Redefining “collaboration” with co-firming relationships
One of my co-firming partners and I recently wrote about the concept of working firm-to-firm in a more intimate way than most people imagine possible—or at least realistic. The topic seems to have piqued the interest of the accounting services community, so we’re back to reveal a little more about this unique type of partnership and answer some of the questions we’ve been getting.
At first blush, people look at our arrangement and see a collaboration. That’s nothing new, right? Businesses have been collaborating with one another since the dawn of time. But what we’re doing is so much more than what “collaboration” connotes in our world.
I liken it to the term “bookkeeping.” How many of us have spent hours upon hours explaining to prospective clients or even current ones that we, as “bookkeepers,” don’t do what they think we do?
“You keep using that word. I do not think it means what you think it means.” – Inigo Montoya
For a long time, there were accountants … and there were bookkeepers. And then there were those of us doing something entirely different, but without the language to describe it. Over time, the jargon evolved and now we have terms like “client accounting services” and “bookkeeping and accounting advisory services.” Sure, we may still have to define what we mean by these words when we encounter someone unfamiliar with them, but we’ve come a long way from just having to choose a label from Box A or Box B, even when they both don’t fit.
What we’re doing at The Profit Constructors—along with firms such as Capovario and Hard Hats Bookkeeping and Consulting—involves collaboration, to be sure. But that word means so many things to different people in our profession and others, yet none of its meanings capture the true essence of our working relationship.
While we try to figure out what to call this new, exciting type of business relationship that’s certainly beyond collaboration, we’ll use the word co-firming to convey the deep interconnectedness of our businesses. If you think of a better word, certainly let us know! In the meantime, I’ll answer some of the common questions we get in order to share some insight and some of the magic behind the curtains. After all, sharing our secret sauce instead of guarding it is one of the fundamental principles of co-firming.
How did you get the idea to try this?
The spark of the idea came several years ago, but we didn’t really dive in and give it a try until early 2022. I had the theory, but I hadn’t found the right firms to put it into practice. I saw other firms doing things that I knew I definitely didn’t want to do. For example, I saw firms bringing on W-2 employees and saw the types of challenges that came along with that.
At the same time, the gig economy was really starting to boom, and I wondered if there was a way I could apply that theory to our profession in a way that really worked for a firm such as The Profit Constructors. Everything came together when I was chatting with Richard Roppa-Roberts, leader of the Roundtable Labs community, who made the connection between me and some other members looking to expand their practices and had room for more work.
Why didn’t you want to hire traditional employees?
Employment law is complex! Let’s say I wanted to bring on employees to just do little bits and pieces of work for some of my clients. This involves tons of time tracking, assigning billable hours to one client or another, setting up payroll, paying employment taxes, and other tasks.
One big obstacle for me is that I’ve long since moved away from hourly billing with my clients. I specifically changed to value billing because I didn’t want to be beholden to tracking hours. If I brought on employees and wanted to pay them per piece of work, I’d have to grapple with hours, again, to ensure I was meeting minimum wage laws. Some firms avoid these headaches by bringing on 1099 contractors instead of employees, but given the type of work being done, it’s a potential quagmire of worker misclassification. I didn’t want to touch that with a 10-foot pole!
The only real solution I could think of was to partner with other firms, run by professionals just as highly skilled and qualified as I am. And to do that, I knew we’d have to do more than just “collaborate.” We’d have to become deeply embedded in one another’s practice.
It sounds like subcontracting: Why don’t you call it that?
The truth is, we do. At The Profit Constructors, we specialize in midsize companies in the construction industry. By nature, these companies are very familiar with the concept of a general contractor (GC) and subcontractors (subs). So, even though co-firming is a model that goes deeper than the typical employer/contractor relationship, our clients understand exactly what we mean when we share with them that The Profit Constructors acts as the GC, providing project management, oversight, and quality assurance. Our co-firming partners act as subs who do the day-to-day account management and in-the-weeds work.
This makes sense to our construction industry clients, but when explaining the concept to other accounting professionals, it’s important to make it clear that this type of arrangement is way more than outsourcing. You might even call it “insourcing” because of how intimately involved we become with the other firms.
Wouldn’t it be less expensive to outsource overseas?
We don’t consider what we’re doing to be outsourcing. But taking the question at face value, it turns out that you rarely save money working with firms outside of your country. Laws and regulations vary widely between countries, so it’s hugely beneficial to us and our clients that our co-firming partners are just as familiar with what’s happening in the United States as we are.
There are also practical considerations, such as language and culture barriers, time zone differences, currency conversions, and specific nuances in our processes and procedures that make working with overseas vendors more difficult. In my experience, what you might save in initial cost going that route, you often pay for—plus some—correcting the hiccups along the way. The whole point behind co-firming is to seamlessly partner with another firm that we and our clients can trust entirely, without spending more time double checking or correcting mistakes.
What do your clients think of this arrangement?
Clients love it! They truly see the value in having a second firm working on their business at no extra cost. We are completely honest about the arrangement from the start, and because of the high caliber of our co-firming partners, clients are happy to work with them intimately while knowing The Profit Constructors is supervising, reviewing, and assuring all work is delivered to our best-in-show standards.
How do your co-firms add value to your firm and your clients?
We are extremely picky about who we enter into a co-firming relationship with. Because every firm owner we partner with is an expert in their own right, often with areas of specialization that The Profit Constructors doesn’t have, we can actually add services to the menu, and charge for them, where we couldn’t before.
With Capovario, for example, Dave Kersting, the firm’s owner, brought a deep expertise in performing worker’s compensation insurance and general liability insurance audits that no one at The Profit Constructors had. Now, we can confidently offer our clients these insurance auditing services (and charge appropriately!) which brings value to clients and adds revenue to the firm.
How do your co-firms benefit from the relationship?
From my perspective, it’s absolutely a mutually beneficial relationship. Co-firming can draw on everything from our professional industry expertise and reputation, back office support, tech stack, and more. We spend less time marketing and pursuing leads and more time doing the work we want to be doing. By co-firming, each firm can take on pieces of the work that we’re best suited for, and allow our partners to do the same. It takes a lot of work, communication, transparency, and yes, even collaboration, but when done correctly it’s a win-win-win for all firms and clients.
To hear more about how members of Roundtable Labs foster true community partnerships among bookkeeping and accounting professions, make sure to check out our session “Collaboration Without Competition” at QuickBooks Connect 2022, Dec. 7 at 3 p.m., and again on Dec. 9 at 10 a.m., featuring Dave Kersting, Richard Roppa-Roberts, Alexis Sadler of Accounting Therapy Inc., and Angela Main Roberts of Main Accounting Services.