W. Michael Hsu isn't a bit bothered that some people see him as the "new, obnoxious kid on the block" who doesn't know what he's talking about. He knows better. And so do his clients.
Michael is an ambitious entrepreneur who just happens to be a CPA. He's also part of a movement I call "the new accounting." This article is the final in a series profiling the movement and several of its adherents. (See the other articles in our September issue on page 52, and in our August issue on page 38). While their practices and focus are diverse, they are generally:
- Highly entrepreneurial;
- Young and diverse;
- Open to new business models and pricing structures; and,
- Willing to cast off traditional approaches not considered relevant or productive.
Born and raised on Taiwan, Michael came to the U.S. at age 10. By 15 it became clear that he had inherited his father's entrepreneurial nature. That was the summer Michael set his sights on a new Honda and went to work selling computers to earn the needed funds. He was so successful that within a year or two he bought a Cadillac, instead!
Encouraged by his mom, though wary of the "nerd" tag, Michael earned an accounting degree from UC Santa Barbara and a Masters in Accounting from Walsh College. He went on to become a CPA. Less than two years after joining a firm, however, he walked into the partner's office and quit, explaining that he simply "didn't like it."
He still doesn't, at least not the way public accounting is traditionally practiced. Michael imagined accounting as the "language of business," a means to help guide business owners toward success. But he found the practice "a bunch of tick marks and historical reporting that didn't add value."
DeepSky, the California firm he founded after some startup partnerships, bucks tradition in numerous ways. Michael, who laughingly acknowledges that he's only prepared one tax return in his life, describes the firm as "the entrepreneur's accounting department." DeepSky helps entrepreneurs understand the numbers that tell their stories, use those numbers to gauge success and, ultimately, grow their businesses. DeepSky does not do tax work or GAAP cash flow statements, and does not actually identify itself as a CPA firm.
One of the key differentiators is DeepSky's focus on product management, the body of knowledge that results in consistently bringing shiny new offerings to market. I'm quite impressed with Michael's knowledge of product management, which is more common in service and retail industries than in accounting services. It's the last frontier of growth, as yet unconquered by most firms.
Michael and his team work with clients to build an accounting infrastructure and customized products to meet identified needs. Using a combination of experts, processes and technology, they offer services including:
- Design/build; and,
- Management accounting and controller services.
The menu is limited by design; Michael rejects the idea that an accounting firm should be all things to all clients. This is the cornerstone of a specialist strategy, which is so relevant in a mature, competitive market. Like other accounting entrepreneurs, Michael believes in sharing with and outsourcing to other specialists, including CPA firms, for recurring compliance and tax strategy services.
I see much more of this approach in our future. Rather than butting heads with hoards of competitors, I believe we'll witness much more collaboration and connection as we morph into a specialist-based profession.
Michael does not think that every solution has to be a masterpiece honed to perfection. His strategy is to figure out what a client needs and collaborate on a scalable solution that can be efficiently implemented. I call this an "app-based" approach to innovation. No need for billions of lines of code and months of waiting for a new innovation, which may not even hit the mark.
Like other new accounting practitioners, DeepSky has established a non-traditional billing structure. Its "Agreed Pricing" strategy promises "no guesses, no estimates, no hourly billings." Also typical of innovative firms, DeepSky relies heavily on technology and cloud-based applications. Most clients come through the Internet. The firm's Web site, DeepSky.co, serves as a platform for thought leadership as well as a source of firm information.
Michael does not see high tech replacing high touch, however. Today he has a sizable client ($150,000 in annual earnings) whom he did not meet in person until two years into the engagement. He is convinced that the relationship could have been even more productive had the parties connected earlier across the table.
FUTURE LOOKS BRIGHT
DeepSky has carved out a promising niche among entrepreneurial service businesses (primarily digital design and law) in major metropolitan areas including New York, Los Angeles, San Francisco and Washington, D.C. The client is typically the CEO, with whom DeepSky forges a personal and productive relationship. Through a process of deliberate growth, Michael has targeted 200 clients and $10 million in earnings within five years.
Michael is aware that many traditional CPAs find his business model confusing or downright weird, and that's perfectly all right with him. At just 30 years old, he knows that his young, non-traditional company might not be taken seriously by many old-timers in the business. But for Michael and other innovators, the fresh perspective they bring is the very basis of their value proposition.
Michael has lots of runway in front of him. It's thrilling to see such entrepreneurial energy behind an entirely new business with a focus on product management.
TIME WILL TELL
After completing this series on the new accounting, I'm convinced that it will have a significant impact on our profession, which will reveal itself over time. In the meantime, I'll offer a few observations.
First, technology has traditionally powered back-room operations. But now with social media and cloud-related solutions, technology has moved from the back room to the epicenter of growth strategy. The three innovators featured in this series -- Jody Padar, Jason Blumer and Michael Hsu -- are leveraging technology in diverse ways. But their common denominator is a single, seamless approach to growth and service delivery. One can barely detect the end of one and the beginning of the other in their philosophy and communications.
Second, technology is not only changing the way we execute the work with clients, but is dramatically changing the way we communicate. With access to Skype, GoToMeeting and other digital tools, we are "laying our hands" on fewer documents and fewer clients.
Finally, the movement is starting primarily with accounting services, rather than with compliance services. As a former auditor I am intrigued and can even imagine virtual auditing and other compliance services. Please don't shoot the messenger - for you doubters, I'm just posing the possibility!
The writer Donald Maass noted, "It takes courage to violate expectations. But sometimes the reward is a new level of success." And at the end of the day, isn't that what we all want?
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