December 3, 2025 • 27 mins
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Editor in chief of Accounting Today, Dan Hood, joins host KC Brothers to look back at two decades of “whispers” in the profession that either reshaped accounting or quietly disappeared. From the long, painful march to the cloud to the hype cycle around blockchain, Dan unpacks what actually sticks, what fizzles out, and what that pattern tells us about the next 5 to 10 years for firms of every size.
Together, Dan and KC dig into the forces quietly reshaping the profession right now, including CAS, private equity, ESG, AI, and the massive wave of ownership transitions on the horizon. If you’re an accountant wondering, “What should I actually be paying attention to?” this conversation will help you sort the signal from the noise and spot real opportunity for your firm and your career.
In this episode, you’ll hear:
- Why it took accountants nearly a decade to adopt the cloud, and what that pattern reveals about every “new” idea
- How blockchain went from “this will destroy audit” to quietly being baked into tools in the background
- Where AI is different from past tech waves, and why future managers will be leading both people and AI agents
- Why CAS is still in the whisper stage and what it will take for it to become mainstream
- How private equity, ESG reporting, and a generational handoff of firm ownership could completely change firm structures
- The rise of lifestyle focused and solo firms, and why the barrier to starting your own modern practice has never been lower
Perfect for firm owners, partners, and ambitious staff who want a realistic, insider look at where the profession is actually headed next.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
KC Brothers (00:00):
Welcome to another episode of Canopy Practice
Success.
I'm here with the one and onlyDan Hood.
Hello, Dan.
Dan Hood (00:07):
Hey, what's going on?
KC Brothers (00:09):
Not much.
I'm excited for today.
You have been with AccountingToday for over 20 years as
editor or and editor-in-chiefsince 2011.
Dan Hood (00:18):
Right.
Right.
KC Brothers (00:19):
Your knowledge of the industry, your access to the
goings-on and the trends, thefailures, everything is
astronomical, I am sure.
Dan Hood (00:31):
We've seen a lot.
We've definitely seen a lot.
A lot's a lot of change overthe years.
KC Brothers (00:34):
Yeah.
I mean, even in that 20-yearspan, let's see, that takes us
back to early 2000s.
And that predates social media.
So that's a whole thing of likeaccountants looking to each
other and building communitiesthere, even using it for
marketing.
Um, I mean, Facebook, speakingof early 2000s, looked very
different in the early 2000swhen it launched than it does
(00:57):
now.
And that same thing applies tojust UI in general and tech in
general and the advancementswe've made in tech.
So I'd love to start by maybehearing a few stories of things
you've seen through the yearsthat like started as whispers,
and you're like, hmm, what'sgoing on here?
And then it built to a larger,c larger conversation.
And then I'd love to hear maybeone of each.
(01:17):
One where you're like, okay,that fell off the map after the
whispers died out, or or thatgot bigger and crossed the chasm
and is now in the accountingcanon.
Dan Hood (01:29):
Right.
Right.
Yeah.
No, I mean what's funny isthere are a lot.
We have a sort of uh a rule ofthumb here that that anything
that's gonna change inaccounting takes about five to
ten years, and it goes throughthis period of everyone in
accounting.
Says, nope, don't need that,not gonna not gonna adopt that,
not gonna that's not gonnachange our firms.
Whether it's technology or, youknow, how you run a firm or you
know, uh employee policies,anything like that, it takes
(01:50):
anywhere from five to ten years,and it goes from nope, never
gonna do that.
Doesn't work in accounting,don't need it, don't want to
bother with it.
Some people are doing it, youknow, whatever, but we'll never
do it at our firm.
I guess we have to look at thisto all right, we'll adopt it
and then this is great.
We should have done this fiveyears ago.
And you can follow that, youcan follow that for everything
to varying degrees, and I'llgive you as an example of one
that that succeeded, uh is thecloud.
(02:12):
It took a decade foraccountants to get on the cloud.
If if uh anyone from Canopy whowas around at the time could
tell you, but anyone in asoftware vendor could tell you
there was a decade where theywere just, what is wrong?
Why won't they get on thecloud?
Why won't accountants move tothe cloud?
It's so great.
And this is all, you know,roughly 2000 to 2010, 12,
somewhere around there.
No one would get on it.
It wasn't secure, it wasn'tsafe, our client data won't be
(02:33):
safe.
We'd rather have it in ouroffices.
It's much safer at our offices,which was totally not true, but
accountants felt that way.
Um but it took and it just tookthem forever to get to adjust
to it.
They would say, no, I'd rathergo to my clients' offices at the
end of every month than cleanup their QuickBooks on-site kind
of thing.
And it really did took, it tookabout a decade uh before
accountants would getcomfortable with the notion of
(02:54):
having data in the cloud andworking in the cloud.
And now, obviously, right, it'shuge.
You can your CAS is entirelybased on having accounting in
the cloud and having software inthere and being able to access
your clients' data in real timewhenever you want from wherever
you are.
Uh but for for a good good 10to 12 years, it was uh they were
constantly fighting against it,just rejecting it entirely.
(03:15):
And for good reasons.
I mean, they were concernedabout s safety and security and
their clients' privacy and allthat sort of good stuff, but it
meant that it took probablyeight years longer than it
should have for the professionto really start thinking about
moving to the cloud in a bigway.
And now, you know, it's it's afantastic thing.
They're there.
It it enabled modern practicesin a way that you we couldn't
even imagine uh in in you knowearly 2000s.
KC Brothers (03:37):
And the early providers at that time of not
addressing that concern, or wasthe it just the accountants are
just way more risk averse thanmost buyers?
Dan Hood (03:45):
Aaron Powell I I think mostly they're way more risk
averse.
There was definitely an elementof the vendors not quite
realizing how serious theresistance was, but I think
mostly it's it's that theresistance was that serious.
Vendors were like, you know,you're online with your own
bank.
Why wouldn't you trust yourbank account's online?
All you're doing is you'reshopping on Amazon.
Why wouldn't you trust this?
And they I think they they theymay have underestimated the
(04:06):
degree to which accountants wereone, risk-averse, two, change
averse, and three, fiercelyprotective of client
information.
KC Brothers (04:13):
Well, to your point, like even with those two
examples you gave of yourbanking and your Amazon, your
credit card information, it'syours.
It's way riskier when it'ssomeone else's information.
Dan Hood (04:25):
Exactly.
Yeah, yeah, no question.
But there's also definitelythere was a lot of change
resistance, just sort ofknee-jerk change resistance
going on there as well.
But and then like you said, Idon't think the software vendors
cleanly understood because theywere so used to everybody else
sort of rushing online, right?
We all as consumers rushedonline and they'd be like, why
aren't the accountants getthere?
It would be so much easier forthem.
KC Brothers (04:44):
It's funny, as you know, an employee of one of
these vendors, we do still listlike cloud as a value prop of
ours, which in any otherindustry I wouldn't do.
I'm like, this is this is tablestakes.
This is uh and and even it'sfunny, I find myself trying to
be careful with the messaging Ialso promote with that of like
the accessibility because I mypersonal um worldview and my
(05:08):
values are that yeah, I I haveapps on my phone that are
work-related and I'll hop onsometimes, but I'm pretty
boundaried with my work.
Um, I like that flexibilitythat cloud and modern-day SaaS
providers provide, but I neverwant our customers to feel like
because we're in the cloud, thatmeans you're accessible day and
(05:29):
night and you therefore youwork all the time or you're on
vacation working.
But it's an interesting crowdto talk to about the cloud
because you get some who are,especially with CAS, where as a
result, they're spearheading theremote work approach.
Um, and it's not uncommon thatI do hear people who are like,
no, I like taking my work withme on vacation.
Um it's interesting.
Dan Hood (05:51):
And I think it's a lot of accountants who are like to
be able to be accessible, liketo be able to, you know, when a
client calls, I want to be ableto answer, right?
It's uh it comes down to it'sit's a virtue, right?
It's the desire to serveclients really, really well.
And I it's weird because youwould have thought that would
have been the thing they wouldjump on, that they would go, Oh,
yeah, this is great.
But they were like, man, I wantto be able to serve my clients
all the time, but only when Ireally want to.
So uh it was a it was a it wasa long time come.
KC Brothers (06:13):
Okay, so what's an example of one that knows dived
that didn't make it past thewhispers?
Dan Hood (06:19):
I did my favorite of this is blockchain.
And I don't know if anybodyremembers blockchain.
We were the entire professionwas sure that it was
particularly gonna destroy theaudit, uh the audit profession.
It was just gonna, you know,with with that kind of certainty
about where information is andhow it's been uh changed and
altered over time and the allthe elements of uh the audit
chain that would go into it andthe that sort of thing, they
(06:39):
just assume, well, this is gonnadestroy the audit.
No one ever really reallymapped out the stages by which
it would destroy the audit, butI think there was a a real fear
of it, not necessarily awell-grounded fear, but an
assumption that, oh, this couldreally be a problem for us
because it will, like I said,create these sort of
unchangeable, unalterablerecords that sort of audit
themselves.
I think that was the assumptionof it.
Disappeared.
(06:59):
Uh there was a period whereaccountants were talking about
it all the time, going toconferences about it, trying to
learn about it.
Sort of the way they'reapproaching AI now, right?
There's a little bit of afrenzy around AI, and AI is the
big thing and it's going tochange everything.
I do think AI will probably panout in a way that blockchain
did, which isn't to say thatblockchain disappeared, right?
I think it just got built intoa lot of products, and we were
like, oh wait, we don't actuallyhave to do anything with
(07:20):
blockchain.
It'll just get built intoproducts to make them more
secure and and more uh moreauditable.
In a way, they created somesome great tools for for
auditors and for accountants,but not a challenge for them.
Adapt or adopt to.
So uh there was a period whereit was on everybody's mind and
then you know, top of mind foreverybody, and everybody's lips,
everyone's going toconferences, having sessions
(07:40):
about it.
And I, you know, I can't tellyou the last time I heard
blockchain in a in aprofessional capacity, in an
accounting capacity, I shouldsay.
KC Brothers (07:47):
To your point, though, about uh you know,
blockchain being built intothings, I feel the same way
about AI though.
The accountants won't have tolearn AI the way like our
engineers here at Canopy do,because softwares like Canopy
all have board members andshareholders who are pushing and
pushing tech companies to notonly build AI, but to adopt it.
(08:13):
Like we're feeling that withinour marketing team of like,
okay, how are we?
And we're getting trainings onhow to use AI and what are
different use cases orapplications, and hey, how can I
help you with this?
And and different things that Ihope that means that
accountants don't have to learnit, that it come becomes more of
a how do I evaluate tech umthat has or or doesn't have it?
Dan Hood (08:38):
Right.
I think I think you'reabsolutely right that it will
get baked into a lot of the thesoftware vendors will have to do
do a lot of the work with AI,right?
It'll get baked into your tool.
I do think that there will besome need for accountants to um
embrace AI in a way that theywon't have to, they didn't have
to embrace blockchain, right?
Blockchain just got built inand you never heard about it
(08:58):
again.
I think you'll find that thereare, particularly as agentic AI
becomes more prevalent, thatwhat you'll find is you won't
have to build any of this stuff,but you will have to learn how
to work with it.
And it'll be a different kindof working with it than just
regular software because it'llbe you'll be tasking them to do
things and you'll need tounderstand what they can and
can't do and how to make surethat they're doing the thing you
want them to do and how tocheck to make sure that they did
(09:19):
it the right way.
You know, it's it'll be more ofa less of a technology thing
and more of a management uh uhtask in the sense of I saw
somebody at a at an AIconference talk about the fact
that this is probably the lastcouple of years, the next two
years or so will be the lasttime where managers solely
manage people, that they'll beend up being managing people and
agents or some form of agents,whatever age form that takes as
(09:42):
they get developed, so that youwill be as much as you're
telling you know junior staff orpeople underneath you how to do
a thing or what to do andmanaging their work and
delegating to them, you'll bedoing the same thing to an
ever-growing number of agents,and that will be a different
kind of management.
And we're terrible at humanmanagement already.
So I'm fascinated all the wayswe could be terrible at managing
agents, but well, at leastthere won't be emotion.
KC Brothers (10:04):
It could just give it its feedback and then it'll
delightfully say thank you.
That leads me to where I didwant to spend the bulk of the
conversation is okay, what areour whisperings today?
I'm gonna list off a few andthen I want to hear if there are
some that you're seeing thatI'm not aware of, which will be
fun.
I think Cass is still talkedabout in a whisper.
Like people, I actually justmet with a gal yesterday who I
(10:25):
met in Boston, just talk to hermore and understand things
better.
And Cass was new to her.
I was like, we haven't beentalking about this for three
years, you know, and that's theextent that I've been at Canopy.
I'm sure it's been being talkedabout more than that.
Um, so I still feel like toyour point about like that five
to 10 year adoption, like Ithink Cass is nearing the end of
(10:48):
that, hopefully.
And I say hopefully because I'ma fan of it.
I think another whisper I'mhearing is PE mergers,
acquisitions.
We could say AI is a whispertoo, though I agree with you, I
it's not gonna go anywhere.
And like the sooner you facethe music of this is gonna be a
part of tech and stuff.
Any other ones you'd like toadd to the list before we delve
into what the future ofaccounting is gonna look like?
Dan Hood (11:10):
Anyways, I would throw in uh ESG.
Okay.
I think it's on it's on theback burner now because the
current administration isn't,it's not a priority for it.
But I but the rest of the worldis focused on that kind of
reporting, uh, you know,reporting on environmental
impacts, on social impacts, ongovernance impacts.
And it's it is a hugeopportunity for accountants in
the sense of right now, auditingof financial auditing and
(11:31):
establishment of uh financialstatements and auditing of them
is a huge business for accounts,right?
Um there's there's a similaropportunity to create and audit
uh statements, like I said, forenvironmental impact, government
impact, social governanceimpact, sorry, and social
impact.
I think, and we're seeing thisalready start up overseas in a
big way, and it's gonna continuethere.
(11:51):
And it's uh you know, it's thekind of thing where it's an
entire other business, just asimportant as a financial audit,
that's a natural fit foraccountants in the sense of
offering another service linethat they're a whole yeah, a
whole other service line of thesame size and perhaps bigger,
right?
Because the whole thing isyou've got you're gonna have
millions of companies that haveto come up with reporting around
(12:12):
their ESG impacts uh and who'sbetter at coming up with new
reporting systems thanaccountants, right?
And then they're all gonna haveto get audited or uh, you know,
have some kind of adaptation.
KC Brothers (12:20):
Or do you say that's only applying to like the
top 500 companies in the US?
Dan Hood (12:26):
It's good, it's gonna be it's gonna be all of them to
a certain I mean there may beyou know obviously small mom and
pop shops may get away from it,but anybody who works with a
Walmart or any of the majorcorporations, right?
Because a lot of thosecorporations, the reporting
requirements go down toeverybody in their supply chain.
So small companies that aresupplying Walmart with anything,
you know, local, you're you'rethe guy who comes over when the
Walmart's air conditioning goeson the Fritz, you may have some
(12:48):
reporting requirements toWalmart because Walmart has
reporting requirements to well,eventually they'll have it to
the SEC.
It's all this is all in theback burner in the US now, just
from the from the newadministration.
It's not one of theirpriorities, but it's not going
to go away because the rest ofthe world is adopting it and
eventually it will come in inthe United States.
So even uh the SEC's uhoriginal proposal, which is what
sort of shelved orbackburnered, included reporting
(13:10):
requirements for that was forpublic companies had to have
some reporting requirements fromall of their suppliers and
partners and the people theywork with, which would come down
to very small companies.
So essentially, in the end, Ithink the overwhelming majority
of companies will have some formof reporting here.
KC Brothers (13:25):
Okay.
Dan Hood (13:26):
And it's I think it's gonna be huge, huge, huge
amounts of money available.
And it doesn't have to beaccounts, it's just they're a
good fit for it, right?
They do this kind of thingalready.
So it's sort of theiropportunity to lose.
KC Brothers (13:36):
I mean, who else would do it?
Dan Hood (13:37):
Well, that's exactly.
But I mean, you know, there'sall kinds of, you know, uh
there's software companies thatsay, well, we can do it, or you
know, we can we can provide thesystems to set it up.
There's all kinds of uhbusiness consultants who would
say they can do it.
KC Brothers (13:48):
Yeah, and with their client base to your point,
where it's not just gonnaaffect um the top big dogs
because it it cascades, itdominoes down to the people who
are their vendors as well.
And a local accounting firmthat services small businesses
with revenues of five million toten million will still be
(14:09):
impacted.
Dan Hood (14:09):
Aaron Powell Some of it's, you know, we're already
seeing in California has somereporting around this.
Um it's easy to see thatbecoming a you know a a
state-based sort of mandate ifthe federal government isn't
doing it.
And at that point, thosereporting requirements are
definitely going to be forcompanies of all sizes.
So even if it's it may bedirect, right?
It won't maybe a directregulatory mandate as opposed to
sort of the indirect trickledown from a more federal level
(14:31):
sort of thing.
But it looks like, because thateveryone else in the world is
doing it, we'll probably end updoing it, which may be a little
behind everybody.
And if accountants don't do it,somebody else will.
KC Brothers (14:39):
Yeah.
Okay.
Anything else to add to thelist before we jump into my
three?
No, I think your list is prettygood.
First one I listed we'll justgo to PE funding.
Dan Hood (14:48):
PE is interesting.
This is one when you weretalking for an example of a
thing that faded away.
I was gonna uh give an example.
When I first joined in 1998, itwas sort of just the beginning
of um this period of where theyhad all these what they called
consolidators or roll-ups goingon, where companies,
non-accounting companies, weregoing all over the country,
buying up accounting firms,rolling them up into bigger
firms.
They made a bunch of biggerfirms, East Star Block was doing
(15:10):
it, American Express was doingit, um, a bunch of other people
were in the space, rolling upall these.
It was a frenzy, it's a crazyfrenzy, sort of the way the PE
frenzy of right now is.
That's when the actual, that'swhen the alternative practice
structure was created, the onethat PE firms now use when they
buy accounting firms to but wehave this agreement with the
others where we get to sit intheir offices and we get to use
their letterhead and we get touse their HR functions and we
(15:32):
get to use their secretaries andwe get to be part of their
health plans and all that sortof stuff.
And it's it's a little bit of aregulatory fig leaf, right?
I mean, it's still the same setof partners, it's still all the
same staff.
They're just for legalpurposes, they're a separate
thing.
Okay.
That was invented.
It's very common now becauseeveryone says, oh, yeah, when
you're all by P, you have tohave that.
But it was created or or firstreally rolled into the
accounting profession in 1999when they had all these
(15:53):
consolidators going on.
It was huge uproar.
I mean, just hundreds of firmswere acquired.
It was gonna change the face ofaccounting, it was gonna
completely up-end everything,everything was gonna be weird.
All these firms, no one wasgonna be a regular accounting
firm anymore.
And by about 2004, it was allgone.
Hundred percent all gone,except for uh UHY and CBIS were
the only sort of uh uhremainders of that.
(16:14):
Uh and C Biz both had uhalternative practice structures.
C C Biz eventually became apublic company, um, but those
are the only two firms wherethere was any impact.
By RSM, I think was still stillhad some issues, not issues,
still had some connections to HRBlock, but eventually the
partners of RSM bought backtheir firm for HR block and
became just RSM, just a regularold accounting firm.
And so by call it 2009, really,almost no trace of this
(16:40):
incredible, incredible wave ofchange that had come over the
profession in three or four orfive years.
Basically no remnants of itall, except like I said, the
sort of weird structure that UHYhad where they'd always say,
hey, we're an alternativepractice structure.
KC Brothers (16:55):
So then did partners buy back from the
private equity at that time, orwhat happened?
Dan Hood (16:59):
Yeah, it wasn't private equity.
It was mostly it was a weirdcombination.
Sometimes it was H and Rblocks, it was a public company,
and sometimes it was an Amex.
So uh it wasn't actuallyprivate equity, but they
operated very similarly, likethey were acquiring firms, and
the firms would occasionally dothe alternative practice
structure because they had tofor regulatory reasons.
But yeah, they basically justwent back to being accounting
firms.
Okay, and so when you when youlook at what's going on now with
(17:20):
the frenzy of private equityentering in, you sort of have to
ask, is this all just gonnahappen?
Right?
They come in, they spend a lotof money, and then they
discover, no, we're not, wedon't really know what's going
on here.
Um we're not making the moneywe want to make.
I don't think that's gonnahappen, but it is the sort of
thing you have to sort of lookback and go, well, there was
this time 20 years ago where wedid the same thing where
everyone was getting bought andthere was all these outside
players coming in.
It was gonna completely changethe face of accounting, and then
(17:42):
it didn't at all.
I mean, at all.
KC Brothers (17:47):
In the real world, when it came to them servicing
their clients, no one would haveknown that there was all of
this businessing happening onthe back end.
Dan Hood (17:56):
Yeah, exactly.
You wouldn't you wouldn't know,and the whole but the whole
goal was, right, for AmericanExpress and for HR Block was the
goal was like we'll have allthese accounting firms and we'll
be able to offer all of theseother services through
accounting firms.
KC Brothers (18:06):
And it just never quite panned out in terms of
like expanding their marketshare and and increasing their
bottom line.
What do you see the angle iswith PE?
What PE is a little Yeah.
Dan Hood (18:20):
It's a little simpler, right?
It's just they just want tomake money.
KC Brothers (18:22):
Right.
Dan Hood (18:23):
It's not they they just want to you know get some
of the profits from accountingfirms.
They think it's uh um a coupleof different things.
One, I think you see PE firmssaying this is a steady earner,
right?
The long-term model of PE hadalways been we buy 10 companies,
nine of them are badinvestments, but one of them
hits a is a home run, right?
And we pay for pay for theother nine with the home run.
That was sort of a standard.
(18:43):
I think what they started tosay is, well, how about we also
buy some companies that aremaybe not home runs, but also
pretty reliable earners, prettyeven in the worst of times,
pretty steady cash flow, even inthe worst of times, right?
There's sort of a good, if youhad throw a couple of those in
your portfolio, suddenly you'renot one winner and a bunch of
losers.
You're one winner, a couple ofsteady guys, and then some
losers, because that's gonnahappen.
But the other big element forthem is uh, and I think this is
(19:05):
probably a little bit bigger fora lot of PE firms, is the
notion that it's accounting as avery fragmented market, right?
It's a lot of relatively smallfirms, even when you talk
talking about the top 100 firms,they are relatively small
companies.
So there's a lot offragmentation, and I think they
look at that and say there's alot of opportunity to build
these, to put a lot of firmstogether and create bigger
organizations that have biggereconomies of scale and can do
(19:28):
all kind all the kinds of thingsthat larger companies could do
that a smaller company can't.
Uh when they put all thosetogether, that's something they
can sell.
Right.
When when three to five toseven years comes along and they
want to get their money back,they've got a much bigger
organization to sell.
They've rationalized it,they've put some resources into
it, uh, we hope, um, and built astronger, larger, more
resilient sort of accountingpractice that you can then sell
(19:50):
to another PR private equityfirm, sell to any other kind of
investor you can think ofbecause you've done a lot of the
cleanup work, put a lot ofextra resources into it, and
made it instead of having to buy10 separate accounting firms
with smaller revenues.
Yeah, one big accounting firmthat has a big regular stream of
revenue coming in.
KC Brothers (20:07):
Yeah.
Well, and then you layer on topof that all of the talk right
now around pricing strategies.
There are so many recommendedbest practices or ways to do it,
historical ways of doing itthat are being successful to
your point of like in the worstof times, they're still
profitable, they're still havingcash flow.
And then you also add on thedelta, the the chasm, the talent
(20:30):
crisis, the difference betweenthose entering the market and
and there being enoughaccountants to go around and the
need, the supply and demandthere.
Dan Hood (20:42):
Right.
And that's a that's a mucheasier problem.
One, uh, there's a there'sthat's a great point because
there's a ton of different waysthat impacts everything.
But one of the big ones is it'smuch easier if you're a larger
organization to manage thatcapacity those capacity issues,
right?
It's easier to have a big HRgroup, right?
You could hire you.
KC Brothers (20:58):
I'm not even thinking about it in terms of
capacity.
I'm thinking about it in termsof opportunity, in terms of
being tapped out of the market.
They're not.
There's plenty to go around.
There's no way there's going tobe stagnation because it's not
like accounting services areever going to not be needed,
even with AI.
And AI is just going to getfirms to be more efficient to
(21:21):
address the capacityconstraints, sure.
But looking through this fromPE's point of view, they see
that, okay, well, demand isoutpacing supply right now.
So huge opportunity.
And then there are already allof these conversations around
how to more strategically priceyour services to have a greater
(21:43):
revenue potential.
That that that really is justprime for investment.
Dan Hood (21:48):
Think about it.
If you're if you're pricing asbadly as a lot of accounting
firms are right now, you couldjust easily make a lot more
money.
Think what you could do if yourationalized your pricing and
got better at it.
It's with no extra work and noextra time, you just suddenly
are seeing a lot bigger returnon your on your client.
So yeah, absolutely.
It's one of those things withtechnology and accounting,
right?
There's there's we're we'recoming off a long period of time
that kind of started in thelate 80s, but really got it.
KC Brothers (22:11):
Um okay.
To wrap up, I can't believeit's 30 minutes already.
PSG, here to stay or will itdie?
I think your opinion was clear.
Yeah.
Yeah.
Dan Hood (22:21):
Yeah, here to stay.
Uh it and and sort of really awhisper now, but gonna be much
bigger.
KC Brothers (22:25):
Yeah, your prediction is it's gonna grow.
Prediction for AI, gonna grow,gonna die.
Dan Hood (22:30):
Oh, totally gonna grow.
KC Brothers (22:31):
I couldn't agree more.
PE, gonna grow, gonna die.
Dan Hood (22:34):
I I have no idea.
I am genuinely, I am torn onthis because like I said, I can
think back, it could be like the1990s, early 2000s.
I think it will probably, youknow, I'd probably it probably
what will happen is I don'tthink it'll be PE.
I think it'll become just thiswhole thing where accounting
firms can be, it can change thestructure of accounting firms so
that you can be anything youwant.
You don't have to be atraditional accounting firm.
You could be a PE backed firm,but you could also have venture
(22:55):
capital.
You could also be backed by,you know, a pension fund that
just wants the steady earningsuh and you just report to them
in a quiet way like that.
It's gonna open up, I think,this is my guess, is that it
will it won't be PE, it'll justbe this whole new range of
models for accounting firms.
So that when you look ataccounting firm, you have to
ask, so what kind of accountingfirm are you?
You know, how are youorganized?
Are you one person who workswith a lot of partner firms?
(23:17):
Are you uh, you know, you knowpart of a weird network of
independent firms that sharework with each other on a much
more serious basis than thecurrent networks do?
You know, there's just gonna beso many options.
Are you a partner, anaccounting firm that also has a
law firm into it, right?
We're seeing some of that inArizona and some big firms
getting in there.
Exactly.
You're gonna be part of are yougonna be an accounting firm
(23:37):
within a wealth manager?
Uh we've got a couple of bigaccounting firms that did that.
So yeah, I think we're that'sprobably what's gonna happen.
It won't be PE.
It'll be some different,greater range of options of
structure.
China we're okay.
KC Brothers (23:50):
Last fun one because you talked about cloud
hosting.
Is it gonna grow or is it gonnadie?
Dan Hood (23:54):
If it dies, and I don't know that it will, if it
dies, it will take a long time.
Because I think there's a lotof particularly smaller firms
that that rely on it don'tnecessarily have the the tech
savvy to to to take care ofeverything on their own or to
rely on a vendor or to figurethat out.
I think so.
Hosting will be around.
At least if it doesn't lastforever, it will last for a for
a while.
KC Brothers (24:12):
Okay.
Interesting prediction.
I don't get that one.
I as someone who's um grown hercareer in tech, I'm like, why?
It's all the cloud.
But like you just laid out uhfor the first little bit of our
conversation thatdie-heartedness with the
security elements.
And maybe it's just gonna,yeah, to your point, stick with
us a little longer.
Dan Hood (24:32):
Aaron Powell And there's a lot of firms, right?
But there's a lot of babyboomers who own firms still who
are like, do I really want tospend a lot of time making a
major technology revolution inmy firm?
Or do I just want to hang ontill I retire?
KC Brothers (24:44):
To that point, my prediction um is very vague, but
the next two or three years, Iam beyond excited for because of
that, because I we're gonna seeso much ownership transfer, I
think, in the next two or threeyears.
I don't think it'll take fiveto ten, where we will see the
people who have been averse tochange or who are like, no, I'm
(25:05):
holding on because I have anexit.
And I wonder too to what extentwe'll see that exit mentality
change because of PE, wherelike, hey, I can get um cash out
now, but still be in my career.
I don't have to wait forretirement.
I think that as a result, aspeople retire, people who have
maybe been anxious for the thestubborn boomers to leave will
(25:26):
then have this resurgence oftech adoption.
Dan Hood (25:30):
Yeah.
I think we're gonna find a lotmore people who are who were
anxious for the boomers to leavewho will say the heck with it.
I'm just gonna start my own.
KC Brothers (25:35):
Well, I think we're already seeing that.
Would you say that's a whisper,or do you think that's gained
traction is now a full on thething.
Dan Hood (25:40):
I think that's gaining traction for for probably
longer than we've thought.
I mean, I think that there'sbeen more.
But I think PE is is uhturbocharging a little bit
because there's people who arelike, I just don't want to work
for the PE firm, not necessarilyfor good reasons or bad
reasons, just they don't theyhave a bad, a bad impression of
it.
KC Brothers (25:54):
Yeah, I think that that is a whisper we probably
should have called out earliertoo, of just people starting
their own, because I thinkthey're whether they're coming
from big four and like I don'twant 80-hour work weeks, this
this kind of lifestyle, or ifthey're even coming from a
smaller boutique local firm withan older partner that might be
stagnant in their ways.
I just think the the barrier toentry for starting your own
(26:17):
effective firm is so low rightnow, to the extent that I have
even thought about it.
I'm like, I know I could be theoperations founder of an
accounting firm and just hire myaccounting talent.
Dan Hood (26:28):
Yeah, no, I would this, yeah, this is a weird,
this is uh it is the barriersare incredibly low, right?
You don't need you you don'tneed anything.
You can do it.
I wanted to jump on you talkedabout, you know, lifestyle.
I think that's one thing that'sthat's a little bit of a
whisper now, and I think it'sgonna become huge, is the notion
of people saying, well, I don'thave to run an accounting firm
that looks like every otheraccounting firm.
I can run an accounting firmthat just if I'm just making
(26:49):
enough for me, that's great.
Uh a little bit of a whispernow, but a lot more accountants
saying, no, I don't need to doall the work that comes my way.
I need to to make enough moneyto live comfortably and to to
offer opportunities to thepeople who work for me.
But I don't need to be, youknow, if I'm if we're all happy,
we don't need to do more workjust to do more work.
Um and I think that's gonna beit's gonna become much more
people are gonna get a lot morepermission to say that um and to
(27:10):
think that way.
KC Brothers (27:11):
I love that.
Dan Hood (27:13):
Which is which is gonna be much healthier for
everybody, right?
KC Brothers (27:15):
Uh yes, we need more healthy accountants.
They do such great work, and Iwould love to see their
happiness score go up and not beon the top list of depression
and we're here to help solvethat problem.
Give them good tech that canautomate things that they don't
need to do and get your timeback.
Go home at five.
Dan Hood (27:33):
Yeah.
KC Brothers (27:33):
Excellent.
Okay.
Well, thank you, Dan.
Dan Hood (27:35):
Cheers.
Thank you, Casey.
It was great.
Welcome to another episode of Canopy Practice
Success.
I'm here with the one and onlyDan Hood.
Hello, Dan.
Dan Hood (00:07):
Hey, what's going on?
KC Brothers (00:09):
Not much.
I'm excited for today.
You have been with AccountingToday for over 20 years as
editor or and editor-in-chiefsince 2011.
Dan Hood (00:18):
Right.
Right.
KC Brothers (00:19):
Your knowledge of the industry, your access to the
goings-on and the trends, thefailures, everything is
astronomical, I am sure.
Dan Hood (00:31):
We've seen a lot.
We've definitely seen a lot.
A lot's a lot of change overthe years.
KC Brothers (00:34):
Yeah.
I mean, even in that 20-yearspan, let's see, that takes us
back to early 2000s.
And that predates social media.
So that's a whole thing of likeaccountants looking to each
other and building communitiesthere, even using it for
marketing.
Um, I mean, Facebook, speakingof early 2000s, looked very
different in the early 2000swhen it launched than it does
(00:57):
now.
And that same thing applies tojust UI in general and tech in
general and the advancementswe've made in tech.
So I'd love to start by maybehearing a few stories of things
you've seen through the yearsthat like started as whispers,
and you're like, hmm, what'sgoing on here?
And then it built to a larger,c larger conversation.
And then I'd love to hear maybeone of each.
(01:17):
One where you're like, okay,that fell off the map after the
whispers died out, or or thatgot bigger and crossed the chasm
and is now in the accountingcanon.
Dan Hood (01:29):
Right.
Right.
Yeah.
No, I mean what's funny isthere are a lot.
We have a sort of uh a rule ofthumb here that that anything
that's gonna change inaccounting takes about five to
ten years, and it goes throughthis period of everyone in
accounting.
Says, nope, don't need that,not gonna not gonna adopt that,
not gonna that's not gonnachange our firms.
Whether it's technology or, youknow, how you run a firm or you
know, uh employee policies,anything like that, it takes
(01:50):
anywhere from five to ten years,and it goes from nope, never
gonna do that.
Doesn't work in accounting,don't need it, don't want to
bother with it.
Some people are doing it, youknow, whatever, but we'll never
do it at our firm.
I guess we have to look at thisto all right, we'll adopt it
and then this is great.
We should have done this fiveyears ago.
And you can follow that, youcan follow that for everything
to varying degrees, and I'llgive you as an example of one
that that succeeded, uh is thecloud.
(02:12):
It took a decade foraccountants to get on the cloud.
If if uh anyone from Canopy whowas around at the time could
tell you, but anyone in asoftware vendor could tell you
there was a decade where theywere just, what is wrong?
Why won't they get on thecloud?
Why won't accountants move tothe cloud?
It's so great.
And this is all, you know,roughly 2000 to 2010, 12,
somewhere around there.
No one would get on it.
It wasn't secure, it wasn'tsafe, our client data won't be
(02:33):
safe.
We'd rather have it in ouroffices.
It's much safer at our offices,which was totally not true, but
accountants felt that way.
Um but it took and it just tookthem forever to get to adjust
to it.
They would say, no, I'd rathergo to my clients' offices at the
end of every month than cleanup their QuickBooks on-site kind
of thing.
And it really did took, it tookabout a decade uh before
accountants would getcomfortable with the notion of
(02:54):
having data in the cloud andworking in the cloud.
And now, obviously, right, it'shuge.
You can your CAS is entirelybased on having accounting in
the cloud and having software inthere and being able to access
your clients' data in real timewhenever you want from wherever
you are.
Uh but for for a good good 10to 12 years, it was uh they were
constantly fighting against it,just rejecting it entirely.
(03:15):
And for good reasons.
I mean, they were concernedabout s safety and security and
their clients' privacy and allthat sort of good stuff, but it
meant that it took probablyeight years longer than it
should have for the professionto really start thinking about
moving to the cloud in a bigway.
And now, you know, it's it's afantastic thing.
They're there.
It it enabled modern practicesin a way that you we couldn't
even imagine uh in in you knowearly 2000s.
KC Brothers (03:37):
And the early providers at that time of not
addressing that concern, or wasthe it just the accountants are
just way more risk averse thanmost buyers?
Dan Hood (03:45):
Aaron Powell I I think mostly they're way more risk
averse.
There was definitely an elementof the vendors not quite
realizing how serious theresistance was, but I think
mostly it's it's that theresistance was that serious.
Vendors were like, you know,you're online with your own
bank.
Why wouldn't you trust yourbank account's online?
All you're doing is you'reshopping on Amazon.
Why wouldn't you trust this?
And they I think they they theymay have underestimated the
(04:06):
degree to which accountants wereone, risk-averse, two, change
averse, and three, fiercelyprotective of client
information.
KC Brothers (04:13):
Well, to your point, like even with those two
examples you gave of yourbanking and your Amazon, your
credit card information, it'syours.
It's way riskier when it'ssomeone else's information.
Dan Hood (04:25):
Exactly.
Yeah, yeah, no question.
But there's also definitelythere was a lot of change
resistance, just sort ofknee-jerk change resistance
going on there as well.
But and then like you said, Idon't think the software vendors
cleanly understood because theywere so used to everybody else
sort of rushing online, right?
We all as consumers rushedonline and they'd be like, why
aren't the accountants getthere?
It would be so much easier forthem.
KC Brothers (04:44):
It's funny, as you know, an employee of one of
these vendors, we do still listlike cloud as a value prop of
ours, which in any otherindustry I wouldn't do.
I'm like, this is this is tablestakes.
This is uh and and even it'sfunny, I find myself trying to
be careful with the messaging Ialso promote with that of like
the accessibility because I mypersonal um worldview and my
(05:08):
values are that yeah, I I haveapps on my phone that are
work-related and I'll hop onsometimes, but I'm pretty
boundaried with my work.
Um, I like that flexibilitythat cloud and modern-day SaaS
providers provide, but I neverwant our customers to feel like
because we're in the cloud, thatmeans you're accessible day and
(05:29):
night and you therefore youwork all the time or you're on
vacation working.
But it's an interesting crowdto talk to about the cloud
because you get some who are,especially with CAS, where as a
result, they're spearheading theremote work approach.
Um, and it's not uncommon thatI do hear people who are like,
no, I like taking my work withme on vacation.
Um it's interesting.
Dan Hood (05:51):
And I think it's a lot of accountants who are like to
be able to be accessible, liketo be able to, you know, when a
client calls, I want to be ableto answer, right?
It's uh it comes down to it'sit's a virtue, right?
It's the desire to serveclients really, really well.
And I it's weird because youwould have thought that would
have been the thing they wouldjump on, that they would go, Oh,
yeah, this is great.
But they were like, man, I wantto be able to serve my clients
all the time, but only when Ireally want to.
So uh it was a it was a it wasa long time come.
KC Brothers (06:13):
Okay, so what's an example of one that knows dived
that didn't make it past thewhispers?
Dan Hood (06:19):
I did my favorite of this is blockchain.
And I don't know if anybodyremembers blockchain.
We were the entire professionwas sure that it was
particularly gonna destroy theaudit, uh the audit profession.
It was just gonna, you know,with with that kind of certainty
about where information is andhow it's been uh changed and
altered over time and the allthe elements of uh the audit
chain that would go into it andthe that sort of thing, they
(06:39):
just assume, well, this is gonnadestroy the audit.
No one ever really reallymapped out the stages by which
it would destroy the audit, butI think there was a a real fear
of it, not necessarily awell-grounded fear, but an
assumption that, oh, this couldreally be a problem for us
because it will, like I said,create these sort of
unchangeable, unalterablerecords that sort of audit
themselves.
I think that was the assumptionof it.
Disappeared.
(06:59):
Uh there was a period whereaccountants were talking about
it all the time, going toconferences about it, trying to
learn about it.
Sort of the way they'reapproaching AI now, right?
There's a little bit of afrenzy around AI, and AI is the
big thing and it's going tochange everything.
I do think AI will probably panout in a way that blockchain
did, which isn't to say thatblockchain disappeared, right?
I think it just got built intoa lot of products, and we were
like, oh wait, we don't actuallyhave to do anything with
(07:20):
blockchain.
It'll just get built intoproducts to make them more
secure and and more uh moreauditable.
In a way, they created somesome great tools for for
auditors and for accountants,but not a challenge for them.
Adapt or adopt to.
So uh there was a period whereit was on everybody's mind and
then you know, top of mind foreverybody, and everybody's lips,
everyone's going toconferences, having sessions
(07:40):
about it.
And I, you know, I can't tellyou the last time I heard
blockchain in a in aprofessional capacity, in an
accounting capacity, I shouldsay.
KC Brothers (07:47):
To your point, though, about uh you know,
blockchain being built intothings, I feel the same way
about AI though.
The accountants won't have tolearn AI the way like our
engineers here at Canopy do,because softwares like Canopy
all have board members andshareholders who are pushing and
pushing tech companies to notonly build AI, but to adopt it.
(08:13):
Like we're feeling that withinour marketing team of like,
okay, how are we?
And we're getting trainings onhow to use AI and what are
different use cases orapplications, and hey, how can I
help you with this?
And and different things that Ihope that means that
accountants don't have to learnit, that it come becomes more of
a how do I evaluate tech umthat has or or doesn't have it?
Dan Hood (08:38):
Right.
I think I think you'reabsolutely right that it will
get baked into a lot of the thesoftware vendors will have to do
do a lot of the work with AI,right?
It'll get baked into your tool.
I do think that there will besome need for accountants to um
embrace AI in a way that theywon't have to, they didn't have
to embrace blockchain, right?
Blockchain just got built inand you never heard about it
(08:58):
again.
I think you'll find that thereare, particularly as agentic AI
becomes more prevalent, thatwhat you'll find is you won't
have to build any of this stuff,but you will have to learn how
to work with it.
And it'll be a different kindof working with it than just
regular software because it'llbe you'll be tasking them to do
things and you'll need tounderstand what they can and
can't do and how to make surethat they're doing the thing you
want them to do and how tocheck to make sure that they did
(09:19):
it the right way.
You know, it's it'll be more ofa less of a technology thing
and more of a management uh uhtask in the sense of I saw
somebody at a at an AIconference talk about the fact
that this is probably the lastcouple of years, the next two
years or so will be the lasttime where managers solely
manage people, that they'll beend up being managing people and
agents or some form of agents,whatever age form that takes as
(09:42):
they get developed, so that youwill be as much as you're
telling you know junior staff orpeople underneath you how to do
a thing or what to do andmanaging their work and
delegating to them, you'll bedoing the same thing to an
ever-growing number of agents,and that will be a different
kind of management.
And we're terrible at humanmanagement already.
So I'm fascinated all the wayswe could be terrible at managing
agents, but well, at leastthere won't be emotion.
KC Brothers (10:04):
It could just give it its feedback and then it'll
delightfully say thank you.
That leads me to where I didwant to spend the bulk of the
conversation is okay, what areour whisperings today?
I'm gonna list off a few andthen I want to hear if there are
some that you're seeing thatI'm not aware of, which will be
fun.
I think Cass is still talkedabout in a whisper.
Like people, I actually justmet with a gal yesterday who I
(10:25):
met in Boston, just talk to hermore and understand things
better.
And Cass was new to her.
I was like, we haven't beentalking about this for three
years, you know, and that's theextent that I've been at Canopy.
I'm sure it's been being talkedabout more than that.
Um, so I still feel like toyour point about like that five
to 10 year adoption, like Ithink Cass is nearing the end of
(10:48):
that, hopefully.
And I say hopefully because I'ma fan of it.
I think another whisper I'mhearing is PE mergers,
acquisitions.
We could say AI is a whispertoo, though I agree with you, I
it's not gonna go anywhere.
And like the sooner you facethe music of this is gonna be a
part of tech and stuff.
Any other ones you'd like toadd to the list before we delve
into what the future ofaccounting is gonna look like?
Dan Hood (11:10):
Anyways, I would throw in uh ESG.
Okay.
I think it's on it's on theback burner now because the
current administration isn't,it's not a priority for it.
But I but the rest of the worldis focused on that kind of
reporting, uh, you know,reporting on environmental
impacts, on social impacts, ongovernance impacts.
And it's it is a hugeopportunity for accountants in
the sense of right now, auditingof financial auditing and
(11:31):
establishment of uh financialstatements and auditing of them
is a huge business for accounts,right?
Um there's there's a similaropportunity to create and audit
uh statements, like I said, forenvironmental impact, government
impact, social governanceimpact, sorry, and social
impact.
I think, and we're seeing thisalready start up overseas in a
big way, and it's gonna continuethere.
(11:51):
And it's uh you know, it's thekind of thing where it's an
entire other business, just asimportant as a financial audit,
that's a natural fit foraccountants in the sense of
offering another service linethat they're a whole yeah, a
whole other service line of thesame size and perhaps bigger,
right?
Because the whole thing isyou've got you're gonna have
millions of companies that haveto come up with reporting around
(12:12):
their ESG impacts uh and who'sbetter at coming up with new
reporting systems thanaccountants, right?
And then they're all gonna haveto get audited or uh, you know,
have some kind of adaptation.
KC Brothers (12:20):
Or do you say that's only applying to like the
top 500 companies in the US?
Dan Hood (12:26):
It's good, it's gonna be it's gonna be all of them to
a certain I mean there may beyou know obviously small mom and
pop shops may get away from it,but anybody who works with a
Walmart or any of the majorcorporations, right?
Because a lot of thosecorporations, the reporting
requirements go down toeverybody in their supply chain.
So small companies that aresupplying Walmart with anything,
you know, local, you're you'rethe guy who comes over when the
Walmart's air conditioning goeson the Fritz, you may have some
(12:48):
reporting requirements toWalmart because Walmart has
reporting requirements to well,eventually they'll have it to
the SEC.
It's all this is all in theback burner in the US now, just
from the from the newadministration.
It's not one of theirpriorities, but it's not going
to go away because the rest ofthe world is adopting it and
eventually it will come in inthe United States.
So even uh the SEC's uhoriginal proposal, which is what
sort of shelved orbackburnered, included reporting
(13:10):
requirements for that was forpublic companies had to have
some reporting requirements fromall of their suppliers and
partners and the people theywork with, which would come down
to very small companies.
So essentially, in the end, Ithink the overwhelming majority
of companies will have some formof reporting here.
KC Brothers (13:25):
Okay.
Dan Hood (13:26):
And it's I think it's gonna be huge, huge, huge
amounts of money available.
And it doesn't have to beaccounts, it's just they're a
good fit for it, right?
They do this kind of thingalready.
So it's sort of theiropportunity to lose.
KC Brothers (13:36):
I mean, who else would do it?
Dan Hood (13:37):
Well, that's exactly.
But I mean, you know, there'sall kinds of, you know, uh
there's software companies thatsay, well, we can do it, or you
know, we can we can provide thesystems to set it up.
There's all kinds of uhbusiness consultants who would
say they can do it.
KC Brothers (13:48):
Yeah, and with their client base to your point,
where it's not just gonnaaffect um the top big dogs
because it it cascades, itdominoes down to the people who
are their vendors as well.
And a local accounting firmthat services small businesses
with revenues of five million toten million will still be
(14:09):
impacted.
Dan Hood (14:09):
Aaron Powell Some of it's, you know, we're already
seeing in California has somereporting around this.
Um it's easy to see thatbecoming a you know a a
state-based sort of mandate ifthe federal government isn't
doing it.
And at that point, thosereporting requirements are
definitely going to be forcompanies of all sizes.
So even if it's it may bedirect, right?
It won't maybe a directregulatory mandate as opposed to
sort of the indirect trickledown from a more federal level
(14:31):
sort of thing.
But it looks like, because thateveryone else in the world is
doing it, we'll probably end updoing it, which may be a little
behind everybody.
And if accountants don't do it,somebody else will.
KC Brothers (14:39):
Yeah.
Okay.
Anything else to add to thelist before we jump into my
three?
No, I think your list is prettygood.
First one I listed we'll justgo to PE funding.
Dan Hood (14:48):
PE is interesting.
This is one when you weretalking for an example of a
thing that faded away.
I was gonna uh give an example.
When I first joined in 1998, itwas sort of just the beginning
of um this period of where theyhad all these what they called
consolidators or roll-ups goingon, where companies,
non-accounting companies, weregoing all over the country,
buying up accounting firms,rolling them up into bigger
firms.
They made a bunch of biggerfirms, East Star Block was doing
(15:10):
it, American Express was doingit, um, a bunch of other people
were in the space, rolling upall these.
It was a frenzy, it's a crazyfrenzy, sort of the way the PE
frenzy of right now is.
That's when the actual, that'swhen the alternative practice
structure was created, the onethat PE firms now use when they
buy accounting firms to but wehave this agreement with the
others where we get to sit intheir offices and we get to use
their letterhead and we get touse their HR functions and we
(15:32):
get to use their secretaries andwe get to be part of their
health plans and all that sortof stuff.
And it's it's a little bit of aregulatory fig leaf, right?
I mean, it's still the same setof partners, it's still all the
same staff.
They're just for legalpurposes, they're a separate
thing.
Okay.
That was invented.
It's very common now becauseeveryone says, oh, yeah, when
you're all by P, you have tohave that.
But it was created or or firstreally rolled into the
accounting profession in 1999when they had all these
(15:53):
consolidators going on.
It was huge uproar.
I mean, just hundreds of firmswere acquired.
It was gonna change the face ofaccounting, it was gonna
completely up-end everything,everything was gonna be weird.
All these firms, no one wasgonna be a regular accounting
firm anymore.
And by about 2004, it was allgone.
Hundred percent all gone,except for uh UHY and CBIS were
the only sort of uh uhremainders of that.
(16:14):
Uh and C Biz both had uhalternative practice structures.
C C Biz eventually became apublic company, um, but those
are the only two firms wherethere was any impact.
By RSM, I think was still stillhad some issues, not issues,
still had some connections to HRBlock, but eventually the
partners of RSM bought backtheir firm for HR block and
became just RSM, just a regularold accounting firm.
And so by call it 2009, really,almost no trace of this
(16:40):
incredible, incredible wave ofchange that had come over the
profession in three or four orfive years.
Basically no remnants of itall, except like I said, the
sort of weird structure that UHYhad where they'd always say,
hey, we're an alternativepractice structure.
KC Brothers (16:55):
So then did partners buy back from the
private equity at that time, orwhat happened?
Dan Hood (16:59):
Yeah, it wasn't private equity.
It was mostly it was a weirdcombination.
Sometimes it was H and Rblocks, it was a public company,
and sometimes it was an Amex.
So uh it wasn't actuallyprivate equity, but they
operated very similarly, likethey were acquiring firms, and
the firms would occasionally dothe alternative practice
structure because they had tofor regulatory reasons.
But yeah, they basically justwent back to being accounting
firms.
Okay, and so when you when youlook at what's going on now with
(17:20):
the frenzy of private equityentering in, you sort of have to
ask, is this all just gonnahappen?
Right?
They come in, they spend a lotof money, and then they
discover, no, we're not, wedon't really know what's going
on here.
Um we're not making the moneywe want to make.
I don't think that's gonnahappen, but it is the sort of
thing you have to sort of lookback and go, well, there was
this time 20 years ago where wedid the same thing where
everyone was getting bought andthere was all these outside
players coming in.
It was gonna completely changethe face of accounting, and then
(17:42):
it didn't at all.
I mean, at all.
KC Brothers (17:47):
In the real world, when it came to them servicing
their clients, no one would haveknown that there was all of
this businessing happening onthe back end.
Dan Hood (17:56):
Yeah, exactly.
You wouldn't you wouldn't know,and the whole but the whole
goal was, right, for AmericanExpress and for HR Block was the
goal was like we'll have allthese accounting firms and we'll
be able to offer all of theseother services through
accounting firms.
KC Brothers (18:06):
And it just never quite panned out in terms of
like expanding their marketshare and and increasing their
bottom line.
What do you see the angle iswith PE?
What PE is a little Yeah.
Dan Hood (18:20):
It's a little simpler, right?
It's just they just want tomake money.
KC Brothers (18:22):
Right.
Dan Hood (18:23):
It's not they they just want to you know get some
of the profits from accountingfirms.
They think it's uh um a coupleof different things.
One, I think you see PE firmssaying this is a steady earner,
right?
The long-term model of PE hadalways been we buy 10 companies,
nine of them are badinvestments, but one of them
hits a is a home run, right?
And we pay for pay for theother nine with the home run.
That was sort of a standard.
(18:43):
I think what they started tosay is, well, how about we also
buy some companies that aremaybe not home runs, but also
pretty reliable earners, prettyeven in the worst of times,
pretty steady cash flow, even inthe worst of times, right?
There's sort of a good, if youhad throw a couple of those in
your portfolio, suddenly you'renot one winner and a bunch of
losers.
You're one winner, a couple ofsteady guys, and then some
losers, because that's gonnahappen.
But the other big element forthem is uh, and I think this is
(19:05):
probably a little bit bigger fora lot of PE firms, is the
notion that it's accounting as avery fragmented market, right?
It's a lot of relatively smallfirms, even when you talk
talking about the top 100 firms,they are relatively small
companies.
So there's a lot offragmentation, and I think they
look at that and say there's alot of opportunity to build
these, to put a lot of firmstogether and create bigger
organizations that have biggereconomies of scale and can do
(19:28):
all kind all the kinds of thingsthat larger companies could do
that a smaller company can't.
Uh when they put all thosetogether, that's something they
can sell.
Right.
When when three to five toseven years comes along and they
want to get their money back,they've got a much bigger
organization to sell.
They've rationalized it,they've put some resources into
it, uh, we hope, um, and built astronger, larger, more
resilient sort of accountingpractice that you can then sell
(19:50):
to another PR private equityfirm, sell to any other kind of
investor you can think ofbecause you've done a lot of the
cleanup work, put a lot ofextra resources into it, and
made it instead of having to buy10 separate accounting firms
with smaller revenues.
Yeah, one big accounting firmthat has a big regular stream of
revenue coming in.
KC Brothers (20:07):
Yeah.
Well, and then you layer on topof that all of the talk right
now around pricing strategies.
There are so many recommendedbest practices or ways to do it,
historical ways of doing itthat are being successful to
your point of like in the worstof times, they're still
profitable, they're still havingcash flow.
And then you also add on thedelta, the the chasm, the talent
(20:30):
crisis, the difference betweenthose entering the market and
and there being enoughaccountants to go around and the
need, the supply and demandthere.
Dan Hood (20:42):
Right.
And that's a that's a mucheasier problem.
One, uh, there's a there'sthat's a great point because
there's a ton of different waysthat impacts everything.
But one of the big ones is it'smuch easier if you're a larger
organization to manage thatcapacity those capacity issues,
right?
It's easier to have a big HRgroup, right?
You could hire you.
KC Brothers (20:58):
I'm not even thinking about it in terms of
capacity.
I'm thinking about it in termsof opportunity, in terms of
being tapped out of the market.
They're not.
There's plenty to go around.
There's no way there's going tobe stagnation because it's not
like accounting services areever going to not be needed,
even with AI.
And AI is just going to getfirms to be more efficient to
(21:21):
address the capacityconstraints, sure.
But looking through this fromPE's point of view, they see
that, okay, well, demand isoutpacing supply right now.
So huge opportunity.
And then there are already allof these conversations around
how to more strategically priceyour services to have a greater
(21:43):
revenue potential.
That that that really is justprime for investment.
Dan Hood (21:48):
Think about it.
If you're if you're pricing asbadly as a lot of accounting
firms are right now, you couldjust easily make a lot more
money.
Think what you could do if yourationalized your pricing and
got better at it.
It's with no extra work and noextra time, you just suddenly
are seeing a lot bigger returnon your on your client.
So yeah, absolutely.
It's one of those things withtechnology and accounting,
right?
There's there's we're we'recoming off a long period of time
that kind of started in thelate 80s, but really got it.
KC Brothers (22:11):
Um okay.
To wrap up, I can't believeit's 30 minutes already.
PSG, here to stay or will itdie?
I think your opinion was clear.
Yeah.
Yeah.
Dan Hood (22:21):
Yeah, here to stay.
Uh it and and sort of really awhisper now, but gonna be much
bigger.
KC Brothers (22:25):
Yeah, your prediction is it's gonna grow.
Prediction for AI, gonna grow,gonna die.
Dan Hood (22:30):
Oh, totally gonna grow.
KC Brothers (22:31):
I couldn't agree more.
PE, gonna grow, gonna die.
Dan Hood (22:34):
I I have no idea.
I am genuinely, I am torn onthis because like I said, I can
think back, it could be like the1990s, early 2000s.
I think it will probably, youknow, I'd probably it probably
what will happen is I don'tthink it'll be PE.
I think it'll become just thiswhole thing where accounting
firms can be, it can change thestructure of accounting firms so
that you can be anything youwant.
You don't have to be atraditional accounting firm.
You could be a PE backed firm,but you could also have venture
(22:55):
capital.
You could also be backed by,you know, a pension fund that
just wants the steady earningsuh and you just report to them
in a quiet way like that.
It's gonna open up, I think,this is my guess, is that it
will it won't be PE, it'll justbe this whole new range of
models for accounting firms.
So that when you look ataccounting firm, you have to
ask, so what kind of accountingfirm are you?
You know, how are youorganized?
Are you one person who workswith a lot of partner firms?
(23:17):
Are you uh, you know, you knowpart of a weird network of
independent firms that sharework with each other on a much
more serious basis than thecurrent networks do?
You know, there's just gonna beso many options.
Are you a partner, anaccounting firm that also has a
law firm into it, right?
We're seeing some of that inArizona and some big firms
getting in there.
Exactly.
You're gonna be part of are yougonna be an accounting firm
(23:37):
within a wealth manager?
Uh we've got a couple of bigaccounting firms that did that.
So yeah, I think we're that'sprobably what's gonna happen.
It won't be PE.
It'll be some different,greater range of options of
structure.
China we're okay.
KC Brothers (23:50):
Last fun one because you talked about cloud
hosting.
Is it gonna grow or is it gonnadie?
Dan Hood (23:54):
If it dies, and I don't know that it will, if it
dies, it will take a long time.
Because I think there's a lotof particularly smaller firms
that that rely on it don'tnecessarily have the the tech
savvy to to to take care ofeverything on their own or to
rely on a vendor or to figurethat out.
I think so.
Hosting will be around.
At least if it doesn't lastforever, it will last for a for
a while.
KC Brothers (24:12):
Okay.
Interesting prediction.
I don't get that one.
I as someone who's um grown hercareer in tech, I'm like, why?
It's all the cloud.
But like you just laid out uhfor the first little bit of our
conversation thatdie-heartedness with the
security elements.
And maybe it's just gonna,yeah, to your point, stick with
us a little longer.
Dan Hood (24:32):
Aaron Powell And there's a lot of firms, right?
But there's a lot of babyboomers who own firms still who
are like, do I really want tospend a lot of time making a
major technology revolution inmy firm?
Or do I just want to hang ontill I retire?
KC Brothers (24:44):
To that point, my prediction um is very vague, but
the next two or three years, Iam beyond excited for because of
that, because I we're gonna seeso much ownership transfer, I
think, in the next two or threeyears.
I don't think it'll take fiveto ten, where we will see the
people who have been averse tochange or who are like, no, I'm
(25:05):
holding on because I have anexit.
And I wonder too to what extentwe'll see that exit mentality
change because of PE, wherelike, hey, I can get um cash out
now, but still be in my career.
I don't have to wait forretirement.
I think that as a result, aspeople retire, people who have
maybe been anxious for the thestubborn boomers to leave will
(25:26):
then have this resurgence oftech adoption.
Dan Hood (25:30):
Yeah.
I think we're gonna find a lotmore people who are who were
anxious for the boomers to leavewho will say the heck with it.
I'm just gonna start my own.
KC Brothers (25:35):
Well, I think we're already seeing that.
Would you say that's a whisper,or do you think that's gained
traction is now a full on thething.
Dan Hood (25:40):
I think that's gaining traction for for probably
longer than we've thought.
I mean, I think that there'sbeen more.
But I think PE is is uhturbocharging a little bit
because there's people who arelike, I just don't want to work
for the PE firm, not necessarilyfor good reasons or bad
reasons, just they don't theyhave a bad, a bad impression of
it.
KC Brothers (25:54):
Yeah, I think that that is a whisper we probably
should have called out earliertoo, of just people starting
their own, because I thinkthey're whether they're coming
from big four and like I don'twant 80-hour work weeks, this
this kind of lifestyle, or ifthey're even coming from a
smaller boutique local firm withan older partner that might be
stagnant in their ways.
I just think the the barrier toentry for starting your own
(26:17):
effective firm is so low rightnow, to the extent that I have
even thought about it.
I'm like, I know I could be theoperations founder of an
accounting firm and just hire myaccounting talent.
Dan Hood (26:28):
Yeah, no, I would this, yeah, this is a weird,
this is uh it is the barriersare incredibly low, right?
You don't need you you don'tneed anything.
You can do it.
I wanted to jump on you talkedabout, you know, lifestyle.
I think that's one thing that'sthat's a little bit of a
whisper now, and I think it'sgonna become huge, is the notion
of people saying, well, I don'thave to run an accounting firm
that looks like every otheraccounting firm.
I can run an accounting firmthat just if I'm just making
(26:49):
enough for me, that's great.
Uh a little bit of a whispernow, but a lot more accountants
saying, no, I don't need to doall the work that comes my way.
I need to to make enough moneyto live comfortably and to to
offer opportunities to thepeople who work for me.
But I don't need to be, youknow, if I'm if we're all happy,
we don't need to do more workjust to do more work.
Um and I think that's gonna beit's gonna become much more
people are gonna get a lot morepermission to say that um and to
(27:10):
think that way.
KC Brothers (27:11):
I love that.
Dan Hood (27:13):
Which is which is gonna be much healthier for
everybody, right?
KC Brothers (27:15):
Uh yes, we need more healthy accountants.
They do such great work, and Iwould love to see their
happiness score go up and not beon the top list of depression
and we're here to help solvethat problem.
Give them good tech that canautomate things that they don't
need to do and get your timeback.
Go home at five.
Dan Hood (27:33):
Yeah.
KC Brothers (27:33):
Excellent.
Okay.
Well, thank you, Dan.
Dan Hood (27:35):
Cheers.
Thank you, Casey.
It was great.
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