John Corcoran 10:05
Yeah. Let’s I’m assuming this is like one person, one guy is easy, because you’re basically buying their clients probably right? For sure. Yeah. Yeah. And what was kind of the highs and lows of that? How did you finance it did it was a something that was financed over time.
John Bly 10:22
So my dad at the time it was it was a small, it was less than 100,000. My dad actually wrote me a check, and I paid my bet my dad back over two years. Yeah, yeah. Again, I was 25 years old, I didn’t have a ton of liquidity. All that money I saved from the paper out, I used on the down payment on my house, my wedding and my and my engagement ring. And then, you know, and that was all spent.
John Corcoran 10:49
And so you end up acquiring, so this this small, you get kind of a taste of it. And you were doing 15 after that. So clearly you liked it. What were the next acquisitions after that.
John Bly 11:00
So we did one in late of late 2004, and then one in 2005. And at the start of 2006, we were, you know, 300,000 in revenue, they were all really small transactions. And we got the opportunity to do one that was just less than a million. And that was a lot of a small jump.
John Corcoran 11:21
That was a lot like that zero requiring something that’s like three times your current size. Yes, yes. And we’re thinking going into that. I mean, you know, I’m sure your friends were like, you’re not everybody thought so.
John Bly 11:33
Yeah, I mean, there’s no doubt. I mean, I think probably, besides my parents and my wife, everybody thought I was crazy. You know, but you just sort of, at that time, this was pretty kids. And I was willing to I had a reasonable head on my shoulder, and I was willing to do whatever work was required. I mean, I didn’t care if it was 130 hours a week, whatever it took to build the business for that limited scope of time in your life. I was in and. And to top it off, we did this deal in June of 2006, for just shy of a million in in new revenue. And literally within 30 days, our only competitor within a couple miles decided they were going to sell and so we had to buy it. So within 90 days did another 600,000 transactions. So on May 31, of 2006. It was my wife and I working out of our house. On December 1 of 2006, we had almost 20 people and 2 million in revenue.
John Corcoran 12:36
Wow. So you go from 300,000 to 2 million in six months or so. And 20 people working for you. And what it was all throw that in as well. And I know you said you were averaging something like 3500 hours a year for for those who haven’t built your time before, that’s absolutely insane. But there’s certain things that you can’t just work your way out of there certain mistakes, strategic mistakes, blunders, stuff like that. Looking back on it now, what are a few of those mistakes? I’m sure there must be some that you wish you could have back. Yeah.
John Bly 13:11
I would say I’m not the type of person that looks back and say I wish I had them back. What I did was I definitely learned from them. So what I didn’t make the same mistake again, if that makes sense. So in this, what the second transaction we did in oh six. I was from a big for background. And to this point we had, you know, even the one we did in June of oh six, we had then closed for transactions in less than 24 months. And and to me a CPA was a CPA was a CPA, they had an ethical standard. They understood tax laws, whatever. And in December of oh six, the transaction we closed. That first month we had a learning curve of what we walked into was not the same. And we we did not do prior to that we did not do any diligence on the quality of the work. Because we assumed a CPA as a CPA as the CPA came in and we had to we had a mess on our hands related to the quality of the work.
John Corcoran 14:09
How did you discover that?
John Bly 14:13
That first week of December of oh six, we walked in and we started getting client calls of hey, I just got another this is an example I just got another IRS notice. The owner said they took care of it. We got enough of those we started digging through files and we found over 115 tax notices that have not been dealt with. At that’s an example. The other thing we found was as we were starting that was December obviously for those of you who know the CPA business, we get really busy starting in the middle of January. And so that’s not a great time to be behind. And not only were behind, we also started to review tax returns and start to prepare tax returns in early 2007. And the advice that had been given every year prior on or three or four very specific issues is totally not allowed. And we had to deliver that news repeatedly to clients. And they’re like, but I’ve been doing this for 10 years, and the IRS hasn’t caught it, or I didn’t know it was illegal, or I didn’t know that. You couldn’t deduct VAT or whatever. And these are, yeah. And it was time after time. And so we had to deliver bad news repeatedly.
John Corcoran 15:19
And you didn’t unwind or you couldn’t unwind the acquisition. Were you thinking at any point like, Oh, we got to get on do this?
John Bly 15:28
So take it a step further as a young 20. I guess at that point, I was 27 years old. I could not really unwind it, we had signed up for SBA debt on those deals. So we had paid cash, and we’re levered up on SBA debt. So unwinding was not a real option.
John Corcoran 15:47
So you had to proceed. We had to move forward with it. Yeah. I’m imagining at the same time, you’re going from, you know, a $300,000 company where you’re doing a lot of the work to now you have to oversee the team. So probably less more your time is spent on managing less of your time is spent on the actual doing of the work. What was that transition like for you? And were there any learnings out of it?
John Bly 16:12
Yeah, you know, I was just telling this story the other day to somebody that to a small startup firm that I was coaching, asked for some advice, mentoring advice. And I remember in 20s, in August of 2006, when I had the first employee quit, and I was totally like a deer in headlights; had no idea. You don’t do that at the Big Four. I mean, it’s like we got 200,000 people, okay, somebody quits, not the end of the world. But when you have, at the time, we were about 10. Before we did the second acquisition, one out of 10, leaving three weeks before a tax deadline, which is September 15. We were like, oh, gosh, this is it. This is really painful. And, you know, looking back definitely, definitely could have would have done that differently. And not has not has been as panicked, definitely learned there. And then I would say in 2007, I was lucky enough to find the Entrepreneurs Organization, which significantly helped me learn leadership skills that I would not have built otherwise. And that’s when I started to fall back in love with reading, and gaining knowledge, not tax knowledge, but gaining leadership, entrepreneurship, business advice, and lessons learned. And had I not found those two things. Who knows where?
John Corcoran 17:29
Yeah, no, for sure. Learning is key. That’s why That’s why we do it. All. I want to ask you about, I want to get to asking about some of the changes you’ve implemented, technology has changed so dramatically in your industry. So I want to ask about that. But before we get to that, I do want to ask about, were there any other acquisitions in of the 15 that still stand out in your mind? either good or bad?
John Bly 17:58
Yeah, so in 2014, I mean, there’s a story for each one both good and bad, right? I mean, yeah, even the one that was in Oh, six that had those issues. It propelled us forward. And I learned a lot, right, and so got a lot better the next bunch of times, I would say, in 2012. In 2014, we did a couple of deals and and, and both of those propelled us to a point. If you’ve ever read the book, No Man’s Land by Doug Tatum, there’s this, you know, sort of dead space that people struggle to grow through. And that allowed us to grow through that space. And I had recently read the book, no man’s land back then, or had seen him speak, I can’t even remember now. And that really was the starting point to say, Okay, we’ve got to get through this as fast as we can. We did a merger of almost equals, in 2014. Were the managing partner of the other firm, who still a partner of mine, and a longtime friend, a guy by the name of Jeff Gordon, not the racecar driver had totally opposite skills that I had mine were more visionaries strategic today, you would call this EOS. And you would call it a visionary and a visionary. And an integrator and he was definitely more of an integrator. And that combination made us just explode.
John Corcoran 19:24
Yeah. You mentioned due diligence was one of the challenges you didn’t do much due diligence before after you had that. I don’t know if disastrous is right. That problematic acquisition in 2006. What kind of due diligence did you do after that?
John Bly 19:40
Yeah, so we did diligence on financial data but we didn’t do any diligence on the work product quality prior to that now we do work quality product, we we sample the largest clients and spend time going through the individual work papers, and we go through the files to make sure we understand what the issue might be and do they really? Are they really up to speed? Oh, we also, I would say that 2006. The other lesson I learned was prior to that, we had taken on employees and whatever, it wasn’t that big a deal. But the culture fit was not good for the employees we took on in that second deal in 2006. And I then realized we needed to spend more time on culture upfront. It’s actually why I started the book with my book on mergers and acquisitions with culture because it became the primary focus of our deals, we didn’t even bother getting into any financial numbers whatsoever. If we didn’t think it was going to be a culture fit. We never even asked for data.
John Corcoran 20:44
Well, it’s interesting, too, because back then were you said that you were looking locally, you’re looking at these other competitors within a radius of you. Now it’s kind of become a more global world, I imagine the acquisitions you’re doing are less constrained by geography. So unpack that a little bit, the culture piece, you know, what sorts of questions do you ask? How do you figure out if there’s a cultural fit?
John Bly 21:09
Yep. So for me, I still do the same thing. But this is just who I am. That could work different for other people. I like to break bread, I like to have lunch drinks, or dinner with the other side as a first step, you know, happy to have a video call and have a chat and learn a little bit for 30 or 45 minutes. But I’d really like to spend two hours or so in person over a meal, rather than just in a confident and stuffy conference room, and preferably, dinner or drinks as well, because it tends to let everybody relax a little bit more instead of like, okay, we’re in a conference room, and we’re gonna have this serious discussion. And even in those discussions, I’m not asking questions about how much money they’re making, or what their financial data is, or how many whatever I try to be very open and transparent about what we do really well. And what we don’t do? Well, I would, I would absolutely open the commode and share at a very deep level, a lot of our greatness and a lot of our faults. And if I see that other person shutting down or feeling like they don’t reciprocate that openness and transparency, which I will always lead with, they’re probably not going to be a fit at the firm. And that’s the last time we’re gonna have drinks. And if I leave that meeting, and they have been open and transparent, there still might be a chance we decide not to do anything further, because they made, they may have said something that allowed me to understand that they are never going to want to be part of a bigger organization, or that they don’t understand what the future of the profession is, or that they don’t understand growth and stuff like that. And it’s much better finding that out upfront than it is after we fall in love with the numbers.
John Corcoran 22:53
Yeah, I know, I know, in flashing forward to today, you’ve got you’re a member of the Board of Directors of Aprio, you’ve run and believe the southeast division 2000 or so, team members there. You’re doing large acquisitions. Now, when we spoke last time, I think there was a $75 million acquisition. I don’t know if that’s your largest. But what are some of the differences but between the small little acquisitions that you did, and the large ones? And I’m sure there are many but but pick a few differences between what you do now and and maybe similarities between what you did back then.
John Bly 23:33
And we still do, we still do some a lot of smaller mergers. We’ve done five in the last six months that were under 6 million in revenue. So we’re not. So we did, we did do a large transaction last year, that was 70 plus million. That’s more the exception than the norm. Just there aren’t that many firms that are that large around the country, in our world. So we have done a lot of smaller ones. The biggest differences, I think, are really around the internal leadership structure at those organizations, meaning at a 70-plus million dollar firm, they have CFOs and have their own business not helping clients, but have their own business. They have leadership of HR and learning and development and talent solutions. And like, well-put-together amazing people. That’s not always the case. And you know, this having interviewed a lot of entrepreneurs, that’s not always the case that a $5 million business many times the founder is doing a significant portion of all of those hats. And so the integration is much easier actually at the larger organization than it is at the smaller one because the leadership teams just, you know, begin to gel and execute. And so that’s actually a lot easier than it is to the smaller ones. The smaller ones, though, have a lot have entrepreneurial spirits that are not always, but a lot of times they have a lot of entrepreneurial spirit, which a bigger firm doesn’t always have. So they bring a lot of energy and different things.
John Corcoran 25:10
Yeah. Were there any other acquisitions of all the ones that you’ve done? Like the one in 2006? Where, if you could have a do-over, you would take it.
John Bly 25:21
Yeah, I think there was one in there was one in 2009 that we would probably have tweaked or maybe not done again, if we had another chance. It wasn’t very large. And it worked out just fine. It wasn’t a culture issue at all. They were actually culturally perfect. It really was just long term vision for what they wanted. And what we wanted. More than three to five years was not aligned. And and so but, yeah, I mean, it’s worked out and everybody’s happy. We still, we’re still friendly and all that. But it’s not. That’s something we’d redo.
John Corcoran 26:01
I love to ask how the pandemic affected different businesses. Before we get to that, about six months before October 2019, you ended up doing your deal with Aprio. At this point, you’ve got about 70 people working for you. Aprio has about 300. So you go to 400 people or so what are some highlights from that? And why did you decide? It sounds like at that point, that’s kind of you selling everything else I think we’ve talked to so far as you acquiring other companies, but that’s you selling or merging with a larger company?
John Bly 26:32
Yeah, so we always built five year plans, you know, thinking about where we were going to be. And we kept doubling in size about every five years. And so we were about 12 million in revenue, 70 people and we looked at what the what the math would look like and what the team would look like, as we fast forward it over the next five years, in that summer of 2019. And we had a we had a strong relationship with Aprio. At the time, Richard Koppelman, our CEO, and I have been friends for now almost a decade. So we already knew each other, our clients, we shared some clients on different projects. So our some of our people in teams had worked together on some various things. And we looked and we said, look, here’s what it’s going to take for us to go over the next five years to get to where we need to be. Even then we might fall behind competitors who are larger than us, even though we normally would chase them down, just because of the amount of technology you said it a few minutes ago, just amount of the technology revolution that we believed was happening in the profession it was can continue to happen.
John Corcoran 27:38
Yeah. And so talk about that, like, how is technology playing a role today compared to 15 years ago?
John Bly 27:45
Oh, it’s drastically different. I mean, from everything from gathering of client data to how we push the final results out to them, whether it’s a consulting engagement, whether it’s a tax return, whether it’s audited financials, we now automate a lot of the package solution on the way that they send it to us, we get a lot of data electronically, you rewind, 15 years ago, or whatever. 19 years ago, when I started, nobody was sending us electronic data, or very few were at the small business size. Also, QuickBooks Desktop was the dominant thing and the small business based, most use Quickbooks online now, I now have regular access to their QuickBooks every single day if I wanted it, if they say, Hey, can you log in? And can you check this transaction out? Or can you see how we’re doing here today? That was a process before that was hard to do. They used to give us flash drives, right? And then they would have to upload and it’s just a pain. Now all of that is really seamless. Nevermind the automation of some, some bank statements that can come into QuickBooks, and then how we can potentially use that to populate tax returns. I mean, it’s a it’s a drastic difference. We’re using AI and bots and all sorts of stuff for dashboard creation for our clients.
John Corcoran 29:00
Yeah. It sounds like you’re have a positive view of technology. I know many in the CPA profession and in other professions are very resistant. They’re they’re fearful. They’re fearful that it’s going to take away their livelihood, that it they’re going to be able to charge less or that what they do is going to go away. Why do you think you have a positive view of technology? And it, at least from hearing what you just said Doesn’t sound like you’re fearful of new technology, new software coming in and replacing what you do?
John Bly 29:35
That’s a great question. I think I’m an I’m person that likes to look back at the history of our profession and also ask people who were smarter who are still smarter than me, but also started way before me. And, you know, it’s not that long ago, that in our profession less than 50 years for sure that people thought who weren’t paying attention that computers would end the accounting profession, right? And they thought, and instead, it hasn’t. It’s actually leapfrogged in a positive way, it’s not very long ago, in the grand scheme of a profession that people were hand writing their general Ledger’s. And then we’ve found ways to computer you know, whether it’s Excel or whether it’s QuickBooks Online, or whether it’s, you know, some SAP software, a million places. The reality is, that just means better data, quicker, more real-time data for us to be able to be advisory and provide some input to help make better decisions. And that just didn’t exist not that long ago, right. And so we’re, uh, if you’re, if you’re proactive and paying attention to what’s happening in the world, in the industry, you’re going to be able to adapt. And yes, you might lose this slice of revenue, but you’re going to do this other piece, that’s probably a lot more fun and a lot more value add to the client anyway, we’re not handwriting debits and credits, like we were in the 70s and 80s. We’re not charging clients less and clients want us more than they did in the 70s. And 80s.
John Corcoran 31:01
It’s an interesting point. Yeah. I’m curious. So you’re you are, your title now is Managing Partner, the South Atlantic in a 2000 person organization, going back almost 20 years ago, it was you, you were the boss, you’re acquiring these small companies, eventually, you had 70 people working for you. A lot of the people that I interview, frankly, can’t handle that kind of transition. And they get to a point where they decide it’s not for them. Why do you think that you, you managed to, you know, continue on working in this large organization, and were able to, you know, exist in a much smaller organization and also in a larger organization? If that makes sense.
John Bly 31:45
It does. And I think you’re right, I have a lot of clients that can’t have one today.
John Corcoran 31:52
To a friend who’s going to become miserable, right? They decided, You know what, this is not for me, I’m a cog in the machine. Now, I used to have all this authority. I liked running my own shop. Now I have all these rules and red tape. There’s there’s a million different things they say.
John Bly 32:05
Yep, there is. And if so, for me, I don’t know if I could go back and do what I did, again, in 2004. To 2012. I mean, it was a lot of work. And, and what we built I’m very proud of but I don’t know that I’d want to like start over and do it the same way. I did, you know, 19 years ago today. It what helps is that Richard Coleman and I and our firms interacted so much from 2014, or 15, to 2019, that we went in very much eyes wide open. I mean, not hiding anything, we knew what we were getting ourselves into. Richard knew what he was getting himself into, with adding me, and I knew what I was getting myself into. So that helped a lot. I would say the other thing is, I have always, always always been all about the team. Even as the decision-maker CEO of my own business, I’ve always been about the team, I’ve always been willing to sacrifice for the greater good of the 70 people today, it’s for the greater good of the 2000. So I’m not the I’m not the person who, you know, sort of had this, I have to make every decision mentality, I, we gave up, I gave up decision making for things under $10,000, as an example, in a written policy, when we were 4 million. You know, like, I just didn’t want to make those decisions. Because I was like, we’re gonna, we’re gonna move so fast that if I have to make every $5,000 decision, we have different problems. And so I was okay with that. Back then. And my philosophy, even at home, which drives my wife crazy, is I’m okay being on the outside of a decision. Like if I’m not needed, I’m totally good with that. But when I’m part of a decision, this is still the case. It might as my input better be valued very highly. And it would be unusual that I would want that decision to go against the value of my input, but I’m happy if you make 100 decisions without me involved. I’m totally good with it. I don’t care. But the minute you ask for my opinion, and I weigh in heavily, and I’ve thought about it, if we go a different direction, it’s not. That’s where I’m from not as excited. They
John Corcoran 34:13
know when not to invite dad into the discussion. Let’s just make a decision while he’s in the other room.
John Bly 34:20
And I’m totally fine with that.
John Corcoran 34:23
I think they know how to manipulate that one. Well, this would be great. John, I love to wrap up with a question about gratitude. I’m a big fan of gratitude and expressing gratitude, especially to those who have helped you along the way in your journey. And so if you look back at, you know, peers, contemporaries, mentors, business partners, who would you want to shout out and thank publicly?
John Bly 34:46
Yeah, so there’s a guy dating back to the late 2000s. All the way up till about 2015, who was a personal mentor, a guy by the name of Tom Waddell out of New York, not New York City, but the rest of New York. who ran a CPA firm that I really admired. He’s since retired. But I remember calling him in 2012. And we saw each other at a networking group every six months. And I remember calling him in 2012. And saying, hey, I want you to mentor me for free. I’ll fly to you, every six months, and you’ll pay for your flights to fly to me and I’ll pay for golf, and drinks and food and whatever. But I want you to spend roughly 36 hours with me every six months, cuz I’m going from a size that I’m familiar with to a size I’m unfamiliar with, and you were 15 years ahead of me, 20 years ahead of me in this process, walk me through it. And, boy, the lessons I learned from him, and were quite incredible.
John Corcoran 35:40
Yeah, that’s great. It’s great when you have someone like that, who’s willing to devote the time. John has been great. Where can people go to learn more about you the book, the podcast, and Aprio?
John Bly 35:51
Yep. So, I’m pretty active on Twitter @JohnBly_CPA. I’m also active on LinkedIn and feel free to email me if you’re interested in learning more, I’m happy to always get on the phone and talk to other entrepreneurs. It’s [email protected].
John Corcoran 36:11
Thanks so much, John.
John Bly 36:13
Thank you, John.
Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time, and be sure to click Subscribe to get future episodes.