Episode 28 - Chris Williams - The Business of Buying Small Businesses - Protea Conversations

Episode Transcript
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(00:00):
Welcome to Proteon Conversations, the podcast where leadership in business and accounting

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isn't just discussed, it's explored.
I'm your host, St. Stephens, and thank you for joining me as we delve into the minds of
some of the most influential leaders in the industry.
Our journey is one of discovery, from unraveling the unique stories that shaped our guest careers,
to invaluable advice that fueled their success.
We hereby provide you with a simple, actionable advice to accelerate your career and personal
growth.
Whether you're a budding professional or a seasoned executive, these conversations

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are designed to offer insight and perspectives that resonate with everyone.
So tune in, engage, and be inspired as we build better leaders together.
Welcome to Proteon Conversations.
Today, my guest is Chris Williams.
Chris Williams is the CEO of System6, a leading fully remote outsourced accounting firm that
serves clients across the United States.
With a background in finance, including investment banking and private equity, Chris brings a

(00:54):
wealth of experience in strategic growth and operational excellence.
Since acquiring System6 in 2021, Chris has shown the ability to increase companies'
revenue while fostering a workplace culture centered on collaboration and client satisfaction.
The graduate of Stanford University, Chris's expertise spans small business acquisitions
and scaling services based on businesses.
These leadership emphasises creating exceptional experiences for both his team and his clients.

(01:18):
Chris is a well-known contributor and speaker in the accounting industry, where he's had
a positive effect on the way people think about the business of accounting.
Beyond his professional achievements, Chris lives being with family, going for runs, working
on his golf game.
Chris, welcome to Proteon Conversations.
Awesome.
Thanks.
Thanks for having me, Zane.
I appreciate all the friendship we've had over the last couple of years and look forward

(01:39):
to the conversation today.
We've got a newborn at home, so I will say that how I like to spend my time has definitely
changed in the last five weeks, but we're super happy and everyone's healthy, which
is all you can ask for at five weeks.
Congratulations on that.
Thank you.
It's been through that before.
Having kids, I had a November baby, so I know how it can be during this time of the year

(02:03):
to have a newborn at home.
Good luck with that one.
Yeah, I'm actually being old.
It's been interesting because I had a professional relationship with System 6 before you came
and acquired them.
That's how we met, right, to use, to start to what would have been referral partners
to the company at that time.
Yeah.

(02:23):
I just want to meet you, talk to you, get to know you.
We had lunch.
It was pretty interesting.
I was like, oh, nice new person.
This would be nice to continue to work.
You know, a great place for me to send referrals that are outside of the wine space.
In three and a half years, I think it's developed beyond just a professional relationship, and

(02:44):
there's definitely a professional friendship, which I appreciate.
I always appreciate the time we take to talk about business and good selling boards sometimes
to just share our frustrations and challenges and a safe space to give us a chance to rethink
about what we're doing for our own business.
Yeah, it's right back at you.

(03:04):
I think, yes, it's not all up into the right, even if that's the long-term trend.
It's hard in the moment.
I think, yeah, I appreciate being able to talk about the realities of some of this stuff,
and hopefully in today's conversation, we'll share some of that with the audience, which
is like, look, even though we've both got businesses that I think at a high level, we'd
say are successful and we're super happy with, like, there's always peaks and valleys along

(03:28):
the way, and there's always stuff that we want to get better at, and I think it's good
for people to hear that.
No, for sure.
I mean, it's the reality of life in a business is that it's not just a straight line, right?
You're going to have to work through the ups and downs, and having people around to do that
together is helpful, having community around you makes a big difference, which I'm sure
you'll find out with the new born at home, community becomes ultra important.

(03:52):
Yeah, so it takes a village, right?
Yeah, of course, I think what people will find really interesting is, I've had guests
here that were accountants and then went to a second career.
You on the other hand are not an accountant at all, but are running a very successful
accounting practice.
So before we even get into that side of it, which is super interesting, I would just like

(04:15):
to learn more about the path that Chris took to get here.
Because for me, it's pretty interesting.
One, you're a pretty smart guy.
Brown University and then Stanford, they don't just let anybody in.
Yeah, yeah, yeah, I can kind of walk through the background and it's definitely different
for sure.

(04:37):
I think you can, just a reminder, I think there's a famous Steve Jobs speech about this.
In 2020 hindsight, you can always paint this really clean story.
But in the moment, a lot of these decisions I made were kind of like, you just got to
pick one path or another and just pick where your gut is.
And then in hindsight, you paint this great story, but just a reminder to everyone, it's

(05:00):
not all super planned and organized ahead of time.
You are sometimes making gut decisions.
So yeah, my short sort of background is career and finance coming out of college.
I study math and econ.
That's a pretty normal pipeline into banking.
Went from there and moved out to California to investing at a private equity firm.

(05:21):
Loved my time there, honestly.
And as I get to later parts of my journey here, I thought long and hard about that being
where I went back after grad school, but spent three years there and then kind of was like,
hey, I'm in my late 20s, I've been kind of doing one thing for five, six years, which
is working in finance.
Like if I have the opportunity to go to grad school, let me apply to some.

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And if I get in, why wouldn't I take a couple years to sort of step back from my current
path and see what else is out there and really pick the career versus kind of the job?
That's really what took me to business school.
And at business school, I came in looking for, hey, what's a way for me to get into more
of the day to day results of business, you know, and investing role you over time, you

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know, you buy companies and you sit on the board and you certainly make some key calls.
Who's the CEO, et cetera, that's going to like determine the success of the business,
but you're a level removed from it.
You know, I'm competitive person kind of wanted to be more like in the results.
So my kind of, as I get to grad school, hey, like what could I do that would get me closer
to being the one who's delivering results?

(06:27):
And then I get to business school and what's become a pretty popular path and even more
so, I think over the next decade is like, hey, there are all these great small businesses
out there in the United States run by, you know, business owners in their fifties or
sixties who want to sell them.
Like that's just what the demographic story is of small businesses in America.
And you know, there's a lot of kind of young, hungry, entrepreneurially oriented folks that

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are like, instead of doing a startup, what if I can go find one of these good steady
small businesses, become kind of the retirement solution for the owner, buy it from them.
You know, step one is kind of maintain it.
And then step two is, okay, how can I grow it and take it to the next level?
You know, it's not about buying a distressed business.
It's about, there's a great small business owner that built a great business.

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They're ready to retire.
They don't want to sell it private equity.
They don't have a son or daughter to pass it on to, you know, and you can kind of present
yourself as, hey, I'm young, hungry and entrepreneurial, just like you were one day 20 years ago.
I'd love to buy your business and take it to the next level.
There's a whole infrastructure around this, you know, search funds is a term.
There's lots of other investors, accelerators, you know, lots of different sort of paths.

(07:36):
Now there's courses you can pay for online and teach you how to do this.
But the general thing I did is I wanted to do something entrepreneurial.
I wanted to bet on myself.
I didn't have a great startup idea.
So I discovered this path of, hey, let me go buy a small business and try and grow it.
And, you know, I looked for a variety of businesses for about a year, looking at different industries
and stumble on outsourced accounting.

(07:58):
I had a couple of minority investors who had some experience in the space and vocalized
it as kind of a good place to own and try and grow a business.
And since System 6, Jeremy, the owner called email among many accounting firm owners I emailed.
And you know, he was one of the ones that responded and six months later we put a deal
together.
You know, lots of decisions along that path, but that's the short.

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The one thing I really like to do, emphasize on that path is kind of the best career advice
I ever got, which is ultimately why I went down this path of trying to go buy a small
business was, you know, when you get to these forks in the road in your career or in your
life even, like, you know, you're choosing two paths, assume each is going to be really
successful, you know, and then like, which one gives you more energy?

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Because life is not just about like succeeding and choosing something that you can do succeed
in, but also like you need to be energized to actually achieve the success in that path.
And that was good advice I got was like, you can go back into finance and have a career
and investing, make a ton of money, or you can go buy a small business, try and grow
it, make it medium, you know, maybe not make as much money, but still do well financially.

(09:07):
And I looked at those two paths and I was just like building something and growing it,
you know, no disrespect to finance.
I've got a lot of friends there, some days I still think about it, but like buy a small
business and grow it gave me energy.
And that was ultimately my decision.
You know, that's what made the decision for me.
Yeah, that is great advice.
I think we were so polarizing and community in society nowadays that it is a success or

(09:30):
failure that most of the time there is multiple paths and nine out of 10 of them are probably
going to lead to success in some, you know, form shape.
And that's great advice.
Just do the one that energizes you the most and if it doesn't work out, now there will
be a new set of paths in front of us and then we have to make that same decision again.
And between those two paths, there were probably 10 other different decisions you had to make

(09:52):
as well.
So just keep moving forward.
More decisions will come exactly, you know, very few things are permanent.
No, that doesn't mean like go do something stupid, like becoming a professional basketball
player was not on my, you know, decision criteria.
I wasn't going to assume that I was going to be successful at that.
So you have to be realistic, but within the bounds, I think that was, that was really

(10:13):
good advice I got.
Yeah, no, I love that.
I, I'm definitely clipping that one for the shorts.
So that's great advice.
Yeah.
Couple of questions from that one, I like, I knew there were people out there that went
to the arts and bought businesses from retiring people, but I didn't really quite understand
that it's an ecosystem.
So can you touch on that a little bit more?
Yeah, I think it's that's really ballooned.
I don't know, probably in the last five, seven years.

(10:39):
But you know, the, the basic idea is, and I, you know, I saw it play out in system six
and I've seen it played out play out time and time again is like often you've got a
small business owner that's built a great business.
They're tired.
They've been doing it for a while.
They've taken their foot off the gas.
They're also like cash flowing a lot from that business often and they recognize like

(11:04):
for me to continue to grow, I'm going to have to start reinvesting that cash to build out
more of a leadership team, et cetera, et cetera.
So maybe they've decided not only are they kind of later in their career and taking the
foot off the gas, but they're like, for me to keep growing, I'm going to have to reinvest
and that means less kind of take home for me in the next couple of years.
So those kind of dynamics, I think create an opportunity for a hungry, ambitious, well-incentivized

(11:29):
person to come in and, you know, put the gas, put the sort of pedal back on the metal and
start trying to grow it aggressively again.
So I think that that's a big part of the, just kind of the why it works.
You know, the ecosystem, historically, there's kind of two main paths.
There's like kids who sort of learn about this young adults, you know, young professionals

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through business school.
Like there's always been a cohort of kids coming out of MBA programs across the country.
It's really expanded over the last probably five, seven years where they're raising, you
know, some money up front, a couple of hundred thousand dollars to keep their lights on.
They've got student loans and they're going to go look out and buy, look for businesses

(12:11):
that are doing, you know, 10, 15, 20, 30 million in revenue, you know, a couple of million
dollars in earnings that, you know, looks a little bit closer to like a small private
equity type transaction.
They've got, you know, a handful of investors and that's one tried and true successful path.
There's a lot to be said about buying something with scale.
And that there's maybe a little bit less structured, some coming out of business school, some kind

(12:35):
of just in general folks learning about the opportunity to buy a small business who are
going to primarily finance that with an SBA loan.
There's a pretty beneficial SBA loan program for acquisitions.
It's called the 7A program.
So that's ultimately the path I went down.
I was kind of like, look, I'll put together the capital structure when I buy the, when

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I find the deal and the deal I found was smaller, so it, it lended itself towards the SBA program.
So those are kind of the two main paths.
There's versions of it, but it's kind of like, Hey, if you want to buy bigger businesses,
you probably need to raise some money up front.
It's going to feel a little more institutional, a lot of benefits with that route.
But there's also, Hey, if you want to buy a smaller business, kind of like, you know,
sub 10 million in revenue, you can do it more through the SBA.

(13:21):
You're going to have a big loan from the government, which means you can own more of
it.
You can own more, kind of, yeah, less institutional, more on your own.
And then I would say, look, there are, on both of those paths, there's investors that
focus on that.
There's, you know, bankers and lawyers and service providers that focus on those types
of buyers.

(13:42):
There's courses you can line up, you know, sign up for that you see on LinkedIn all the
time and Twitter, you know, like, just like there's courses probably on how to start a
winery.
There's courses on how to go buy a small business.
So it has really turned into an ecosystem and there's, you know, obviously some people
trying to profit on it, maybe in not the best way, but, you know, business, more and more

(14:04):
kids coming out of business school see it as a different path to entrepreneurship versus
VC.
I think it's just getting more popular because there's more sellers out there as the kind
of small business ownership ages.
Yeah.
And if you're a business owner and you are sort of thinking about an exit strategy, which
you all should be doing from day one, you should add this to the list.
I mean, it seems like a great way, especially for a service business, I think this is a

(14:27):
great place to sort of come in.
You know, I obviously don't know the structure of your deal exactly, but you know, a lot
of these deals end up with founders sticking around for a couple of years, being the sort
of face release from a period of time, you know, to turn over so that the clients hold
on and just run because they're scared of the new ownership.
But it is a good way to sort of keep a legacy going and get your buy out because you can't

(14:49):
be certain that an employee is going to want to buy it or a family member wants to take
out.
And even though there's a ton of private equity money going around, it's not that easy
to get that money, but they're looking for very specific types of accounting businesses
right now, service businesses.
So the option is there, but this seems like a much more accessible route for most people.

(15:11):
Yeah.
And I think, you know, it's ultimately about like, what are you solving for in your exit?
Like, yeah, this path, it's never someone who's going to be able to pay as much as a
private equity firm or, you know, a bigger, if we talked about accounting, you can sell
private equity or you can go sell it up, CBIS or any account of the large accounting firms
that are doing acquisitions, you know, those folks are always going to be able to pay more.

(15:35):
But you know, there's, I think the small business owner often feels like they want someone,
like you said, to protect their legacy, to care for it.
Of course, you know, we've made a ton of changes.
The business looks different now than it did when I bought it.
But you know, there's a little bit less of like, I think a quick rip the bandaid because
yeah, this, you sold it to one person who kind of can't afford to do that.

(15:56):
Like they need to come in and stabilize and make sure things stay the same versus you
sell it to a big machine and they can make those changes much faster.
So yeah, it's one of several paths.
I will say, sure, private equity like probably has a higher standard in terms of metrics
they're looking for and how much they're going to be willing to pay.
But if you don't have a sellable business and you haven't done the right things to make

(16:17):
it sellable, like don't count on this as being your bailout.
Every buyer, even if they're an individual one, kind of like me is still looking for
some important things so that you feel like the business can continue after the owner leaves.
Yeah, I think it's critical.
Set yourself up for success if you want any of these options to be available to you.
So that is important and getting the structures in place.

(16:40):
And the good thing is like all those decisions that we talk about every one, but it's all
stuff that also helps your business before you sell it anyways.
The core of it is remove yourself from first and foremost sort of the day-to-day delivery
of service, second, remove yourself from kind of core growth and really have yourself in

(17:03):
the organization that's someone who's strategic big picture stuff.
That's a much more sellable business than if you run a tax practice and you're still
signing 50% of the returns.
Yeah, totally get it.
I mean, you touched on that, you know, the outsourced accounting space made a lot of
sense, but what would it really attract you to the space?
Yeah, I mean, so you think about like, like, there's successful businesses all over the

(17:28):
country in all kinds of different industries.
You got to think about my background, which is like, and my story, which is like, I'm
coming into a business like literally with zero experience running that business.
I don't know anybody to team, I don't know any of the clients.
So kind of the first and most important thing I was looking for is a business that is kind
of stable and inherently going to continue.

(17:50):
Like if I bought a business with a bunch of chunky project revenue, like a construction
business, you can make a bunch of money in that, but, you know, all of a sudden there's
a new owner and, you know, the projects that go up six months from now, they might not
hire us because they don't know me for, for many.
So the recurring nature of the business, you know, of sort of day to day accounting that

(18:13):
we're in, that was definitely the most attractive thing.
Like our clients are on subscription payments that pay us, you know, they have contracts
they can get out of, but I knew that the day I came in, you know, all the revenue was still
going to be there at least for the next couple of months.
So that was, I think by far the most important thing, you know, quality of revenue, so to
speak, recurring revenue.

(18:34):
The second thing was like, you want to be in a good industry when you buy a small business,
you know, rising tide lifts all boats.
There's only so much you as the operator can really do.
So I felt like accounting is a critical service.
You know, people don't just shut off their accounting accountants and bookkeepers when
the economy has challenges.
So not only is it recurring like from a contract basis, but it's like, it's a kind of foundational

(18:57):
mission critical service that's going to continue.
And then, you know, the industry was growing.
There's all these tailwinds from COVID of people starting to take their bookkeeping
and be willing to have it done by somebody remotely.
You've got all these small businesses on QuickBooks desktop.
As they start to modernize, you know, they're going to move to QBO.
So now you've got all these more small businesses that are going to be potential customers of

(19:20):
ours.
So I felt like recurring revenue, kind of mission critical industry, growing industry,
you know, and that was a lot to make it super attractive.
You know, there's, there's threats.
We have technology and AI.
That's a real threat.
You know, that there's, I also see opportunities in that as well.
Yeah.
You know, there's more things, but the core of it was like good industry, good revenue

(19:41):
model, which allows me as kind of a rookie coming in to not have a business that's going
to fall off the cliff day one.
Yeah.
I mean, I guess, you know, coming out of that COVID period of time as well, it was highlighted
that, hey, accounting is an essential service.
So that gives you, you know, if the government is telling you need your accountants, that's
a pretty good say that it's going to be around for, but even if the world is changing in terms

(20:03):
of accounting, or there is these threats of technology to our service offering, but I
know we've spoken about this before and it's more using it as an opportunity to create better
service offerings, especially in the subscription model, which you guys have.
Yeah.
Yeah.
I mean, I think look, there's on the AI stuff, like there's a world, you know, 10 years from
now, seven years from now, I don't know, where maybe it really is doing a lot of our work

(20:25):
and maybe our businesses need to look very different.
But I know in the short term, yeah, there's a ton of sort of opportunity for us to be
more efficient with it.
And then we can spend less time doing kind of like, you know, not fund data cleanup and
more time actually helping our clients.
And we're constantly adjusting, you know, from our conversations, I know that the business
that you bought and the business you have today are two very different businesses, even

(20:48):
though they effectively give the same service.
Walk me through that process of how you've had to adjust over the three and a half years
that you've been running the company.
Yeah.
And I think, you know, some parts are, I'll say some parts are super different, but the
parts that are, you know, I think for us, the thing that ultimately makes us successful
is our culture and our people, you know, our business is people business, like the product

(21:10):
we deliver is really our people.
So, you know, we've definitely changed a lot, which I'll get into, but I have tried to keep
what I felt like was a very positive culture when I got here, one where we're kind of focused
first on making sure our employees have a good experience.
You know, I've definitely tried to maintain that because I really believe that I know
you do too.
Like if we grind our employees out, you know, and make this not a good place to work, they're

(21:34):
going to leave and then we're not going to persist as a business.
But yeah, I would say basically our journey has been, you know, I can't, it's all tied
to growth.
So I sort of came in and, you know, started spending more time on growth than Jeremy had
and Jeremy's a good friend of mine.
Like he would tell you, yeah, he'd like, you know, four kids taking a split off the gas,

(21:55):
not taking as many sales calls.
You know, so I did not come in and discover a bunch of problems in system six.
Like I think changes happened naturally over time, but my main focus out of the gate was
okay, how do we grow this thing more?
You know, because I have ambitions, I want to run a bigger business, et cetera.
And then all of the changes that we've had, I would say in the last three and a half years

(22:16):
came from that.
There weren't a ton of problems that I saw in the business that we had to fix day one.
It was more just as we grew, then it created challenges that we've worked through and continue
to work through.
So I would say a couple of the things that are very different for us.
One, we have had to create a leadership team, you know, we're kind of double in size.

(22:41):
We're 20 people when I bought the business, we're 40 people now.
So you know, that means we have sort of more administrative stuff that we need to do.
Like we had someone kind of part time in HR, now she's full time in HR.
You know, I did sales for a lot of that journey, but pretty quickly, and I wish I'd done it
earlier, I hired a sales person because I was getting bogged down in sales and I was

(23:04):
creating backlogs.
So we now have a head of sales.
We have the operate with the pod structure.
So we have service teams and each of those service teams has a leader, but now we have
a head of delivery who sort of sits on top of those team leads.
So that's a new position in leadership.
We've got a head of operations.
So someone who does things like billing and our internal bookkeeping and technology, and

(23:26):
then we've got someone in charge of sort of process workflow and technology.
That has all really come together, I would say over the last 18 months as we've been
able to afford those positions as we grew.
So there's a big shift for me that comes in that, which is like, I'm no longer just managing
people who are doing accounting work.

(23:47):
I'm managing who have it's kind of obvious to see if they're doing a good job because
they have day to day deliverables.
I'm like, did you close the books on time or not?
But now it's like managing managers is an adjustment certainly of like, hey, you got
to set quarterly expectations for folks.
Part of the metrics they can report out on on a weekly basis, you can make sure they're

(24:09):
making progress on those goals.
And then helping those leaders, especially if you're promoting them internally, which
we've done a lot of, understand that what we're asking of them now is different than
what we were asking of them two years ago.
And they need to grow and they need to evolve.
And that's because it's not about sort of, hey, what do we want you to do based on your

(24:32):
skills?
The job is based on what the company needs and you need to do what the job is asking
of you.
And yeah, so that means we've had to teach some people some new things and help them grow.
So that's one kind of big part of our story is creating a leadership team and me growing
into what that looks like as the leader of that team.
And I think the other big thing is we've, a lot of our growth came from changing our

(24:56):
kind of core customer.
We started bringing up a lot of the medium side businesses where maybe more cruel accounting,
less cash, more investor reporting, more consolidated reporting.
And we've actually started to like, we might have gone a little too far there.
We've taken on some really big customers that are pretty burdensome for us.

(25:18):
And so, you know, maybe we're going to walk that back a little bit and try and get back
towards more, a couple million dollars, sort of solo owner, small businesses and less of
these kind of 10, 15, 20 million dollar more institutional clients that are just, they
pay us a lot of money, but they can be harder to serve.
So those are probably, you know, we've had challenges around that, you know, we got these

(25:41):
more complicated clients, can our team serve that?
Do they have the skills?
Are we staffed with enough capacity for those more complicated clients?
I'd say that's where, you know, that's where we've had some challenges and then hiring,
you know, hiring is hard.
And then especially as we're growing faster, we had to hire a lot faster than we ever did
before.
And we definitely made some mistakes in that.

(26:02):
You know, so recognizing that, you know, yeah, if you have a team that's hiring, you
know, one person every now and then, and now you're going to ask them to hire a person
a month, that's like a total shift.
And you need to make sure ultimately that like, as the owner, I'm doing the right thing
to set them up for success and not just say, Hey, your workload just kind of doubled, like
go hire a bunch of people.

(26:22):
Like, all right, are we putting everyone in a position to do that well?
Yeah, it's great.
I mean, I take that all the way and then my big summary of it would be you started with
an accounting business.
Now you have a business that provides accounting services.
Yeah, I think that's a good way to put it, right?
There's, you know, there's a layer.

(26:45):
Yeah, like, you know, if you have a business that is less than 20 people or whatever, chances
are the vast majority of those people are in delivery and there's just a layer there
that doesn't exist to truly make it, you know, kind of a sustainable business where the owner
can go on vacation or etc.
Or it can be more sellable, etc. etc.

(27:06):
So yeah, you truly, I think become more of a quote unquote business when there's sort
of a management layer in place, but you got to grow to be able to afford that.
Chris, what is your day to day look like?
Yeah, so I actually, one thing I've started this year, especially with a newborn in
is like I'm tracking my time more directly because I'm kind of sure.

(27:27):
Now that there's like so much more at home that I want to spend time on, I want to make
sure I'm like spending my time at work on super high value stuff.
So I, you know, I have, I look at it kind of on a weekly basis.
I have about six direct reports ish.
We have one leadership meeting a week.
So there's, you know, kind of 10 hours a week there about, I would say kind of recurring

(27:51):
one-on-ones with team members and maybe, you know, a one-off follow on that needs to happen
based on something we're trying to get done or they're trying to get done and I'm trying
to help them with.
I do, you know, I fluctuate, but I do a couple of hours a week of networking, probably, you
know, meetings with other firm owners, either one-on-one, you and I have lunch once a quarter
or like I'm in a couple of groups that meet once a month.

(28:12):
I think that's super helpful for any small business owner to learn how others are doing
things.
Also like acquisitions is something we look at as a way to grow and it's a good way for
me to build my network, you know, in the industry for when people might want to sell.
I probably have a couple sort of biz dev calls a week.
Like I'm not doing customer sales calls anymore, but referral partner or, you know, someone

(28:36):
who owns five businesses and wants to have a general conversation and like it makes sense
for the CEO to get there.
That's in there.
You know, I try to keep my email to kind of one hour a day.
Occasionally there's a fire drill here and there I need to really spend some time on.
So that like all probably adds up to I would say sort of 20 hours a week of sort of recurring

(28:56):
one-on-ones or other kind of meetings that happen.
And then the rest of the week is spending time.
Every quarter I probably have like two or three balls that I'm trying to move forward
that are kind of, we run on EOS.
So we call them rocks, but like strategic projects for the company that really rely on
me to push forward.
So you know, right now some of those are we just, we bought a small accounting practice

(29:19):
in December.
So I'm spending a lot of time talking to those customers, working on integration.
We are thinking about revamping how we do compensation internally.
I'm working on that with our head of people, but I have some stuff I have to own there
around kind of data analysis.
And then we're trying to get some different sales and marketing channels working this
year.

(29:40):
So I'm working with a third party marketing agency and that stuff kind of probably adds
up to, you know, 50% of my time.
So I would say half of my time is sort of recurring stuff and then half of it is allocated
to whatever three, four projects I'm trying to work on at a time.
And I'm super guilty of instead of keeping it to three or four projects, I'll keep it

(30:01):
to eight and then I won't get anything done because I'm spread too thin.
Yeah, somebody that just finished reading traction that's a big no, no, but you learn
the hardware, I guess.
Yeah, as a leader, you know, I definitely like my mentality on me as a person is like,
I'm here to serve the team.

(30:21):
And so anything that comes up that they're like, you know, this would be great if we
could move it forward.
I had a huge bias to say yes, especially like I'm a new owner out of the gate, you're trying
to earn trust and respect.
So you want to get a ton of shit done.
But, but I certainly last year in particular learned that by saying, hey, yeah, I can take
on that project for the business, you know, and saying that too many times, I didn't get

(30:42):
enough done.
So I'm getting more comfortable.
Like even internally, if people on my team, you know, report directly to me, they'll say,
hey, have you made progress on this?
And I have to say no, because it's not a priority for me this week.
And they understand, you know, part of my job is to make sure I spend time on what's
most important for the business.
And sometimes might not be that, you know, whatever issue they have might not be that

(31:03):
important and people have to be okay with that.
Yeah, makes a lot of sense.
So you've been doing this just over three and a half years.
What are the biggest lessons you've learned through the process?
Yeah, I think, you know, this is like, you know, we've all, I guess there's, there's
mistakes that we have made as a business that I think, you know, regardless of kind of the

(31:24):
ownership story every business makes.
And those are really, like I said, you know, just around when you start to hire faster,
making sure you're set up for that, making sure you're hiring for how the business may
be changing.
We started taking on these more sophisticated customers.
Well, let's make sure we hire people that can serve them.
So I think there's a lot of good lessons for us there.

(31:47):
I think also, like I said earlier on the, you know, it's great to bring in new customers
from a new channel, but make sure you think about, again, like how that's going to impact
your business a couple of years from now.
Is this business, is this customer, it might be a bunch of money.
Are they going to require a different level of service?
Is it going to require you to spend more?
That's going to decrease your gross margin?
Like just thinking through how changes in the business, you know, how fast you're growing,

(32:11):
what type of customers are bringing on, how that's going to impact things for the next
couple of years and just making sure you're kind of happy with those impacts.
But I think probably every business owner goes through that.
I think more interesting for me, I think when you're kind of new in an organization, whether
it's a promotion or like me or I bought it, you know, you want to be really deferential
and you want to be like really supportive and I think I'm glad I did that out of the

(32:34):
gate, but I also think at some point you have to like make your expectations known.
And if, if you're not vocalizing kind of what you're asking for out of the team or what
you want to see out of them, like you're not being fair to them because then you're just
going to be upset when like something doesn't get done and then they're going to be like,
well, I didn't know that's what you're looking for.
So I think I definitely, you know, I think more quickly, if I go through something like

(32:59):
this was just sort of in the right way, sort of say, hey, look, these are what I expect,
you know, expectations have been one thing in the past, but you know, part of my job
as a new owner is I want to raise expectations as a better as a business and like not being
afraid to do that earlier on, I think, you know, like again, you want to be differential
supportive of the team that you have, but your job is to try and help improve the business.

(33:23):
And so if that means you want to raise expectations, like you got to do that.
I think I was a little slow to start to vocalize some of those things.
So that's, that's kind of in, you know, in my acquisition journey, the big takeaway is
just like, you know, speak your mind faster, you know, and if ultimately your expectations
don't align with people on the team, like then you'll have to make some changes, but

(33:47):
it's better to have to make those changes than like you not speak your mind.
And then like, that's not a good situation because then you're not happy with the results.
Yeah, I mean, putting that vision in front of people so they understand where you're
going is important.
Setting those expectations and holding them accountable to it makes a big difference.
And, you know, like you say, speak up sooner, right?
Because then people understand what they're getting into and they can choose like, am I

(34:08):
staying on the ship or I'm jumping off?
Yeah.
So I think that's a good lesson for anybody in management leadership, any position, like
make it clear what you want.
Yeah.
And, you know, and we like, fortunately, you don't have necessarily had a bunch of
folks that have had to jump off the ship or I think me too.
But, you know, even if we did, like, it's not that you don't like the person, it's not

(34:30):
that you can't treat somebody like super well on the way out, but it's like, it's about
what the business needs.
And, you know, if the business is going to have XYZ expectations because you as the owner
set them, then like people need to be able to get to those.
And yeah, you're the new owner.
You're allowed to have new expectations.
Yeah, for sure.

(34:50):
And separations aren't always like a bad thing, right?
You can have separation because the value is down the line.
You can have separation because you decide to go different path in terms of the work
level and they just don't meet those expectations or qualifications or, you know, they could
just be people come in and like, gosh, don't really like your face.
So it's time for me to move on, right?
Like if these things happen all the time.
Yeah.

(35:11):
Yeah.
And like there's structural turnover in every organization.
And again, I don't want this to sound like, you know, I'm coming in and like, want to
like, you know, cycle everybody out or wish I had.
I just think it's, it's more, I have seen more growth and kind of like our team do better
more recently as I have more clearly vocalized my expectations.

(35:31):
And I just think that has helped us perform better as an organization.
And so I wish I'd done that earlier.
100%.
If they know what the target is, they can move towards it.
If you're not giving them a target, they're just sort of running blind, which is not super
helpful.
And you think you don't want to give someone a super aggressive target because you want
to be nice to them.
And that is important in a business transition.
But like, if you're not speaking with your actual expectations, what's your actual target

(35:54):
is, you actually end up doing worse by the person over the long run.
Yeah.
Totally agree.
Couple of the other things you touched on, hiring people.
Remember if you want to scale, you have to be ready to scale.
And that includes your hiring process and having that put down exactly what you're looking
for.
We don't want to hire a bunch of lemmings, but at the same time, there's generally probably

(36:17):
a good profile of the person that works for your business or the position that you're
looking for.
And you need to be able to set those expectations early and hire for that position.
So I think that's a great point to touch on for anybody trying to grow a business.
Hiring is tough.
It is brutal.
And you have to be as sort of objective as possible in the process.

(36:38):
And then you can take, when it comes down to two grade counters, then you can take the
one you like the most and use the subjectivity along the line.
But if you can stick objectively, that's the best way to scale success.
I believe.
Totally.
Have a scorecard, get multiple people involved in the process.
Try to source some candidates on your own because there's always better people that
are kind of out there not looking for a job than just people who are applying.

(37:01):
And recognize that, yeah, it's a sales job hiring.
So make sure the people you have on it want that type of role or have that desire to spend
some of their time on it.
Yeah, I think we think about our core job is to deliver accounting services.
And yes, that is.
But for us as a growing accounting firm, a lot of our core job is to hire well because

(37:23):
that's how we deliver accounting services.
So it's not an afterthought.
It's not something you just pay a recruit or for or you just spend a couple of hours
on.
It's like hiring is a core motion if you're a growing business.
And you need to focus on it just as much as you focus on profit or as you focus on the
delivering the widget off the factory correctly.

(37:45):
Like you have the most dial quality control process in the world.
Your hiring process should be as good because otherwise you don't have a good hiring process.
You know,
What's even out of them, right?
Yeah, exactly.
Yeah, the last point was talking about the client.
And I love talking about niche niche, whatever you want to call it because I'm super ultra
niche, right?
Like the wine industry, but client size is a niche as well.

(38:08):
And trying to set those expectations of what that client looks like.
Yeah, we'll all have a niche at the end of the day.
Nobody actually serves everybody.
That's impossible.
And it is setting those expectations and those goals and what the client looks like and sticking
stick.
When you start floating above or maybe below, those ones are the ones that end up costing
you more money, especially on a subscription basis because you're putting in hours that

(38:32):
you just can't recover.
For sure.
I mean, I definitely, you know, I have ambitious targets for this business.
So I tend to think revenue, revenue, revenue.
You know, we, I'd say there's the economic cost of maybe bringing on customers that,
yeah, you know, are a challenge for you to serve.
Like certainly we've had lower margin on a couple of them, but I think, you know, there's

(38:53):
a non economic costs that can be even more, which is wrongly like advice.
If I were to say, hey, who are the kind of wrong fit customers that we've brought on
over the last couple of years, we're talking about a handful, you know, it's not, it's not,
we've brought on, we bring 40 clients a year roughly, you know, there's probably five
or 10 a year that, and now we're getting better at it.
That were sort of misfits for us to bring on, but you know, they create so much more,

(39:15):
not just margin challenges, but just stress, et cetera.
So you know, that's, that's something that I've learned is that it's not just about
the revenue and ultimately the margin, but like, what's it going to do to your team?
And then, because when you start to really have margin problems is not if you just have
one client that's out of whack, but if that means, if that one client burns somebody out

(39:37):
and then they leave, now you've got 30 clients that you have a problem with.
So yeah, I think, you know, definitely like understanding, you know, upfront, hey, is
this, you know, do we, do we want to serve this type of client?
What's it going to take?
Maybe, you know, slowing down out of the gate, like we just kind of went for those and just
started bringing them on real fast.
And I think maybe if we had sort of brought on a couple, done it for a year and then really

(39:59):
stepped back and asked ourselves some questions, there's some learning there.
And I think the last thing is like, you know, and you get this, like, think about the end
industry that you're serving and their journey because like, even if it's a profitable, great
customer, you know, we brought on a bunch of $10 million revenue, high growth, sort of

(40:22):
ambitious businesses.
And a lot of them got to 20 million revenue in like three years.
And so they like naturally started to go in-house because they got big and could build in-house
finance teams.
And we, you know, a lot of them we serve fricking fantastically, but there's a structural churn
that's going to happen that maybe isn't going to happen for a smaller business.

(40:44):
So I know a bunch of people love to serve startups or e-commerce, like those businesses
turn over a lot because they go out of business.
So like think about the end industry you're picking.
Chris, what is your short term goals for yourself in your business?
Yeah, so I, you know, I just, we're about 5 million revenue now.
I want to get us to about 10 in the next couple of years and I want to expand our service

(41:06):
lines like we really just do day-to-day finance operations.
We want to get into tax and we want to get into more sort of CFO advisory to really be
kind of the one-stop shop of sort of finance services for small business owners.
And I think I'll kind of pick my head up from there and figure out how do we want to continue
to grow?

(41:27):
You know, do I want to hire a GM and spend my time somewhere else?
But I know that like I have kind of that short term, yeah, let's double revenue again in
the next couple of years while diversifying our service lines and then I'll worry about
longer term from there.
You know, as I think about my time, I want to make sure that like, you know, I still

(41:49):
get pulled down, I would say below the leadership level occasionally, you know, I've got a client
relationship, they're pissed off, I need to jump in like, you know, I got to get rid of
that stuff and that I think just growing a little bit because yeah, I want fewer fire
drills that I basically need to touch because that slows down my ability to work on kind

(42:10):
of bigger projects, you know, and some of that comes from I need to better delegate,
I need to stay out of the weeds myself more, you know, there's probably a little bit of
a micromanager that I'm guilty of.
And then I think, you know, as I think about myself in the business, like, I'm very goal
oriented, I'm very okay, I want to get to this thing of 10 million, you know, and then
I want to go from there, it's like, I need to find more peace along the journey for myself.

(42:33):
I think I get so destination focused and then I get concerned about whether or not we're
going to hit that destination, like, we're not going to hit that destination this year,
no matter what.
So like, don't stress out so much, I think about whether we're going to hit something
that's a couple of years out, because it's kind of unknowable right this second.

(42:53):
You know, and I think that'll make me better manager, a better husband, a better father,
if I can sort of be a little bit more peace, even though I still have along the way, even
though I still have ambitions.
And I think the last thing, like, something I'm sorting through in real time is like,
you know, one of the benefits of owning a small business or any business is like, you
know, I control my calendar, I get to call my shots, which is great when I have this

(43:18):
morning, you know, a bit of a meltdown at home or our daughter and like more than usual
for five week old, and I like cancel a meeting to help out because my wife had to tell me,
you know, like, I love that flexibility, but also it means you're like, you decide
how much you work, no one's telling you how much to work.
And now that I have like a much more of a family at home that I want to spend time with,

(43:40):
I think it's still like literally in process right now, just like, how much do I want to
work?
What's the structure I'm going to create for myself?
And I think I need to build some sort of kind of like box for myself of, yeah, when,
how, how much so that every day I'm not kind of deciding should I work late tonight, you
know, when should I go home for dinner, like, build more structure around it.
It's nice to have a room, but I need some structure.

(44:01):
Yeah, we'll go through that topic for our next next lecture.
Yeah.
I know all the terrible advice that I have around it, but I've been able to do that fairly
successfully even though I probably work way too many hours.
But that's fine.
Chris, throughout this whole conversation, you've spoken a lot about being people first
and it makes me think that you've got some great advice for people who are becoming leaders

(44:26):
and their approach towards leadership.
Can you share anything with us that would help us become better leaders?
Yeah.
One phrase that I learned early on from somebody, you know, again.
Private equity firm I worked at, you know, everyone thinks private equity is a double,
like not always the case.
You know, the head of our group, Guy's worth, you know, a bazillion dollars, super successful.

(44:48):
You know, he talked a lot about you should feel like you work with your boss, not for
your boss.
And you know, I know that of course there are times where, you know, as a manager, people
do kind of work for you, you have to overrule them, make a decision, et cetera.
Like yeah, that of course happens.

(45:10):
But I think as much as possible as a leader, recognizing you're putting people in a position
because you're asking them to do a job.
And then it's your job to kind of try and help them be successful, whether that's with
resources, additional hires, training, problem solving, like, yeah, you're partnering with

(45:30):
them to get something done so that you can have more time to go do other stuff yourself.
So like recognizing that people who work quote unquote for you, under you, you know, they
enable you to have more time to do higher value stuff.
So like in the time that you spend with them, how can you make them feel like you're a partner

(45:53):
with them?
How can you help them?
And because in turn that then gives you more sort of, they're more successful.
That's going to create more capacity for you to do higher level stuff.
That's kind of my mentality.
You know, and then I think I already talked about one of the other big things, which is
like whatever the expectations you have of this person, whatever the job is that you're
asking them to do, like make sure that's super, super clear.

(46:16):
But I think trying to approach people who work for you and reframe it as you guys work together
is going to enable a much more successful partnership.
Yeah, great.
Built some relationship, built some trust.
People will then want to work for you, which means you're working together towards the
same goals, which is fantastic advice.
There's a trust well, right?
There's a like, I don't know, willingness to do, to deal with chaos well.

(46:39):
And it's like, you want to be able to ask your team to work late every once in a while,
like you can't do that all the time.
You know, heavy partners so that when shit hits the fan, you need someone to step up.
They're like willing to do that, as opposed to just like that being the consistent reality.
Yeah, that's great advice.
Chris, you shared a bit of personal stuff with us, but give us something interesting

(47:01):
about you that will get to sort of get a better flavor of who you are.
Yeah, yeah, I was doing a little fraction, you know, you know, you talked about earlier,
I love running.
I've always been self competitive, like I played golf competitively growing up and still
do.
And so you think about like the physical activities I've done.
They tend to be more individual oriented.

(47:21):
And I think that, you know, I played team sports too, like baseball growing up and love
that.
But I do think, you know, if you want to be the leader of a business, of course, it's
a team, you need people to support you to work with you.
But like, you also got to be comfortable being alone.
And I think I'm just reflecting in how I am.
Like, I hear a lot of small business owners to talk about being lonely.

(47:41):
I like never feel that.
And I think it's interesting because I kind of grew up with, you know, that is sort of
like, that was my athletic experiences running, playing golf.
And I think that's something I still enjoy.
I love playing golf.
I love playing by myself.
It doesn't happen that much.
I love to go on a run.
And so, yeah, I do have this kind of comfort with being on my own that I think is really

(48:03):
important to develop if you want to run a small business.
I mean, I was just glad to advise being successful at life, but maybe just the intro to me.
Yeah.
And other stuff is like, look, I'm very proud to live in California.
I love it here.
I've lived here for 11 years.
It absolutely has its challenges, but I tell people, you know, 40 million people live here

(48:27):
for a reason.
So I know that California gets bashed and I get it, but I always, I just feel super
lucky in the proximity we have to just beauty and the places I can drive in a couple hours
and be outside.
I mean, you know, I see, I live in Marin not far from you and it's like I see you every
day I go for a run.

(48:47):
Like that's pretty unique.
So really fortunate to be able to live here.
Yeah, the hills around me are pretty beautiful.
Just looking out the window right now and it looks like even though it's pretty cold out
there, it's still a beautiful day.
Yeah.
We have it pretty good.
It's like cold for us is 55.
You know, exactly.
Chris, one of the things we like to do to close out our product conversation is some rapid
fire questions.

(49:08):
If you're ready, I have five questions for you.
I'm excited.
I'm a little nervous, but I'm excited.
Nothing too difficult.
Let me know when you're ready and we'll start with question one.
Fire off.
What would your death row meal be?
Hamburger and french fries, but skinny french fries, not like thick ones.
And they got to be like crispy.
I mean, basically like what cooked McDonald's fries, thin, salty, bring on the fat and grease.

(49:33):
Perfect.
Do you prefer the mountains or the ocean?
Probably prefer the mountains.
For activities, I'm not really good at like sitting on the beach and reading.
Fair enough.
What is the quality you appreciate in a good friend?
I think where like you don't feel like you, you can go a long time without talking to
them and not feeling like any different or in kind of no expectation that like, oh, you're

(49:57):
mad at me that I didn't call you like, I'm yet like we're all young and busy.
We've all got young families.
Like, you know, it's hard to be on a consistent cadence.
But the ones that I know I could go, you know, six months without talking to and text them
and be like, I need to talk to you tomorrow.
That's true friendship.
What is your favorite piece of technology that makes your life better?
Good question.
I mean, it's like hard to take it.

(50:19):
We're doing a lot of dishes right now.
We've got a newborn and we have a bottle washer and she's doing a lot of formula because breastfeeding
has been a challenge.
So the formula machine and the bottle washer, those at 2am make our lives a lot easier.
Absolutely.
I love it.
Last question.
Do you have a favorite book that you recommend everybody reads?
Yeah, I mean, only because we're kind of going through the implementation of it right now.

(50:41):
This is nerdy and not that exciting, but, you know, traction and any of the kind of
EOS books, I think traction is really compelling.
So that's the first one that comes to mind.
I wish I was reading a lot of like, you know, fun leisure books right now, but I think my
minds the other book I'm reading right now is 12 hours sleep by 12 weeks, which is maybe

(51:05):
so you can see where my head's at these days.
Maybe it's a great book for new parents.
So go and read that as well.
Chris, I really appreciate you time today on protea conversations.
Thanks for being here.
Thanks for having me, Zane.
Thanks for all the friendship looking forward to our next launch.
And with that being another party of conversations.
Thank you for joining us in this journey of learning and inspiration.
Today we've been inside from our guests and taking another step towards understanding
that there's chemistry in the history of business and business.
Thank you.
I'm going to take a break.
So I have to get subscribed to create conversations on the open side of mind so you never miss

(51:42):
an episode.
We'd also love to you to look forward to your experience.
So thank you for being here.

(52:03):
I'm going to snap to the link there.
Join us next time for more interesting stories and advice on conversations like this.
Until then, keep striving for excellence.
I'm Zane Glein.
Thank you for listening.
Be happy.
Be happy.
© finally Zane.
We have over the past couple of years spent together.

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Episode 28 - Chris Williams - The Business of Buying Small Businesses

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Episode 28 - Chris Williams - The Business of Buying Small Businesses