Earmark Podcast | Earn Free Accounting CPE

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

David Wurtzbacher: [00:00:00] When you chart out demand versus supply of people over time. What that math tells you is that ten years from now, 2035, every CPA in the profession will have to be 2.7 times more productive on a revenue per employee basis than they are today. That is crazy.

Blake Oliver: [00:00:22] Are you an accountant with a continuing education requirement? You can earn free Nasba approved CPE for listening to this episode. Just visit earmarked in your web browser, take a short quiz and get your certificate.

Blake Oliver: [00:00:38] Hey everyone, and welcome back to earmark. I'm Blake Oliver. Today I'm joined by David Wurzbacher, founder and CEO of ascend, a private equity backed platform that transforms accounting firms operations. David brings unique insights from scaling Lightwave Dental from 7 to 80 locations before creating ascend, which has completed nearly two dozen successful accounting firm acquisitions in just two years. David, welcome to the show.

David Wurtzbacher: [00:01:05] Thank you. Blake, I'm happy to be here.

Blake Oliver: [00:01:07] So is it fair to call ascend a roll up?

David Wurtzbacher: [00:01:10] You know what? I really hate that term. Um, but if you're trying if you're reaching around and trying to understand. What are we doing? Um, that's an okay place to start. The reason I hate the term is it's just so impersonal. And it sounds, um, like such financial engineering or something, and that all this is about is like, kind of creating a dogpile of, um, of, of firms. So we have a much bigger, more intentional vision than that. But I think it's a fair, a fair place to start.

Blake Oliver: [00:01:42] So you're acquiring small accounting firms and like, how does that work? Uh, what kind of firms are you rolling up? If I have to use that term, you know, what kind of firms are you bringing in? And and how does it work when they join ascend?

David Wurtzbacher: [00:01:59] Yeah. So, um, to answer that, maybe it would be helpful just to tell you a little bit about the genesis of the idea for ascend. So I'm not a CPA. I, I come from outside of the profession. Um, but I for a long time have been very interested professionally in these, these professions that are like bedrocks of society. And they're essential, but they don't usually attract a lot of talent from outside of that industry or profession. And so what I, what I'm really motivated by is finding, uh, where in, in an industry, the business owners have a common set of problems that I think I can help solve. And, um, there's not hubris in that. It's just that, you know, the outsider perspective and kind of marshaling different types of resources can be really useful. So I at some point, the accounting idea occurred to me. I started talking to partners at firms of all different sizes. Um, I talked to staff, I talked to clients, and I learned that, that it's a really interesting time in public accounting right now. You know, of course everyone is talking about the pipeline issue and how do we fix that? And, um, everyone is so interested in the technology topic, but I heard lots of other things like, hey, there's been a couple of private equity deals. We're not really sure what to make of that. And the AICPA says we need to be, you know, taking a big step towards advisory and away from compliance.

David Wurtzbacher: [00:03:24] And, um, so there are just lots of interesting things. And I would ask people, you know, what are you what are you going to do about all of that? You know, that's quite a cocktail of problems or opportunities, depending on how you see it. And, um, people said, look, if you want to tap into resources to make a lot of these problems easier to tackle, like an option that's out there and it's been out there for many decades, is to merge up, just, you know, move your firm into a bigger firm and you get some help and you get some extra resources with all those things. And I said, okay, well, what's the problem with that? Because I could kind of hear it in their voice. Um, when it was a particularly entrepreneurial, uh, CPA that I was talking to and they said, um, well, we are fiercely independent. And I heard that a lot. I heard, you know, this value come out all the time. And I said, okay, there's something interesting here. And I also found myself, frankly, drawn to the entrepreneurial, fiercely independent, um, firm leader. I thought, like, wow, look at the drive and the creativity and the energy and all the opportunities surrounding them. So, um, the, the whole model of ascend was to bring the resources that people were looking for to reach their full potential while preserving their independence. And so, so.

Blake Oliver: [00:04:45] So I get to keep my brand, my firm name when I join ascend.

David Wurtzbacher: [00:04:49] You do. And and I would elaborate on that and say, um, when I would ask people like, tell me more about independence. What is it about independence that's that's so precious to you? Most of the time, the the answers I would get back were name on the door. We have a long standing reputation in our community, and our reputation matters. Uh, we care a lot about our people. We care a lot about our clients and the way that we serve them. Um, we don't want to just disappear into a bigger firm where we become just a number, and we just have, like, a day job to do. We like the strategy and the business building. And so we want to have influence over the strategic direction of our firm. And um, so I said, great, like we can preserve all of those things. So when somebody comes in, that's the promise. The promise is we are going to, um, promote you and support you and amplify everything that's great about you. And as we come together, we're going to have some strength in numbers, and we're going to have some scale that allows us to build some critical integration in the back end so that you can focus on doing what you love. And no one has to reinvent the wheel. Um, and so when somebody comes in, you know, they start to learn the resources that we have and the integration that we do across firms and kind of where that line is between the things that they do on their own and the things that we do together.

Blake Oliver: [00:06:12] So private equity has been a big buzzword in the profession. A lot of negativity around it, particularly around every time there's a big private equity investment in a large accounting firm. Yeah. Um, there was just a story in the Wall Street Journal comparing what's going on in accounting specifically to what has happened in medical. Yeah. Over the last few decades. Yeah. And the stats that I see are not great of surveys of doctors like doctors. The vast majority of them, well, at least the majority. I think it's like 60% or more view private equity as having had a negative impact on their profession. And only 11% or so have a positive view. So there's there's a lot of like fear in accounting that like this is where we're going. The part model is dead. That's what Mark said at the AICPA recently. Uh, and what's going to replace it? Is it like private equity ownership of accounting firms? Um, like, what do you think about all this? You know, as, as somebody running a private equity firm, you know, this this is what what what do you have to say to all the CPAs out there who are worried?

David Wurtzbacher: [00:07:33] I honestly like I think you are right to be worried. You know, like the the reputation of private equity is not unwarranted. And the issue with roll ups and I'm using air quotes if quotes. If you're just listening to this, is that most of the time they exist because some private equity guy decided that he wanted it to exist. And so the whole purpose for the rollup is to generate a return for that guy and that private equity fund. And so what happens, particularly when you have a short time horizon, is that private equity, like, doesn't really see the people involved. They don't really see the meaning in the work. They don't really see the the trust and the relationships that are what in particular public accounting are built on. And that's where like bad decisions get made, like short time horizons not focused on the right things. So as you mentioned at the top of this, um, I came from the dental industry where I did something very similar. Um, and. Really, when we started Lightwave Dental, like, we, we were the anti corporate dentistry people. Like that was our whole, our whole approach was that the private equity backed corporate dentistry had gone in and started like basically actively, actively pushing dentists to diagnose in a certain way and to use supplies and lab work from certain places and like it was all about profit. It was all about profit and the doctors.

Blake Oliver: [00:09:04] More services, more revenue.

David Wurtzbacher: [00:09:07] 100%.

Blake Oliver: [00:09:08] Like that's what they're pushing for.

David Wurtzbacher: [00:09:09] Well, actually in dentistry. Okay. So in dentistry, more revenue. Yes. So if you're, you know, you've been to the dentist, you're not a dentist. Like, you don't know if you need a filling or a crown for your work.

Blake Oliver: [00:09:22] Or an x ray.

David Wurtzbacher: [00:09:23] Yeah. Or an x ray or whatever. And so we would say, hey, let's just like stack these up, let's do more crowns and fillings, blah blah blah. Let's, let's get all of our lab work done overseas, even though even though the higher quality stuff can be done right there in your hometown. And so the whole idea of Lightwave Dental was, we are never going to do that ever. We will never infringe on the autonomy of a clinician to diagnose the treatment that their patients need. And are we going to make less money than someone who does do those things? Yes, we're going to make less money. But like the whole point of it was to have happy dentists. We thought if we had happy dentists that were doing what they love and providing the care their patients needed, that they would stick with us for a long time and we could make long term decisions together. And we would, we would, we would grow and everyone would win. So that was a very different approach in dentistry when when I got there.

Blake Oliver: [00:10:17] Um, and that's interesting you mention that because I was last year, I was at the pool in my community, and I met a dentist who worked for a private equity, a corporate owned dental practice. And he was a young guy, new, you know, young in the, in his profession. And he was just, like, complaining about it, like they just book him solid and he has no time to breathe. And he's just going from patient to patient to patient. Yeah. And he felt overwhelmed. And he's like, is this the rest of my life?

David Wurtzbacher: [00:10:49] Well, that's really sad. That's really sad for that for your friend. But unfortunately like it happens a lot. So the Wall Street Journal article you're mentioning, I, um, I saw it too. And it was they were not dentists, but they were, um, hospital doctors of some kind, if I remember right.

Blake Oliver: [00:11:04] Emergency room doctors, er, doctors.

David Wurtzbacher: [00:11:06] Who were saying, hey, like, private equity hasn't been good for us. So you and public accounting should be aware of, of what could happen here. And the corollary here on public accounting in particular is like the quality of the work auditor independence. Yep. Um, and that sort of thing. So I think that like, I think the the warning is not unfounded, you know, because there are plenty of examples in the medical world, as they point out, where there have been issues around this. And so I think it's really important if you're going to do anything with private equity, it's really important to figure out, like, what kind of people am I talking to? Why are they interested in accounting? How long are they going to be here? And do they really get that? This entire profession is built on the trust that the public has put on us, um, to, to like, steward the financial ecosystem, basically. And, um, I think honestly and unfortunately, like a lot of people don't understand those things. Um, maybe it's because I had the experience in dentistry, but I think it's also just because of the way I see work and the, um, length of time that I plan to be here.

David Wurtzbacher: [00:12:19] And just my honor for the profession in general. Like, we've been really focused on this for a long time. We brought in, um, a general counsel and a deputy general counsel from the profession to really help us with, um, quality management standards. And how do you operate? Um, with the spirit and the letter of the rules when it comes to alternative practice structures, and I don't think they will have a problem with me saying this, so I'll just say it. But we proposed to the AICPA that they let us be a standard bearer for all of the overeager private equity people that are trying to get into public accounting so that we can help people understand the seriousness of, um, of this issue, and we can help them operationalize the code of conduct. Anyone can go and read the code of conduct. But how do you actually operationally make sure that you're staying, um, true to like the quality promises that are so important to the profession. And it seems as though where it's headed is they're going to let us do that, um, on a volunteer basis through the AICPA.

Blake Oliver: [00:13:20] That's great. So it seems like the the time horizon of the private equity firm is really important here. If if you're looking for a really short term return, Then and you're not thinking about people, then. The obvious way to juice EBITDA is cut costs. Pile on the services. You know, add a lot of revenue. But there's these long term costs that are like not on the balance sheet. These liabilities you build up right with people. Yeah. Um, so like what what is a short time horizon in your mind and what is yours? What is how long are you in for in this?

David Wurtzbacher: [00:14:05] I tell people all the time, so I am I am, uh, 37 years old. And I tell people all the time, this very well could be the last thing I do. So I'm, I'm thinking of ascend in terms of decades. So to me, short is certainly anything less than ten years. And you will not find a private equity firm that says, like, we want to be here for for ten years, that that is just not the way that it's operated, that ten years is usually the entirety of the fund life that they're investing out of. And so they will all say, hey, we're in it, you know, 5 to 7 years. The data on the private equity industry says that that most investments only last 3 to 4 years. And so you're on to it. Like, you can imagine the types of decisions that you would make if you were looking to make a quick buck in such a short period of time. And, um, I think that, you know, like, certainly that works in some industries, like private equity has generated good returns for their investors, who, by the way, like a lot of people don't understand this, that the investors in private equity funds are causes anyone would care about, like charities, hospitals, endowments, foundations, pension plans, insurance companies. Um, but but, uh, um. Oh, man, I just lost my train of thought.

Blake Oliver: [00:15:26] Um, they're not. So it's the. But the investors are passive Right after.

David Wurtzbacher: [00:15:30] Those investors are passive. Yes, those investors are passive.

Blake Oliver: [00:15:34] And they and so it's the fund managers that have this obligation to deliver this return that they've promised. And they have to figure out how to do it in a very short amount of time.

David Wurtzbacher: [00:15:43] They do.

Blake Oliver: [00:15:44] Yeah. And and so like you said, if, if you're trying to flip a firm in 3 to 5 years, what kind of decisions are you going to make? Are those going to be good for the people or are those going to be better for your short term profit?

David Wurtzbacher: [00:15:58] Right. Yeah, exactly. Which yeah. And yeah, it's and it's just unfortunately it's just impersonal for the, the average private equity investor that's getting involved. So we set up this this from the very beginning. We said we wanted to be a top 20 firm. We actually got pretty close to that pretty quickly. We are now by size a top 25 firm across the whole group. But that was never the part that we would emphasize, we would say we want to have the most engaged employees in a profession that we have revitalized. And that revitalization comment is, um, meant to just sort of harken to the talent shortage, the pipeline problem, and kind of remembering a time where, um, going into public accounting was like one of the hottest jobs that you could get out of college. And that has changed for a variety of reasons. But our vision of what the future of this could look like is where that's true. Again. And, um, so we're a very people focused, and we're not going to solve any of those problems in three years. You know, like there are things that we can put in motion and make a lot of progress on in a short period of time. But like, it's going to take us decades to fully realize our vision.

Blake Oliver: [00:17:15] So what do you focus on then on this longer time horizon? How do you help firms? You're not rebranding them. You're not bringing them all under ascend. They are keeping their individual brand website, all that. Yep. So, like, what is it that you're doing that creates value for the firms that are joining ascend other than, you know, the financial buyout that I assume that the partners are getting? Yeah.

David Wurtzbacher: [00:17:49] So, um, I have a take on why the pipeline problem exists that I think is pretty different than what a lot of people say. Like, I hear so much about, um, the 150 hour rule and base compensation, and we need to go to the middle schools and high schools and, like, tell people about public accounting. And I'm not against any of those ideas that surround those things. Like, I think there's there's good thought in those ideas. But my, my view is that, Um, it all comes down to leadership. And if you have great leadership, then you build great workplaces and you offer great services to people, and people want to come work for you, and then they stay for a long time and develop their careers. And in public accounting, the um, client service orientation, as honorable as it is, um, it it sort of like puts a cap on leadership in a firm because the client is always coming first and the work is seasonal. And so there's only so many times throughout the year where you can really make progress on strategic initiatives that, you know, you should do. And so the very first place that we go is to the leader of the firm. And you have a, you know, typically what you have is a managing partner who is at least doing some client service. And usually they're doing a lot of clients of client service. And um, Um, we want them. We want to help them through a transition to become a true CEO, defined as them having one client, which is the firm.

David Wurtzbacher: [00:19:34] So we're not discounting the importance of client service. What we're saying is that there ought to be a leader in the firm that is only focused on making the firm better, and we're really not going to be able to do a whole lot until we get to that point. Once we have that. Um, the next thing that we want to help the leader with is to set a vision for their firm. And a lot, you know, coming up with a strategy and a vision and writing it down and all these things, you know, mission, vision, values all that. We obviously didn't invent any of those concepts, but there is some trick in the doing, um, in terms of actually enlisting everybody in your organization in that mission and aligning everybody to it, that's really quite cultural. Like a lot of conversations that you hear about culture are about benefits and the fun things you do and retreats and stuff like that. And those are all really important aspects of culture. But there's also this like high performance angle of culture. And what we want is to create inspiring clarity of purpose. That's how we talk about it. So clarity of purpose about where the firm is going to be in the future and how exactly each person in the firm contributes to achieving that vision. And like these two things alone, like the leader and the culture aspects ignite an energy in these firms, it's really unbelievable.

David Wurtzbacher: [00:20:56] Like we had like there's so much potential just trapped in great even the even the best public accounting firms. We have many that have gone from, you know, 15, 20 million of revenue to 40, 50, 60 million of revenue in really short periods of time. And their employees are happier. It's not like It's not like they're, you know, taking on all this work and everybody's drowning like they're set free in an interesting way. So once they come up with their strategy, um, we then have part of the trick in the doing is like a rhythm for making sure that you're staying on track with that over time that we help people with. But once they once they've documented, hey, here's where we're going, here's what's important, then we can start plugging in the resources of ascend, um, into that firm so that they can have help along that journey. And like ordinarily, if you're a small firm that wants to become a medium or large firm, there is a ton of there are a ton of decisions and investments and hires that you have to make to transform yourself in order to do that. And what we say is when you plug into ascend, you can skip the line on all of that because we have the resources you need. So, for example, um, anything back office we can just do for you.

David Wurtzbacher: [00:22:14] So the accounting for the firm finance, the HR, the payroll, all the compliance filings that you got to do. We could take that off your plate. We have a centralized technology team that will make sure that you have a tech infrastructure that can scale, that's secure, that's cost effective, that's easy to use. You don't even have to worry about it. Um, we have a recruiting team. That's amazing. Um, and we can talk about them if you're interested, because that was one of the first teams that we built. So you can tell them, hey, here's who we need and we will go get them for you. We bought a company called Sentient Solutions. That was, uh, they have a team in Hyderabad, India that do tax audit and CAS. So we bought that business, we installed new leadership, we transformed it, and we created a playbook around how you actually can use a global team to elevate, um, the work that you're doing for clients. Uh, we have an AI team that's, you know, proprietary like software engineer type people that are building things for our people. Um, I just today came from our Cass summit, so it's like 1 or 2 of the Cass leaders from every single firm. That. And we're just identifying bright spots of how people are running and building their Cass businesses. So there's also a lot of community and collaboration that we are facilitating across firms.

Blake Oliver: [00:23:33] Knowledge sharing, resource sharing. You've got the back office teams set up. You've figured out the technology. Yeah, that makes a lot of sense. But like you said, in order to take advantage of all that, if you are the CEO of the firm, if you're running the firm, you can't be doing 80% client work and 20% running the firm.

David Wurtzbacher: [00:23:55] Yeah.

Blake Oliver: [00:23:55] So that's where you start. Is is getting getting the leader out of client work as much as possible? Do you have an example of that you can share?

David Wurtzbacher: [00:24:04] I do, um, yeah. We had uh, so the I would say the so actually the very first firm that joined going to send. He wasn't doing any client. The managing partner wasn't doing any client work at all. His name is Aaron Dawson. And frankly, I probably learned a lot about what I think about this topic from him. The third firm that joined was a firm called LMC in New York. And Lee Cohen was kind of classically doing a lot of client work himself. And, um, the big there were two big unlocks for Lee that, you know, now everyone kind of has the opportunity to learn from, uh, that helped him to elevate out of client work. So, um, the first thing is that is all about mindset. The mindset that you have. And it's just so common, especially when you're close with your clients, to believe that, um, nobody can do this but me. Um, no one can have this client relationship but me. And, um, so you kind of have to confront that mindset and say, like, you know what? Like, I have great people here, and here, and I can help my client understand that I'm here, but that it's a good thing for them that we have, you know, bright, young, hungry people in our firm that are that are going to do work for them.

David Wurtzbacher: [00:25:22] Um, so that's a that's a big thing. The second thing that, um, Lee would say, like 50% of it was just a mindset shift. And the other 50%, he would say, was that we hire a we we help find a chief growth officer for every single firm that joins. And, uh, this is not your kind of classic BD chief growth officer that you hear talked about a lot in public accounting. This is more of a, um, general manager talent from outside the profession. A lot of them have MBAs, but they are like hungry, humble, smart people that come in and just start creating visibility for that leader about, hey, here's what's going on in the business and here's the opportunities, and here's what you could be focused on focusing on that are really going to move the needle. And so between the mindset shift and the CGI, um, Lee Cohen literally became a different person. He would tell you that. He would say that he was like stressed and unhappy and all these things. And he became someone who was very happy and set free. And, um, you know, contributing and contributing at a level and turning his firm into a type of firm that he really never imagined.

Blake Oliver: [00:26:34] And was there like a magic moment for him when that when that switch happened? I mean, that's a very dramatic change.

David Wurtzbacher: [00:26:41] It's very dramatic. Um, the answer to that is sort of yes. There was a magic moment. So it started. We do this thing called CEO Power Launch, where we bring these managing partners in as cohorts. And for a couple of days, we talk about this transition from managing partner to CEO. And that was the first kind of like head explode moment for him. And then we have sort of a little bit of a book club that we do together. And there's a book called ten X is better than two x. Have you ever heard of that, Blake?

Blake Oliver: [00:27:12] I haven't, but I like that idea.

David Wurtzbacher: [00:27:14] Yeah, I like the concept.

David Wurtzbacher: [00:27:16] Is that, like, if you focus on things that really, really matter, you're going to get a dramatically better result and you will be happier. And, um, I do think that it's just human nature to sort of get drowned out, like like, like to find yourself drowning in limiting beliefs and small thinking. And if you can break out of that, um, it makes a big difference. So I know, particularly for Lee, that book made a big difference.

Blake Oliver: [00:27:43] I mean, I know how it feels, uh, when I had, you know, my firm, the, the, the big moment was, I don't know, I don't know exactly when it happened, but I had a there was like a month or two where I was completely overwhelmed because I was managing all these client relationships. And I finally got someone on the team who I thought, maybe they can do it. Maybe they. You know what I mean? Like, and I'm just going to take a chance and just transition this stuff and see if it works. And it was like 80, 90%. But guess what? The clients didn't really care about that 10% that I was so worried about. Sure didn't mind. And I was able to come in and help when I needed to. Yeah. And I realized that for like so many years, I was just holding on to all this stuff that I didn't need to. Uh, it was not necessary.

David Wurtzbacher: [00:28:33] Good on you for realizing it. Yeah. You know, another thing that I encourage people to do is, um, just carving out time to think is so rare. You know, like, there's always a notification or a thing to go to or a thing to do. And just like sitting yourself in a different part of your house, or like going to a nice hotel and renting a conference room or something and just thinking about, like, what do I do all day? And why is it that I'm doing those things? Um, and what would have to be true for me to move this around. It's amazing how quickly you can really, actually like, land on the answers that will set you free. But it does take at first the intentionality to go and like, do some deep thinking about all that in the first place.

Blake Oliver: [00:29:20] I'm convinced that it's impossible to do more than one thing well at a time. Yeah, like you can choose one thing you want to be good at and work on that. But doing two things or three things or four things, it's not.

David Wurtzbacher: [00:29:34] It is hard.

Blake Oliver: [00:29:35] Not really possible. You have to pick. So if you're if you're prioritizing the client work, that's what's going to get done. And that's great. But you're not going to be able to scale for sure. You're not going to be able to run your firm like a real managing partner.

David Wurtzbacher: [00:29:48] Yeah, I agree with you completely.

Blake Oliver: [00:29:51] So you got to make that leap. Well, um, let's talk about the talent strategy. Talent acquisition. You said I think that was one of the first functions you built? Yep. And it's one of the biggest problems that firms face. 75% of firms report staffing shortages. I mean, it might be more than that. Um, so what do you what are you doing for your firms when it comes to helping them attract and retain talent? Like what is working at ascend?

David Wurtzbacher: [00:30:26] So, um, the first thing that really worked was building a team of recruiters from outside the profession that really know what great recruiting looks like and just pointing them at the problem. Like so many firms that have recruiters like, grew up in the profession. And so they're also kind of trapped with like the baggage of old ways of doing things. Or um, maybe it's a CPA turned recruiter. There's a lot of those, um, and they just don't know the best practices for finding candidates and building momentum and hiring process and closing that candidate. So having professionals from outside the profession that are doing this all day, every day for our firms, it's a huge needle mover. Huge. The the second thing is what I call having an irresistible offer. So what I mean by that is, um, you have you have to have something different on offer for a good candidate because that candidate has a lot of choices, right? If they put themselves out in the market like we you know, we know we hear the stories all the time. Good candidates have six, seven, eight offers that they can choose from. So at a send that irresistible offer is um, it is really about like what it means to be an acend supported firm.

David Wurtzbacher: [00:31:44] It means everything you love about the smaller local firm, plus everything that is great about scale and having resources. And, um, you know, especially like the young people in this profession. Like they can tell the difference between a firm with great leadership that's going somewhere and a firm that is stagnant. And yeah, when you get in, you talk like they start talking to our people about like, hey, tell me about the culture where they actually have something really interesting to say. It's like, you know, here's where we're going to be in five years and here's how we're getting there. And our CEO is like focused on all these things and da da da da. And the candidates really pick up on that. The the other part of the, um, irresistible offer is actually financial. So the profession, um, has been very base salary heavy forever. And part of the reason is that, like incentive compensation is kind of hard to figure out. It's like, oh, you know, there's always unintended consequences. And how do I design this and make it fair and everything. And um, so we we have a bonus program off the shelf that firms can use that, um, really allows us to pay our people more in cash than they can get anywhere else.

David Wurtzbacher: [00:32:57] Um, and on top of that, because we have private equity backing, like we have more flexibility in terms of how we use equity compensation. And so we have well over 100 people across all our firms that are managers or senior managers that are investors in ascend. They they own ascend stock. And that opportunity to make more money with better tax treatment throughout your career. And sort of the opposite of all those things in the legacy partnership model, is really, really attractive to people. So, um, those are the two things that that really, um, kind of unlock the talent problem. We even great firms, like every firm that came in said capacity is our number one issue. And we're like, okay, we'll go do our best to fix that. And now, like it is that that issue is gone. So our big issue now is like, how do we go and get all of the right kinds of new business that we want to keep our great people. Um, you know, excited and motivated and and working at the levels they want to be.

Blake Oliver: [00:34:01] So did I hear you right? You said the hiring was the biggest challenge. What was the biggest challenge?

David Wurtzbacher: [00:34:07] They would describe.

David Wurtzbacher: [00:34:07] It as capacity.

David Wurtzbacher: [00:34:09] Capacity?

Blake Oliver: [00:34:10] Capacity.

David Wurtzbacher: [00:34:10] Yeah.

Blake Oliver: [00:34:11] So okay. I love hearing that ascend employees are also shareholders or have equity. How does it work? Is it like stock options? Is it uh, you know, how do you do it?

David Wurtzbacher: [00:34:25] Yeah. So the way it works.

David Wurtzbacher: [00:34:26] Is, um, every firm, depending on their own growth, earns for themselves an equity pool. So our firms that grow the most get the most equity participation. Um, and then that pool gets allocated to the people in the firm, and we don't allocate that for them. That's up to the partners to decide. Hey, how are we allocating this? And then we we provide some guidance based on the, the, um, level of seniority in the organization. Like here's a range that we think is a is an acceptable range. Based on this big survey we did where we asked people in public accounting, we had like 500 responses. We asked them, how much would you like to invest in any given year? How much would you invest over the course of your year? But think of this as like bite size chunks, like ten between 10 and $50,000 that people are investing. And it's really being funded by this bonus program that we also have. And so they are like basically dollar cost averaging into ascend stock over the course of their career. And we teach them like here's how equity value creation works in a business like this. That's outside of the partnership model. And then they they can connect the dots between like, oh, um, if we're doing this thing or that thing or we watch ascend succeed, that is that is what's driving equity value for us and our families and for each other. And it really does create like a different, um, cultural energy.

David Wurtzbacher: [00:35:51] Yeah.

Blake Oliver: [00:35:52] Well, it's taking it's taking what's good about the partner model and keeping that ownership, shared ownership of the, you know, high highest performers at the firm is what's great about the partner model. Yeah. So if you get rid of that what is there to create the culture of we want this firm to succeed rather than we're all just mercenaries.

David Wurtzbacher: [00:36:17] Yeah. Yeah. Absolutely.

Blake Oliver: [00:36:19] Earn a salary because it's it's ultimately like if your people leave, you have no firm. You have nothing.

David Wurtzbacher: [00:36:24] Nothing. Yeah, absolutely. And it is the people.

David Wurtzbacher: [00:36:27] I'm totally with you on all that. Blake. And I would add a.

David Wurtzbacher: [00:36:30] Layer.

David Wurtzbacher: [00:36:31] To say that it's a really important design principle for us that everyone, no matter what firm you're at, you own ascend stock because it's the firm that earns the pool of equity. But it is equity in ascend. And that creates a one team attitude across all of our firms. That is really the reason. Like it unlocks so much collaboration, um, across the firms because they feel they enjoy being a part of something bigger.

Blake Oliver: [00:37:02] Okay, so you said that after solving talent, figuring out the recruiting, it was now business development. That's the priority because you gotta you're hiring all these people. You got to give them work to do. Yep. So how does how does ascend approach biz dev marketing sales when you have all of these different brands? Yeah, that's that's a that's a disadvantage of this model compared to just having everything under one.

David Wurtzbacher: [00:37:32] I would I would say maybe.

David Wurtzbacher: [00:37:34] You know, maybe not.

David Wurtzbacher: [00:37:35] Okay. Um.

David Wurtzbacher: [00:37:36] These brands that are a part of ascend, some of them have been around like 5060. In one case, 100 years. Um, we are very focused on the middle market. So although we're a top 25 firm, and I know there are other top 25 firms that say their middle market firms. But what I mean by that is, like you take a smaller, nimble, high touch white glove service type of a firm where there's a lot of employees that want to work at firms like that. There's a lot of clients that want to receive their work from a firm like that. We care a lot about that type of firm continuing to succeed and thrive for the for the long haul. And I think over time, what will happen is the ascend firms are like the only independent option in a market, um, as consolidation runs its course, uh, through the profession. So we're really, really I really like having these long standing local brands, um, just like in talent, like, I think the, the, the way that you move the needle on this is, it's, it's like it's simpler than maybe you would think. So, um, the first thing is for the firm to understand what kind of client do we want? And most of the time, if you look at the mix of new business that people bring in, it's the hodgepodge of stuff. There's like.

David Wurtzbacher: [00:38:55] Yeah.

David Wurtzbacher: [00:38:56] Really small businesses.

Blake Oliver: [00:38:58] We help everyone, right? Whatever you.

David Wurtzbacher: [00:39:00] Need. Yes. Yes. So focus.

David Wurtzbacher: [00:39:02] What kind of client do you want? And we don't tell them what kind of client that is. Other than that, we are really happy to be in this middle market segment. Um, but that was the case for them anyways. So we help them through an exercise of defining their ideal client profile. This is just like basic sales and marketing stuff. Um, then you should have a goal. What is the new business goal? Again, we don't tell you what that is, but looking at all the people you have and how how much, um, you know, how much work they need to be achieving their own career goals and your goals for the firm. What is your goal? And let's get smart about breaking that down across all the people who must or want to be involved. Um, so that everyone kind of understands their contribution to the greater whole. And then finally and this is this is like, you know, it's just like, let's keep track of it and have a meeting where we review our pipeline and like, hold each other accountable to, like, doing the activities that are required to convert a lead into a new client. And so we just help firms through that, um, those kind of fundamentals of, of new business. And then I will add one other thing, which is that, um, we have run a business development training series just to help younger people kind of figure out how to do this. Every firm's got the, you know, the rainmaker that sort of naturally understands these things. But how do we make it less scary for young people who want to develop in their career, but are kind of not sure about how to do it, or they don't like sales? Um, and so we have a series of courses that we offer for people to just kind of bring down some barriers there to.

Blake Oliver: [00:40:46] Yeah, that sounds great because when I was at a top 25 firm, uh, there was a lot of sales training, but below the top 100, it can be really difficult to learn how to do this for sure, because you're kind of in a client role until suddenly you are in a business development role in a lot of firms, right? It's sort of like you make it to manager and then they expect you to start developing business if you want to make it to partner. But you've got a ton of work to do and nobody teaches you how to do it. So you just got to go figure it out 100%. And some people do. They just figure out a way they they maybe they hack their own way into it, you know, or they just they were good at golf. Right? And they figure it out or. Yeah, you know, they.

David Wurtzbacher: [00:41:32] Here are two.

David Wurtzbacher: [00:41:32] Things that really move the needle that maybe will be helpful to listeners. Um, First one is. Surprisingly, the average person in a firm like doesn't know all the services that your firm offers. So just.

David Wurtzbacher: [00:41:46] Doing.

David Wurtzbacher: [00:41:47] Really basic education, like here's what we do, here's what that means, here's why it's great for clients. You know, here are some examples. Um, it just gets people's wheels spinning. And instead of having like, oh, I got to go like sell this one service line that I know, like they, they know more about the whole firm. So that's a really easy thing that anybody can do for their people. It's just like, have a lunch and learn where you explain everything your firm does. Um, the next thing that we learned from one of our firms that I thought was really cool is that anytime they go meet with a referral partner, they ask that referral partner to bring one of their young people, and then they bring one of their young people. So you're going to the meeting and you've got like, the connections happening.

David Wurtzbacher: [00:42:27] Yeah.

David Wurtzbacher: [00:42:27] Um, at different generational levels. And you're just like those, those younger generations are just planting seeds, you know, like they're working on clients. They can talk about stuff, but really you're forming the foundation for a relationship that's going to grow and blossom over time.

Blake Oliver: [00:42:42] I love that you're it seems to me like the common thread here is you're taking best practices, you're taking structured approaches, you're taking like the learnings of MBAs for the last hundred years, and you're just giving that to these firm owners so they don't have to go learn it all and put it all together. I mean.

David Wurtzbacher: [00:43:06] Yeah, that's a big part of it. And what I, what I would.

David Wurtzbacher: [00:43:09] What I would add to it is that the, the ascend team now is about 80 people. So just to put that in perspective, like the country's largest alliance has a staff of 30, because if we have 80 people that all they do is wake up every day and ask themselves like, how can we serve our firms better? And so not only is there an intellectual like repackaging, Let us help you not have to go figure this out on your own. There's also, like boots on the ground that are helping you do the work and make progress. And that's a big, big part of the formula here, too.

Blake Oliver: [00:43:47] That's a way to think about it. It's not a roll up. It's it's like you're in alliance with equity. Common equity ownership.

David Wurtzbacher: [00:43:58] Yeah.

Blake Oliver: [00:43:59] Right.

David Wurtzbacher: [00:43:59] Yeah.

Blake Oliver: [00:44:00] That's what it feels like.

David Wurtzbacher: [00:44:02] Yeah.

David Wurtzbacher: [00:44:02] We toyed around originally with like should we call ourselves, you know, an alliance or a neo alliance or something like that?

David Wurtzbacher: [00:44:10] But it really is um.

David Wurtzbacher: [00:44:12] It is a like we're building this really powerful, like, nucleus between all of the firms that can help everyone achieve more, uh, than they would be able to achieve on their own.

David Wurtzbacher: [00:44:24] Yeah.

Blake Oliver: [00:44:25] And you couldn't really do what you're doing in just a pure alliance, because there needs to be common ownership.

David Wurtzbacher: [00:44:31] Common ownership is. That's exactly right. And it's also, you know, a lot of this is like it requires capital to do a lot of these things too, right?

Blake Oliver: [00:44:42] Yeah. You can't just give people knowledge. It's not enough. Yeah. Um, you can give people I mean, I've been educating accountants for a decade now. You can't just give people knowledge. They don't have the time to do it. They don't have the resources to do it. You have to help them do it, too. Yeah. Yeah. Interesting. Um, I think we're going to come up with some sort of, like, new name for this.

David Wurtzbacher: [00:45:01] Yeah, that'd be great. I would, I would love some more ideas.

Blake Oliver: [00:45:04] Right. Because, like you said, roll up is not is not ideal. It's like that. That has negative connotations that I just don't feel apply here. Yeah. I'll have to think about it. Um, before we go, I want to talk about tech and AI and all that because it's shaking things up. It is automating a significant percentage of compliance work or has the potential to do it. We actually haven't seen in surveys that it's Doing a crazy amount of the work yet, right? Maybe firms are saving, like two hours a person, and that's for the ones that have really adopted I two hours a week, maybe. What are you seeing? What are you working on? What's going on at ascend when it comes to AI and automation?

David Wurtzbacher: [00:45:49] So, uh, first of all, just an observation about this. Um, there is so much more like hype and, um, like future forecasting than there is reality in this area. So, you know, for the firm that's feeling like, oh my gosh, I'm totally behind. And everyone else has automated their whole workflow and I haven't. Like, that's just not that's just not the case. Um, here's something really interesting. So we, we once um, early days of ascend, we, we charted out demand in the profession that's just going up and to the right because things are getting more complex and business formation and all these things. So things. Demand is up and to the right. We know that the there are more people leaving the profession than are coming in to the profession, and something pretty serious would have to change for that to to change directions. And when you chart out demand versus supply of people over time, what that math tells you is that ten years from now, 2035, every CPA in the profession will have to be 2.7 times more productive on a revenue per employee basis than they are today. That is crazy. That is really, really crazy.

Blake Oliver: [00:47:05] Yeah. When you consider that like a typical firm, a firm that's doing well, uh, their staff are, you know, bringing in what, like 200,000.

David Wurtzbacher: [00:47:14] Yeah, that's a pretty.

Blake Oliver: [00:47:15] Typical year in.

David Wurtzbacher: [00:47:15] Revenue. Yeah. So that. Exactly. So that number has to get close to 600,000. Yeah. Per person. Um, the even scarier, the even crazier thing than that is that at that point in time, um, about 85% of the profession will be people with a decade or less of experience. In a world where most people say, like, you can't even make partner in ten years. So, um, that is the backdrop that we start with where we say, okay, um, that is a big problem, and we want to be racing to the solution as fast as we can. And our acquisition of sentient is a part of that kind of global teaming. And our AI strategy is a part of that, too. Um, we decided that, like, there are going to be some cases where it makes the most sense to buy a product that's out there, just like anybody else. And there are going to be some cases more intimate to our workflow where we would rather build product ourselves. And so we are spending many millions of dollars this year developing our own AI driven solutions to elevate what people are doing in, in their careers. Um, and it's really exciting for our teams because they know that like, like, no, almost no public accounting firm at all, but certainly not a medium sized or smaller firm is going to be able to do that. Yeah. Track the talent, spend the money, all that kind of thing. Um, and it's one of the things that we can do. So we're really excited about that. Our team will will be, um, close to 30 people, just like software engineers and product people by the end of the year. And, um, and we're really excited about what the future holds for them.

Blake Oliver: [00:49:07] Well, it sounds like the best of both worlds from a tech standpoint. You're getting the smaller, firm culture in whatever firm you're a part of. That's part of ascend, but you're also getting whatever the Ascend Tech team comes up with.

David Wurtzbacher: [00:49:21] So Ascend Intelligence.

Blake Oliver: [00:49:23] And send intelligence. There you go. Trademark that.

David Wurtzbacher: [00:49:27] Yeah, exactly.

Blake Oliver: [00:49:28] Before Apple gets to it.

David Wurtzbacher: [00:49:29] Yeah. So, you know, it's it's still early for us. Um, but we've done a lot of work on what's possible and what will it cost and how fast can we do it. And.

Blake Oliver: [00:49:40] Well, the thing is, David, there's still so much, uh, that to be done in just like normal workflow optimization. A lot of firms that you talk to. Well, probably by the time I talk to you, I imagine they have some kind of practice management system in place, but a lot of firms don't.

David Wurtzbacher: [00:49:54] Management is so messed up in the profession. Like it doesn't. It's so messed up. There's like hardly a good version of it. And, you know, one of the things that we're that our AI team is working on is how do we take all of the client context that you pick up over years and years of a relationship and really actually get it into one place? Yeah. So it's out of your head, it's out of the spreadsheet and the work papers in your inbox and some other tool that you use for this or that. How do we get all that client context in one place so that it's right in your fingertips? And it's really easy to be a trusted advisor. Instead of spending all of your time like aggregating the things that you need to do work. Yep. Um, so that's one of the things I'm really excited about.

Blake Oliver: [00:50:36] Well, I'll have to have you back on to talk about it at some point in the future. David, it's been a real pleasure. Thank you for joining me and sharing Ascend's journey and mission with earmark. And, uh, can't wait to see you around.

David Wurtzbacher: [00:50:52] Thank you. Blake. It was fun.

Blake Oliver: [00:50:54] Oh, by the way, before we go, actually, I should I should say if anyone's listening and they want to, uh, get in touch with you or learn more about ascend, where should they go?

David Wurtzbacher: [00:51:04] You know what? Just email me. I'm David at ascend together comm.

Blake Oliver: [00:51:08] Thanks, David. Bye.