2015 Client Letter

Written Jan 20, 2015 by Nth Degree CPAs

Dear Nth Degree Clients:

I often like to muse to friends, family and Nth Degree’ers about how the lynchpin for starting Nth Degree CPAs was to create a firm that’s deeply rooted in its relationship with clients, staff and business partners. In my opinion, the bedrock of any solid relationship is open communication and transparency. So, with that, I am writing you my first annual CEO report with the goal of providing open and transparent communication. Before I delve into more intimate details about our firm, I need to address a few block-and-tackling type things.

Changes. Did I get your attention? Most don’t care for that word. As context, our business is time and expertise: We provide accounting, tax and finance expertise and we do that by selling our time. Over the years, we’ve experimented with different ways of “selling our time.” We’ve tried hourly, hourly with an upfront payment, fixed-fee with an upfront payment and hourly with a minimum. We’ve also tried different upfront payment amounts such as 50% of the expected fees or flat amounts like $350 or $500. In every tweak of the model, our goal is the same: make it easy and fair for both parties. As a result of these experimentations, however, we have clients on different billing models and as a result it makes billing unnecessarily confusing for many clients. We always tell clients: simple is better. So, while it’s scary to change, because any time you change the way you bill clients you risk offending someone, we realize we have to take our own medicine and put a stake in the ground. Here’s what that stake looks like and you’ll see it reflected on your engagement letter:

  1. Elimination of fixed fees;
  2. Standardized upfront payment amounts regardless of total expected cost; and,
  3. Establishment of one standardized engagement letter for the year to cover nearly all services you may require, rather than the continual issuance of new letters for work

As you read the above, your first reaction, if you’re someone that was on a fixed fee arrangement, might be: “well, crap, now they’re going to charge me more.” I can assure you that’s not our intent. Rather, what we’ve learned with the fixed fee arrangement is that 90 percent of the time one party is losing. What I mean by this is: sometimes we earn more than we should, given the actual hours worked, and sometimes we earn less. So, here’s what you can expect from us in 2015:

  1. Monthly statements if any work was performed so you know how much time we’ve incurred and the associated cost;
  2. Your original fixed fee quote was based on current rates and expected hours, so your total bill should not change materially unless:
    1. Your situation has changed materially since the prior year;
    2. We have to follow-up often to obtain information; and/or,
    3. The information we obtain is inaccurate resulting in the re-preparation of your return
  3. In any of the above situations, we would let you know at any time if it appears the total time would exceed prior year fees

I hope that over the years we’ve earned your trust so that you can expect we will hold to the above and, I’d suggest, if not we are not worthy of serving you and we owe you a sincere apology. Regardless of whether you’re concerned or not, I always invite you to call me.

Now that I’ve addressed the more operational piece, I’d like to delve into the things that really get me fired up on a day-to-day basis. For me, our guiding-star are the following 3 firm goals (in no specific order of priority as they are all intertwined):

  1. To be the best local CPA firm that supports closely held businesses and individuals based in Western Washington.
  2. Foster a culture that elevates every Nth Degree employee’s career while remaining supportive of personal aspirations such that they always feel like a member of the Nth Degree family.
  3. To reach 15 full-time equivalent staff

Nth Degree has a goal that we generally refer to as “being the best,” which we continually strive to achieve, and I feel we made great progress towards the continual pursuit in 2014. We started the year off with a bang as Nolan Bradbury, our Accounting Services Director, accepted my offer to become a Shareholder of Nth Degree and assume the corporate title of COO. We made significant monetary investments including moving our office and upgrading our network infrastructure to better serve you. We hired Jason Hedlund to lead our tax practice, we developed an internal playbook to grow our staff and watched Chet Syverson and Mandy Rubeor pass the CPA exam. Near the end of the year, we acquired another firm’s book of clients that’s complementary to our practice and gives us some scale to give the staff aspirational goals. The acquiring firms owner will serve in an advisor role for the foreseeable future and provides us with 40-years of valuable insights. We also added 4 stellar winter interns: Marissa Chu (law student at SeattleU), Zach Trahan (accounting student at SeattleU), Gordon Burgess (accounting student at WSU) and Maggie Yang (accounting student at UW). I’m bias when I talk about “my kids” but this interns are world-class and any firm would be lucky to have them on their team. “Being the best” however is goal that requires constant and consistent pursuit. This isn’t a goal we can fall into and the #1 thing we require is the feedback of our clients. Really, you are the ones to decide if we are the best. And, therefore, that is why in 2015 we will:

  1. Launch formal client surveys;
  2. Expand our blog posts to offer you an opportunity to provide feedback;
  3. Launch brown bag educational opportunities, also offering you an opportunity to provide feedback

Regarding our second goal, it all starts with getting the right people on the team. If I’m being entirely honest, this is the hardest goal to me. In 2013, we completely overhauled our hiring process to make it conform with our relationship-first focus. This means we spend A LOT more time with candidates before hiring and spending a lot of time exploring what ultimately motivates them. We look for the following characteristics:

  1. Humility – this includes self-awareness and openness to multiple perspectives.
  2. High-ceiling – someone who is a consistent pursuer of knowledge and personal betterment
  3. Personal Accountability – this is someone who asks questions like “What can I do to contribute?”
  4. Loyalty – equal loyalty to oneself, their team, their family/friends and clients

In 2015, we seek to consistently execute on something we call the “Nth Degree Employee Blueprint.” It’s too detailed to outline here but in short it’s based on the notion of being consistent across a wide variety of areas.

Regarding our third goal, your reaction might be: why so specific about headcount? In short, we want to grow because we believe it’s necessary to retain the top talent we’ve worked so hard to obtain the last 5 years. Our plan is to get to 15 and reassess. This goal is also the least ambiguous. We do this by growing our client base and/or expanding our service offering. We have a number of ways that we plan to do this: acquisition of other firms and more traditional business development activities. Ultimately, we believe that we need to do best by our clients at every touch point and the rest will take care of itself.

With that, I’ll wrap up this rather detailed email. I hope it’s helped achieve the goal I set out in the beginning which is to establish an open and transparent dialogue. Please do not hesitate to reach out to me at any time.

Regards,

Dan Nicholson, CPA, CGMA
Nth Degree CPAs, PLLC