written by Casey Troyer
Angela Pierce: What I admire about you is that you’re very entrepreneurial. You’re building a firm, and I think the challenge with professional services is that it’s not a widget. It’s all people.
Tom Akin: It’s all people.
Angela Pierce: Right, so first question. Tell me a little about the firm. What type of clients do you have, what they look like, what they’re profile is, and what types of services you do most often?
Tom Akin: We started the firm in 1991. It was myself, David Doherty, Howard Klein, and Joe Feuge. We all had a background with Ernst, but we had gone different places. I had been with Ernst for thirteen years, and went to another small firm for two years. I learned a lot about small firm practices, but I didn’t enjoy that particular firm. David Doherty was a tax partner at this same firm, so he and I discussed starting our own firm. We then contacted Howard and Joe. We started our firm in 1991 with the four of us. We had one assistant who worked for us, and she did everything. We didn’t know how to order chairs and desks and things like that.
Angela Pierce: All you knew how to do was accounting work.
Tom Akin: Right, I hadn’t learned how to open an office! So, that was 1991. We didn’t really know who are customers were. We didn’t really have any at that time. So, you start calling people, right? And we ended up getting clients that we never thought would come to our firm.
Angela Pierce: Why did they come to you guys?
Tom Akin: They wanted the personal relationship. We thought some of them wanted the big firm relationship, and we later found out what they really wanted was the personal relationship. Some of the clients we thought we would get we either didn’t get, or didn’t get for a number of years. It was an interesting dynamic to see who came to us and who didn’t.
Angela Pierce: How long did it take you to build a mass of clients that made you say, “OK, here we are. We’re a firm now. We’re able to pay for our dinner.”
Tom Akin: I think probably after about five years everyone knew we were probably not going away, and we’re a real firm. We started getting clients who would say, “Hey, we’ve been at Ernst or KPMG, but now we’re ready to go to you guys.” We had a lot of business before that, but we really established ourselves as a market player around the five-year mark.
Angela Pierce: You know, in San Antonio, if you ask someone about a good regional firm, yours always comes in at the top of the list.
Tom Akin: That’s good to hear and you know, we have sixty people now in the office. We’ve got about fifty professional staff and about ten administrative staff.
Angela Pierce: That’s great! Good job.
Tom Akin: We’re about 55% tax, and 45% audit, so we’ve got a good group.
Angela Pierce: So when you started your firm, how did you know or did you know that you would be successful? Was there something that made you think there was a light? Or was it more like, “I’m sick of what I’m doing. Let’s just jump and see what happens.”
Tom Akin: All of us had a lot of public accounting experience, so we knew how to do public accounting. It was just a matter of getting the clients. I knew very well that we could do audit work, review, and compilation work. My tax partners knew they could provide tax and advisory services, so we knew how to service business and individuals. It was just a matter of getting clients. We all had ten to fifteen years of experience, so we had a lot of contacts throughout San Antonio. I thought we could be successful, but we had no idea if we’d eventually be a sixty-person firm or a fifteen-person firm.
Angela Pierce: So, in looking at the people that come to you guys, what’s the trigger in a small-mid-size business that makes them come to you? At what point do they move from their bookkeepers up to you guys?
Tom Akin: On the tax side, anyone who is in need of tax planning or return preparation can come to us. That trigger is just needing to get better service, more expertise, and sometimes better fees. We don’t claim to be the cheapest, but we promise to give you a better bang for your buck. On the audit side, we pick up work at two different levels; we pick up audit review work when the company has a bank compliance requirement.
Angela Pierce: Shocker!
Tom Akin: Right. They say, “I need a review or I need an audit” because the banker says that.
Angela Pierce: I’ve been there, you know.
Tom Akin: Been there, done that. We also get a lot of work because the business owner wants the assurances provided by an audit or review.
Angela Pierce: The comfort!
Tom Akin: The comfort, right. They want the auditor in there.
Angela Pierce: They just want a third party there to look at it.
Tom Akin: Right. Particularly, if that owner has been taking more time off or they’re just not there every day.
Angela Pierce: What about if they’re trying to sell it?
Tom Akin: Always. When we have a company that is sold, we try to stay involved on both ends of the transaction. Sometimes we don’t have the opportunity. But if you do a really good job with the transaction and the other party sees that, sometimes our firm is hired by the purchaser and we retain the client. That’s a really big win.
Angela Pierce: That’s awesome. So, what do you think the biggest challenge is for smaller companies when they come to you? Let’s say they come in and they haven’t used a firm of your size before. What always trips them up?
Tom Akin: Well…
Angela Pierce: By the way, I can answer all of these questions. [laughs] I’ve been on the receiving side of all of these questions.
Tom Akin: Oh, I know. [laughs] If we are hired to perform the tax work or audit work, the client has to have good records. We can’t create those good records for them, and sometimes clients who have never been through the process don’t understand that. They think we are the ones who get their books and records in line, but it doesn’t work like that. We have to audit their books and records, which means we can’t also be the bookkeeper.
Angela Pierce: Do you guys ever come in and help them clean up on occasion?
Tom Akin: We can do bookkeeping, but we have to be careful not to cross the line to where one could ask “Am I independent or not?” if an audit or review is involved. But we do have a bookkeeping department that specializes in (primarily) QuickBooks accounting.
Angela Pierce: Of course.
Tom Akin: Many times companies don’t know if their bookkeeping is good or not. An audit is usually a real learning experience!
Angela Pierce: You can say that again. I think I’ve been through about fifteen annual audits, and I have yet to find one where I say, “Man, that was a piece of cake!”
Tom Akin: Yeah, they never work like that. Typically, an audit is better the second year than the first year.
Angela Pierce: Sometimes they’re not. There are just different issues every year.
Tom Akin: We always hope. A second year audit should be about 20% more efficient than the first year. If we spend 100 hours on the first year audit, we hope to spend about 80 hours on it the second year. At least in theory!
Angela Pierce: So, assuming a client has reasonable books and records, how much heavy lifting is it for them? How would you describe it to someone if they haven’t had to go through it?
Tom Akin: It’s quite a bit of heavy lifting, especially the first year. The controller or bookkeeper or whoever they have in that position will sit down with us in the planning phase so we can let them know what to expect and what we need. We give them our Prepared by Client (PBC) list, which consists of things like sub-ledgers, reconciliations, account analysis, copies of contracts, etc. It’s usually a fifteen to thirty line item list, so that’s when the client realizes it’s going to be a lot of work.
Angela Pierce: Yeah, but it gets them prepared which is what they’re looking for right?
Tom Akin: Right, and it brings them into the reality of what all is involved.
Angela Pierce: Business customers ask us all of the time what the cost or range is for these services. You don’t have to give me any of your secret sauce, but if someone asks you the cost of getting a good firm for their tax returns or audit or review?
Tom Akin: For a typical corporate tax return, a ballpark cost is $3,000. That’s a pretty good starting place for corporate tax returns. Our low end range for an individual return is about $750.
Angela Pierce: And you guys probably aren’t the most ideal for individuals since you’re a larger firm.
Tom Akin: Yeah, if all you have is a W-2, use Turbo Tax.
Angela Pierce: Yes, just go to Turbo Tax.
Tom Akin: Moving to audit work, it’s hard to do an audit for less than $10,000. Reviews can be a really good service for small businesses that are pretty steady, and consistent in their operations.
Angela Pierce: What does a review entail?
Tom Akin: I like to describe a review as being 40% of an audit. Everyone does about 60% less work on a review than an audit. It’s more analytics. We ask good questions to management such as do the numbers make sense, are the gross profit margins in line, are the salary numbers in line, and if anything sticks out then we ask about that. We don’t audit the information. Instead, we can inquire at all different levels, such as the owner, the president, the controller, the bookkeeper, and see that the stories are consistent. The low range for reviews is about $4,000 to $5,000, and we do some reviews for $10,000 to $15,000.
Angela Pierce: I’ve actually never had a review done.
Tom Akin: Reviews are a really good product for some businesses and associations/organizations, where things should easily lineup consistently year to year. Reviews give the Board assurances that things are getting done right and they allow the “auditor” a few days to be in their office and asking questions.
Angela Pierce: Absolutely.
Angela Pierce: This is not on my list of questions, but I have to ask. Have you ever seen fraud?
Tom Akin: Well, not all of the time, but we’ve certainly seen it.
Angela Pierce: What do you do?
Tom Akin: You hope you never see it.
Angela Pierce: Yeah. I’ve seen it before actually, and it’s a pretty freaky thing.
Tom Akin: It is. If we do see it, we can’t win. If it’s our client, and it goes back to the previous year, the question is, “Why didn’t you see it?”
Angela Pierce: Well, if I were an owner I’d want to know if there was fraud going on.
Tom Akin: Of course, and it’s almost always with the person you would least suspect.
Angela Pierce: Oh yeah, we all know that! In grad school 101, they tell you it’s the nice little lady with the little glasses.
Tom Akin: Yeah, it’s usually with a very trusted employee.
Angela Pierce: Yep. Ok, so what’s the hardest thing about running your company? What keeps you up at night?
Tom Akin: Well, it’s all of the people stuff. We have no inventory or products. It’s a people business so we have constant pressure for staff. Being in a public practice is difficult. You have to juggle from one engagement to another.
Angela Pierce: I’ve never done public, so I can imagine that it’s a nightmare.
Tom Akin: Yes, the administrative and tax staff personnel have a desk to sit at, so they go to the same location every day. The auditors are out and about, working at twenty different company offices during the year, and they don’t really have one place to call home. It’s a difficult job, so hiring good people and keeping good people is our main issue.
Angela Pierce: Yeah, that is hard, especially when it comes to travel. My first job out of college was as a field auditor, and I traveled my tail off.
Angela Pierce: OK, so what kind of big mistakes have you seen made by smaller companies over the years? And what would you say to help them?
Angela Pierce: Well I think most growing companies should also be thinking of an exit strategy. It may be two years, five years, or twenty years down the road, but an exit strategy is needed. We certainly get involved with companies that believe their bookkeeper is a controller. But bookkeepers are bookkeepers for a reason. And controllers are controllers for a reason. A company that’s growing has to have good numbers. When our firm comes in to audit, which means verifying that the numbers produced are fairly stated, we generally need to see a qualified controller on staff or the audit will be difficult.
Angela Pierce: What criteria or check box should someone have when they are looking for an accounting or audit firm?
Tom Akin: You want to know your engagement partner, and if he/she is going to be available when you call. And if you call, will the partner respond timely? Then you need to see how your account is going to be staffed. You want to meet those people. Is it going to be staffed with a staff person, a senior person, or a manager?
Angela Pierce: W hat’s the difference between a staff, senior, and manager?
Tom Akin: Years of experience. Generally, a staff person has one to two years of experience, maybe three. A senior position generally has worked two or three years up to five or six. Most companies won’t promote to the manager level without the CPA designation.
Angela Pierce: Do you have any other concentrations in Texas, besides San Antonio?
Tom Akin: San Antonio is our main office. We also have an office in New Braunfels and an office in Boerne. The New Braunfels and Boerne offices are small and generally staffed one to two days per week, but we actually have a lot of work in those locations. We service all of South Texas, but concentrate in San Antonio.
Angela Pierce: OK, so what else? I know the partner and the staff, so what comes next?
Tom Akin: Another thing we push in our firm is timeliness. We want to get in and get out. We want to plan when the work is going to be done, plan when the tax return will be delivered, and we want to beat the delivery dates on these services from the year prior.
Angela Pierce: That’s great. You know, my audit has been late every year. It’s getting progressively later. Even though it’s not my fault, it’s embarrassing as a finance team.
Tom Akin: Yes, we always try to beat the prior firm’s timing. On the audit side, it depends on when the client is ready. However, you can still be efficient. I always ask whose court is the report in? I want to get the report draft to the client as soon as possible. On the tax return side, I do not care when the due date is. I want to tell you when I can get you the return. You won’t believe how much work we’ve picked up because the tax return is filed on the final due date and the owner or controller is out of town.
Angela Pierce: I’ve been that person. If I’m not there, I can’t sign. I’ve had to get things sent to me by Fed Ex, and then I have to send it back, and I’m on vacation. It’s just a mess. That’s probably one of the differentiating things between you and other companies, and why you’ve been so successful.
Tom Akin: I guarantee that’s why we get work from the other firms.
Angela Pierce: So the key then, I guess is to find the thing you can be best at. For you, it’s probably being prompt and expeditious.
Tom Akin: Yes and it’s definitely a service. Some say it is compliance driven, but it’s a service business.
Angela Pierce: Absolutely. Even if I weren’t required to have an audit, I’d have an audit. To be honest with you, as a CFO, I really hate audits. I don’t even do the work, and I hate them because no matter what, something always comes back that you screwed something up. However, when we’re done, I am assured that I have financials that someone else looked at, that we both made corrections to, and I think they’re pretty good. It gives me a sense of comfort.
Tom Akin: That’s right.
Angela Pierce: Ok, so here is the question I ask every one. What would you do if you could do anything else?
Tom Akin: Well, whatever it is, it would be in Alaska.
Angela Pierce: Really? Have you been there?
Tom Akin: I have. I’d want to do something in the leisure industry like a tourist! I’ve always been in public accounting, but one industry I always looked at getting into when I was younger was oil and gas. It’s so cyclical, but had I not gone into public accounting, I probably would have gone into oil and gas.
Angela Pierce: Really? So it’s always been interesting to you.
Tom Akin: I like the people in oil and gas. Entrepreneurs all the way.
Angela Pierce: Great. OK, next question. What do you know now that you wish you knew when you started your company?
Tom Akin: How to talk to clients.
Angela Pierce: Really?
Tom Akin: Yes.
Angela Pierce: Explain…
Tom Akin: For example, when you’re asked a question, don’t think you have to know the answer right away. You just have to know how to get the answer.
Angela Pierce: That’s an accountant response. We think we have to know the answer.
Tom Akin: Right. Answering a client’s question when you’re not really sure is a bad trait. I’d say when I started the firm twenty years ago, my tendency was to try and look smart, and I always wanted to know the answer. When you go to the doctor, you want to know what’s wrong with you, but doctors’ don’t know the answers. They have to run a test.
Angela Pierce: That’s so true.
Tom Akin: I don’t need to know the answer now. I’m not embarrassed to say I need to research their question. I’m a lot more comfortable talking to clients now. Maybe it’s because I’m older now…
Angela Pierce: And tired? I’m tired.
Tom Akin: Yes, and it’s so much easier to wait a day or two and get the right answer than it is to call back and say you were wrong.
Angela Pierce: That’s really good advice.
Tom Akin: And I’ve also learned in time who to go to for answers.
Angela Pierce: Yeah. That’s good advice for any company. I’ve definitely learned that I wanted to be the smartest person in the room when I was about 25 but now I’d prefer to be the dumbest person in the room.
Tom Akin: That’s right. And we don’t realize this is what we need until we’re much older. I want to get the best service to our clients and to do that, I have to have the best staff. We have a lot of good staff, and it’s great because I want to have the best people around me. It makes things so much easier.
Angela Pierce: What advice would you give someone who wants to start a professional services company? I want to ask you this since you started one. Like we said in the beginning, you had to take a leap of faith. I’ve tried to do consulting before, and this shit is hard.
Tom Akin: First, I think accounting is a great field to be in. There are unlimited rewards with what you can do if you work hard. But like any other career, you’re going to get out of it what you put into it. If you don’t work hard, you’re not going to be successful. It requires a lot of hard work.
Angela Pierce: Do you think a good number of your people want the partner track and really want to grow the business?
Tom Akin: No, I really don’t. I think about 20% of staff think they want a partner track, and 10% of those will change their minds. I think the other 80% of staff are happy to have a good job, and we really try to give them a good opportunity at ADKF. Our exit strategy for the last fifteen years has been to build a firm that will continue after we retire. Build staff from the bottom up. My exit strategies are my senior managers and partners, and I hope their strategies are the same.
Angela Pierce: Right. Keep that lineage going.
Tom Akin: And I think in public accounting, you have to have at least 50 employees to keep the train going. We’ve got 60 now. I’d be more comfortable with 75, and by the time I retire, I think we’ll be at that level.
Angela Pierce: This is always my final question. Any parting words or do you think you’ve said it all?
Tom Akin: Going back to your question earlier. You asked whom a business should hire when looking for a CPA. You want to hire someone who is interested in your business. If a partner is just giving you a service and is not interested in what you’re doing, then hire a different partner or firm. The partner doesn’t need to know all about your business because they’re not in your business; but they need to want to understand the business and like it. Or you have the wrong firm.
Tom is a founding and Co-Managing Partner for Akin, Doherty, Klein & Feuge, P.C., a Texas based public accounting firm. He has nearly forty years of public accounting experience, supporting firms from small family owned to multi national public companies. He currently services on the Board of Directors and as Audit Committee Chairman for Rush Enterprises, Inc. He is a CPA and graduated from the University of Texas at Austin.