Growing Your Business Through M&A With John Bly

Intro  0:04 

Welcome to The Future is Borderless podcast with David Nilssen. We feature top entrepreneurs and thought leaders from around the world, those who bring a global mindset and a unique perspective to their life and business. Now, let’s get started with the show.

David Nilssen  0:23 

Hey, David Nilssen here I am the host of the show. On The Future is Borderless, we connect with business leaders and thought leaders from around the world who have what I refer to as a borderless mindset. And the idea behind them is to share ideas and innovations, best practices, things that will help power growth in both our personal and professional lives and help us to continue to thrive in a rapidly changing world. Now, this episode is brought to you by Doxa Talent. Doxa that helps businesses to source full time highly skilled workers from all over the world. And as a result, these companies can scale faster, increase margin and improve culture. They provide everything from accountants, sales, development reps, virtual assistants, and even software engineers to publicly traded companies and even small local businesses. If you want to learn how to power or grow your business with offshore professionals, simply visit doxatalent.com. All right. Well, my guest today is John Bly, who is the Carolinas regional Managing Partner of Aprio, a premier CPA and business advisory firm that’s headquartered in Atlanta. After starting his career at PricewaterhouseCoopers, John left to found a business with his wife Darcy. That was Bly and Bly CPA. And under his leadership, the family owned Bookkeeping and Tax Service business became one of the fastest growing privately held companies in North Carolina even making the Inc. 5000 list. John, built the business engineer the gross firm, seeded the firm’s growth through organic growth but also focused on M&A. And they actually merged with 14 firms during that period of time up until he combined forces with Aprio. Now 2014, John published a book entitled Cracking The Code: An Entrepreneur’s Guide to Growing Your Business Through Mergers And Acquisitions For Pennies On The Dollar. And the book provides growth-motivated entrepreneurs with strategic step-by-step blueprint for sourcing analyzing and financing deals. Now as I was reading through John’s bio, I found it interesting. He graduated from Bryan college with his Bachelor of Science, in Business Administration with a concentration in accounting and computer information systems, but then went on to earn a Master’s of Science and taxation from the University of Denver. And if that weren’t enough, he also has a CPA, CVA, CM&A, CGMA. I’m not going to even spell out what those things mean. But I’ll just tell you that he’s a lifelong learner. He’s wicked smart. And he spends his time advising and guiding entrepreneurs. So think about their largest asset in a strategic way. So with that, John, welcome to The Future Is Borderless.

John Bly  3:07 

Thanks, David, I appreciate the intro. And for those who don’t know me, I’ll just knock it off right off the bat and say the initials are just because I’m a really excellent test taker. So anytime anybody needed any time with the firm wanted to grow a service line, they’re like, hey, John, can you go take that test next week? I’m like, yeah, no problem.

David Nilssen  3:29 

Why not? Yeah, you look at your bio and it’s like alphabet soup all the way across. Pretty impressive. But hey, look, I want to jump straight in and ask a question, because I have started many businesses, but all of them with a partner. You started a business with your spouse, I mean, and I always think like being an entrepreneur, it’s hard not to bring work home. But you combine the two together, I’d love to know like, what’s it like working with your spouse each day? And how did you guys even split your roles?

John Bly  4:01 

It’s a great question. So we started in 04. And at that point, we had been married about two and a half years. And we had known each other about four years prior to that we met in undergraduate. So, had known each other for about six years when we started this. And we were in our 20s, probably young, dumb and naive. And if I did it again, in my 40s, I might be twice as dumb. But in my 20s, it seemed like a great idea. And we were working from home, literally not in the garage, but in the front office and in the formal living room, on opposite sides of the house with the front doorway in between us. And you know it because you’ve started, it takes a lot of hard work. And so we were aligned on being successful. That was what it came down to. Number one, we were aligned, we wanted more freedom and flexibility than our previous employers gave us. And so the rest of it, we were not going to fail. And so we worked I honestly, there was some times during that first two years where we were averaging north of 100 hours a week each. Which seems crazy now this far in the past, but it was what you do. And so we didn’t have time to fight or argue when you’re just trying to get a business off the ground.

David Nilssen  5:19 

Yeah, I was going to say, I mean, 100 hours a week is a lot of hours. And when you guys thought about your rules, like how did you guys divide and conquer in that regard?

John Bly  5:29 

So I was more market facing, if that’s an even thing, it can be when you’re two people, right? But I followed up on all prospects, I tried to do all sales related to accounting and tax. We actually reviewed each other’s work. So QC, if you will. So she would do something, I would review it, I would do something, she would review it. Because when you’re working that many hours, and you’re trying to provide high quality, you also want to make sure you’re providing some quality control, because you could be pretty tired. So we did that. And then on the day to day have our own business, HR accounting payroll, she handled all of our internal operations side. So we found that the things we were good at, and we continued to try to manage them. She was great at client service at once they were in the door, but she didn’t love prospecting. So I focused on that.

David Nilssen  6:21 

Yeah, got it. Well, so If you were to look back on that, I mean, do you think working with your spouse was easier or harder than if you had started it with a business partner?

John Bly  6:34 

I think it was a lot easier, given what we were doing. Because we were both having to work so many hours. We didn’t have to pay for office space, as this is a dumb example. Right? This is 2022. And we’re laughing because so many people are working from home. And that seems obvious. But in 2004, that was not obvious. So if I’d had a business partner, maybe we would have had to get office space to begin with. And when you want to work for six hours on a Saturday, that’s a lot more challenging to have to go to an office and work and you’re working around the clock. It also meant that while I was working ridiculously hard, so as she said, I wasn’t missing out on anything.

David Nilssen  7:07 

Yeah, that makes sense. I’m curious, in your biography, we started talking about or I introduced the fact that you grew your business through M&A, or mergers and acquisitions. And then you had written a book on this, obviously, that was a big part of your growth story. Can you walk me through like, at what point you guys started this business? At what point did you start to think about acquisitions? And what was your first deal? What did that look like?

John Bly  7:31 

So actually, it started pre-day one. So in 2004. I know this is silly, right? 18 years later, but in 2004, I was reading the journal of accountancy. And in the back was a classified ad, which, by the way, probably doesn’t even exist anymore. And it’s dumb to even say, right, and I was like CPA firm for sale, you can buy, I was still working at PricewaterhouseCoopers. Great firm. And I was like, this is weird. You can buy one that doesn’t make any sense to me who would buy a CPA firm, then I, like started reading up on it. And I was like, well, I think I might buy a CPA firm. And so then started paying attention. And in August of 04, and in September of 04 to kickstart literally from leaving our jobs to getting dollar one of revenue. We bought two really small CPA firms that both did under 100,000 in revenue, one was from a classified ad in the newspaper. No kidding. And the other one was, was from a broker who sells accounting firms. And that got us started enough to say, okay, we’ll have some revenue, we’ll have some referral sources. There’ll be people who will pay us money. And we’re going to take a big pay cut, and we’re going to figure this out.

David Nilssen  8:53 

So, by the way, two things that you said that most of our listeners won’t know, classifieds, and newspaper, but we’ll get to that maybe in the second show notes. Just out of curiosity, though, like so you acquired two CPA firms, you’ve worked for a large practice. But here you are day one, you walk in now you got these two companies, not one, but two companies, you’re trying to merge, merging their culture, you’re merging their systems like all that, like, like, walk me through the first two or three things that you did, and like, how did it all go?

John Bly  9:24 

Yeah, so the first two, I will say that when we got to three and four, we got a whole bunch of employees. But in the first two, we didn’t get any employees. We just took out sole practitioner owners, so we didn’t have to deal as much with culture. We did have to deal with technology, integration and software. And that was, candidly something that at the time in 2004, I was 25, I gave zero thought to. I should have given more thought to it, but that’s what you can do when you’re willing to outwork a lot of people to make it work and you’re together. And so we did figure it out. But we really had no idea what we were doing. And we knew a lot about tax and accounting, but we didn’t know a lot about systems and integration and tried to figure that out. And we did. It took us longer than we would have guessed, which is part of why we had to work so many hours. But yeah, we learned, we learned the hard way. We figured it out. By the time we got to deal three and four.

David Nilssen  10:21 

I mean, your degree, obviously included computer, you have a background with technology, not just the tax, you think that served you well, on this regard?

John Bly  10:31 

Yes, it definitely did knowing that enough to be super dangerous. I mean, I had, whatever 27 credit hours in computer systems, specifically not coding or anything like that, it definitely helped. Learn it by the way, side note, if any of your listeners are young or have kids thinking about college, I will say that the only reason I got a computer degree was because I got the college in 1997. And I was probably one of the few who didn’t own a computer. And I was like, I should probably figure this out. How many credits can I take a semester without paying another dollar? And so like 15 credits is like full time graduate on time. You can take up to 21 at every school in the country. I was like, well, I’ll just take more classes, and I’ll get a double degree. And I will pay an extra dollar. And that’s what I did.

David Nilssen  11:18 

Wow. And I was going to say, like, as I read your educational background, and the fact that you’re a good test taker, now we know why that worked. All right, so I asked you about the first deal. I mean, it’s a it sounds like he did like a dozen or more right? Which one are you most proud of? And then next question would be like, which one was the hardest, and I’d love to hear sort of which one you’re most proud of, and why. And the same with the hardest.

John Bly  11:44 

I’m going to start with the hardest, I’m actually going to reverse it because I learned better by going through the hard stuff. So in 2006, December 1st of 2006, we had done four transaction. So this was number five, in a 26 month period of 27 month period, and had gone from her and I working out of our house to at the end of this merger, we were going to do 1.5 million, and we were going to have about 14 15 16 people. And she was stepping away from our core business and was doing some CFO consulting work out of the core business and I had taken on a partner. So what we learned in this deal was sometimes owners are more tired near the end of their selling days than you think they are. And you better do a lot of diligence around what have they let slip in the last year and this person had let a ton slip. And we had found what I thought were pretty good firms the first four profitable but quality work, right, maybe not the best work, maybe not the best client service, but nothing that issue. In this particular case, we were buried in responses that way behind months behind on emails, things that just didn’t pay attention to right IRS notices that had mounted to about 115 at the time for different clients that they just never responded to told clients they didn’t take care of. And we spent December in January and into mid-February, digging out a hole that was almost unimaginable. And from that we learned a lot of diligence on the quality of the work. We hadn’t done any really diligence on quality of the work up to that point and changed our diligence process after that.

David Nilssen  13:33 

I was going to say I want to talk about diligence because that is obviously something that I’m sure there’s skeletons buried in every transaction. That sounds like service levels, one of those.

John Bly  13:45 

The best to deal, so best ever in June of 2014. So in June of 2014, May of 2014 you mentioned I wrote a book, I started sending it to the top 25 fastest growing businesses in our markets. So as I wrote, I would write a letter with it and say, hey, congrats on growing really fast. If you ever think about going a different way, here’s a strategy. Call me if you ever need anything, right? So I send it to all these people. One guy takes it to his CPA, his CPA calls me and he’s like, what do you do in maleness to my client? And I was like, what? Pretty sure I can do whatever I want. He was just kidding. Fortunately, we had a meeting that did not turn into a deal. But what it did was convinced me to pick up the phone and call a buddy of mine, who we ended up doing a transaction now at the time. We were about 4.2 million in 2014. They were about 3.5 million. And instantly, we jumped to a whole another level. We went from 30 ish people each to 60 plus people and had a lot more, we went from one office to three offices. And we closed that deal. We had known each other for about six years. But our all of our employees and our partners didn’t know each other, we’re not in the same market, we’re two hours drive away. And I closed that deal at the US Open on a Sunday on Father’s Day. So my wife, my dad, and him, I entertained them all at Pinehurst number two for the US Open. And during the round of golf, we watched, obviously, the real golfers were playing, we actually talked through what it would actually look like. And within like three weeks, we had to draw it up. Now our partners and our employees thought we were crazy. And they needed six more months to get comfortable with it. But we ended up doing that deal. And that really launched us to where we are today.

David Nilssen  15:43 

That’s super cool. I remember, as we were talking about that, I remember a piece of advice, one of my old mentors gave me which was, Dave, because when we first started my first business Guidant Financial, we were really fast-growing company, we started with two guys basically, and grew it up to now over 200 people. And I remember him saying at one point, like this is a very special culture. But once you get to 25, it’ll change. And I just refused to allow that to be the case. And we fought that for a long period of time. But ultimately, the larger you get, the harder it is to sort of maintain that sort of family environment. So when you have 30 people, and you acquire another or merge with another and now you’re 60 like what did that do? How did that sort of shift the way the business works? And the cultures, you kind of had to figure out how to blend them together? How did you deal with that?

John Bly  16:28 

So I’ll tell you what was most challenging was internal ops, because we each had people who did specific things, and they overlapped a lot. And so figuring out those egos and those personalities and trying to help blend them, that was where we spent most of our time, it was not on the 27 year old tax expert, we all need those, that was not a big deal. They were going to continue to serve clients, right. But the internal ops people definitely overlapped. And we spent a lot of time making sure that they were aligned, and that they knew there was going to be a home and that they were going to get to specialize more, not less. And so they were going to get to do less of the stuff they like because they didn’t, although they overlapped in current roles, they didn’t overlap and what they all enjoyed. And so they got to do more of what they enjoyed. And we started redefining roles, and it took a while. It took almost a year and a half to make sure that everybody sort of felt really good about their new roles and all those people are still with us, which is great. Now, we’re eight years later, so that’s pretty good. So we did a good job. But I will say it did take some time to get everybody comfortable. For sure.

David Nilssen  17:35 

Yeah, for me. Now imagine for a moment, it creates sort of this period of uncertainty for them and their role in the business and the leadership. And a lot of people aren’t really wired for that. So it’s just curious how you did it

John Bly  17:47 

Especially accountants, by the way they’re not.

David Nilssen  17:51 

Well, if we can just maybe level up for one second here, I’m going to just maybe go back in the process a little bit and say, like, outside of it, I never thought I would say newspaper and classified so many times, John, but like, today, how do you identify the companies that are willing to sell? Like, if I’m thinking about our audience, a lot of entrepreneurs, they’re thinking about going down this path? Like, what are some of the like, most common ways that you would advise someone to start that process?

John Bly  18:19 

Yep. So it’s a bunch of what I call, guerilla marketing. I mean that a little bit facetiously, in that you think about it the same way you think about sales, right? I mean, you’re good at that. I’ve been known to be pretty good at it over the years, the thing that you do is, tell the centers of influence, let bankers, attorneys, financial advisors know you’re potentially interested. If they’re dealing with you, guess how many other CPAs they are dealing with, a bunch, right? So they know others know, like, oh, Billy, or Susie is probably 70. They’re probably looking for a transition instantly. They make an intro, because that’s good for their business. And even if it doesn’t go anywhere, it’s opening up doors. So that we did direct mail to about 60 CPA firms that we had done enough research on to know that they had a managing partner that was over the age of 55. So that doesn’t mean they’re interested in selling but that’s at least a conversation starter. We did those every six months, mail not email, because that generation generally does not answer well to an email of a marketing, but they do to mail because nobody else mails. We were different. So we did that. We built SEO into our website about so if you searched CPA firm for sale, we would come up always on page one of Google even though we were a CPA firm, because we built it into our like the way we did business. We would go to our own trade shows and share that we were interested in continuing to grow through mergers and acquisitions. I wrote the book, I did a TEDx right. I mean, certainly I’ve used that to market then, a little bit more directly in most industries. There are a handful of business broker M&A experts in the field, but that’s all they do. And so in the CPA world, there are about five. Every one of those five know who I am. And they have at least 16 years, right? One of them, David, you and I happen to be in the Entrepreneurs Organization, one of them, I helped actually join EO Charleston, about six years ago. So, you tend to stay friendly with these people, because they really are looking to get deals done, and they know who’s going to get it, the old wasn’t going to waste their time. And I got to the point where I could spend 30 minutes looking at something and know if we were going to have any interest.

David Nilssen  20:33 

Yeah, no question. So you put it out there, right. And I completely get that I see that there’s lots of different ways that you went about sort of socializing the message and making sure those centers of influence as you point out there knew about it. So deal flow starts coming your way. You talked a minute ago about some of the diligence that you may have done poorly in the past and tightened up over time, but like, what are some of the things that you use to evaluate which companies to acquire versus walk away from?

John Bly  21:02 

Yep, so we figure it’s a little bit like your sales funnel? And maybe not maybe your sales funnel is different, but most sales funnels, we would try to put 10 in the hopper to do one deal. And so that was it, right? If we looked at 10, we found that three we were sort of interested in and one would get done. And so the more you can look at the more deal flow, the more opportunities, the better you can get the more refined. So I got to the point over the last almost 10 years where I would always start with a 15 to 30-minute call, talk, no numbers, just interested in having a conversation. What are you looking for? Here’s what we’re looking for, not dollars, but like, are you looking to retire tomorrow? Are you looking to spend the next 20 years working, why we’re looking to grow, here’s why we’re looking to grow, here’s what we’re weakened, here’s what we’re strong in. And then if that went well, for them, and for me, then it was lunch, an hour and a half to two hour lunch. Because if I left lunch and never wanted to eat with them, again, I didn’t care what the financials looked like, it almost didn’t matter.

David Nilssen  22:09 

The lunch test noted.

John Bly  22:11 

Because there’s just not right, like, I think you know this about me, I’m fairly open book, I tend to be fairly transparent, I tend to have a lot of fun. So those things definitely reflect in the culture of the firm we have built over the last 18 years. And if this person is holding everything close to their vest after I’m sharing, because I’m happy to go first, and I’ll share a whole bunch. And then if I ask a question, or they don’t share back, then it’s probably not or if they look totally terrified by me sharing, then they’re probably not going to have it, they’re probably gonna have a team of 10 or 15 or 40, that’s back at their office that looks the same.

David Nilssen  22:52 

And it’s funny, that actually really resonates for me. We were talking about partnerships earlier on in this conversation, right? Like, for me, doesn’t matter if the finances align, if you’re in business with someone that you don’t like, that’s a problem, because we spend more time in the office than we do at home. So better to like who you work with and enjoy what you do. Otherwise, what’s the point? So starting from that perspective, doing more of sort of a values assessment and get a chance to see like, Is this someone I want to spend time with? Makes a lot of sense.

John Bly  23:22 

And we do all that before we ask for any numbers?

David Nilssen  23:24 

Yeah, well, actually I think that that makes sense. Because it allows you to sort of assess the individual rather than fall in love with the deal, right? If you see the numbers and the numbers are amazing, you might justify the individual and actions should be just the opposite, right?

John Bly  23:36 

Yep. That took us a few deals to figure out.

David Nilssen  23:41 

Oh, man, I wish you had talked to me beforehand. No. So in the title of your book, it talks about acquiring for pennies on the dollar, right. And there are lots of different ways to structure a transaction. I’m just curious if you had maybe a couple of go to methodologies, because when you buy through a business broker, my guess is that that’s a more traditional way, because they also get paid in the transaction. But like, talk me to talk to me about some of the ways that you guys acquired businesses.

John Bly  24:12 

Yeah. And we did every way you can imagine and the title I’ll start with that. So for pennies on the dollar, is the traditional which I think one of your businesses plays in this space fairly heavily is the traditional SBA loan because what I always looked at from same when we’re advising clients same when we’re doing deals with our own money is like what is my I say cash on cash return? Right? So how much do I have to put down? How much more am I going to make next year? How much more profit? And then what’s the long term value play? So in a million dollar transaction value most people having even if they’ve owned a sizable company for a while think they need a million dollars of cash to buy a business when the reality is buying a business and I’ll say for purposes of this, for this interview, under 5.5 million is really almost easier than buying a house. And people do not know that. And so, for today, you can do some creative things. But generally, let’s say 10% down, you can buy a very profitable business, making a ton of money, and you’re gonna make more than you made the day before. So your cash on cash return sometimes is 1,000% a year or something. I mean, even after debt service. And so that’s really the thing that I wanted a message in the book was, there are ways to do it. And that’s one. And we did some SBA financing in our early days. In 06 and 07 and 08.

David Nilssen  25:43 

Yeah. Are there any others that you think are, service-based business? Let’s talk about those. Because that’s really what you were in? That’s what I’m in. Like, from a service-based standpoint, are there other ways that you thought about it?

John Bly  25:54 

Yeah. So yes, we have done some earn outs, where we, based on retention, we may put some skin in the game, we may put 10 20 40% of the purchase price down, and the rest based on retention of clients, retention of people. We have done through mergers, where there’s a full equity swap where we’re not paying anything, because you’re David’s age, who’s a young guy younger than me, and we want to grow together. And we know that the sum of our parts is better than we can do on our own. And so you’re hanging around. Because maybe, for instance, you started a CPA firm, because you liked doing CPA work and advising clients. And as you grew to $3 million, you realized that you don’t have time to serve clients anymore, you’re just running a business. And that’s not what you want. So you want to be part of a bigger firm. So you can go back to serving clients.

David Nilssen  26:45 

Yeah. Does it make sense to deploy one of those based on something because like, as you said, that intuitively I thought, gosh, I might do a merger, if this is somebody, I want to do business with long term that I see as a great partner who’s bringing something to table that I’m not. I might do an urn out. If I’m worried about customer retention, I might do a full buyout if they’re ready to retire, or if I couldn’t stand to work with this person, but I loved their business. I mean, is there some correlation there?

John Bly  27:12 

Yes, there is an I, unlike some people, I never made it about what I wanted. I always asked what they wanted, right? Because if they come up with the plan to start with, not the dollars, right, like not the dollars and how we structure it, but what are you looking for? Are you looking for growth for the next 20 years? And you’re just looking to hook your wagon to a bigger machine? Okay, well, let’s then in diligence, I’m exploring different things. I’m exploring, are they going to be somebody who can take orders? Or like, follow along with a team? Do they need to be the guy or the girl? Because if so, that’s going to be a problem, right? I’m focused on different things than if they’re 75 and retiring tomorrow, then I’m more focused on are the clients good? Is the team good? Are they going to fit? Does that make sense rather than? And I wouldn’t put them in my box, I would say, what are they looking for? And I’d move that direction and then fit the deal around them, that way, they felt like they were really involved. And I heard them.

David Nilssen  28:07 

It’s so funny, like, I think of a CPA, and no offense, like you don’t think about in terms of strategic sales or thing. But that’s actually what you’re laying out, right? I mean, they always tell you in sales, find the customers pain or motivation. That’s what you have to tap into. And you’ve sort of intuitively done that by saying, well, what do you need? What do you want? And they’re helping to sort of design something that that moves them closer to that, and you’re just one of the solutions? Right?

John Bly  28:30 

Yeah, well, that you’re just testing my age again, David, because there was no entrepreneurial degrees when I graduated college in 01. They started about four years later, otherwise, I might not have been a CPA and gotten some sort of entrepreneurial degree.

David Nilssen  28:44 

Well, it seems like it worked out. In fact, you’ve obviously, since combined forces with Aprio. Tell me a little bit about like, why that made sense for you to sort of team up with a larger sort of CPA practice and business advisory group.

John Bly  29:02 

Yep. So it was 2019. So three ish years ago. Yeah. Dumb luck, as it turns out, but sometimes you need that in, in business. But in 2015, I met Richard Kopelman, who had just maybe two years before that become the CEO of Aprio, 60 plus year old firm at the time, out of Atlanta. No other offices at the time. But hundreds of people in Atlanta and we became friends, and we shared ideas every six months, he would come to Atlanta, I’d be in Chicago, right? He would come to Charlotte, I’d be in Atlanta, and we would hang out with share ideas. He would call me on some deals occasionally be like, hey, you’ve done a ton of these. We’re just starting to do deals. What do you think about this? We’d walk through and then in like 2017 a few years later, there was a bunch of stuff that changed in some laws that we needed help with, some international expertise that we were too small to be able to have multiple full time international tax people, things like that. Well, by the time we got to 2019, we were sending Aprio. And just to put it in perspective, we were a little north of 10 million in revenue. And we were sending Aprio, about 750,000 of work a year, that we could not do. So part of it was synergistic where our team members knew we were working hand in hand, they were talking to Aprio people all the time. Our clients knew it. And everybody got along. And so in the summer of 2019, we just started having real discussions about what it would look like if we decided to merge. And we did and haven’t looked back been very fortunate. But we had known each other for years before and had almost like test drove the car, if that makes sense, right? We had shared a lot of work a lot of clients, no bad experiences ever made us feel like we were aligned in a lot of ways.

David Nilssen  30:57 

Yeah, I mean, you guys had a chance to try before you buy, right, like that’s the nice that you guys knew each other had a chance to sort of work through some of that. It’s funny that I’m obviously in the talent, business. Talent scarcity is a major issue today. But funny enough, I don’t know if a lot of people noticed the CPAs, in particular, have been tight for a long time, because as I understand that there’s more people retiring as a CPA than actually being certified as one. So how are you guys dealing with the scarcity issue? And how are you differentiating as an employer in that area?

John Bly  31:29 

Yeah. I think the average age of a CPA today in the US is 58, or 59. I’m a baby. So how are we dealing with it? We’re dealing with it a number of ways. First of all, we’re trying everything we can to hire people in the United States, wherever they sit. So we’re being flexible. were five years ago, we would not have been right. So we have people sitting in your old state, in the state of Washington. We’ve got people sitting all over the country. I think we have employees now in 45. states. And five years ago, we were in like three states. So hiring remote certainly helps. Over the last decade, starting about 2015, we started to explore overseas talent, too. And we started in the Philippines, in 2015, or 16 with offshoring, and really very specific need, like one person, and they weren’t even our full-time person, we were sharing them. And that’s expanded a lot over the last, whatever, six or seven years to the point where now we have a team of 150 in the Philippines. And they’re our team.

David Nilssen  32:44 

Yeah, not surprising. I mean, we serve many, many CPA firms, even lawyers, I mean, there’s all sorts of service businesses, there’s such great opportunity out there. Let’s talk about your clients. More at the aggregate level. I mean, you see the financials, the valuations, and you talk business strategy with all sorts of entrepreneurs. And I’m just curious, like, is there a common thread that you see and not factoring external forces, of course, because those we can’t control, but is there like a common thread that you see between those that businesses that are really solid and growing versus those that are struggling?

John Bly  33:22 

Yes, I would say the number one, by a lot is leadership, and executive decision making and knowing strengths and weaknesses of the founder. So the ones that sometimes they can overcome it with just pure brute force, and what I mean is like, they’ll just outwork everybody. But the ones that think they know it all and don’t provide leadership at the next level and don’t continue to hire higher end talent as they grow, get stuck. Like, there’s a book Doug Tatum’s, No Man’s Land, they get stuck there in this spot where they can’t grow because they think they know it all. They don’t make good decisions, the business sort of ebbs and flows, and over a 10 year period, they’re essentially flat or a rounding error when you put an inflation. So that by far, is the driver of the businesses who just take off like crazy and the ones that don’t

David Nilssen  34:19 

I mean, what would you say though, to the person, so I hear this all the time from the entrepreneurs and I talked to which is I definitely a COO, I know it, but I can’t afford one.

John Bly  34:29 

I would tell you, I know that answer, and it is because their lifestyle is too expensive. Their personal lifestyle is the problem. So as real life has it, right. That’s why mergers ended up working so well for us because you’re not used to making that extra money. So we would use the extra profit most times to hire extra talent, which then allowed organic growth to happen even faster. And we knew that for a handful of years, we would take no increase and reinvest everything in the business. And so we made had that strategic decision, at least for the entrepreneurs that I hang around with the vast majority, and by vast majority, I mean, 90 plus, it’s probably closer to 99%. Lifestyle creep happens, and they end up spending whatever. And so if you have to invest, let’s say, 150,000, and a new salesperson or 150,000, and a COO or whatever, they can’t afford it, because their lifestyle can’t afford it. It has nothing to do with the actual business economics.

David Nilssen  35:27 

Ain’t that amazing, your expenses always creep up to the level of your income no matter where you are. That’s just a harsh reality. John, I know we’re getting towards the end of our time here. Just a couple more questions. I’m curious, because here we are sitting in q4. And I know this is a little bit more tactical. But I figured while we’re on the phone, let’s take at something that’s really applicable right now. It’s q4, what are you talking to your clients about as they prepare towards the end of the year? What are you suggesting them they think about, or keep in mind is that sort of march towards the end of 2022?

John Bly  36:04 

Well, one of the things different than many years that I’ve been at this, we’re hyper focused on inflation, we’re focused on advising clients to get in front of it, we’re focused on if there’s a major, if there’s a major recession, if it’s not just a tiny little issue, if it’s a major recession, the thing we’re worried about, is clients, allowing their customers to get too deep in their pockets. What I mean by that is, does it take them too long to bill and collect the dollars they’re owed. And so getting much better at collecting right now is critical, because if I slow pay you by six or eight months, and inflation is at 10%, I actually took a five or 10% discount. So those are really important. And then the other thing we’re talking to him a lot about is, as you’re thinking about giving raises that many businesses are having to give very large percentages, that has to drive price increase. You can’t eat that, you might be able to eat it right now. But over a period of time, your gross margins are going to deflate quickly, and you’re going to have a problem and you’re going to grind yourself in over a 12 or 24 or 48 month period, it’s a real problem.

David Nilssen  37:15 

Man, I’m going to put a pin on that one, because I’ll just tell you from my own experience, we always wanted to do right by our clients, even if it was at our expense and actually created more than just an expense. But it created a real challenge long term. Right now is an environment where I think so many people recognize the cost of doing business is going higher. And if there’s any time you actually have real permission from the market to raise your prices, now would be the time and it’s not to take advantage of it. It’s just to make sure that you do right by your business. So you can continue to do right by your clients. I love that feedback. Last question. I mean, this is a little bit sort of vague. But I’m just curious, like, what is something that’s going on today for you that you’re personally very excited about? Or something that you’re really learning that is really keeping you engaged?

John Bly  38:03 

Not totally personal? All right, so totally personal. So I have a 16-year-old daughter, she is a junior in high school. And one thing I’m finding absolutely fascinating, is the college search process. So she is a junior in high school. I’ve read now like three books, I go to whatever seminars I can go some of the organizations that you and I share in common have some webinars occasionally around college admissions. And I am just soaking it up, because I find the whole process unbelievable. Not in a good or bad way, just totally fascinating from a thirst for learning sort of thing. So one of the things that I’ve learned recently that I’ll just share is, they send emails to your kid, for hey, check out our school, check out this virtual tour. Clicking on that link, no different than Amazon or Google or Facebook is tracking everything we say out loud. They’re tracking if your kid clicks on that link. And that impacts if there’s two students that are equal, that impacts whether your kid will get in or not. They’re paying attention to how much they’re interacting with the school. And if they’re not interacting with the school, just because they applied, they’re probably just putting in an application. Whereas if they’re very serious, they’re checking out the webinar, they’re clicking on that link, they’re putting it on YouTube, all of those sorts of things. And they have scores around it, which is just it’s not something they publish. But as I’ve learned, it is a behind-the-scenes trick and it’s crazy.

David Nilssen  39:35 

Wow, super scientific, then that’s doesn’t surprise me that I mean, with the amount of kids that are trying to get into the available spaces for college admissions, they’ve got to figure out a way to find those that are the most serious about it. That’s super interesting. And how badly do you want to apply given your educational background? I mean, time to get another degree or certification, right.

John Bly  39:54 

Well, I don’t know about the application process and I don’t know when the last time you toured the campus was but the campuses that my daughter is touring are places that I think I could live right now. They’re very nice. Gorgeous. I think I can move on campus tomorrow. So I don’t know if I need to take classes but they look gorgeous.

David Nilssen  40:10 

Well, I’m a bit of ways from that. But I’ll keep that in mind as my kids continue to get older. Great. Well, we’ll stop there. John, I appreciate your transparency of all the insights. We’ve been listening to John Bly of Aprio, the author of Cracking The Code: An Entrepreneur’s Guide to Growing Your Business Through Mergers And Acquisitions For Pennies On The Dollar. If you don’t have the book, order it, it’s available on Amazon now. But John, where can people go to learn more about you and the work that you do?

John Bly  40:39 

Yeah, so LinkedIn, John Bly, CPA, feel free to email me [email protected]. Or you can follow John Bly, CPA on Twitter.

David Nilssen  40:50 

Fantastic. And we’ll put all of that in the show notes, John. Thanks again for being on today.

John Bly  40:55 

Thanks, David. Appreciate you.

Outro  40:58 

Thank you for listening to The Future Is Borderless podcast with David Nilssen. Be sure to click subscribe to future episodes so you can hear from more top entrepreneurs and thought leaders, and we’ll see you again next time.