 40% of the firm. 60 still weren’t.

There was, they have 250 firms in the line. That means there’s a 100 firms out there, there’s doing outsourcing. Just being at the conference, the major sponsors with the biggest booths running all over the place for two or three or four outsourcers, think back five years ago, it wouldn’t happen. Now, it’s becoming much more acceptable. It’s just now becoming the mainstream. That’s a lot of what’s happening in public accounting. Once it gets to the mainstream, it starts happening, and now you’re seeing a lot of momentum picking up with it.

It’s still all baby boomers. How can I do that? How can I send my work over to Asia? What are my clients going to say about this? How can I not have people working at home out of these virtual work environments? I think that’s the big issue. I think the younger the leadership, the younger the management, the more forward-thinking I think the more successful you’ll probably be.

[00:17:55] AD: Based on at least what I’ve seen, I think that does apply more broadly than just accounting. I think it’s across the services industry, and law firms and others alike. Let’s jump on. What’s number two on your list?

[00:18:04] GS: Number two, I think it depends upon the firm. Number one is everybody’s dealing with that. Number two, there’s people who are more successful. There’s things like diversity and inclusion that are on the list. Three or four years ago, I used to own a conference with a couple of colleagues, and I wanted to start talking about diversity and inclusion. They told me, they said, “Oh, nobody wants to listen, so we’re not going to do that.” The reality was, they were right. I mean, nobody wanted to listen. The reality is today is diversity inclusion is an element going forward. I’ll tell you, where it’s really going to really start influencing accounting firms. A lot of it’s going to be with prospective clients, where clients are going to say, “Listen, tell me what your diversity inclusion policy is, and give me your numbers.”

Now, that may not happen with privately-owned entrepreneurial businesses, but it sure as heck going to happen when you’re going to do in large not-for-profits during the not-for-profit link. Or if you’re playing in that upper market of the publicly traded companies, it’s going to be issue going forward. I have a colleague of mine who spends a lot of time on it. She talks about just being intentional. That if you’re intentional in trying to solve the problem, you’ll solve the problem. If you sit there and don’t do anything, nothing’s going to happen in the problem.

A lot of people are going to say, “Well, I can’t do anything about it, because it’s based upon the intake.” The intake is at a such higher level than what I deal at. People entering national basis at industry and I can’t influence that. You’re right. I mean, it’s hard. I mean, those are just huge obstacles going forward. It’s an obstacle. If you look at the accounting profession today, the ownership at these level is still for the most part, white male baby boomers. Females have made a huge input into it, but in terms of people of color, it’s just not where it needs to be.

If you look at where this country is heading, and the demographics of the country, it just doesn’t match the industry. There’s going to have to be some major changes there. That’s going to be on the list. Maybe it’s not on the front burner, but it’s got to be on the back burner at some point in time. That would be on the list.

One thing that we’ve been spending some time on that I find to be very interesting is this whole idea of growth and how you look at growth as an organization. What’s happened is, is that for 100 plus years, accounting firms grew one way, and the way they grew was based upon creating relationships. Whether you’re a country club, whether you’re involved with philanthropy, symphony, whatever, you would go and try and position yourself to create relationships going forward. From those relationships, try and grow your practices.

What we found, certainly, which has accelerated this is a pandemic is that nobody was able to retain those relationships for two-plus years. You wouldn’t go into the country club. You weren’t doing the same things you’d done before. We actually were doing a study for a significantly-sized firm in the south. They really wanted to help us with their growth strategy. I told them, I said, this is something we really don’t do. They said, “Well, we really want you to do it, because we think you want know the industry, and etc., etc. So we did it.

What we came out with is, we really came out with really three different prongs to looking at growth from an accounting firm. The first is an M&A strategy. Having been in the industry for so long, I will tell you, most firms have a serendipitous strategy, not a thoughtful strategy in terms of how they’re going to grow. They might pick a city, and maybe that’s strategic. But I heard they’re going to end up with the city, it’s going to be very serendipitous. Do you have a strategy in terms of your M&A strategy? What does that look like? Where  you want to be? What are you trying to accomplish? Are you trying to follow over in a call? Are you looking to be in a region that has more college graduates, so you can focus on the other side of it? What is that strategy?

Are you eliminating firms that have succession issues, because now you get those issues? Looking at that much more closely, and maybe even going into things like maybe verticals of higher levels in terms of getting people to join you, to try and get sided effort, was laterals at higher levels, and move a lateral over. The second hole, our areas in digital and we got exposed to a business that actually do a podcast just like this. I’d written one of my most recent book, and somebody asked me to do a podcast. We did a podcast. We ended up hitting it off, and we ended up representing this company and the company is called The Real Estate CPA.

This is a 31, or 33-year-old kid who started a business five years ago and is doing probably 7 million dollars in business today. 100% virtual on his employee base. He has clients in every state, and he has created this company totally virtually, focusing on one vertical being real estate. The whole idea is that I use 40 is the cut off. If you’re over 40-years-old, then you need a new account. What are you going to probably do? You’re going to probably ask for references. If you’re under, 40 you need to account. What are you going to do? You’re going to do it on the Internet.

You buy some real estate, you own a fourplex, and you want to find someone to help you when you go real estate CPA, he’s going to pop up number one. He’s going to have a search engine optimization, number one. This guy, this young man is getting almost 300 leads a month. His biggest problem is vetting leads right now, because he’s just really hit on something. This whole idea of adding digital component to your marketing, if it’s a vertical, or how you do that has become a new element.

Then the third element to that would be the traditional way you’ve done it. I think, if you’re leading a firm, I think you have a huge opportunity to look at growth differently. When I had my CPA firm, our largest verticals are on restaurant practice. It was the largest restaurant practice in the country. We had 500 restaurant clients coast-to-coast. I think how hard that was to do over a 15-year period, being in Cleveland, Ohio and convincing somebody in Seattle, or San Diego that we should be their new accountants. We did it and it was really hard. I think about how much easier it is today to do something like that, if you want it to look at that. That’s an element I would definitely be putting on my list in terms of where we should be potentially going, moving forward.

[00:24:11] AD: I want to summarize a couple things I heard from you. I want to come back to the DEI component in a minute. In terms of growth, you said serendipitous growth versus intentional growth, or thoughtful growth. The thought process that for many firms at times, it seems like the growth is, well, we might identify the city, or we think this is a market, but there doesn’t – at times, seem to be a real thoughtful strategy.

What would you say to firm leadership, somebody that’s sitting in a leadership role today to really become more, I guess, thoughtful or more intentional on what that growth strategy looks like?

[00:24:45] GS: Well, a couple of things. I mean, first of all, you would set parameters on what you don’t want to do, and that’s going to eliminate something. The perfect example today is there’s been so much M&A in the accounting industry, and that’s really because smaller firms can’t build a succession plan. Because they can’t. They’re not doing the right things to attract millennials and the way firms used to succeed in the past for the most part was that a firm would only sell to the younger people. Well, you can’t sell to younger people, and there’s value how they potentially get rid of this firm.

Do you really want to buy that kind of firm, a firm that could be a good firm and could have some good clients, and you could be interesting, but they have no succession plan? You’re basically buying in to creating the capacity to handle that firm and the relationships going forward. That’s a really tough mountain to climb. That’s probably not makes the most sense. Other parameters you could have as client is partner ages. What you find is, if you have partners who are 65-years-old than most current, their clients are probably 65-year-old type clients.

That can be great if you’re really focusing on estate planning and personal wealth management. If you’re an entrepreneurial type young group, probably not going to be a good fit. You certainly could look at parameters. The other element that you just don’t see, and I know it’s really hard to do it is to do the research and trying to find the firms that you think it was the best, and maybe approach those firms. Now, certainly, it’s a long shot. Do they really want to? Are they actively looking at? The example would be, we were in the restaurant industry and here’s a firm in Chicago. We found that 60% of what they were doing in the restaurant industry was such a perfect fit for us.

Once we mentioned it and said, “Hey, does this make sense?” We did a deal, and we combined with them. With a very short period of time, we totally owned the restaurant practice, and probably the number one restaurant city in the country, in Chicago. That was being intentional in terms of trying to find firms you’re going to fit what we want to accomplish. Most of the time, what you’re saying is, “Yeah, I want to go somewhere.” You find somebody and you figure it out. That whole process, I think, a lot of people understand it. I always talk about, when a train leaves the station, sometimes it’s hard to stop the train. Maybe you got to think about, before you start the train, how does this going to be fit? Does this make sense to really do this? There’s a lot at stake.

I mean, a bad – there’s nothing worse than a bad merger. The hard to get out of, culture and ruin a good thing. There’s not lot of things I think you need to worry about, trying to do it the right way.

[00:27:18] ANNOUNCER: This is Branch Out, bringing you candid conversations, with leading middle-market professionals.

[00:27:26]AD: Your point of being thoughtful about – call it targeting. I’m putting on my investment banker hat on here for a minute. Thinking back, I’ve done some work in proactive by side, target search in and trying to push through an acquisition. My lesson from when I spent time doing that was one, it takes a lot of time. It’s usually not the very first phone call that something goes somewhere. It does take time to introduce the idea to have the conversation and keep things moving there. It sounds even just starting to put some of that proactive thought into it can drive a lot of value there, and start those conversations because you never know where it went. In your case, you’re describing where you did that, and what it did is it opened up an opportunity to really allow you to take over and become that dominant player in that industry.

[00:28:11] GS: Yeah. I think one of the challenges in the accounting industry is because we were talking a little while ago about how it’s a Follow Me industry. People have really accepted the fact that these M&As are big, some people have convinced themselves that a small firm, they can’t compete anymore, they have to get to a larger firm. There’s a lot of willing sellers today and willing buyers at the same time. That’s really what’s been feeding this real frenzy. I get it. I’ve been in the industry forever. I know, selling my firm as part of BDO. There was advantages. The advantage was, or things like the fact that was important to us international tax as we got bigger with our clients. It was hard for us to get that level of expertise in international tax. A BDO gave you that.

Are there ways to fulfill that without merging with BDO? Yeah, there are ways. You can work with other firms. You can join alliances, so you don’t potentially have to exactly do that. It’s just understanding that can you still be independent and succeed? I personally think what’s happening with this whole industry is you’re seeing this tremendous amount of M&A, and also, private equity in the arena, too.

What’s happening is everybody’s moving upstream. They want to move upstream. People don’t realize this, but let me just mention this. It’s to me, it’s interesting is that 20 years ago, this is the 20th anniversary. It was last week of Sarbanes Oxley. What happened was Sarbanes Oxley is that they created this whole additional tier of work for the Big Four, the Big Four just before that went from five to four. Manderson folded. What’s happened is the big four really abandoned the upper end of the middle market and maybe called some of the lower end of the public market.

I don’t think we realize how big a space that is. In this big country, it’s huge. It’s billions and billions and billions of dollars. What’s happened is we found, call it the top 10, 12 firms, take away the big four, maybe take away the next three, but maybe of 10 firms after that, they’re now all approaching a billion dollars in revenue. These firms have reason to go into that market.

Now, from my perspective, I’m not a 100% sure why after being with BDO for a short period of time, because it didn’t excite me. The relationships are not a value-add relationships. They’re a compliance relationship. I like helping people. I can help a small business. I can’t help GE, and they’re not going to listen to me, and I probably can’t help them. What’s happened is you find these businesses have grown into this market, these major competitors. You could look at a Dixon Hughes, which is in the middle of the southeast. Now, they’re a billion-dollar firm. They merged and now they’re called FORVIS. Now, they’re this huge firm.

Now, you’re a middle market company who used to be using Dixon, and you’re saying, is his really where I want to go? Is this really where they’re spending the effort? I believe, there’s been this huge opportunity created in the middle market, if you want to stay in the middle market. You need all these bells and whistles to be firmly in the middle market. The answer is probably not. I’m seeing firms jumping on the bandwagon, and I scratch my head and saying, boy, you’re jumping on the bandwagon when there’s a chance right now. They have a huge opportunity, if you’re willing to be in the middle market going forward, because your toughest competitors have abandoned the market and attempted to move upstream.

[00:31:40] AD: It’s an interesting perspective. I definitely, sitting on the sidelines watching, you see a lot of the M&A activity happening. Your example of DHG and becoming FORVIS. These large mergers that are occurring and BKD. Sorry, BKD –

[00:31:53] GS: BKD. That’s what I meant.

[00:31:55] AD: Becomes FORVIS. What you’re really describing is that the reality is, and this is if you’re a firm leader listening to this on that small, or middle market size, you don’t necessarily have to either merge, or try to get to that next mega size. There is an entire swath of the market here, the middle market that needs servicing, and is as your to your point, some of the bigger players are swimming upstream and leaving a lot of opportunity there in that middle band.

[00:32:21] GS: Well, when we merged with BDO, I mean you could – BDO, they would have ads on, Meet the Press. You’re watching Meet the Press, and you’re off three dentists together, and you were part of my old firm SSG, and now you’re part of BDO. You got to be sitting there saying, “Do I really want to be with an accounting firm that’s advertising on TV? Is that really where I want to be?” The message is, it’s probably not the fit. That’s where I think that we still have the significant opportunity is firms willing to stay in the middle market. Having done this my whole life, I mean, I started with, with the big eight firm. When I started my firm, I went from number eight to probably number 40,000. Then we merged, moved all the way up to number five with BDO when we sold to them.

What I like, is I like helping businesses. I like helping people. It’s very different. It’s just not wrong. It’s just different. These companies that they work for, the companies have a lot of smart people, just the smartest, the accountants, so they have that internal capability. Tax strategy, things like that. They don’t have to have the accounting for investment, just so will be the helper on that. You focus on this middle market, and if that’s what you want to do, you got people who really going to listen to you and potentially need your help.

[00:33:37] AD: I think that makes a lot of sense. Winding down here, before we get to the – do want to go back to DEI for a moment? Because you referenced that earlier, the importance behind that. I guess, my question to you, maybe this is a broad question, but I’ll ask it around DEI in particular. All of these things we’re describing, whether it’s the intentional strategy for growth, or taking time to focus on quality practice management, or taking time to reevaluate the processes that you have and improve them, or focusing on a DEI initiative. All of that requires the firm leadership to invest time and energy and resources in it. None of that will just happen. All of that requires, and one of the greatest challenges that I’m sure you can relate to from your role here, it’s often time, resources, money is sometimes an element of it. It’s really a time oftentimes. “I got too much going on, too many things going on.”

What do you say to someone to think about, how do you create time? Or how do you really prioritize these things and make them happen? Again, using DEI as an example, to really make that initiative come to life and be successful?

[00:34:38] GS: Well, a couple things. Number one, this is tangential to that is I’m a huge believer in advisory boards. I sit at a half a dozen advisory boards. When I had my firm between 1999 and we sold in 2014, we had an advisory board. We used to meet twice a year. That was really helpful to me to get their perspective. These are smart people with different perspectives. Also, had an edited degree of accountability to what I was doing to get things done. That was really helpful.

In terms of just the time, so we talked about that at boot camp a lot. There’s probably not a bigger believer than anyone in the country than me, that if you’re running these organizations, if you could do so without having any direct client relationships, you should do so. You should be spending your time on the business. Now, what happens is, if you start moving down the spectrum, and you get to smaller CPA firms, I understand it’s much more difficult to do that. Because if you’re a three-partner firm, and you’re the managing partner, they just need you servicing clients.

There’s a point that I’m not sure what the point is, but it’s probably a firm, it’s 10 million dollars on up, where there’s probably a legitimate argument to take that managing partner and have that partner focus on nothing but one client and that client being the firm. In 1999, we did that at my firm. I probably had the largest book of business. I gave up my clients and I focused on running our firm. We grew from 12 million to a 100 million dollars in the next 15 years. That would not have happened, if I was still servicing clients.

When you tell people to do that, “Oh, I can’t do that. These are my clients. They need me.” The reality is, what happens is, whoever you’re going to give it to, if it’s running well, you’ll never hear from them. If there’s a problem, you’re going to be the first person they’re going to talk to. You still have that relationship with the client at an as needed basis going forward. To me, you just need to create the time. I talk about that in the bootcamp. The example is that if you work an hour on a client, how much money could you make? Or if you work 500 chargeable, or 700 chargeable hours on a client, I mean, how much profit is there, versus taking that hour, and in my case, having 575 people working with me, is to take that and see how I can make all them a little bit better, a little bit more productive, things like that. It just works. To me, that’s really important.

Now, one of the items and this is stolen from the law firms, because accounting firms didn’t do this, but I’m a big proponent of doing this right now, is – some protection to the person willing to take that risk. Because in some ways, what happens is your clients, or your equity, and the thing you could fall back on is your clients. If you give them all away and you do a crummy job managing the firm, what happens? Are you out? What I tell people, if you’re going to take that and that’s a concern for them, give that person a get out of jail pass for two or three years. Reinstate their compensation and agreed upon level and give them a chance to rebuild their practice.

At least they’ll know that it will mitigate the risk in terms of them taking that lead in times, in terms of running the firm. I think that makes sense. Nothing happens without change. My favorite course that I teach at bootcamp is a course on strategy and execution. All of a sudden, you become the managing partner. Well, what were you? You were an accountant. You’re a tax accountant. You’re an attorney. You’re an audit person. Now all of a sudden, not only you’re running the firm, you’re the chief strategist for the firm. You’ve never done that before.

I spent a little bit of time talking about how you develop strategy. What are the things you could do? I talk about getting outside of the bubble. If you stay in the bubble, you’re dead. I mean, you don’t get outside advice. You don’t look outside your organization. Get outside of the bubble. I also talk about is that strategy is not hard. Strategy is really easy. What’s really hard is execution. Execution takes time. In order to execute, do have the time to ensure you can execute. Then what comes along with that is this whole element of delegating, having people accountable to you and trying to move this forward.

That’s one of the reasons why I like having this outside advisory board. Because to me, what it was is this was an element that made me become accountable and to get execute. I tell people, growing my firm to where I was at, the thing that we were the best at, we were better than anything else in terms of executing the strategy. We were great at, now pick the right strategy, of course, but we were great at executing that strategy. That’s really what got us from pretty much a startup to a 100 million dollars, which is incredible ability to execute what we wanted to do.

[00:39:20] AD: Well, and it sounds like that, a component of that, the excellence and execution was having the time and dedication to the working on, versus in the business, that element of really, it’s a core focus. It’s not something you’re doing after 9 to 5. It is the 9 to 5, and focusing on that.

[00:39:38] GS: Right. It is. We talk about that a lot. I mean, exactly as you just laid it out. We talked about working on the business as opposed to in the business. If you’re looking to grow, you’re looking to be more successful, you’re looking to move, move forward. I mean, you got to do that. You got to work on it. You can’t be working in and it’s not going to change.

[00:39:59] AD: Absolutely, absolutely. Well, Gary, I appreciate you coming on here. I appreciate the advice you gave for everyone today. You’ve mentioned your Managing Partner bootcamp. We will make sure that’s linked in the show notes below for any listeners that want to check out and learn more about that. For anyone who wants to get a hold of you, Gary, how can they get in touch with you? What’s the best way?

[00:40:13] GS: Well, one more thing I want to maybe mention, too, is we just came out with a new book and the new book we just came out with called The Virtual Office. This was from our perspective. Then my book that I just wrote a couple years ago, I think has some benefit to those interested. It’s called Building Blocks. We’re on our second or third edition, and so probably 10,000 of them out there. That’s a pretty good one if you’re interested in that. If they’re interested, we’re Winding River Consulting. I’m Gary Shamis. [email protected] Give us a call, or holler if you think we can help.

[00:40:43] AD: Well, absolutely. We’ll make sure that that is linked in the show notes. We’ll have the link to the book as well and your Managing Partner bootcamp. Again, for listeners make sure to reach out to Gary. Gary again, I appreciate you being on here. Appreciate your time and contributing to the show today.

[00:40:57] GS: You’re welcome. Thanks.


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