On this installment of our Trailblazers interview series, we interview Michael Ly. Michael is the founder and CEO of Reconciled It, a cloud accounting firm recognized as a "Firm of the Future" by Intuit. Reconciled It employs over 30 staff and has grown 100% year on year for several years.
Amazingly, that only takes up 50% of Michael's day. The rest of his time is spread between two other ventures and coaching other firm owners.
In this conversation, we speak with Michael about:
The recent Expensify announcement
Building a scalable growth engine for his firm
His learnings from coaching dozens of other firm owners, and so much more!
Read or watch the full interview below.
Michael, do you want to quickly introduce yourself?
Yeah. I'm Michael Ly, I'm CEO and founder of Reconciled, and we're an online bookkeeping and CFO advisory practice, based out of Burlington, Vermont with a national presence in the U.S and we have over 40 employees now scattered in about nine States I think, working with hundreds of entrepreneurs and customers across the country. I'm married with three young kids, I married a Vermonter. That's why I live here.
And I would probably fashion myself to be a serial entrepreneur. I don't really think of myself as an accountant. I started two other companies in the past two years. One of which is more in the HR space and is run by a separate CEO, my business partner. A separate CEO, Laura Pillsbury. And then, I started a financial reporting application called Saasable last October.
And we launched this year in the QuickBooks online store now. And that's an analytics platform for a recurring revenue company. So, I have a lot going on in my life. But I enjoy food. I enjoy people, I enjoy Yosef and I love talking and sharing, and so happy to be here and happy to talk with anybody and I love meeting new people all the time.
Amazing. And that's really the goal of this series, is to talk to people like Michael Ly, who blaze their own trail as it is. And really, I think everyone when they're starting their own business, they have a unique perspective. And every business is different, and the way that they go about to solve problems and grow their business is often unique. And they're often lessons that we can all learn whether we're talking about a SAAS business or an accounting business. There's a lot of parallels 100%.
I think perhaps the most interesting thing that happened in the last 30 days from an accounting industry perspective, and it had national press talking about it, which is hilarious in its own way, was the expense by human.
There was a lot of strong opinions, a lot of strong opinions, a lot of negative opinions. When you're an expense by customer at least work at the expense by customer. What was your initial reaction when David Barrett's email hit your inbox?
I read it, and whenever I read something that gives me a strong reaction, I always take time to process, well, why did I have a strong reaction? And I thought it was an inappropriate email. I think that what they wanted to write and their opinion about it, they could have written and posted somewhere that was probably more personal to David, or maybe a venue that didn't feel so intrusive to both myself, but also to the customers that we've put on Expensify.
And the fact that they really didn't solicit feedback from the accounting partners or permission that we would want an email like this sent to our customer base. So, I really took the weekend to think about it. And I thought it was inappropriate. I thought the venue was inappropriate, whether or not I agreed with the actual message itself is a completely different, I just thought that the way they did it and the way they tried to communicate it really alienated a whole group of people, a large group of people in a large segment of their customer base in partner channel, that they could have really avoided if they did it a different and more tactful way.
And did you get clients of yours reaching out about the email?
Yeah, we had a few come reach out, and we had some obviously that ignore expensive vice emails, because they go to the spam or they go to promotions folder or whatever, which is great. I'm glad. We luckily didn't have any that were so upset that they wanted to leave us or leave, or have to create damage control for us, which was helpful. But we definitely had employees as well as customers who had strong negative reactions to it. And so he really helped me think through how I would want to respond, and ended up writing a post on our Reconcile blog about it.
And almost as a different perspective, also a different way of approaching it and communicating a more inclusive message than what Expensify was communicating.
Yeah. I tend to agree. The medium and the channel chosen is not great especially when you're relying on a channel too, and relying on a channel social capital to introduce your product, you want to maintain that as a high trust relationship, and asking for permission is generally the way you want to do it for sure. I read your post, I thought it was great.
It's like both sides of America, I'm based in Canada, so I'm going to speak in that way about our country it's a bit divided, but it's probably maybe just, it's louder in a certain respect and there's lots of reasons to vote on both sides of the aisle. And you don't need to come out from a place that articulates it in such a strong manner perhaps, it's the way to say it.
Exactly. And there's a variety of reasons why people choose to vote. And there's a lot of reasons why people don't choose to vote, or can't vote. And that's what I felt the email did not address at all. It was not inclusive in that sense at all. And so, I talked a little bit about, and you can go to the Reconciled blog and read about it. I talked a little bit about my family history.
That if my parents had received an email like that they're entrepreneurs, they received the email like that when they weren't citizens and unable to vote at the time, that is a reminder of exactly what they escaped and came to this country for, that messaging, that rhetoric of, you must do it this way or our way, or you don't believe in the values of American life or democracy or whatever.
So, I talk about those that I felt it was poorly communicated, that the medium was wrong. And that there's a better more inclusive messages that include more people. And it counts in general. I've met accounts, and you've met accounts from all walks of life in the U.S and in Canada, that come from a variety of political backgrounds, a huge variety from different States and stuff.
But in general, when you go to County conferences, there's a lot of unity. There's a lot of inclusiveness. There's a lot of sharing, open doors, friendship, that are not divisive like that email was. So, I think for the County community, it wasn't that people in the community didn't necessarily agree or disagree with the message itself, it's that it didn't come off inclusive and welcoming like the community is and has become, and continues to become.
And I think our conferences and when we get together and things like this, where we talk and share or an example of none of us care about your voting background or mine, or whether you did decide to vote or not, because we're going to be inclusive and share what matters to us in our business, and in our life. And so, that's really what I cared about when writing.
And that's what we're promoting at Reconciled, and all the companies have started is inclusive environment that accepts and embraces people from all backgrounds and opinions, because that's the diversity of entrepreneurs and accountants, is all backgrounds and opinions and cultures, and walks of life, and religion and faith, and whether they choose to vote or not, it's their choice. And that's the beauty of being in a free country. So yeah. Yeah, hopefully that makes sense.
Absolutely. I remember, now I guess it's been many years, but when I first entered the accounting industry and saw the way that people did collaborate and shared, "Hey, this is what's working for me, here's what's not." With people that would seemingly be almost competitive, just from the outsider's perspective. And it was amazing. And I was like, "Oh, this is just a totally different mindset." Where there's just so much business to get that it doesn't matter, and everyone's going to have their own cut on this.
So yeah, it's really an amazing inclusive community, 100%. As we look at 2020, and I guess it's coming to a close, I think most people are probably overall happy about it. I've talked to a couple people recently. They're like, "Yeah, looking forward to 2021." I'm like, "Why?" They are like, "It's a fresh start."
Let's just reset everything.
For Reconciled It, how has your business adapted this year?
I would say that, because of the nature of how we were set up already, there wasn't really much adaptation that was needed. There were a few internal changes that we made. For example, we had a number of part-time employees. We began transitioning part-time employees out to only focus on hiring full-time employees and offered all our part-time employees full-time roles, or help them find other roles, or gave them contractor positions with us.
That was an internal change, but from an operation standpoint, nothing really changed much. We continued to serve customers, we tried to make sure we operate as efficiently as possible in our operations team or client delivery team. And we continued to grow our sales and marketing team to continue to acquire customers throughout the country. We've had record months. So COVID really has not impacted us.
We had a small blip in the first month maybe in March or April, but then everything was unknown to everybody. And probably most firm owners maybe went, "Whoa, are we going to be out of business, or are more businesses going to closed or be adjusted?" And the reality was, because we focus on online companies, because we focus on consulting firms, digital marketing agencies, all of those industries grew and did very well. Alcohol and breweries, they all did very well during COVID so we were benefits.
And it's funny, we benefited from the fact that we didn't niche, which is a big, big, big conversation in the past five years in accounting, as button niching into verticals, we didn't niche into any verticals that were brick and mortar. We didn't niche into restaurants, retail stores, cafes, small coffee shops.
And those were the industries that were decimated or mostly impacted. We didn't niche into travel hotels. We really niched with no strategy, really. It was just luck. So, the only other I think big change this year was, I began the year before COVID and then entered into COVID really testing out the thesis with a roll-up strategy and acquisition strategy that we wanted to roll out this year.
And we're very successful at talking to the right capital partners, and firm owners that were interested in selling to us and merging into Reconciled, so that they could have more growth opportunity both for their employees and their customers. That was a great exciting thing this year. We were able to wrap up our first acquisition a week and a half ago, in beginning of November. And we're hoping to do a next one by February 1st. And so, that's on top of our just organic growth path that we already have going on with ourselves. So, that's been very exciting.
Nice. And was there anything that surprised you this year? Assuming coronavirus global pandemic, ignoring that huge elephant in the room for a second, what were the surprises that came up as a result of all this change?
I would say, well, one was, I was surprised the government rolled out the PPP loans. I was very surprised and the EIDL loans, they basically gave the equivalent of a cheap mortgage to small businesses across the country and two and a half months worth of payroll for free. I mean, now it's obviously taxpayer dollars ultimately are going to be paying for this. It all obviously rolls into taxpayer dollars, but I was very surprised.
And I was very surprised that there wasn't stronger requirements to get those funds. So those were a big deal, but for the companies who took advantage of those and leveraged it both to keep staff and talent, which is in accounting, I would estimate, I don't know official numbers. I would estimate that in accounting, there wasn't as big of an impact in unemployment, as we probably imagined because most accounts were able to work from home.
So talent, I think continued to be the big, big, big, big challenge. Talent and finding great talent. It continued to be a challenge before and after COVID, and during COVID. We double down on talent, we continue to hire, we continue to find the right people. We continue to have massive amounts of people apply, but I was surprised at the stimulus and the amount of stimulus, and then how resilient it made some industries, and the exponential growth that digital marketing and e-commerce, and some of these industries online SAS companies were just having, it was just gangbusters.
And then, where the stock market's been at has probably been super surprising that it's basically fully recovered on the stock market level. And so, all those are signals going, "This is just odd and surprising and completely different than the messaging of what the impact of COVID should have been to our country, and to our economy." It tells you about the resilience of people, the resilience of entrepreneurs, the resilience of accountants.
I know many County offices that did not shut down at all, and honestly doubled their workload because of how long the tax season went this year. I know many that did not, and I know many accountants who said, "I still want to go into the office. I still want to see my coworkers, I still want to work hard." That was very surprising, but speaks to how amazing the accounting community is and how dedicated they are to their clients, even though it's grueling and the hours can be grueling. It's pretty amazing to watch.
Yeah. The number of conversations we've had with partners about them leaning into their client's businesses to help them get through this, it's inspiring. It really is. And so, as you look ahead to that fresh start in 2021, what are the areas of investment for your firm?
Well, we are definitely making investments in people operations, HR area. We'll be adding team members. We are in the early phases of building out our own technology solutions internally for Reconciled, mainly around workflow, task management. We really want a solid tool that can scale with us, and not have to rely on the tools made for smaller teams, because we expect to probably be somewhere between double or triple the size within the next year, from both revenue as well as in people perspective.
We want to make a better process for our contractors. We have about 20 contractors that work with us in a variety of other roles like CFO work, or controller work, or projects. And we want their experience to be a lot better than it is right now. We've really focused so much on our employees that our contractors have less ideal experience than we would like, so we're investing in that, and then acquisitions. We'll be doing hopefully three to four acquisitions next year, if not more.
So, finding those right firm owners that are ready to exit, or maybe are wanting something bigger and better for their team, and they want a partner that can carry on their legacy. So we're excited about that. And of course, it's always looking at new apps and seeing which app partners have upgraded themselves and are going to be a better solution for us than our current ones. We're always evaluating those every year, whether that's payroll partner, app partners like Relay, app partners like Expense Reimbursement.
We're re-looking at everything all the time to make sure it's serving our customers the best, and there's new platforms coming out every year. And there's better platforms. It's very interesting, our space, the accounting and FinTech space is so hot that it seems everybody is able to start something and is coming out with something. So, finding those right partners that best serve Reconciles' customers, I think is an area we're going to be investing as well.
It's funny how times change.
Is that funny?
Oh man, that just makes me want to share so many stories. Okay, let's keep going. As we did our research to get ready for this interview, one of the themes that came out about how you've grown your firm is really around experimentation. You've just tried a lot of stuff. Is that a cultural talent that you've embraced as a company? How do you think about experimentation in the context of running an accounting firm?
Yeah. One of our team rules is always be learning. So, literally this is what we tell every employee, always be learning. You need to be learning. And I don't necessarily care if just accounting related. I think it comes from the fact that I've spent my whole life learning. I had to learn after my parents came to the country and I was born. I had to learn how to grow up in a home that wasn't very American, surrounded by Americans.
And I had to learn how to navigate what it was to be a kid of refugee parents and then how to eventually become my own person in my own identity. I had to learn how to meet my wife and have kids and raise kids. So all those things we do learn, but then in business, I was always willing to say yes to even the hardest things, even the things I knew I didn't know how to do, both in accounting and finance and too often than not, I meet more than enough people that are willing to say no very fast.
Early on in life, willing to say yes when you're young and you're dumb, and you're willing to learn, and you have confidence to find out where the answers are, I think is very beneficial. And so, early on with Reconciled, and I think with every firm owner there at this places, you don't know what you don't know as you're building your firm. So you say yes to everything and you figure it out. And as you begin to find new processes, and standards, and systems, and the types of customers you want to work with, you can slowly start saying yes and no to the right things and the wrong things.
I definitely always experimented, in the beginning experimenting, do we go desktop hosted? Do we do QuickBooks online? Do we do zero? What do we do? And then quickly based on what the market feedback was solely focusing on that, how do you price? Focusing on that. And then, I think for a lot of Vermonters as you grow, one of the biggest obstacles I hear and see is that a Vermonter is generally the owner is their own problem. They're their own limiting factor. Because, they become pretty good at everything in their firm.
But when you're pretty good at everything, you're not great at anything. You're just pretty good at everything. And you need to be great. You need each area of business to have somebody great leading it that's great at that area. So I early on, as I began to build a firm, I wrote down what is the area that I believe that I'm really great at, out of all the rest and how do I slowly replace myself in those areas, and not be afraid to let the person that coming in to make mistakes so that they can prove out the great model that needs to take place.
And so, I've always told employees and team members who have become leaders at Reconciled, make mistakes. If you're not making mistakes, you're not trying hard enough, you're taking it too easy. So make some mistakes. Accounting is accounting, but most of it is fixable. It's not surgery. We're not in a operating room, we're in a set of books that we can change and fix. And we can correct errors. So, give room for people to do that. You can make a bad decision on a higher, it's okay, it's not the end of the world.
You can let the person go and find another person. So, there's all this iteration. And then the same thing with apps is trying multiple apps and seeing which one works itself out best and has the best customer service. So yeah.
I hear customer service is always the key part. I can do the stuff, but if I can't email them or call them, cool. And then, what was the craziest experiment you ran to find new clients,
The craziest experiment?
I wanted to ask a general question and then thought "No, let's amp this question up, and let's find something exciting!
That's really, really funny. What's the crazy experiment? Well, I am a person that likes learning, and I love putting myself in situations where I feel odd. I feel like the odd man out, because I've always felt that way my whole life. I grew up in Arizona, I was one of the only Asian kids at my school. I grew up as a refugee kid, I was one of the only refugees immigrant kids that I knew, besides my brother and my cousin.
So, putting myself in situations make me feel at home. It makes me feel like, "Oh, I'm familiar with feeling left out." I was always the shortest kid in the room and in the class photos, I was always in the front row with all the little girls, that was me and I was like sitting down and then all the tall boys were behind me.
So, I always felt left out. Probably two of the most fun ones, I would say risky as well, is I went to an e-commerce conference for Jewish people. So it was it's called JCON. It happens every year in Brooklyn, in New York, and it's for the Jewish community primarily, but anybody can go, but it's targeted the Jewish community. And the Jewish community has a huge e-commerce multi-channel seller community. They sell products online, and sometimes products and services to just their community, but also to Jews around the world and also to people around the world.
And so I was there, I was one of the few non-Jewish people there. I had a booth as Reconcile, I brought an employee, and if you know anything about the Jewish community, they spend the spectrum of both liberal to very conservative religious communities. And so, it was a risk for me. I remember accidentally bringing non-kosher candy because I didn't know, I didn't know. I had a whole bowl of candy. I got from target at my booth to pass out.
And I luckily had somebody kind come my and tell me, "Hey, you can't serve that candy here. It's not kosher, but here's some bags of candy that are," so they were really kind about it and forgiving. But that was risky, right? Because, it's a community I was very unfamiliar with. I wasn't dressed the part. I was just myself. S, that was one. And then I also attended in booth the black entrepreneur summit. And so, I remember calling and saying, "Do I have to be black to attend?" Because I didn't know, I was an idiot. I didn't know.
And they said, "No, of course anybody can attend. It's just targeted to black entrepreneurs, but anybody can attend." So, we were one of the only, or maybe not the only non-black vendors that was within, I had a biracial employee which was half black that worked with me. And she came with me because she happened to live in the area. But other than that, we had a great time.
I loved just learning about entrepreneurs in that community, and having a booth there and dealt with my own interesting racial conversations while I was there at the conference. So, you just don't know what you're going to get into. But I learned a ton and also continue to benefit from the fact that we engage there, and we become known as Reconciled as a company tat's very inclusive.
And so we welcome people from all walks of life and backgrounds, and are very intentional about our hiring in those areas as well. We have a diverse workforce in an industry that's generally not diverse. And especially I really value promoting and upgrading people of color, women, people with different backgrounds or different countries to come work for Reconciled. I'd say that was the two, probably the riskiest and fun.
That sounds great. That sounds really fun. As you've run different experiments, I'm guessing you figured out how to make something work. And then you do it manually, I'm guessing with the first time, and then you figure out how to leverage automation along the way. What's that mix for you, as your firm is trying things and probably different now than it was a year ago or two years ago.
I remember taking on an e-commerce customer once they were using BigCommerce as their e-commerce platform. I never touched BigCommerce before and they wanted to integrate it with QuickBooks online. And I went, "Okay, well, I'll figure it out if you let me charge you for it, I'll figure it out." I did that and it was a pain of a project, and I did it and was able to leverage a tool like Zapier to do it. I'd never used Zapier until then. And so I figured it out, and now it's processing hundreds, if not thousands of transactions a month for this customer. And I've been able to do that process now more automated way over and over and over again for more customers on BigCommerce.
So, that's an example where I wasn't afraid to try it out, set up a template, a process, document how it works and now allowing other people to take over and do a similar process. That's an example, another one was sales and marketing is, I figured out email marketing. I learned, "Hey, what would differentiate us? Oh, email." Now everyone goes, "Well, email. Email has been around for a long time." Yeah, but not in accounting.
Marketing is not something accountants do, it's something generally minority of accounting firms do it. Software companies do it all the time, and so do companies from India and other places, development companies, IT companies, but accounting firms? When was the last time you got an email from an accounting firm offering you services. So, I figured that out early on in Reconciled's journey and then began experimenting with two different email marketing engines and Aby tested them side by side, and then ended up with one primary partner that we use till today.
And that's probably the largest and fastest reason why we grow organically so fast, is because of this email marketing engine, which is a huge surprise to people when they hear like, how are you going? Email, people respond to our emails. I don't understand why. It's not for the weak, it's definitely a slog, but it works. And we are very successful at it. If you give it time and patience and the right thing.
Now we're trying to jump into more inbound. We're actually not heavily driven by inbound marketing as a company. I don't think accounting industry in general is, it's my opinion, but I think most of the accounting industry is driven by referrals and old school networking. But, there is more and more of a segment of the small business market looking for accountants through online channels.
We're experimenting with that to see if we can get better at that. But we've differentiated ourself enough through sales and stuff. That's the process I usually jump in, figure something out manually, then try to document it, and then pass it onto somebody, watch them do it, show them how to do it, watch them do it, and then let them take over. So, a lot of the stuff I don't even oversee a lot of the automated processes. We have some other team members overseeing it to make sure it doesn't break and make sure it just keeps running.
One person that I've met on your team is Mary, director of accounting and operations, If I remember that correctly. She helps taking these projects, operationalizing them, making sure they're documented, helping drive automation across the firm. Number one, how did you meet Mary? Because, it sounds like he's a unicorn basically. And then two, when did you realize that it was time to find someone like Mary and bring them into Reconciled?
For reconciled, when you start out as a firm owner, you have all this hats you're wearing, and you generally can define them in different buckets. One is, the big hat is client delivery, operations, client delivery, providing the accounting service to your customers. And generally, most accountants that start firms they're comfortable in that lane. They're comfortable in this lane, and they're comfortable managing people in that lane because they come from other accounting firms, or in accounting department or that's what they love doing, serving customers.
I knew that lane early on would be one of the first lanes I would want to let somebody take over, although I would consider myself a pretty good controller or a pretty good CFO. I would not consider myself the best manager. I would consider myself a good leader, pretty good leader, but not the best manager. So, I knew the team that did client delivery, the bookkeepers. We call them cloud accounting specialists.
The accounting professors would need a really good manager. So early on in Reconciled growth, I think when we were about a dozen people, I hired a manager and probably a little too early than I needed, but it was at the time when I knew if I didn't, it would get too late and I would be hurting by the time I was ready to hire somebody. And often what happens is, people hire too late, not early enough. I erred on the side of hiring earlier than I needed. So, I hired her and it wasn't Mary at the time. It was a [inaudible 00:31:33] and she was great.
And she took us to the next stage. And then we had a manager that came in and took us to the next stage, and then there's Mary who's been with us for a year and a half now. And has taken us this far and continues to take us farther. Because she came from a more traditional accounting firm, but that was three times our size. So, she understood where we wanted to go. And she understood that we wanted to get there, but to do it with technology and with operational efficiency.
So she's been great. And so finding them is a matter of getting your message out there in the marketplace. I've been very intentional about taking interviews, even with the smallest of audiences, even with early podcasts or early webinars, anybody that would talk and let me share, I do that because I can take these information, these videos, this audio, and send it to people, and people can find us.
When we put out a job post for any role, because so many people are following us, so many accounting professionals, one of the number one visitors to our website are accounting professionals that are looking at us and evaluating and hoping that they can find a job with us. So it makes it easy when we put up a new role that a Mary finds us, or somebody else finds us.
I feel not only are you working on branding yourself to get new customers, you got to brand yourself to get new employees, your future talent. And that's one advice I give to firm owners is always be interviewing. Regardless if you're hiring tomorrow, just interview people all the time, because you never know when you're going to need somebody. And you never know when they're ready, interview people, even people you know are in other firms or other companies, you do not know when they're ready to leave, you don't know the situations going on. You don't know if COVID is going to hit and they're going lose a job. You don't know anything.
So, always be talking to people and building those relationships. And you're going to meet people that are going to just love what you're doing and will think about you the moment they want another job and want another career or a partner. So, that's what we did. And Mary came through that route and we continue to do that everywhere I can. And we have other people in our company that are doing that too, doing webinars and podcasts being interviewed.
We had our head of HR, she did a podcast on VirtForce. VirtForce is a virtual job search for military spouses. People in the military that are leaving or people that are on reserve, they need jobs, and we've had a really good luck hiring spouses of military, or people in the military. So, we're really proud of that. And we wanted to get in front of that audience more, so even giving your team permission to be on these forums, to talk so that people see other faces outside of just you as the firm owner. I think it's important too.
That's wicked. I remember having a conversation with Mary about operational efficiency, but also delivering great customer experiences. And the thing that stood out was she cited a chewy. I want to deliver chewy experiences. And I was like, "Okay, I'm from Canada. Can you please explain to me what chewy is?" And she was like, "It's a dog product company, an e-commerce company." Am I remembering that correctly?
Yeah. It's basically think of it. They're like the Zappos, Zappos is a shoe company here, if you're familiar with them. They're like the Zappos of the pet world, they are loved. Their customers love them. You don't just like chewy, you love chewy. You go there to buy pet food, and buy pet stuff if you have pets, I don't have any pets. Mary introduced me to this website. But what it is, is they make you feel the pets you're buying for are part of your family, and part of their family.
And so, Mary brought that concept in this, "Hey, we want to be chewy to our customers. We want to be Zappos to our customers. We want to create a Disney experience." And so, we use that language internally a lot is what's something chewy you've done with customers this week, or this month, or this year? What are the ways you've over-delivered and given and gone the extra mile.
That culture is definitely been a huge, positive benefit from having Mary here and contributing that to the company and that language. And some oftentimes you just need the language to talk that way, that helps people remember. But then it all starts seeping into people's lives because now they're like, "Well, how do I be chewy with my family, and with my spouse, and with my kids?" It's been really, really cool to see.
And as you think about those two experiences you've been able to deliver for your customers, what stands out? What was one that you were like, "Oh, that was actually really amazing, that we're able to do that. And they reacted really positively."
I think there's just so many different examples. And we recently did a customer survey, where I'm just blown away by the amount of positive testimonials that our customers have for the bookkeeping team, for the county accounting team they work with. It has nothing to do with me, I'm not servicing customers anymore like that. They are doing all of the hard work and the amount of positive feedback people are getting anywhere from, you were attentive during COVID and you helped me, you really helped alleviate my anxiety, that my business wasn't going to fall apart, or you helped us make sure the data and the numbers for the PPP loan were right and accurate and made that process seamless when our banker wouldn't respond to us. And so, we have so many different examples of that, and I'm just super proud of the team who slugged through this season.
Because they were prepared for it already, they weren't having to deal with, "Oh, how do I transition to work from home?" They were already working from home. "How do I operate the way Reconciled operate?" They already operated this way. "How do I be chewy?" We were already talking about that. So it came second nature to our team, which was awesome. But the feedback was just tremendous from majority of our customers.
It's just been amazing to watch. And it's weird because you never think you'd hear in your life. "Oh, I love my accountant. I love my bookkeeper." You don't expect words like that to be sent to you from a customer, but they do. And it's just so cool. It's just really, really cool to watch.
If you're delivering a high quality set of books that as a business owner you don't have to touch, and you are saying [inaudible 00:38:09]. It's like, "This is great, this is awesome."
Yeah. I don't have to touch, I don't have to worry. That's great. Yeah. That's been amazing.
Cool. And then, from an operational perspective, what say in the last 12 months, what's an improvement you made that's had the biggest impact on Reconciled?
I would say we have in our onboarding team, we've really defined how customers come into the company and how they're set up and the experience they get in the first 30 days. It's probably second to none. It is the experience our customers talk about, because it's not what they expect with an accounting firm. And the fact that it's technology driven, it's very guided and it gets you to the finish line to win and to be successful with the Reconciled.
That's really, really great. And we get a lot of great feedback about that. Probably one of the best experiences our customers can have, because that onboarding team is made of two rockstars right now that really make our customers feel like VIP's. And so, I always tell people, in accounting you've got just a few weeks to make the best first impression possible, and that's where you want to strike while the iron is hot, because whatever happens there, if you do really well then you're okay for the rest of the time, they will remember that really well for a long time, if you do poorly and then you hit it out of the park the rest of the time, they will remember how poor you did.
It's all about that experience in the beginning. And so, we really made that and hone that in and made that run really smoothly. And then the Ops team, we've had some changes in the Ops in the way we structured, how we work. And the way we did teams has shifted this year. We started out in the beginning of the year with a specific pod model. And then we shifted that pod model to operate a little differently this year. And that's worked a lot better. That's helped, I think alleviate some confusion for our team internally and also some more growth opportunities for everybody on the team, which has been great.
Nice. As you rolled out that onboarding process, what were the biggest challenges that you ran into?
I think it's helping people understand, the customers come with such a variety of needs and what sales has sold them and what the customer agree to in the sales contract. A customer will almost inevitably bring up something that they want or expect it that was not communicated in sales, was not brought up, was not even in the agreement that onboarding has to figure out either how to upsell them on, refer them back to sales or provide an experience temporarily to say, "Okay. Hey, we can do that. But just so you know, this is a one-time thing we're going to do for you."
And so, it's getting that flexibility in onboarding to be able to do that and give that customer experience that still feels really chewy, even though it's something that wasn't promised or wasn't agreed to. And that comes up a lot in accounting in general. It's just an expectation of your customers are going to ask for stuff that aren't really in accounting. And they really didn't say, but in their minds they thought it was.
And so they bring stuff up that is just so random and they bring it to onboarding like, "Oh, I have to register my business in this other state or country next month. Is there something that you guys can do right now?" Stuff like that where it's like, "Well, we don't really do that, and" It's just providing that flexibility in the onboarding experience that I think has really improved our customer experience.
Got it. And so really empowering those team members to make a judgment call about how to handle this, and training them about how to handle it?
Yeah, exactly. You don't want all questions and scenarios to come up to you as the owner or the firm owner, or even to your manager, to your leaders. You don't want every question coming. Because then, your employees don't feel empowered or they don't learn the consequences of making the right and wrong decisions. So you want to empower them to say, "Hey, here's certain scenarios where, yes just make a decision, decide what's best your judgements. And you're going to make a mistake and that's okay. You're not going to get slapped on the hand for it. You tried your best to serve the customer. And if it results in mistake, that's fine. That's the risk we take, we're human beings, that's fine."
You don't want to be the bottleneck, it slows your growth down. I would say empowering your employees with the ability to do things like that is really important. And that's what the best companies with best customer service like Zappos, chewy, Southwest airlines, that's what they do. They empower their employees to be able to offer refunds and do things at the drop of the hat without needing permission. Because they know it's a better customer experience and better retention in the process.
That's awesome 100%. Now, I know you do some business coaching with entrepreneurs and teams and you also mentioned earlier, that often the biggest limiting factor on a firm's growth is actually the owners. What do you see are the areas that accountants struggle with most, in terms of building and growing the business?
I think two things, one is accounts identities generally are, I'm an accountant. And that identity is limiting to the true identity you have as a firm owner. I mean, you're a business owner and then if you're trying to grow, you're an entrepreneur. Entrepreneurs in general are growth oriented, and they're trying to grow an enterprise. They're trying to grow something. So entrepreneur, small business owner, those identities are something that most accountants don't resonate with. Many don't, they know technically they are a small business owner, but if you ask them first, what do you do?
Most accounts you meet they say, "I'm an accountant." They don't say, "Hey, I'm a small business owner, or I am an entrepreneur." So, you could see where they're coming from. And I think it's limiting, or basically limits the way they think about how to build their business. And because accounts are primarily accountant identity, they are more comfortable in the client service role than anything else.
So, when you talk about HR or you talk about sales, or you talk about customer service, IT, other functional areas of a business, they just may not be as comfortable to grow that. And so they're willing to put up with, "Well, I'll just do what I can because we're just going to keep serving clients." And because accounting firms are just overwhelmed with customers generally, there's just so much work out there.
You can generally grow a practice, even a small one pretty quickly and get full with work. And so, I think that's a big challenge for accountants, is their own identity, thinking about their own identity, how do they view themselves? And then, how do they want to present themselves to customers? I'll give you an example for me, even though early on the Reconciled name was nothing because it was new so I was building brand recognition into it.
It does take a mix of people trusting my ability to deliver. But as we continue to grow, I continue to push every customer and every sales opportunity down to the brand of Reconciled, pushing them to, "You're not buying Michael, you're not buying me, I'm part of the team, but you're buying this brand and the team behind it, and the people behind it." So I think the other thing is, as accountants not only selling who they are, but selling the brand and the processes they built, and that's I think a flip that's hard for a lot of accountants, because they're used to selling themselves and selling their expertise, their knowledge.
And I would say that, if you do a good job growing and documenting your knowledge actually, doesn't really matter, at some point your knowledge will be surpassed by your teams and the people in your company. And it's better that way if you're trying to build and scale up business, if you're trying to stay small and stay as a small team and you be the center of the expertise, then yeah, you're doing a great job by just selling yourself as an accountant and limiting your growth to what you can handle or what you have expertise on.
But I think if you do it right, your team will outgrow your knowledge and your abilities and they should, and you should be happy they do, and give them opportunities to grow in the firm because of that.
But it sounds like there's a couple of stages there. So, it's one, taking off your accountant hat for a second and thinking about it as like, "How do I build process and how do I bacon resiliency in my business effectively?" That's step one. And then step two, is thinking about, "How do I abstract myself from actual service that's being delivered." Is that the two parts of it, that switch?
Yeah. And for some accounting firm owners, they don't extract themselves. Because if you find the most joy in that piece, then you shouldn't extract yourself. You should say, "Hey, if you find the most joy in being a client delivery person, we'll go find a CEO to run the company, go find a sales person, go find a HR person." You don't have to be the CEO. You don't have to be. You can still own the company and not be the CEO, that's actually a reality. And there's a lot of examples of that, where you have two founders who do not run the company. They're the founders, but they found sophisticated CEOs or people who were just better suited at the business side of the operations, or at the sales side of it.
And you can go and be happy and serve clients, and help operations teams. And so, I think accountants may think like, "Oh, I need to be at the head of it. I need to be the face. I need to be the one in charge." Well, you actually don't have to, you could be the owner and be directly and indirectly in charge of everything, but you can also give it to the hands of a trusted person that knows how to build a business and operate the things you're not passionate about. So you can focus on what you are passionate about.
For a lot of accountants it may be like, "No, don't extract yourself from operations, go ahead and stay in it. Just find other team members to leave the rest and give them the keys to run the company."
Or you could always just sell to Reconciled It.
Well, you can sell to us or come do accounting work for us. We're happy to talk to you.
Sweet. Actually, before we wrap up and move to Q&A, where can people find you?
Yeah, they can find me on LinkedIn or Twitter. I'm easily reachable. Just look at Michael Ly, I'm probably the first one that pops up, with L-Y. Last name is spelled L-Y. So Michael Ly, Reconciled. Or you reach out on Twitter, I love connecting with people, especially firm owners, happy to chat about anything and everything. You name it, doesn't have to be about accounting either. It could be about life, anything in life. I love chatting and learning and meeting new people.
Love it. Thank you so much for spending your time.
Cool. So, if people have questions, please either add them in the Q&A, or add them in the chat. I might have one or two more as backups just in case.
All right. I have a question about the M&A strategy. At what point were you like, "Okay. It makes sense for us to now start doing these firm roll-ups and build and grow that way?"
Yeah. I love this. I love talking about this, I was talking about this with our employees in Reconciled because they had lot of questions about it and how it would impact them. In the business terminology, we call it M&A, we call it acquisitions. We have these very businessy terms. Well, before the pandemic, when I entered into 2020, I said to myself, "My team and I have built a really great culture in a business." And it's a place that a lot of accounting firm owners really wish they could build and really wish they could be a part of. But recognizing that not all accounting firm owners are geared towards building something like this, but they want it. They want it for their employees. They want it for their customers. They want it for themselves.
But I'm not going to lie, a lot of people can't do it as accountants. They just can't, maybe they came straight from an accounting firm with a really bad culture, or maybe they have no experience being a CFO in a growing company. Well, then what examples do you have for building a great culture? The last company I was an employee at before starting Reconciled, when I was living in Seattle was one of the best cultures I'd ever been at. And it's called the Mosaic company. I was there, I eventually became the VP of finance there before I left. And if I had stayed in Seattle, I would have probably retired with them.
I loved that company. I'd loved the CEO, loved the leaders there. So I just said to myself, "We've built this thing that many people want and in the world of accounting few people get to, so why don't we invite people to come join us? That's the way I look at it, because at the end of the day, I'm actually inviting a firm owner to come join us if they want to, but at minimum for their employees and their customers to come join us and to come experience the culture that we've built, and the team that we built, and the service we built.
It's really an invitation, it's an invitation to build something great together. So I entered the year realizing that, thinking through that and putting together basically the thesis around that, presenting that to my team and then presenting it to outside interested parties and to firm owners that I knew personally. So, everyone I'm talking to and we're talking to, they're not really publicly for sale. They're people that I've met in the industry. People I've met at conferences, people I know who have great firms, but I could tell they're maybe at next stage in their life, or next stage for the firm.
And if they're at a crossroad where they don't want to invest all that it takes to go to the next level, they can just really skip that by coming to join us and give that to their team and their company. And if that aligns with the goals aligned there, then it works great. That's the way I look at it. And it helps us reach our goals a little faster, helps us get some great leaders and some great employees. But also, ultimately helps us serve our customers better. Because if talent is the number one limiting factor to growth outside of customer acquisition, which I think has been something that we've been able to take care of, then finding great people, those great people are already working at great accounting firms. And that's why we're inviting them to come join us.
Just while we wait for a question or two to pop in, come on guys, I see you there, I know you're there. Come on ask something. Otherwise, my curiosity is going to fill up the rest of the time. When you make the decision to acquire a company, how do you onboard those folks? How do you make them feel part of the team? What's that process look like?
Yeah. I wouldn't say it's a walk in the park. It's not a walk in the park, it's definitely challenging as it takes a lot of planning, you want to make sure your leadership team's involved and on the seller side, just so you know how it works in generally in the industry is, and this is not just in accounting, but just any M&A transaction is generally unless it's a public company, most of the time when it's two private companies, the selling firm and the selling employees, generally only one person, if not a few people know that the selling firm's going to sell, and you as the buying firm, you usually don't meet the employees until the absolute last minute, the absolute last minute. So, you have to basically plan a process of like, "Hey, we're going to do an..." Just you would hire new employees.
We're going to do offer letters. We're going to do an invitation. We're going to cast a vision of what we want to offer and invite you to come. And just because of the dynamics and the risks that are involved in selling your business, that's normally how to operate. So, people would love to imagine like, "Oh, I'd love to be able to just slowly go into this and that I can give the employees a 30 day notice and give them off or all this stuff."
It just doesn't work that way with private companies, because the risks are too high. And the chances for success are challenging. You want a plan and you want to make offers and usually you're having to win people over very, very quickly and set a process that's predictable and standardized for people, so that they know clearly at what the path looks like to be a part of Reconciled and to transition over.
I love that language around invitations, and we did get a couple of questions. Thank you. Angela asked, "When you were just starting out, what were the two events that you attended?
QuickBooks online was the first event, and I'm a religious attending since then. I think my first one was until the 15 or 16. And so, I attended every year since then. And it was a big eye opener, before that I did not know a community existed. I did not know there was a thing called the accounting community, because I had previous just been a CFO at different companies, and controller at different companies. So, you don't attend these conferences generally, as somebody who's just inside a company, huge, huge eye opener for me, it was great.
I would say that that was a big one. And then another great event, is Thrivers event. And Thrivers event that they do in Greenville, South Carolina that Jason Blummer does and his team, great event. I Love it. Absolutely love it. Second to none in many ways. If you're a small firm that's trying to become very advisory focused, second to none.
Awesome. Oh, I think Angela was referring to, I think it was JCON.
Oh, yeah JCON and then the black entrepreneur summit. Yeah. Those were two events I attended in early 2019, I believe, or 18. But those were the events that were... And Yosef was asking, "What's the craziest thing you've done to get customers." I said, "Yeah, well, I went to two events where I'm not part of that population of people, but I was able to go and be booth at them." So, JCON conference and then black entrepreneurs summit.
Cool. And then Sonia asked, she said number one this is great. And then two, have you ever considered doing training for accountants and how to grow a firm?
Well I guess this is a training right here. I have not considered doing formal training. Frankly, I'm just busy, I'm busy with running Reconciled and the other companies that I have to start. So, I'm busy. That's where I make my primary money and I do love teaching and training, and I speak at conferences and I do webinars and stuff like this. And basically what I'm going to teach you there is what I'm saying here. I'm very transparent and open. I don't think any of the stuff I'm talking about is rocket science, it's stuff I stole from other people and stuff I learned on the way and then got mentored on. So, big advice is join a peer group, either a mentoring group, coaching group, peer group.
I'm part of one it's called Vistage. You can look at Vistage online. V-I-S-T-A-G-E. It's the world's largest CEO and peer mentoring group in the world. So I've been in one since 2014 and I pay a pretty penny per month to be a part of it, but it is a huge key to my success. Huge, huge key, because I'm surrounded by other entrepreneurs and CEOs that have also built great businesses. So it's who you're surrounded with and get coaching from, and peer coaching from is really a big deal in my opinion. So I invest in myself every year a lot of money for my own personal and professional growth. So, I would highly recommend a peer coaching group for anybody.
Perfect. And then Misa, hopefully I pronounced that correctly. So this has been a great insight to grow a firm, that is definitely my goal. That's awesome, thank you for joining us. Sweet. So, we are now at time. Michael, thank you so much for joining us, everyone else. Thank you for making time out of your busy day.