Patrick dictor thank you for joining me today on acquiring minds Patrick you were a guest on acquiring minds early last year I interviewed you in February 2022 so 10 or 11 months ago you had recently acquired a bookkeeping business apple tree and we talked about your search why you wanted to buy a business why you wanted to buy a bookkeeping business in particular and how you ultimately found and acquired Apple trade now you are more CEO than Searcher so I wanted to have you back on to hear how things have gone in your first year start us off Patrick though with a couple of minutes just on your background and refresh people's memory on your your acquisition of apple tree well thanks for having me on um I love the Pod I love hearing these stories um they're inspirational and educational to all of us so my my bio um I'm not an accountant by trade um I got my undergrad in MBA and I spent seven years at a digital marketing company in a sales leadership role and loved working with our small business clients and then I spent three years in a small business advisory and coaching firm and we're constantly referring out bookkeeping and I just saw how transformational it was for the clients to really have improved bookkeeping and ultimately I went looking for a business to acquire and I I closed on Apple Tree Business services at the end of 2021 and so I'm about 13 months into owning it um and um really enjoy it and we've done a couple more Acquisitions since then so that's my my quick bio great awesome and uh how big was Apple Tree when you acquired it uh 1.2 million Top Line and 330 000 sde perfect well first question for you Patrick just broadly how do you feel about this path uh of acquisition entrepreneurship that to you know to buy a business and become a business owner you were um it's all very abstracted but now you're a year into it uh tell tell the audience what it feels like and how you reflect back on the decision to to go this way I'm I'm so grateful that I did it and um you know I was joking with my wife the other night that I'm I'm so happy for this path and you know just it's been a ton of work but just seeing where the farm is at now and in this season of life I think it's the right move you know I'm working more than I ever have but um for for good reason and for good upside um and uh I don't have any regret so really happy about it beautiful okay and as you said about 13 months into actual ownership is there any like just Top Line learning or two from the last year really about anything about search about being a CEO about small business life anything that you would want to share to somebody contemplating this path yeah I think for any Searcher um what I would tell them is you know it's such a roller coaster before you close and you just you have to hang in there work the process you have to just look at a ton of deals I'm very grateful for the firm that I bought it was really well run and we have a really solid team and um you know there were some there were some businesses where I I probably would have given you a lot different answer if I would have closed on them you know they were just they would have been a lot harder to um to grow or to scale um or to you know frankly like live off of um so for Searchers I would say hang in there commit to the process and just know that like you'll figure things out sequentially right like I see so many Searchers where I think they get things out of order you know they look at a Sim and they're already trying to like do due diligence before they've talked to an owner talk to the owner move the deal along you know have a second call have the LOI figure out the legal later like hire an attorney right like figure out the SBA financing later right like I have a lot of people that you know I feel like they just they look at step 12 before they figure out step two and three um and the analogy I always tell everyone so Moses Kagan on Twitter he's a real estate guy yeah but he talks about like if you look at enough deals when a good one comes across it's like seeing the Matrix like you'll you'll know that it's different and you'll move fast and I I think that's the number one thing that a Searcher can do is like you just have to look at a ton of deals and when a good one comes it'll jump out of you and you got it you gotta pause I do I do like that advice it sounds like a rather magical experience what I what I don't like about that is that advice is that if I if what what if I see a really great deal and it's just my first second or third business that I'm looking at you know I'm not going to have the confidence if I really internalize this advice to move on it because I'm going to say well I I just can't be smart enough yet to make this call and maybe the answer is you're probably not like don't let yourself buy the first second or third no matter how good it looks because you probably aren't smart enough what do you say that yeah chances are very unlikely that your first couple ones are going to be good but you know if it does feel like a good one maybe you you know compare that to another four or five and see if it really does rise above yeah you just said uh a second ago that you know you feel very fortunate to have acquired apple tree um because you got a really quality business which is of course the name of the game is it good in all the ways that you thought pre-close or has had there been surprises that you just got lucky with um no the things I thought pretty close was like okay this has really good recurring Revenue you know there's a good team in place the owner isn't you know managing all the clients himself um and all those things have turned out to be true um there's definitely been a ton of challenges and a lot of like you know kind of like speed bumps right and like some small skeletons in the closet but not not big ones um but those initial things that made me feel good about it have all been true great okay well uh let's talk about what any numbers behind this past year what is what does it look like it was 1.2 million in sales when you acquired it uh where are you today at the end of 2022 or yeah 2023 yeah we finished up around 2 million in Revenue um so we grew about 60 Top Line um we're on pays for I don't know three three point five in 2023 um if we didn't inquire anyone else so um Team size was 12 team members that close in and now we're probably 22 team members and Patrick I know that you've made two Acquisitions this year which we're going to get into here in just a sec is that Revenue growth due to those Acquisitions or is it in the is it in the the original Apple Tree just organic growth through apple tree a few things you know those closed later in the year so not a lot of that is from those um we raise prices in July so that that helped a little bit we've had organic growth so it's kind of the combination of those three things raising prices organic growth and then these other acquisitions well so the raising of prices is is not something that you can do every year um so do you think but you're talking about a lot of growth this coming year as well and I don't anticipate that you'll raise prices again no actually oh and just kind of along with inflation sort of thing or okay okay um so and so I guess part of the the Top Line growth then is also just keeping Pace with inflation so we'd a little bit of that but well I mean I'm just that 60 number is pretty huge Patrick I mean this is not this is not typically seen in small business you know small business is slow and steady 60 growth a year is is not slow and steady that's a ton of growth so you must be psyched and is there any so it's I I guess I'm just trying to draw you out a little bit on that that's a very impressive number is are you as kind of pleased and surprised by it as I am I I am pleased it's better than I thought we would do um you know my my goal from the start was to sell one or two new clients per month and we've we've averaged four so um some of that was just from like low hanging fruit with marketing some of it was like I'm I'm just better at sales than the previous owner I don't know how to say that um that's my that's my background um and the other thing was I made a big investment in a person dedicated to just onboarding because previously onboarding the new bookkeeping tax client is a ton of work it's like four or five times the work of a monthly process and so I made a big investment to hire somebody just for that and she's a rock star so that kind of like opened up a lot more growth and then um you know previous owner only sold in a couple States in New England and you know after I looked really hard at that I decided to sell Nationwide so that opened up the funnel um and then you know my personal Network and um some inbound from Twitter has helped with new clients as well well you do a great job of getting your name out there on LinkedIn on Twitter uh and and that bears fruit in terms of new clients mm-hmm yeah and I I think one thing that's been surprising you know is like um so many people don't like their accountant you know there's a lot of demand out there that if if you do a half decent job with marketing you're going to get leads it's a matter of like are they the good leads that you want and like are you appropriately staffed to be able to take them on because there's so many accountants retiring from the industry and less students coming in and you know not many people love their account because they're just notoriously like overworked and like not very communicative so um the amount of demand that's out there has been has been surprising to me so I'm not like some sort of like sales marketing genius I you know I picked an industry that you know is like is uh is an easy one to pick up new clients in yeah yeah and do you find that most of your clients are coming from unhappy experiences or are some of your clients using bookkeeping and accounting services for the first time in apple tree it's a little of both so you have some people who you know were frustrated by account with a similar scope and they're moving to us and then there's some people who have said you know I used to only have somebody do taxes once a year and now I'm ready for like a more full-fledged bookkeeping Tax Service right or you know we have some of these Searchers who are buying a business you know so you're picking up a new client that really needs like the full Suite of services well and so you picked an industry with great um Tailwinds uh so that's you know that's rule number one and maybe good Tail wins for demand terrible Tailwinds for talent you know well and so let's so I want to dive into the business itself so you you were very um thesis driven you you know you had this experience that cultivate was what was when we were employers you'd spent years there three years I think Consulting small businesses and one of the things that you saw again and again and again was that like many small businesses their books were a mess and you just you really can't pull any levers well with it with with dirty books so it was just it was super valuable for all these clients to have clean books and just so you just saw the value bookkeeping and that was kind of what what piqued your interest in bookkeeping um and so now that you've actually been in the industry and this is no longer kind of an abstract thesis or Theory um how do you feel about the business we've touched on two things lots of demand but but challenged in terms of supply of people going into this industry as as practitioners talk to me about that what's that about there's just like just like in the trades there's just like fewer people all the time or what yes there's there's just less I think some people say that the student that might have gone into accounting a lot of those are going into software and Tech that kind of like detail-oriented like math bent you know type of student is going into writing code um there's heavy burnout so even people that aren't at retirement age want to leave the industry those are the two factors like people leaving the industry who aren't at a retirement age and and um less students coming into the game so on the one hand that's bad news for you because it makes hiring that much harder on the other hand it means that prices for your services are going to go up over the next five and ten years like is it a net positive that basically it means that your services are going to becoming scarcer and therefore you'll be able to charge more over time yeah I'm kind of an optimist so I'll look at it that way and I also think like I um I'm I'm gonna figure out recruiting and I'm gonna apply my sales skills to recruiting whereas other people won't you know so I'll I'll be able to recruit so I'll solve it so all in all like I'm excited about that and I'll figure it out um one thing that I thought pre-close that's changed is I thought it'd be really easy to Offshore and I don't I don't feel that way anymore I do think that's inevitable like you most firms need to be doing some sort of offshoring eventually or you can do the low-level skills there but what I've definitely learned is just how complex accounting is and um all the intricacies of the way U.S companies work the way different states work or the way tax code is like you you can't just offshore quickly one of the big themes in your in our first interview was that you are not an accountant CPA yourself and how that was a big hurdle to finding a business to buy there are I guess a handful of Brokers business brokers in the accounting Financial Services world and they all kind of stonewalled you uh they wouldn't they wouldn't send you deals because because you didn't have the credential that they looked for um but you made it you made it work for yourself doing proprietary Outreach by the way people should really go back and listen to your first episode it was an awesome one on many levels um now that you're in the business was it a problem that you didn't know you know that you don't come from any accounting background or bookkeeping background for question one question two how educated have you gotten on the actual what your business does I I definitely think it was a helpful one that I couldn't bring bias to it I had to slow down and listen um I maybe brought some fresh perspective in um you know I think now I'm well versed in the fundamentals of bookkeeping and managerial accounting tax I'm just I'm very novice there you know there's still just there's still so much complexity to tax um I'm you know trying to learn that all the time so we have a great team you know and I I lean on them a lot and the previous seller has been great in the transition um where it it still bites me sometimes as I I do our sales so like if I don't scope something properly or I don't understand a Nuance um then our team is kind of like hey you know like this is much more of a bear than you let on so um that's definitely something that I I need to work on and continue to educate myself on is tax intricacies and was that at all a source of um tension between you and the team that you're not one of them there is tension when I am trying to lead change or bring on new clients and they're like hey I don't think you under understand like how hard this is to work with new clients or this isn't a good time to do those things you know so we've had we've had shitty conflict you know around those things um or working through it I think um but that's come up where they're like dude leave us alone you have no idea what this is like from you know December to April one of the other things that we talked about in your first interview was the you were initially looking for Pure bookkeeping and you you didn't want to buy a firm that was doing tax work uh you kind of loosened that criteria um you saw apple tree and talking to the owner of Apple Tree the business that you now bought that you now own um gave you some comfort that it would be fine now talking to a year later I hear you mention tax work a lot so has It ultimately become some a big part of of the business or what breakdown the kind of the relative percentages of strict bookkeeping and tax work yeah I'm definitely grateful that I did buy a firm that includes tax um tax now is probably 30 to 40 percent of our Revenue um but the reason I like that we do taxes because um on the client delivery side even if you're doing bookkeeping you're going to get pulled into tax related questions and conversations as tax planning comes up or depreciation comes up or you know year-end changes are made um the other reason I'm grateful that we do tax is because I think a lot of clients want that One-Stop shop that does their bookkeeping and their tax and tax usually leads new clients in the door more than anything and then we pick up the bookkeeping as they come in so I'm I'm grateful you know that that's part of our service mix um yeah and if you were talking to a Searcher who's interested in this industry is there kind of a sweet spot that you tell them to look like a tax firm with bookkeeping or bookkeeping firm with tax or what would you say now being on the other side of this since my first episode with you have probably had 50 calls with people who really after that episode um the thing that I always tell them I'm like okay imagine two firms one is modern it's only 700k in revenue and it's 150k at Ste there's another one that's a little bit more old school and it's like three million Top Line and like 800k sde most search books and everything would tell you to buy the bigger firm with 800k sde and I tell them buy the smaller modern one every damn day of the week because like if you fast forward two years that that modern small firm will be in a much better spot than the the big firm um so I tell them to look for like recurring billing you know cloud-based you know bookkeeping you know if you can or bookkeeping and taxes a bundle um versus like you know picking up most of your Revenue just during the tax season or bookkeeping being an afterthought you know that's just like it's it's um it's so painful to try to change a firm like that um that you know you want recurring revenue and you want modern tech focused accounting well well that was going to be my follow-up question it's like is is the opportunity not to buy a larger firm and retrofit it or I guess sorry for the vulgarity stay the away like it's just it's not worth it okay there's like three layers of change management you have staff Behavior you have client behavior and you have technology and it's just brutal to try to take like all those on and and change it over okay that's okay like you know apple tree when I bought it was probably like a seven out of ten modern and to get it to like an 8.5 has been really hard and if you were to try to take like an old school firm that's like a three out of ten modern and like bring it to a nine like good luck forget it yeah okay all right listen listen to the man here audience um one of the things that you had um envisioned what your kind of your vision was was doing something of a roll up I think I heard you on David Barnett say like you you the sweaty the sweaty startup the Nick Huber of accounting firms yeah and then now that seems hopelessly naive and you swore in fact that you wouldn't do any more Acquisitions though you have and work here you tell us why but but what was it um that you were naive about and why is this why is that was that initial Vision did it turn out to be impossible well it's just back on how hard change management is after your first one if you're going to do Roll-Ups you have to be really intentional that the client profile is similar the tech stack is similar the pricing is similar right so like at apple tree we use QuickBooks Online for bookkeeping we use ultra tax for tax our clients are billed monthly our team is paid on a percentage of the production that they do like those are very those are just core tenets of the way the business runs and if I were to try to acquire something that was tax only and the bookkeeping they did do was on zero and no clients had monthly billing and like all the team is on hourly or salary like those those are just so incongruent that trying to get any type of synergy um is going to be difficult and accounts don't like change you know so like if you're coming in acquiring a firm and you're trying to tell them that like we're going to change our billing and your chain your pay is going to change you got to learn different software like people that are already like overworked it's it's just it's a tough it'll decline you know so um the reason I did end up doing these other Acquisitions is because they really one of them was identical to our type of firm um and then the other one was like you know 80 percent match and like really modern profitable firm um but otherwise I just think like you know you can't do the massive roll-up thing in accounting you'll churn staff and you'll churn clients it should the the integration piece just doesn't work yeah yeah the um in these two Acquisitions so let's let's hear briefly what happened there did they just come across your desk or did you are you kind of still out there searching a little bit so the smaller one was about 150k in Revenue um was in our association and they that owner came to me um he said you know like why don't I merge with you so that these clients have a home if I do retire um so that went pretty well um and then the other one you know I was just poking around on these sites where accounting firms are listed and I saw one that was listed for sale by owner and you know it was like very different you know red like recurring Billy and also had CFO Services um had a very strong Niche everything was cloud-based you know so I reached out to them I didn't hear back emailed again didn't hear back and I saw his base in Denver I was like hey I'm gonna be in town let's get on a call and um finally got them on a phone call and um it just felt like it really could fit from the start so that's one came to me and then the other one I found online oh there's your your um sales Acumen at work there Patrick most people wouldn't have followed up that first email but you made it happen and closed that's awesome yeah thanks um you you talk about your goal being five million dollars in Revenue in five years so last year when you bought it was 1.2 you grow to you grew to two you said I think you said this year expect to get to over three did I was that right yes so you so you're on track to hit that five million dollar number and that assumes no additional acquisitions right right so if yeah we're on Pace to hit the goal or maybe a little bit ahead of schedule and especially if we did Acquisitions we 'd really be had a schedule and um let's actually talk about Acquisitions versus organic growth so um episode that aired last week about um uh Logan and Bradley and Austin who acquired a landscaping business and um thought that they were just going to grow through acquisition and then ultimately found that organic growth meaning just growing through sales was a much better dollar for dollar way to do so do you have any thoughts there yeah I think um acquisition is just more expensive you know um I do think it can make sense that like it'll catapult you forward and you can get really good um cash flow from it but if you were to just compare like you know our average client Pages 10 to 15 000 per year and my acquisition cost from organic growth is like you know 10 of that Revenue but if if I were to go acquire that I'm going to pay one times that annual revenue or 1.2 or 1.3 times so you're you're paying a lot more um yeah but again like it'll it'll just take your firm to the next level if you if you do it well it really depends on your goal right like if if my goal is just to like grow as fast as I can and sell in a few years like yeah I'd do more Acquisitions but my goal is to really like hold this company for a while and like optimize for like a platform and for cash flow so it's different on that point just a few more questions here Patrick before we wrap on that point about optimizing for kind of a platform um you know I think I think you entertain the the the fantasy of kind of the holds Co right yeah um so so payroll and accounting won't be the last place that you're buying businesses in your career is is um but starting there with that platform business and have developing all these relationships with these clients across all these different Industries is this industry buying a business in this industry and making bookkeeping your platform business do you think that that's a good way to kind of open yourself up to other Acquisitions in other Industries when the time comes we're talking five years from now yes totally and that was that was part of my original thought I just didn't want to say it you know because the whole go thing is overdone or you know it's like I wanted to be the guy that like goes and executes first um but I've already seen it you know clients say like yeah I think we want to sell someday but we don't know what that looks like right or um usually you're the first person to find out that they want to sell right so I I do think it's a great strategy to really like get those relationships going and you know get Insider information and get potentially deal flow you know um one of the things I also heard you say also on the David and David's podcast is was about how another kind of angle to your acquisition of bookkeeping was that you would um cross sell consulting services that you also just kind of offer and that actually hasn't panned out as well as you thought and what struck me is like we can often in business like have this idea about how how the Synergy that we you know that we imagine so you know you buy bookkeeping and you know you'll be able to convert a lot of them into your existing consulting services and and it'll it'll be beautiful um and and it kind of hasn't panned out uh as I heard you say and then and I just so I kind of want to just kind of make the same point about the hold code thing he pretty much already answered it but like nice in theory you know you have all these bookkeeping clients across all these industries across the country um you know it's going to just fill your pipeline with future Acquisitions but like probably in practice doesn't work that way but but what I'm hearing is in fact you think now that you really are inside the business and see these relationships that actually in fact that theory could really manifest itself in practice yeah yeah I think so I mean whether it's like whether it's worth it at that time is like tpd right so if I'm making a good amount of money it's like okay do I go through all this effort again in this like really time intensive thing or do I just invest in real estate and equities and call it a day you know yeah so yeah fair enough um okay the uh two more questions for you here um Patrick first uh you bought a business that had three hundred thirty thousand dollars in Ste so that's kind of buying small um and a lot of people would say no you gotta buy you know buy larger buy 750 buy a million dollars in ebitda um it comes up over and over again on the Pod now that you're in it uh and you've you've grown in you know you're on your way to growing into that sde do you have any uh thoughts on that advice that that you hear so much about buying big my singular goal is to just prove the search Investment Group guys wrong you know so every time they tweet just tag me and say well this guy you know I'm kidding um I I bought smaller uh for a couple reasons and I don't think it works for everyone I bought smaller because I wanted to retain 100 ownership I didn't want to take outside investors um I also knew that I had an unfair Advantage like I could come in and do billable Consulting work that would cover that service or cover um you know growth I don't think many people can do that right if you go buy a plumbing company you can't say like oh I was an investment banker and like let me drive new Revenue all of a sudden through the business right like so I kind of had a unique Advantage there I think the other reality is like there's not that many like accounting firms that come up for sale that you're going to be able to get as a Searcher like if they are five six hundred a million dollars in ebitda like private equity and Regional firms are going to beat you every day of the week you know unless you're just paying some outrageous multiple right unless you're paying like seven or eight X like you're just not going to be able to close on those so um I was just betting on my ability to you know have a competitive Advantage post close mm-hmm great and then lastly Patrick uh looking back on your transition so when we spoke the first time you were kind of right in the middle of your transition you were very freshly in the seat um do you look back on that time that transition period and is there anything that you would have done differently did you do something wrong the one thing I wish I wish it would have closed sooner so we closed December 31st and I wanted to close November first so it would have given me you know another 60 days before busy season I didn't have that but it is what it is you know so I closed and then went right into busy season so we like I don't have much time to really learn the ropes yeah we were understaffed and you know the culture was very much like you don't do anything new you don't hire people until May 1st like so it would have just given me more time to like try to hire or like work on stuff before a busy season but here we are okay anything that we didn't touch on Patrick that you want to share with with Searchers out there no I I love this community you know so like if you're in a search stick with it reach out to people um I'm happy to chat with people and um it's worth it great great what's the best way to reach you yeah I'm on Twitter so Patrick Victor um I'm on LinkedIn and you know you can find our business if you need accounting services appletreebusiness.com is the URL and um that's about it cool well all that will be linked to in the show notes Patrick thanks for coming back on really uh congratulations on obviously not only the acquisition but what you've done in the 13 months since sounds like you are um just I hate to use the phrase but sounds like you're kind of crushing it so thanks well we'll see I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business