Why Does Red Earth CPA Service the MSP Industry?

I am often asked why Red Earth CPA focuses on providing cloud-based accounting to the Managed Service Provider (MSP) industry.  It is a fair question, and it is a pretty simple answer.  But, in order to answer it, I need to explain a long standing grievance I, and many others, have  with  the accounting industry.  When I started Red Earth CPA, I had been accounting for a while, working for a traditional firm, providing the same services that almost all accounting firms provide, and I was a little frustrated with the world of accounting.    This was my industry.  This is what I had chosen to do as a career.  Yet, as I looked around the accounting world, I realized something was terribly wrong.  The accounting industry is broken.  Everywhere I looked, I noticed tell-tale signs of past, present, and future failure.  

The Accounting Industry is Broken.

The standard accounting business model itself is simply no longer sustainable.  It is not good for clients, and it is not good for accountants.  Long hours providing impersonal service has become the norm.  The average accountant brags about their war-wounds of pulling all-nighters, sleeping at their desks, planning the births of their children around tax season, or coming right back to the office after the birth of a child.  These stories and expectations are part of why the industry faces a shortage of accountants.  By all outward appearances, it is not a pleasant industry to work in.  Thus, fewer and fewer quality people are willing to take on the job.   

A shortage of accountants, like a shortage of anything, leads to diminished quality service.  The work is there, but there are too few workers to do it.   Therefore, accountants have way too many clients to be able to provide all of them with knowledgeable and efficient quality services in a personal way.  

And because demand is high, so is the cost.  I have talked to multiple discouraged clients and business owners who have repeatedly stated their frustrations about the simple availability of their accountants altogether.  They are too hard to contact, sometimes taking days or weeks to respond to an email, if at all. 

The Accounting Industry is Stuck in a Break Fix Model.

Due to the shortage of accountants and the abundance of work, the industry is stuck in a break-fix model.  Small businesses simply cannot afford to keep an accountant on staff.  Accounting firms concern themselves more with billable hours than personal service, leaving little room for sustainable quality service, and there is no time at all for preventative maintenance.    

That was the epiphany.  The accounting industry is broken.  The break-fix model that pervades the industry is not sustainable.  Personal, in house accountants are too expensive for most businesses, and the industry is making accountants miserable.  

I think it can be fixed.  

I knew that I would not be able to fix the entire industry, but I at least wanted to fix my part in it.  So, I started looking around at other industries that have had similar problems and managed to overcome the challenges. 

The Connection with Managed Service Providers.

This is where I started to connect the dots with MSPs.  When I started my firm, one my first clients was a Managed Service Provider.  As I studied their business model, I started to notice practices that could benefit the accounting industry.  I started to understand the monthly recurring revenue, the help desk, the managed services, fixed-fee auto-billing, and the fixed scope of work.  This is what I wanted for my business.  

The MSP Business Model Excels at Simplicity.

I loved the simplicity, the fact that the client understood exactly what they were paying for before they signed up.  Clients of MSPs understood that they could outsource their IT to an MSP to manage tech issues in their company and know the solutions they were looking for were there.  I started researching what Professional Service Automation was and understood how that integrated into accounting.  It just made a lot of sense for me from a service standpoint that people could interact with more than just one person on their account and could be served in a much faster way.

The MSP Business Model Provides What Customers Crave; Responsiveness.

I also noticed the whole MSP industry measures how quickly they respond to a client request.  I realized immediately that tracking this metric alone could improve what we do as a whole. Coming from an accounting industry where it is often days, if not weeks (if at all), that a client gets the service they need – the MSP model is just a tremendous leap forward in terms of service.

I wanted to adopt the MSP model in my industry.  So, I started to look closer at how they did business.  I began to understand the billing, sales tax, profit lines, and gross profit, all the little nuances of financial reporting for an MSP.  Most importantly, they were able to build a scalable business model around shared service to their clients using the appropriate technology and structure.  

The MSP Industry Cracked the Code on the Break Fix Model and So Can We.  

The further I dug into the MSP industry and researched the reasons that they serve their clients the way they do, the more I realized how similar our industries were.  In the early 2000s, when the modern information technology industry was nascent, they were at a similar crossroads that the accounting industry faces today.

To get all of their needs met, almost every business needed a tech person on site. The demand was there.  Some of the best-paying jobs on the horizon (well into the six figures) were network engineers.  They were going to be needed virtually everywhere to sit in offices and service their clients when required.  For big businesses, that was a sustainable model.  But, for small businesses, there was no way they could afford those salaries, regardless of their demand for the service.  So, the labor market  figured out a way to outsource those services.  

Outsourced Accounting is The Way Ahead.

A new type of firm started to emerge (the MSP), that was focused on this outsourced service.  They could piecemeal exactly what a business needed, create a package that could meet their needs, and make it affordable.  Outsourcing meant smaller businesses would not need to break the bank by keeping a tech person on site.  Instead, they would pay a monthly fee and have access to a pool of people who were all familiar with the company’s needs.  This also provided the increased benefit of having someone who was always available.  If something happened to one person or they were (gasp) on vacation, there was always a backup. 

I recognized that what the MSP industry could do would work in our industry.  I started to make this business model a focus for Red Earth CPA.  Over time we began to build a comprehensive tech engine that allows us to streamline our services, much the way an MSP uses their PSA, to provide cloud-based accounting.  This is where we are going.  We provide outsourced cloud-based accounting services to help plug the gap in business’ accounting needs.  

We Genuinely Like the People.

This brings me to the final, and maybe most important, point on why we want to do business with MSPs.  We like the people.  We have similar goals.  MSPs serve others and develop relationships with their clients, often spanning years and into decades.  They take care of the businesses around them.  Most people we have interacted with in the MSP industry are genuinely concerned with serving their clients well. . . and so are we.  It is always a pleasure to do business with people you respect,  who provide a service that you understand, in a way that you admire.  

For more information on how we can service MSPs please visit our MSP page Managed Service Providers | The Red Earth Story (redearthcpa.com) or connect with us!