What the hell is water?

I love podcasts.

I listen to all kinds - podcasts about science, about the economy, and of course, about the Green Bay Packers. I recently stumbled upon a podcast series called Open For Business produced by Gimlet Creative in partnership with Ebay. This podcast is a series of super digestible lessons about how to run a business - from how to price your product, how to conduct a marketing campaign, to even how much you should pay staff. Suffice to say, as a small business owner, it blows my mind.

One of the episodes that most resonated with me was about the incredible statistics surrounding immigrant entrepreneurs. 

40%?! That's crazy!

The podcast goes on to describe some of the reasons for this gross over-representation - including differences in culture, work ethic, and circumstances.

However, the thing that stuck with me most is best encapsulated by this story, told in the podcast:

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?”

That's deep.

The point of that story isn't to point out the stupidity of the younger fish in comparison to the older fish, but rather to illustrate the fact that those of us who are so entrenched in our day to day cannot see something so blatantly new and different like an outsider.

It's a plea for fresh ideas and new perspectives. The story describes exactly why so many entrepreneurs are immigrants - because they are able to see things when conducting business in the US that we, as natural-born Americans, cannot.

This lesson is what we're trying to live out at Innovative Income Strategies. We have been entrenched in the old referral and hourly based billing model. We've seen the burnout that can happen when CPA firms focus primarily on volume of tax returns. And, we've seen CPA firms lose young talent due to lack of innovation.

We're ready to help you get beyond what you thought was your world - and show you that actually, it' s much bigger, much better, and much more rewarding.

- DC

Are CPAs Startups?

As a small business owner myself, I go to a lot of networking events.

I go because I genuinely enjoy meeting people, and because I love learning new things. 

As you can probably imagine, I collect a LOT of business cards.

Case in point:

I love these events because I think you can learn so much about someone's business by the way they describe it in person. It's one thing to read about someone's product offerings on their website, but it's an entirely different thing to listen to their founder explain their product in-person.

However, the one thing that I love most about these events is the word of mouth marketing.

I can't tell you how much business I've generated for others just because I made a connection between strangers.

This direct marketing sounds like a no-brainer. You just go and talk to people about your business - sounds easy, right?


The truth is that most connections - even if person A desperately needs what person B is selling - fall flat. Why? Think about how you would describe your CPA business to a potential client.

Let me try:

Blackstone CPAs provide quality, personalized financial guidance to local individuals and businesses.

Or how about:

Rogers, Matthews, & Lacy LLP: The most trusted adviser for tax compliance.

...sound familiar? 

The ugly truth is that most CPA firms sound completely identical.

If you have trouble differentiating your CPA firm from another, why would you expect customers to do differently?

Luckily, there's a model that embraces excellent communication. And it comes from a great place: startups culture.

You know, companies like Uber, Dropbox, and BiteSquad. Companies like TaskRabbit, PostMates, or even Pigeonly.

These companies all do two things very well: 

  1.  They distinguish themselves from their competitors; and
  2.  They create unimaginable amounts of excitement in talking about their value proposition.

When you watch the founders of these companies speak, they're excited and animated about their product. They spend their energy on describing how their products are so different and innovative.

Heck, we have so admired the communication style of startups that we now use it in every day business vocabulary: ever heard someone describe a business as "the Uber of ___________"?

CPAs, it's time to start thinking of yourselves as startups. You are founders trying to build great empires. You are people who are unabashedly excited about your product.

Here at IIC, we embrace startup culture and have developed a marketing model that infuses startup mentality into any small business.

Contact us and ask us about how we can help you differentiate yourself from the crowd - and no, you don't have to wear a black turtleneck and jeans.

- DC

Jack and Diane Build a Montessori School (with Qualified Dollars)

Recently, I was chatting with a client (we'll call him Jack) who called me up with a few questions on how to get creative with investing qualified dollars.

As I dug deeper, I found out that his girlfriend (we'll call her Diane) is building a Montessori school in their neighborhood. Prior to securing the financing, however, Diane has to come up with $500,000 in a down payment.

Jack, being the industrious guy that he is, decides to pull together investors to come up with that down payment for his girlfriend. He knows that the easiest place to start is often friends, family, and business colleagues - so he looks there first. 

He finds out that his mom and his brother have dollars in their qualified accounts that would be willing to invest with....but, no matter which custodian you go with, "Diane's Montessori school" is not going to be an option on their investment portfolio options.

I knew just the solution for him.

Enter: the Self-Directed IRA

What it is:

A self-directed IRA is a custodial account that allows the client to determine where the money is invested. It isn't strictly different than a traditional or Roth IRA, except for the fact that it offers many more options for investing outside of the normal portfolio.

A traditional or Roth IRA is like this bucket that you can only put approved stocks, bonds, mutual funds, and CDs, into.

A traditional or Roth IRA is like this bucket that you can only put approved stocks, bonds, mutual funds, and CDs, into.

With a self-directed IRA, you can put those approved menu options PLUS real estate, notes, private placements, and much more.

With a self-directed IRA, you can put those approved menu options PLUS real estate, notes, private placements, and much more.


In addition to the traditional or Roth IRA benefits (tax deductions, income tax deferral, etc.), clients get to invest in investments that they understand and care about. It allows them true diversification of their portfolio.

I'm a good CPA. How come I don't know about this?

No worries - it's kind of weird. Self-directed IRAs have actually been around since the IRS created IRAs in the 1970s. Could be that self-directed IRAs have not received lots of attention because most institutions who offer IRAs only allow traditional investments.

Self-directed IRAs sound great! I'm going to recommend them to all of my clients!

They are great - but hold off on recommending them to all your clients. Self-directed IRAs are not for everyone. They're for clients who really want true diversity in their portfolio and have deep knowledge and experience of investments outside of the big four.

How do I know which of my clients would benefit from a self-directed IRA?

It's all in the relationship. Here at Innovative Income Consulting, we always start with the foundation that authentic relationships allow you to work deeper with clients. How do you know if your relationship is good enough to broach the topic? Try our test - "Does this client call me when they're looking for advice for their business, even if it's not directly related to finances?"

If not, you may want to start putting some work in. Not sure where to start? We're happy to help.

- DC


Stop calling yourself an accountant. Call yourself a small business advisor.

What comes to mind when you think of a "modern business?" 

A business that someone can start - or has started - today. What does it look like?

Or, maybe more simply, where does it fall on this spectrum:

Odds are, the business that you pictured - and the businesses that are flourishing today - are more akin to Uber than they are to GE. The businesses that are being started and are growing today are constantly changing and redefining the marketplace. They are disrupting - in some cases, spectacularly so - what we thought were the bedrocks of Business 101.  

Accounting/Tax Compliance work has followed this same trajectory - evolving first to suit traditional businesses with traditional needs. Accounting grew out of a boring (but necessary) business function: at the end of the day, someone  has got to count and report on the beans.

But as you just realized, the work today is changing. Heck, even the vocabulary is changing.

As the CPA, you perhaps are in the best seat to be a business advisor.  You already have an intimate view into the company's operations. Rather than merely performing routine tasks, why not use your seat of opportunity to suggest advice and actually advocate for your client's business?

Case Study: new business funding

Here's an example of what you should be advocating to your clients.

It used to be that businesses used one of three ways to secure funding:

  1.  Get a loan from the bank.
  2.  Use your personal savings.
  3.  Talk to investors.

This covered 99% of all business funding cases. However, there is now a world of alternative funding in online lending. Online lending ranges from cloud-based marketplaces that connect businesses with funders (eHarmony but for investors and business owners) to new financial vehicles that pay advances for outstanding invoices. 

With those other traditional funding methods being so cumbersome and risky (and in most cases, both), it's no surprise that today's modern business is looking for more simplified and innovative options.

Here's where you come in.

You, as the CPA, are key. You have a great line of sight into what the small business owner needs, and the ability to pull the information together in an intelligent way.

The world of alternative funding is heating up - as is the world of other business tools and resources. By adding this body of knowledge to your toolkit, you'll look like a rock star. 

Need help with these new technologies? Not sure of what kinds of new tools you should be adding to your toolkit? Don't worry - that's what we're for.

After all, if you don't advocate for your business owners, why on earth would you expect them to advocate for you?

- DC

In Praise of Teachers

It’s Teacher Appreciation Day!

This is the time during the year, maybe more than any other, when teachers need and deserve a hug.  The long school year is winding down, testing is in full force, students are getting anxious to move on to what’s next and everyone is anticipating the summer break.

I have a number of close friends and clients in my life that are teachers.  The respect they deserve for all they’re doing to lay the foundation for our collective future can’t be overstated.  I know I don’t tell them often enough how much I appreciate their efforts so I’m glad we have a week designated just for them to remind us the value they add to our society every day.

Being a good teacher is not an easy job. 

Most of us are blessed to have been taught by dozens of teachers during our lifetime.  Some may remember them all, but for me three stand out as having a tremendous impact on the person I’ve grown into today. 

Not surprisingly, because all my key mentors in life have done this, the three that stand out were the ones who pushed me to do things far outside my comfort zone and then continued to follow through with encouragement, advice, honest feedback, and a level of patience that goes far beyond the level possessed by most normal human beings.

This week I want to give a big shout out to all the teachers I know, and an extra special shout out to Mrs. Behne (5th grade home room), Mrs. Measner (7th grade speech teacher) and Mrs. Seagelstrom, (Debate coach and German Teacher).  Your efforts contributed to me becoming the person I am today and the amount of appreciation I have for your efforts is indescribable.


Cheers to all the teachers!

- DC

Don't Be Afraid of the Robo-CPA

I don't watch TV much (well, except for my Modern Family binges...but that's a story for another time). One of the few shows I do watch every now and then is 60 Minutes - did you catch the latest episode?

They had this fascinating segment on FinTech ("Financial Technology") about how thousands of startups are challenging many aspects of banking, which they say is too old fashioned.

(Can I get an "Amen"?)

This segment profiled two brothers who were frustrated at how long it took banks to process payments. In a world where messages and texts can be sent around the world almost instantaneously, why does it take days and sometimes weeks for banks to route money? Taking this problem into their own hands, they created Stripe, which is an online payment solution that helps consumers and businesses alike get paid faster and more securely. Never heard of it? You've probably used it very recently. In fact, over one in four Americans have used Stripe in the last year. It's incorporated into a lot of the big sites - Facebook, Twitter, and even department stores like Saks and Macy's.

On the surface, the story seems pretty standard for Silicon Valley:

  • Very young founders - the brothers are 25 and 27
  • They both are college dropouts - Harvard and MIT
  • They're both programmers, and created a tech solution

But one part of the segment really resonated with me. Take a look at this exchange:

Lesley Stahl (60 Minutes correspondent): And I’m hearing “eliminate jobs,” I mean we’re talking about hundreds of thousands of jobs in the banking sector, tellers and, you know, financial advisors, you name it.

Patrick Collison (co-founder, Stripe): I think in general technology always sort of makes some jobs less relevant, or perhaps, even obsolete, but I will say that the idea that sort of these people will find nothing else to do seems like it’s way too pessimistic on the capabilities of everyone as human beings, right? These—

Lesley Stahl: Have you looked at the employment scene right now?

Patrick Collison: I think it’ll take a while to adjust, but when you think about just the creativity of people and what they’re capable of and the sort of aspirations and dreams that they have, the idea that they’re not capable of anything more than sort of performing these automatable clerical tasks, I don’t believe that for a second.
— http://www.cbsnews.com/news/fintech-shaking-up-the-financial-industry/

Sound familiar?

This is the exact argument right now going on about robo-CPAs and robo-advisors.

Thank you, New York Times, for this ridiculous picture.

Thank you, New York Times, for this ridiculous picture.

Right now, our industry is in a bit of a pickle - we're so worried about robo-CPAs and robo-advisors taking over our jobs that we're trying to figure out how to differentiate ourselves and become "the most trusted advisor." We're trying to justify our fees and operations by dismissing the idea entirely that someday, an algorithm could replace our job. 

But that mentality completely misses the point.

True, computer algorithms are really good at performing the route standardized aspects of our jobs - think filing expense reports. However, something that a computer algorithm cannot do - and, I argue, wont' be able to do ever - is form relationships with real live people. 

Think about all the monotonous routine things that you have to do in your job every day - wouldn't it be nice if those things were easier? Were automated? 

Think about how much more time you would have to focus on the aspects of your job that actually drive you and give you energy - whether that's talking to clients, solving a complex tax problem, or even building your business.

Put another way, think about what would happen if you focused away from the 90% of things that add little value (and comprise 20% of your revenue) and focused more on the 10% of things that add a tremendous value (and comprise of 80% of your revenue).

Instead of focusing on the client work that you just have to process and move forward, think of the benefits of focusing on strengthening the relationships with those clients who have the potential to bring in incredibly rewarding work, both financially and professionally.

By the way, Stripe is currently valued at $5 billion. Maybe they're onto something.

- DC

Advice for Introverted CPAs

I recently stumbled across this Harvard Business Review piece with a great name: "How to Talk in Meetings when You Hate Talking in Meetings."

Although I'm an extrovert myself, I - like everyone else - interface with introverts daily. And, like many people, I have been guilty of assuming that the introverts I face in meetings don't have anything to say.

This is especially true of the CPAs I run into - as the stereotype goes, many CPAs tend to be more introverted due to the nature of the work (or, the nature of the work tends to attract more introverted people). 

Introversion in a business setting often comes across as awkwardness, apathy, or even ignorance - characteristics that can absolutely kill a client relationship. Think to yourself - how do you conduct yourself in meetings? Is there danger that your clients may view you as standoffish or aloof? 

There has been a wealth of research on introversion lately, out of which has come a number of useful tips and tricks to assert yourself while also honoring your introversion:

  1. Do a lot of prep work. This applies to formal board meetings, coffee chats, presentations, or even 1:1's. Being well prepared will give you more confidence to speak up.
  2. Be the first one to talk. I know, this one sounds counter intuitive and difficult. But if you make the effort to bring forth your ideas earlier, you'll feel more a part of the meeting - and thus, feel more empowered to contribute.
  3. Be at peace with half-baked ideas. The next time you're in a conversation, notice how many (extroverted) people seem to blurt out ideas that don't seem completely fleshed out - and then, more importantly, notice how little anyone cares. I admit, this is a muscle that you have to strengthen - it feels uncomfortable to just blurt something out. Instead of worrying about how many holes your idea has, trust that the content is good.
  4. Speak a tiny bit louder than everyone else. I know, I know - this one seems insidious. But I'm not talking about yelling or shouting - just being almost imperceptibly louder than those around you. Psychologically, this will catch people's attention.
  5. Assert your need to think things through. When you are presented with a comment that doesn't immediately register, don't be afraid to reply: "I need some time to think about that." No one will take it the wrong way, you'll buy some time to think, and - maybe most importantly - you'll seem confident. Which, even if you don't feel particularly confident at the moment, is huge.

Not a fan of text? Here's an infographic instead:

Most importantly, I want to emphasize one last point - there is nothing wrong with being introverted. Society (and especially business culture) may favor aggressive extroverts, but this is rapidly changing. Make sure to honor yourself and your introversion, and honor the fact that you bring real contributions into the workplace. Just as darkness cannot exist without light, extroverts cannot exist without introverts. 


- DC

Equal Pay Day and the Accounting Profession

Today - April 12, 2016 - is Equal Pay Day.

Or, put another way, to make as much as a man did in 2015, women would have to work until today to compensate for making $0.79 for every dollar that men make.

Let that sink in.

This morning, I was intrigued by a tweet that went out via the official US Census Bureau's twitter:

Intrigued (and frankly, a little outraged at the disparity), I decided to dig a little deeper.

Here's what I found:

The financial sector has a lot of work to do. 

Last year, the Center for American Progress produced findings that attempted to bring out the most equal and unequal jobs in America by gender. Vox also picked this up with an article graphic (reproduced below, but I highly recommend you check out the actual site for an interactive version):

So, the most unequal jobs tend to be in the financial sector.

Accountants and Auditors fare slightly worse than the national trend

Wanting to see how the data compared for accountants and auditors, I pulled some data from the Bureau of Labor Statistics and the US Census Bureau and created this chart:

Note: While the data on 2013 and 2014 came from the US Census Bureau, the data on 2015 came from the Bureau of Labor Statistics. I'm not sure if this explains the pretty drastic decrease in average earnings in this period, but that isn't the focus of this graph.

Female accountants and auditors consistently make less than their male counterparts. In fact, here's what the numbers look like when you take female wages as an overall percentage of male wages:

2013 - Women earned $0.75 for every $1.00 a man earned.
2014 - Women earned $0.76 for every $1.00 a man earned.
2015 - Women earned $0.73 for every $1.00 a man earned.

Remember - the national gap is currently $0.79 for every $1.00.

The gap should be $0.00.

Happy April the 12th - and let's get to work.

- DC 

PS - I realize that there's a lot that goes into the differences in pay among different genders. For an interesting take on all these factors, consider listening to this podcast (we LOVE Freakonomics).

Friday Data Dump - Is your state saturated with CPAs?

The Bureau of Labor Statistics (BLS) has just released a fascinating blog post about the concentration of accountants, auditors, and tax preparers by state. In the post, they measure the concentration of accountants and auditors by state in 2015 through the use of colored maps like this one:

Location quotients of accountants and auditors by state, 2015

Source: Bureau of Labor Statistics

This map might look a little confusing - but bear with me here.

For their analysis, the BLS used an analytical technique called a location quotient (LQ). In essence, the LQ measures the concentration of certain groups compared to the national average. In this case, an LQ of 1 would mean that a state has the same proportion of accountants and auditors as the nation overall. A LQ higher than 1 would mean there are more accountants and auditors, while a LQ of less than 1 would mean there are less than the national average. The LQ adjusts for population size, too.

Get it?

On this particular map, areas with higher LQs - and thus, more accountants and auditors - are colored a darker red than lower LQs. So darker red = more accountants and auditors.

(Wondering why it's accountants and auditors? Beats me - that's just how the BLS aggregates their data.)

There were some interesting things about this data that popped out at me:

  • No surprise about the East Coast - the state with the highest LQ is Washington DC. Seems natural that the area would have a high proportion of accountants and auditors.
  • Interestingly, the state with the second highest LQ is Colorado - weird. Also, high LQs in the Upper Midwest. Wonder what that's all about...
  • Conversely, there seems to be an accountant and auditor no-go zone in the Deep South. Hmm...

While I could probably go on and on about just how awesome data is, there are a few practical implications and important questions for practicing CPAs in these insights.

Rather than write long and boring paragraphs, I've summarized these questions below in handy infographic form:

What do you think about the latest BLS results? Let me know in the comments!

- DC

Are you future ready?

In a recent Accounting Tomorrow article, 80% of CPAs surveyed agreed that their role over the next decade will include more emphasis on consultative business development, risk management, and advisory services.

While the article itself is interesting, I found the full report to be even more revealing. Check out these results!

CPAs will need to become more intimate with the tools that can fit their clients' needs - this has always been true. However, future trends bring change at such accelerated rates that many CPAs can be caught unaware. Who has time to keep up with all the available options?

The future is coming...are you prepared for your evolving role?

Be future ready. Be a rock star.

Let us help you get there.

- DC