Starting any new business, let alone an accounting firm, in the current economy is a challenge. But less than three years ago, following a stint at Denver-based CPA and business advisory firm Hein & Associates, that's just what W. Michael Hsu did - though he'd rather you didn't call DeepSky an accounting "firm."
Instead, Hsu views DeepSky as a virtual accounting department, providing outsourced client services such as invoicing, bookkeeping and business consulting.
"For me, I never saw myself as an accountant - I always wanted to be an entrepreneur and a businessman," revealed Hsu, who is a CPA. "You can't learn about being an entrepreneur in school, so at Hein I learned going into audits I wanted to explore different businesses and pick the model I liked. When I left to start this firm, I began with the consulting model, and slowly we developed a real message of being a single accounting department that businesses can leverage."
With the advent of mobile and cloud accounting products, more CPA firms are engaging in business process outsourcing functions, a trend on which DeepSky has patterned its operating strategy.
Hsu wants to show how new technologies - particularly cloud applications - meld with basic accounting services to create a new firm paradigm.
There are currently five members that make up DeepSky; three in Irvine, Calif., and two back-office personnel in Detroit. The average age of its staff is 28, and all carry non-traditional CPA firm titles, such as Accounting Ninja, Chief Number Cruncher, and Customer Experience Advocate.
In fact, two of the five DeepSky staff are still in school, one of whom - accounting ninja Mark Bayya - is taking the CPA Exam.
All of them adhere to DeepSky's virtual services model for serving growing companies, a void that Hsu feels has not been filled by traditional firms.
"The current state of accounting is a bit broken. I think [accountants] lost sight of what accounting is really for. We forget we can communicate value and knowledge, and get stuck in the idea of selling a commodity," said Hsu. "Accounting isn't just a cost center; accountants can get caught up in providing better financial statements or compete on price. The DeepSky vision is that accounting was created to serve entrepreneurs. We sell knowledge and use technology to help deliver service."
WALKING THE WALK
In terms of technology, the vast majority of the firm's functions are cloud-based, mobile and paperless. Though the firm itself is headquartered in Irvine, Calif., with other associates in Detroit - where there is no physical office - they can conduct their work from wherever they or their clients happen to be at any given time.
DeepSky utilizes an online accounting solution for invoicing, billing, accounts payable, bank reconciliation and bookkeeping work. For clients with more than 2 million customers, it utilizes hosted QuickBooks.
Each DeepSky member is equipped with a Mac and a smartphone, and any paper the firm receives is quickly scanned. The practice operates on an online project management and collaboration application.
Hsu and his team realize that there are clear challenges to offering fully Web-based services, as well as to its overall business philosophy. The firm has been selective about its client base, so much so that earlier this year it fired the majority of its clients and is in the process of rebuilding.
Hsu attributed the mass dismissal to deploying the wrong pricing models and differences in philosophy with existing clients. "I realized that we have been doing it all wrong, so we are in the middle of restructuring right now; we want to have the right customers for us," said Hsu. "When I started this, I didn't want to do hourly pricing, so I came up with a fixed-price model, but didn't know how really to price and I was still guessing on hours and perceived profits and that wasn't right. I also realized many of our clients were not in line with what we believed in and not helping us grow. So we let them go."
At press time, the firm had just over half a dozen clients, all of whom, Hsu said, were very committed to his practice, and more clients are currently in the pipeline. Aiding the transition, and handling clients going forward, is customer experience advocate Rachel Clark - who helps ensure that clients are all properly serviced. Though still in school and not an accountant, Clark believes she is up to the task.
"When I first got the job, it was more administrative, so I did a lot of different things, but I think this is the most important job," said Clark. "I went to school for accounting, but I'm more about outreach. The most challenging part of my job is the onboarding process and educating customers on how we do things."
Hsu realizes that his firm has a long road ahead, but is confident he has the right formula for success as he sees more companies needing virtual accounting departments. He said that DeepSky can serve any variety of business that fits under that definition, but the firm's ideal clients are service-based business that generate between $1 million and $10 million in revenue.
As for marketing, DeepSky has a social media presence, utilizing Twitter, Facebook and blogs, as well as being present at conferences and trade shows.
"I see having an outsourced accounting department as the future, and people are finding us for this purpose. We don't replace CPA firms, but we replace in-house accounting departments," said Hsu. "Entrepreneurs usually do their own [books] to start, then they hire and hire and hire. Our vision is to eliminate all of that and have us help build their companies. We show them they have a choice."
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