Episode 109: The Accountant's & Bookkeeper's Guide to Designing a Lifestyle-Driven Business

In this episode of The Wize Guys Podcast, Brenton Ward, Jamie Johns, and Ed Chan dive deep into the transformative journey of turning an accounting practice into a self-sustaining business.

Jamie shares his personal experience of working with Ed and the mindset shift that revolutionized his approach to business. They discuss the common misconception that an accounting firm must be built to sell, and how Ed's philosophy challenges this by emphasizing the potential for greater returns through strategic investment in the business itself.

Ed elaborates on the importance of designing a business that runs without the owner's constant involvement. He highlights the benefits of viewing the business as an asset, focusing on the long-term return on investment rather than short-term profits. The conversation touches on critical concepts such as creating robust systems, restructuring leadership roles, and setting up processes that allow for scalability without the typical growing pains.

Whether you're just starting out or looking to scale your existing practice, this episode provides actionable tips and inspiration to help you achieve a business that not only grows but also gives you the freedom to step back and enjoy the fruits of your labor.

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PS: Whenever you’re ready… here are the fastest 3 ways we can help you transform your accounting/bookkeeping practice:

1. Join 40,000+ subscribers to our transformation Friday tips – Every Friday, our Wize Mentor and Thought Leader of the Year, Ed Chan will send one actionable insight from his experience of building a $20 million accounting firm that still runs without him – Subscribe here

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Transcript

Brenton Ward: 0:02

From Wize Mentoring is The Wize Guys Podcast, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time- poor practice to a business that runs without them. I hope you enjoy and subscribe!

Jamie Johns: 0:19

First of all, it's really a mindset, so for me working with Ed. First of all, it's really a mindset. So for me working with Ed first of all was the mindset that my business can be an investment because I think there are a lot of business brokers out there and a lot of theories out there that you work in a business to sell it. There are a lot of business coaches out there, for example, in a particular franchise that I won't mention, but they all talk about the one purpose of a business is to build it up and sell it. So when you start talking to Ed, it turns that theory on its head and says, okay, well, if you can get a better return on your business and set up your business in a way that it can get a better return on investment than property or the share market. So Ed's argument is why do you sell it? And it's purely focused on results.

Brenton Ward: 1:13

So that resonated with you or were you questioning the fact, given that, at that point in time, your business was fairly heavily built around yourself, would you say?

Jamie Johns: 1:23

Well, it was like a lot of guys who start out like myself and like Ed did, it's all built around you. Ed talks about the butterfly catcher versus the garden that attracts the butterflies. So you know, in the early days we all grow our businesses just by sheer referrals and you know we do all the grinding and the minding and the finding and if you take the finder out of it then you often don't have the referrals and you don't have the growth. T he discovery session really turns a lot of traditional thinking on its head and solely focuses on two factors. One, can your business give you a good return on investment compared to other asset sources? And secondly, can you set up your business to run without you?

Jamie Johns: 2:09

Now, if you don't have the right mindset to believe that your business can run without you, then you really need to get to stage one. You know stage one is, I think Dr Stephen Covey talks about. You know, private victory and public victory or there are two creations. So it really mentors you to say, well, it there's two creations so it really mentors you to say, well, it can be done, I've done it, this is how it's done and you've got to get it through your mind first. That's the first thing, but the second thing is purely focus on a business sense is let's get a good return in investment on this business and you go to work every day, as Ed said, to work on the balance sheet. A lot of us, including myself and other accountants, as soon as we have more staff, more systems, more procedures, we think of it as P&L. We think, oh, that's an expense, oh, that's just another expense. So you've really got to change your whole mindset around working on the business and building an investment over the longer term, not the short term.

Brenton Ward: 3:04

So yeah, so, Ed, can you give anyone who would like to undertake their own discovery session with themselves now what the steps would be to really get that underway? Sure, Absolutely.

Ed Chan: 3:17

It's not that difficult. You just got to ask yourself, you know, if it's a husband, and then we then design that business instead of just letting the business take you wherever the wind blows, so to speak, that you actually design your life, you design your business and you design the kind of income that you want and the kind of lifestyle that you want. I mean, I personally wanted more choices in my life and I knew that the only way I could get more choices in my life is to have a passive income. The best way and quickest way to build passive income is to invest it back into your own business and structure in such a way that it runs without you. And that's what I've done and it's achievable. We're in the right kind of business.

Ed Chan: 4:21

The problem is that there have been some very good marketers out there who've sort of brainwashed us into thinking that compliance is dying compliance isn't a very good product and people don't value it and so forth and so forth. But compliance is the only business that's growing. They're also saying that it's dying, but it's not dying, it's actually growing. It's growing because our population is growing by 250,000 to 300,000 a year and our immigration policy is quite healthy. So whenever skilled migrants come into this country, they all get a job and they all need to do tax returns. So the compliance pie is growing and I keep saying that's a great business model because that's the only business model that I know that the government drives business to your door because it's illegal not to do a tax return. It's recession proof and all you need to do is to manage it efficiently so that it's profitable and we don't need to go chasing for new business. The business is pretty close to an annuity in nature, so what better business can you have than the government drives it to your door and it's as near annuity as you can get? And the pie is growing.

Ed Chan: 5:37

As long as there's tax in the country, there's always going to be tax changes. Whenever there are tax changes, you always need an accountant. So there's tax in the country, there's always going to be tax changes whenever there's tax changes, so you always need an accountant. So there's been a lot of confusion created by a lot of people out there and generally, they're from people who had a vested interest. They were either trying to sell you their products or sell you their services or something, and they misrepresent what our industry is, and because of it's created a lot of confusion and that's led a lot of accountants to believe that you know at the end of their working life they need to flog it off and get as much as they can and not retain an interest in it. But naturally, if you don't have systems in place and if you built the business around you, then you have to sell it. There is no other option.

Ed Chan: 6:22

So what I'm saying is don't run it like a partnership, run it like a corporation where we separate ownership from your labor, from your skill.

Ed Chan: 6:32

In a partnership model it doesn't work because just because you're an owner, you think you've got a say in everything, even though you may not have the skills or experience to get involved in certain aspects of your business. But because you're a partner and you're an owner, you have a say in everything. And it doesn't work. And if you turn it into a corporation where you separate the skills out from the shareholding so some people are more CEO, some people are more COO, some people are more CTO or CFO, and if we each stay in our flow in our area of expertise and let each other run our areas and then hopefully together you'll produce a profit and then you pay a dividend based on your shareholding that works much better, and then you pay a dividend based on your shareholding that works much better and I've proven it and it works and it's much more effective than a partnership model. And I'm not talking about the structure. I'm not talking about the legal structure. I'm talking about the management, the way you run the business.

Brenton Ward: 7:36

Okay, so going through that process, Jamie, what were the highlight moments for you coming out the back end of that discovery session and what was your sort of realigned focus from that point?

Jamie Johns: 7:47

Yeah, the main thing to mention, Brenton and I know this will resonate with hundreds of accountants is the realisation that you don't have to be the central person to run the firm. So it's almost a humbling process. You've got to realize that the firm can run without you. That's the most important concept to realize because when Ed shows you how that can be done that's a real choke point in the discovery session that he'll show you how that can be done, discovery session that he'll show you how that can be done. And the other thing is I think you know Ed mentioned, is once you realise how that can be done, then it's really important to get that structure and foundation of teams and operational systems in place.

Jamie Johns: 8:35

One of the things you've always said, Ed, is it's okay to scale, but get your foundations right first, because otherwise you're going to scale problems. So I'd been down that path. I'd tried to scale and I tried to do this and tried to do that in my own business and I was only scaling problems. So it's really really important for the accountants and whoever's listening that you get those foundations right and, like Ed said, even though you're a small business, act like a big one. So put systems and processes and people in place. Even if you have to wear a lot of hats at the start, make sure you get the foundations right, because if you don't do that and you go to scale, then you're only going to scale problems we talk about in the discovery session, where this stage because I know we're going to get into the foundations and the systems and the processes yeah, at this stage.

Brenton Ward: 9:27

I think we want to take an opportunity now to take stock of where they are and to really follow those steps that Ed outlined before really look, you start to look at your business from an investment perspective. Where do you want to be when you're 65? What lifestyle do you want to be living at that stage of your life and how is your business going to provide for that? Can it provide for that and Can it provide for that? And in its current form, is it going to be able to do it? If not, we need to start putting some numbers on that future position and start working backward from there to really kick this journey off. Is that fair to say, Ed?

Ed Chan: 10:06

Absolutely. You hit the nail on the head. You've just got to design your life and it's all there to be designed because of the industry we're in, it's annuity in nature. The government drives it to your door and we deal with accountants who are reasonably easy to deal with. They're educated and easy people to deal with and you know the systems are all there. We just have to put everything together and it's all quite achievable right?

Brenton Ward: 10:34

So, for everyone, this is your opportunity now to really take some time. So, whether you're going to do it straight away or you're going to lock it into your calendar now, take some time even if you have to rewind this and go through those steps that it outlined just prior, just earlier, in terms of what you should be doing to really take yourself through this discovery process, but to really, at this stage, pause, stop and spend some time understanding where you'd like your life to be when you're 65, and is your business in a position to get you there? If not, we need to recalculate some numbers and start working backward from there. Ed, thank you so much for sharing that part of your journey and the journey that you started your firms on. I think it's a brilliant place to start and, Jamie, looking forward to hearing more about how you took Sky Accountants through this part of the journey as well.

Jamie Johns: 11:25

Absolutely. Perhaps I'll go first, but yeah, we'll have a lot of exercises and tasks that, as you said, Brent, will help people really dig down into the details of this process. Ed's outlined some of the bigger concepts that we do, but we'll certainly take them through the details so that they can wash out what we need to achieve in this section of the course.

Brenton Ward: 11:48

Brilliant.

Ed Chan: 11:48

Ed, Thanks for having me Brenton. It's an absolute honor to share some of the things that I've experienced with everybody, and I look forward to continuing to do that, Having me Brenton. It's an absolute honor to share some of the things that I've experienced with everybody, and I look forward to continuing to do that.

Brenton Ward: 11:59

Ed, the pleasure is all ours. We look forward to hearing more of your learning, but for now let's begin with the end of mind, or at least go through our discovery session and really understand where we want to take our business. Thanks, guys. Thanks Brenton. Thanks for tuning in. If you liked this episode, please remember to subscribe and leave us a five-star review. For more practical, wise tips on how to build a business that runs without you, head over to wizementoring. com/podcast to download a free copy of The Accountant's 20-Hour Workweek Playbook. We've included a link in the show notes below. See you in the next episode!