Bianca Basilio: this episode is about what happens after technical excellence, what separates firms that survive from the truly scale. Mark, you spent over 35 years helping accounting firms transition from being great technicians into being great businesses. you look at work today at Smithink ⁓ what kind of transformation are you most on with firms right now?
Mark Holton: It's a good question Bianca. The industry I think has changed and changed dramatically over the last 40 years that I've been involved. I wish it was only 35 but let's be honest up front. Over those 40 years we've gone from doing things manually to just about everything we do now is automated.
Bianca Basilio: you
Mark Holton: But over those 35 to 40 years, we're still seeing the same thing in the industry. And that is firms are too heavily obsessed with compliance activity. And because of that, they're falling back on it as their security blanket. They're not looking to, I'm not saying taking risks, but they're not looking for what happens next enough in my opinion. know, roughly 30 odd years ago, my accounting firm, we were focused very heavily on compliance and it was frustrating me. You know, we had clients that needed business support. We had clients that needed business development. We had clients that needed someone to sit there and talk to and in the form or probably a business coach, call it what you will. We never had the time. We never looked at ourselves and said, are we truly working with the right clients? Are we spending too much time working with the wrong clients? And because of that, our capacity was always under pressure. We made that decision 30 years ago to move, not to change to the extent that it replaced compliance, because that'll never happen, but to move more into business advisory work within our firm. And that took an awful lot of time, an awful lot of transition. But in my mind, that single one decision converted us from a practice to a high performance firm. Did we do it right? Probably not. If I had to do it again, would I do it differently? Absolutely. But I had an enormous amount of success and an enormous amount of fun doing it. And I saw clients grow, and I saw their businesses grow, and I saw their financial literacy grow. And had I not... going down that pathway, I doubt very much I'll be talking to you today. because the industry frustrated me so much and the fact that clients or so little value in what we did. And because of that challenge, our bill quite regularly, I would have looked for something else to do. So it was like an epiphany for me to, to get to that point in my career where I thought there's got to be more Bianca than just sitting there pounding out tax returns year in year out. Admittedly making a good profit for it. Don't get me wrong. You know, and still today, 30 years later,
Bianca Basilio: Yeah.
Mark Holton: it's still as if not more profitable than ever before because the large amount of what we do these days is automated and we should be doing it quicker and if we are doing it quicker we're doing it more efficiently and we should be making more profit but how do I take my firm to the next level that's not doing what you've always done year in a year out it's doing something different it's taking a calculated risk
Bianca Basilio: Yeah. a sec.
Mark Holton: It's planning and strategizing well towards where you want your firm or your business. Let's just call it a business instead of a firm in the future, because you know exactly where it is today.
Bianca Basilio: Yeah. That's perfect. Yeah. So in your experience, like what separate business, I'll say pharma businesses, the plateau from they actually become enterprises and they grow.
Mark Holton: I've seen thousands of firms over the last 30 years that thought business advisory was a great idea. ⁓ Some started and then failed. Some started, then stopped. Some never started. Why the question should be, and that is because they just kept falling back on doing compliance activity, tax audit work, whatever it was, because that was comfortable. Advisory is uncomfortable. You're not dealing with something that if the client doesn't do it, the government will penalise them for not doing it.
Bianca Basilio: Yeah.
Mark Holton: advisory work, business development work is not compulsory. It's not regulated. It doesn't come with a penalty if you don't do it. So it's harder to engage. It takes a different mindset. It takes a different strategy. I've seen so many firms look to change their strategy, but they're not executed. Yet expect clients to do so. And I think that's what separates a typical accounting firm from a high performance firm or high performance business. And that is if you're going to set a strategy, execute it, hold yourself accountable, get someone to be your accountability person to ask the sort of questions and follow you up and drive you nuts. Otherwise, it's nothing more than a bit of paper that everyone thinks is a great idea. And if that strategy document includes
Bianca Basilio: yeah it's also super right just act like plan act yeah yeah
Mark Holton: an area where you're going to offer new services to existing clients, when you're going to use those new services to leverage new, better quality A-class or B-class clients, then commit to it. know, resource it, change the model, do whatever's necessary. It's not negotiable.
Bianca Basilio: Exactly.
Mark Holton: See, when I work with an accounting firm on strategy, I break it down into five key areas. And the first area, the most important one is financial management. Because at the end of the day, we're doing it for the love. We want to see financial rewards come back. But those financial rewards will come back if you can get the other four right. The second pillar is people. Right people, right job, right task, right pay rate.
Bianca Basilio: Exactly.
Mark Holton: And if that isn't following that model, you will not profit to the level that you want to. The third pillar is your procedures, your processes. Are they the most efficient they can possibly be? Do they need revision? And not just in compliance activity, but advisory activity. You need systems and processes there. You need to be able to have a regulated model where the right person at the right pay rate does the right task. And Bianca, I see too many accounting firms having too many people too high on the employment roster at too high a realizable rate of return doing too low level work in advisory because they've never trained and developed their team to do it.
Bianca Basilio: Yeah.
Mark Holton: The fourth one is clients. They might annoy you, but they're necessary. Are you looking after them the best way you possibly can? Do you know what your ideal client is? And are you hunting for it? And are you culling bad clients on the basis of that criteria? Too few firms have ever sat down and put it on paper. And lastly, probably equally as importantly as services, what else can you offer the client to build better, more successful, more profitable, cash rich businesses that are worth more tomorrow than they're worth today? And if that's how you want to run your business, that's how you want to set up a strategic plan to do so, then there's no excuse for failure.
Bianca Basilio: Amazing, love that the five pillars are fantastic. So what do you like, when do you usually realize a firm won't scale when you don't see these pillars happening?
Mark Holton: because they won't commit to their strategic plan. It's easy to put in a plan, for example, under services that I want to offer business advisory work to one client per month over 10 months at an average of $1,000 a month, for example. That's easy. It's a copy and paste. The question then is how do you do it? So you go back to your first pillar, which is people. Do you have the right people? Do they want to do this work? If you don't have the right people, where are you going to find them from? And then how do I set up a business advisory division that concentrates just on that? Because if they're concentrating on doing all their tax work and audit work, and you're going to drop this on top of them, they're never going to get to it. They'll always fall back on what they're comfortable with. So how do I resource that model? What systems and processes under the processes pillar do I need to put in place to make sure that advisory can be done by the right people in the right firm at the right pay rate? I can't emphasize that enough because if you don't get that right, you can't scale it. And if you can't scale it, who's going to do it when you're on holiday or you're not there or you're sick or whatever?
Bianca Basilio: Exactly. is that one.
Mark Holton: Okay, I know you can scale an accounting firm based on compliance because everybody basically knows what to do and everybody's involved. Advisory is not treated with the respect that it needs to get it going. You know, and then clients, let's let's just go and take the top 20%. That's all just the top 20 % of your clients and love them to death. Set yourself a goal of doubling their compliance fee in the next 12 months and hold yourself accountable to it. You know what you gotta do? You gotta build a business within a business. Not add pressure to an existing model that if you sat down and thought about it will crack if you put more pressure on it.
Bianca Basilio: There's no ready for it.
Mark Holton: You know, we don't go and build a second story on a house that has a faulty first story. It makes no sense. We've got to get that scalability right. And it comes back to three things, systems, processes, and people. Without those three, and the most important one there, Bianca, is people. Without them, you're better off seriously not even going down that pathway.
Bianca Basilio: One of the... Yeah.
Mark Holton: Just do compliance work, so you're blue in the face and you'll still make money. But you won't build better clientele. And if another practice goes down that pathway of advertising that, good luck holding on with them.
Bianca Basilio: Yeah. Listen. So I assume like how can you tell very quickly if a firm is a real business or it's just like a practice?
Mark Holton: because it's willing to take clients to the next level and do whatever's necessary to put in the systems processes people to get them there. I'll give you an example, Bianca. A firm I know very well in Australia has had everyone try advisory over the last five years. And it went like that.
Bianca Basilio: So when you see a firm death, yeah.
Mark Holton: because they got too busy, they had too many clients, they had other pressures running the practice. They bit the bullet a couple of years ago and went out and employed a business advisory manager and set it up as a separate division within the firm. The success that they've had... because one person and a bit of support are now, you know, with budgets in place and KPIs in place, are focusing on that. And all the partners need to do is feed the client into it. The mistake is getting busy partners, busy seniors, busy managers to become busier. That's where it files.
Bianca Basilio: So when you see a firm that really is a business, what type of systems are usually already in place behind the scenes?
Mark Holton: Well, look at, you look at, you've got to look at what I call diversified services as distinct from compliance activity. Compliance activity, there's a me and a one systems, processes, checklists, you know. One of the things I challenge every firm with with processes is have you sat down and mapped out a job scoping plan from the moment it comes in to the moment it leaves.
Bianca Basilio: exactly.
Mark Holton: So if somebody comes in as a new employee, they can see exactly how you do business. A lot of firms struggle with that when they go offshore because they haven't documented well enough what they do onshore and they struggle getting offshore with staff to do it. But with compliance, it's all systemized. Then everyone in the firm has a little role to do.
Bianca Basilio: The offshore will expose the issues.
Mark Holton: And the partner sits at the top of the tree. If you think of it like a tree, the partner sits at the top. What should the partner be doing? And that's engaging existing clients, developing new opportunities for clients. Too often they're too heavily on the tools. When it comes to an advisory job coming in, who's going to do it? Well, the partner, because only they can.
Bianca Basilio: Yeah.
Mark Holton: because we haven't invested enough time, resources, activity in training, you know, the next level, the next level, the next level, the next level, you know, and that's where it falls.
Bianca Basilio: And it's so simple, right? It's just that you map out your workflow and you can see exactly how it looks like. It's so simple when you think about it, but people don't do it, really.
Mark Holton: because they're too busy doing what they always do and they're too comfortable doing what they always do. I can say that I've been in the game for 40 years. know, if people don't like it, I don't care. What are going do to me? I'm on the end of my career, not the start, but I've seen an awful lot in 40 years. know, and well, 30 years ago, I pushed my firm, some screaming into advisory. If I had to do it again, I'd do it totally different. At least I had a go.
Bianca Basilio: Exactly. Yeah yeah it's the truth isn't it yeah so No. Yeah. Yeah, exactly. Experience. So what do owners think matters that actually doesn't?
Mark Holton: least I tried. Well, when you're talking about working with business owners, you've got to get inside their head. You know, you can't be thinking like an accountant. Let's be honest, how many business owners come into their accountant, the accountant puts financial data in front of them, they sit there with glazed eyes, because all they want to really know is how much tax do I have to pay? You know?
Bianca Basilio: It's like...
Mark Holton: We're not telling stories. We're not financial storytellers. We're not turning numbers into knowledge. We've just got numbers. Numbers are wonderful. Accountants love them. Business owners like cafe owners and builders and farmers and everybody else, they're not financially trained. At the end of the day, and I'll say this because I've learned this over the years,
Bianca Basilio: Yeah.
Mark Holton: Why do you want to add more value to a service that they have to come to you for? That they can't do themselves? And everybody does the same way, even though you think you're different, they're not. Why are we trying to add so much value to the compliance model and so little value to the business advisory development enhancement model? What do I think owners want? They want to know whether or not they're doing things right. They want someone to talk to to be able to bounce ideas off them. You know what else I really believe they want? And I know this for a fact. They want to see the financial impact of key business decisions before they're made. Because half the time they make a decision, then their advisor finds out later too late. They want a service that I call scenario planning.
Bianca Basilio: 100%.
Mark Holton: And that is tell me whether this is good or bad now so I can make that decision tomorrow knowing it's the right one. Now that's easy to say. When it comes to a firm, you've got to have your infrastructure in place to be able to deliver that when the client needs it. Not call them back for two or three days or email them a week later.
Bianca Basilio: Exactly. Exactly.
Mark Holton: They need it now. So unless your systems, processes and people resources are right, then all you'll be doing really is failing a client in a service model. Clients want our accountants to be better business development people. Help them make more profit. Help them strengthen their cash flow. Help them put in structures so that when things are due, they've got the cash there to pay it. And more importantly, help them make their businesses worth more tomorrow than they're worth today.
Bianca Basilio: That's so resonating. I just want this service as well. I just want someone to give me like, what is this structure that works for you?
Mark Holton: Look, some of them Bianca, some of them will say, I only want you to do my tax return. Great. They're not an A-Bowie or B-Class client. They're a C. So if you want to keep doing that, then allocate that resource and take your high-powered staff, your potential development staff into another sphere. You know, if the client doesn't want it, advisory won't suit everyone. Financial planning doesn't suit everyone. Every client doesn't need human resources advice or IT advice, but the top 20 % are the top 20 % because they do it well. So if I can take 10 clients, I can launch advisory services with them.
Bianca Basilio: is Yeah.
Mark Holton: Even at a thousand dollars a month, that's 12,000 by 10, 122,000 more dollars than what you currently got. And all you're doing is enhancing the relationship with an existing good client. You're making it sweeter. You're making it stickier. They're less likely to leave you and they're more likely to turn what I call a walking, talking billboard and go out there and tell everyone how great you are.
Bianca Basilio: Okay, Lina? Exactly. So why do you think like I feel like I wouldn't say most firms struggle with this business advisory? It's like fear or comfort, identity?
Mark Holton: What is the downside of that? It's definitely comfort. It's a lack of confidence. It's a fear that the client might ask something that I don't know the answer to. Who cares? If they asked you a complex tax question and you didn't know the answer, then what would you do? I mean, you wouldn't just tell them anything and hope it's right. You take a step back. and say, look, that's a really good question, it's a complex issue, let me invest a couple of hours, which will cost you X amount, and get the right answer for you. What's the difference? They ask you something you don't know, that's a piece of gold that you got in your hand to deliver something new.
Bianca Basilio: Fantastic. Yeah. And you know for the next one the SQS is, right? So that's it. Learning curve.
Mark Holton: Yeah. To answer the question even more, I think it's a lack of what I call the two C's, which is commitment of board level to change the model to allow something else other than compliance to work and a distinct lack of capacity in the individuals on the firm.
Bianca Basilio: I love that. I love the perspective. Yeah, fantastic.
Mark Holton: The other thing it needs desperately is a business advisory implementation plan. It needs a plan from start where you are today to where you want to be in the future. It needs goals and needs budgets and needs KPIs. know, I mean, if I said to you today, how many clients do you want to work with? And you told me 10. And I say, well, if we get 10 in 12 months, what's the next goal? What's the next goal for the next three years? What do you want? How much income do you want to earn out of this? How much profit do you want to make?
Bianca Basilio: Because I, you need clarity. Yeah.
Mark Holton: You've got to plan the day to execute tomorrow. And one of the biggest mistakes firms make is go out and buy software. Then think, what will I do with it? one of the biggest mistakes firms make is go out and buy software. Then think, what will I do with it? They put the cart in front of the horse. They put the cart in front of the horse. The cart's gotta remain behind the horse. You gotta work out what type of services you wanna offer the client, what type of clients you wanna offer it to, what type of ⁓ charge rate you're gonna go out there with, how much it's gonna cost you to deliver. And when you got those ducks in a row, then we look for software to help you become more efficient.
Bianca Basilio: Exactly.
Mark Holton: Not go out there and buy software then think, well, what do I do with it? Because you know what you'll do with it? Nothing. Then you'll hold onto it for about six months because you're not going to get rid of it. And 12 months later, you'll get rid of it. And then you go, you look at the return on investment, there is none.
Bianca Basilio: Exactly. I like, what I say exactly that. None, completely. Because usually people tend to install systems and work around the system, but it's the opposite. The system needs to work around your workflow and your people. think that's the opposite.
Mark Holton: Totally. Software is an aid to deliver. If you don't know what you're delivering, to whom you're going to deliver it and how much it costs, good luck.
Bianca Basilio: Exactly. Yeah. So many ways to, yeah. So, would you say that this is the biggest, when the owner usually become the biggest bottleneck in the firm?
Mark Holton: one not letting go. Two, expecting their team to do more than what they're currently doing when they don't even know if the team are comfortable with it. Three, failing to look at the model in the future that's going to satisfy their strategy. And four, committing to a strategy and not executing it.
Bianca Basilio: Yeah. It was the hardest. Yeah.
Mark Holton: and blaming everything and everyone for that.
Bianca Basilio: But not themselves. Yeah. And what's the hardest responsibility for them to let go of?
Mark Holton: ⁓ when a good client brings in a job that might not be compliance based and because they can do it, they do it without thinking, can I take Bianca, train her, let her have a go at it? And I become the reviewer, not the doer. Cause I've never invested the time in Bianca to give her a chance. Not knowing well enough whether their staff actually want to be. working in this space. Just assuming because they're good at what they do, they'll be good at something else. I asked a firm the other day, of your staff, how many of them are financial storytellers? And the partner looked at me like I was talking another language. So how many of your staff actually want to tell stories to accountants, want to take them on a journey that starts with once upon a time and ends with happily ever after, but the critical thing is what's in the middle.
Bianca Basilio: Exactly.
Mark Holton: And he looked at me like I was talking a different language. He doesn't know his team. And I said to him, very blatantly and honestly, moving into this space is the wrong thing for you to do to work out whether you've got the right staff. And if you haven't, you've got to find them from somewhere.
Bianca Basilio: That's it. Exactly. That's amazing. ⁓ That's very valuable. So when you look, going back to the systems, right? So we need to have systems working well for you. When you look at the most accounting firms today, where do you think automation would actually make the biggest difference?
Mark Holton: Okay, good question. It's made a huge difference already. When we look back at the old days of how we had the handwritten tax returns, then we moved to word processes, then we moved to computer systems and electronic lodgements and digital submissions, that's just phenomenal. I think anything that's done manually in an accounting firm can be automated and will be. The real challenge for us in the future is AI. ⁓ We're talking a lot about it. ⁓ I hear it day in, day out. I receive social media posts, people wanting to sell me a 30 day AI course and I'll be the most dangerous person in the world. Well, I don't want to be the most dangerous person in the world. I'm quite happy doing what I do. So they're pushing the wrong way to me. The challenge with AI and other services, undoubtedly in the future, we're going to have more data than we've ever had before.
Bianca Basilio: Hahaha Exactly. Yeah. Yeah.
Mark Holton: We're going to have more intelligence about the client, their business, their industry than we ever have before. The question, Bianca, is what do do with it? And how much do you charge for it? And you can't charge anything for it unless you turn it into a service. So I've got all this information, all this intelligence, brilliant stuff.
Bianca Basilio: Exactly, but this helps the case,
Mark Holton: You know, I can go into anything and say, give me some data about this industry and KPIs about this industry and the rest of it. But what are you going to do with it? Sure. It's going to make us more efficient. Robotics are going to come in and I think they'll have a major impact on the compliance activity because anything's any cognitive structure, you know, can be automated. So we're to be doing stuff quicker. We're going to, you know, we're going to have
Bianca Basilio: That's that one.
Mark Holton: the implication of technology when it comes to lodgement of tax returns is changing. Just have a look what's happening in the UK with their making tax digital project. Hasn't hit Australia yet. Will it probably? When? Who knows? But then we've got all this other data. I saw an example recently using the internet, using AI, of doing a complete analysis of the hospitality industry in one part of Australia. And it was showing, you know, what type of client stays, how long they stay, ⁓ how much they spend, what they're willing to spend, et cetera, et cetera, et cetera. And I can basically take it all, it and look beautiful. And I put it in front of a client. But we're gonna do that for nothing.
Bianca Basilio: You
Mark Holton: So what does that service call? How much are gonna bill it for? Because I'll go back to what I said earlier with the compliance model, why you trying to add some value to something that the client has to do, can't do themselves and already come to you? If you're gonna do something, make the client's business better, more profitable.
Bianca Basilio: Exactly. Exactly. You need to leverage what you can get with AI as well. The information, it's ⁓ so many things you can get with AI.
Mark Holton: What will the future hold? I think we'll be looking at real-time benchmarking and real-time budgeting before we know it. We won't be looking at benchmarking that's 12, 18 months old. It'll be real-time. We won't be sitting down there with budgets that were prepared 12 months ago. They can be updated. They can be reviewed. They can be managed online. They can change as people put transactions in. I think AI will have a major impact on what we do as well as machine learning. But until someone can explain to me how do I turn it into a service and how much I bill it for and can tell me what other firms are billing it for, I'm excited but I'm not enthused.
Bianca Basilio: Exactly. Do you think the industry is actually ready for this deep automation or there's still resistance?
Mark Holton: I don't think it has a choice. When you look in the UK, was the industry there ready for making tax digital? They didn't have a choice. The government said, we're going to do it. It's probably the best thing, you know? If you don't have a choice, then you've got to bite off more than you can chew and chew hard. If you have got a choice, you can procrastinate. So I think my advice to firms in AI is get involved. Don't treat it as something nice to look at.
Bianca Basilio: second. Yeah, well. 100 %
Mark Holton: start to make it part of your strategy.
Bianca Basilio: and leverage, yeah.
Mark Holton: It involves leverage, learn.
Bianca Basilio: 100%. Yeah, but do you do you still like, especially in Australia, do you feel this resistance between in the accounting firms?
Mark Holton: No, I think I don't think there's enough knowledge to make a resistance.
Bianca Basilio: ⁓ really? So it's a step back?
Mark Holton: I think everyone's sort of amazed by what they can do. They've got chat GPT or some other sort of application they can jump into occasionally. I don't think they're making it part of their workflow enough. And I don't think they have the strategy around it to implement it as part of their workflow. It's not to say it won't be done. I think it'll have to be done to remain competitive in the future.
Bianca Basilio: Exactly. And if you have to be, yeah. And do you think this is knowledge issue? they need to. And also lack of time, right? Probably too busy with this, you know, day to day.
Mark Holton: That's a significant problem. It's lack of time, lack of capacity, lack of the right staff, and then falling back into what we've always done. That's what needs to change.
Bianca Basilio: Yeah. it's still about AI. Like it's getting a lot of attention right now. ⁓ And when you look the noise, where do you think is generally fits ⁓ like inside a couch firms in a practical way?
Mark Holton: I think certainly the availability of high quality data and knowledge about the client, their business. ⁓ What it doesn't tell us is what's important to the client from the client's perspective. I call that a WITI, which stands for what's important to you. I think that's something we still need to address.
Bianca Basilio: love that.
Mark Holton: How do we know what a client needs if you never ask them? But through AI, we'll have availability of, let's be honest, if you're gonna do a presentation these days, why don't you go into AI first of all and ask them to do it for you? And then turn it into a PowerPoint presentation and teach it how you like things and teach it how you want it formatted and laid out and what your template is. Why aren't we trying to invest in AI to do the 95 % of the tasks we used to have to do ourselves?
Bianca Basilio: Exactly what I see in accounting firms have most to gain with AI capacity, right? They have like they'll gain capacity to work in the...
Mark Holton: They will undoubtedly gain capacity to do other diversified things. That doesn't mean they will because if they don't have the right staff, the right systems, the right processes, but they need to start to invest in that now. They make up too many lame excuses for not doing this stuff. I will do it after Christmas. Christmas is the greatest excuse in the world to do nothing.
Bianca Basilio: Exactly. 100 % agree. I know.
Mark Holton: Then when they get back, I'm a bit busy. You know, because I haven't been here for the last few weeks, so I'm a bit busy. Particularly in Australia, it's a pain because we stop in late December and don't come back to mid-January. Then they don't want to see us do anything until February. Then there's the next deadline, the next deadline. Their strategy's wrong. The other thing I see with firms when it comes to strategy is they do a strategic planning day, but they don't hold themselves accountable every year.
Bianca Basilio: Yeah. Yeah. Is it?
Mark Holton: Yet I sit on not-for-profit boards in Australia and have for 30 years and we do a strap planning update or a strap planning day every year. Accounting firms do it, create a plan, put it in a drawer and forget about it. There's no accountability. And that comes from the top. That accountability has to be there at board level. So accountability drives performance. AI will only be beneficial to the part where their strategies are being executed. I think you'll see an impact on AI when it comes to compliance activity without doubt. I think you'll see more robotic bookkeeping and robotic inferences coming into play. I've got no doubt about that.
Bianca Basilio: 100%.
Mark Holton: ⁓ I think you're going to see a million and one apps launched and loaded out there that can do just about anything you want. The question is when you get off the merry-go-round and how many do you buy and how many can you use? ⁓ I've seen more developments in business advisory software than I've ever seen in my life. I think the market at the moment doesn't know which one to use. So there's a bit of an issue there around what do I buy? What do I use it for?
Bianca Basilio: Exactly, it's a lot of noise and you get overwhelmed with so many information that you have.
Mark Holton: an awful lot of noise. It's fraught with danger, not utilising it, grabbing it, not just sitting back and saying, I'll wait to see what happens. I think we've got to be on top of it. And if you're going to be on top of anything, comes back to, is it part of your strategy? Strategy needs to drive performance, not the other way around. And that's where I see firms not doing it well enough and not getting their clients to do it well enough.
Bianca Basilio: Exactly. up soon. That's important. So there is anything like in this that you'll be cautious about?
Mark Holton: I've things, new technology's never scared me. It never has. ⁓ I think it scares some people. ⁓ Lack of knowledge, does it scare me? Probably not. Just haven't got the time to get as much as I need. But if something new's there and somebody tells me about it, I'm the first one to have a look at it and give it a trial and give it a go. I have companies coming to me with new ideas and advisory saying, I have a look at it? The next question is, how do I get accountants to buy it? Accountants will buy anything, by the way. They will buy anything that's shiny. Then they will think, what do I do with it? Wrong story.
Bianca Basilio: Yeah. Yeah, for sure.
Mark Holton: So I don't think there's any great fear out there at the moment. In fact, I think there's more interest in business advisory with accounting firms than I've ever seen. But the problem and the failure to implement hasn't changed. It's like 30 years ago, we had no software, but clients were still asking for help. So we did what we did. And the software of choice was Excel. The software of choice today is still Excel. So how far have we grown in 30 years?
Bianca Basilio: Yeah, I do love Excel, but we need to, you know. Yeah.
Mark Holton: Accountants lobby Excel Bianca. We do spreadsheets when there's no need for a spreadsheet. That's how we're built. That's in our DNA.
Bianca Basilio: Yeah, well the good thing, some automations still use Excel, so that's good, we can still use Excel for some things.
Mark Holton: I tell you, every practice, let's say a client comes in today and needs a cashflow done. 90 % of the time they'll do it in Excel, even if they got cashflow software, because it's easier and quicker. The challenge is next time when you've got to update it, you've got to do it again. So there is efficiency there, but...
Bianca Basilio: Exactly. So... For sure.
Mark Holton: What do I think the industry is scared of? I think it's scared of change to a certain extent. I think it's too comfortable, definitely. I've been saying that for years. I think it needs something like the Brits have done, and that's all of a sudden the government changed the whole model in this making tax digital thing. And all of a sudden there's a whole stack of compliance income that's gone. Sort of makes you stand up, doesn't it? And you look at
Bianca Basilio: It is.
Mark Holton: Right around the world, who created the compliance model? The government. Who's got the ability to change it? The government. What has the accountant got to say about it? Nothing. Yet we're so reliant on that source of income. Yet we say to clients, don't put all your eggs in one basket. Look to diversify. Maybe we need to take some of that advice ourselves.
Bianca Basilio: Exactly. Hahaha Yeah. second. So if a firm want to change only one thing this year, why would you give them the highest return? What do you think that is? ⁓
Mark Holton: Sit down today, review your strategic plan if you have one. Look at it as what have you achieved over the last 12 months. Mark yourself out of 10 on what you said you do compared to what you did do. Look at the next three years if you want, but make sure you've got strategic actions in place for the next 12 months. Because if you don't deliver the next 12 months,
Bianca Basilio: I forget the important is the action,
Mark Holton: The next three years ain't gonna happen. Plan today, execute tomorrow. Develop strategies that are realistic, not too many, but then from that point, hold yourself accountable to it. Strategy updates need to be part of every board meeting in every accounting firm.
Bianca Basilio: So what do you think stops them from doing it?
Mark Holton: time, resources, ⁓ nobody's there jumping up and down asking the sort of tough questions they need. And then when they put someone in, they don't like what the person keeps doing, so they get rid of them. Lack of commitment. They're not committed enough. They all say they are. They all say, we'll do it. They start well, then...
Bianca Basilio: they don't. So disruptive question here, so do you think some firm owners don't actually want to build a real business even if they say they do?
Mark Holton: Yes, particularly those ones getting towards retirement that are just looking on getting a return back on the investment they've put in. It takes a while to develop a high performance business like that. It doesn't happen. It's not like turning on a light switch. doesn't happen overnight. It takes a while. Someone that might be looking at the next two or three years before they get out, they're just looking at how do get my money back? How do I transition into retirement? I understand that perfectly. I've seen numerous examples of it. The plan to change the model is too late.
Bianca Basilio: Yeah. So when you.
Mark Holton: because they're going to get out. The challenge should be the next layer of owners who are looking at the next 10 years, the next 15 to 20 years. What sort of business do they want to build? Could they build a business that actually diversifies and is worth more in the future than it's worth today?
Bianca Basilio: Yeah. So when firms resist these systems and strategic part of it, why are they actually afraid of losing? What would you say it is?
Mark Holton: I don't think they're afraid of losing. I just think they're so used to doing what they've always done.
Bianca Basilio: Yeah. So what did they choose instead? Comfort? Just, you know, what they know.
Mark Holton: Which is it. because it's profitable? Because everybody's saying that compliance is dead and isn't? No. You know, it would never be dead in my lifetime, but you'd be fraught with danger to think it's going to stay the way it always has.
Bianca Basilio: It isn't, definitely not. Yeah. Do you think there is a cost for this choice of not moving forward as a business advisor?
Mark Holton: The cost is another firm does it, goes out there, promotes it, and all of a sudden your high quality A-class clients that you think they love you don't love you that much. It's losing high quality clients to firms that are offering more than you.
Bianca Basilio: in
Mark Holton: And that's the day you gotta look yourself in the mirror and say, why didn't I do this? Why am I waiting to lose something to realise that I should have done it, gone down a different path to hold it?
Bianca Basilio: Yeah. 100%.
Mark Holton: I hope the industry in the future doesn't do that, but I know it is.
Bianca Basilio: So for anyone listening who wants to follow your work or connect with you, where's the best place to find you?
Mark Holton: Yeah, probably the easiest one these days is to get me at markholton.com.au. That's mark, M-A-R-K, Holton, H-O-L-T-O-N, one word, .com.au. And that's probably the easiest way to get me Bianca.
Bianca Basilio: Mark, thank you. That was incredibly valuable. I really appreciate your time and your perspective here.
Mark Holton: It's been more pleasure, I've enjoyed the chat
Mark Holton: It's a good question Bianca. The industry I think has changed and changed dramatically over the last 40 years that I've been involved. I wish it was only 35 but let's be honest up front. Over those 40 years we've gone from doing things manually to just about everything we do now is automated.
Bianca Basilio: you
Mark Holton: But over those 35 to 40 years, we're still seeing the same thing in the industry. And that is firms are too heavily obsessed with compliance activity. And because of that, they're falling back on it as their security blanket. They're not looking to, I'm not saying taking risks, but they're not looking for what happens next enough in my opinion. know, roughly 30 odd years ago, my accounting firm, we were focused very heavily on compliance and it was frustrating me. You know, we had clients that needed business support. We had clients that needed business development. We had clients that needed someone to sit there and talk to and in the form or probably a business coach, call it what you will. We never had the time. We never looked at ourselves and said, are we truly working with the right clients? Are we spending too much time working with the wrong clients? And because of that, our capacity was always under pressure. We made that decision 30 years ago to move, not to change to the extent that it replaced compliance, because that'll never happen, but to move more into business advisory work within our firm. And that took an awful lot of time, an awful lot of transition. But in my mind, that single one decision converted us from a practice to a high performance firm. Did we do it right? Probably not. If I had to do it again, would I do it differently? Absolutely. But I had an enormous amount of success and an enormous amount of fun doing it. And I saw clients grow, and I saw their businesses grow, and I saw their financial literacy grow. And had I not... going down that pathway, I doubt very much I'll be talking to you today. because the industry frustrated me so much and the fact that clients or so little value in what we did. And because of that challenge, our bill quite regularly, I would have looked for something else to do. So it was like an epiphany for me to, to get to that point in my career where I thought there's got to be more Bianca than just sitting there pounding out tax returns year in year out. Admittedly making a good profit for it. Don't get me wrong. You know, and still today, 30 years later,
Bianca Basilio: Yeah.
Mark Holton: it's still as if not more profitable than ever before because the large amount of what we do these days is automated and we should be doing it quicker and if we are doing it quicker we're doing it more efficiently and we should be making more profit but how do I take my firm to the next level that's not doing what you've always done year in a year out it's doing something different it's taking a calculated risk
Bianca Basilio: Yeah. a sec.
Mark Holton: It's planning and strategizing well towards where you want your firm or your business. Let's just call it a business instead of a firm in the future, because you know exactly where it is today.
Bianca Basilio: Yeah. That's perfect. Yeah. So in your experience, like what separate business, I'll say pharma businesses, the plateau from they actually become enterprises and they grow.
Mark Holton: I've seen thousands of firms over the last 30 years that thought business advisory was a great idea. ⁓ Some started and then failed. Some started, then stopped. Some never started. Why the question should be, and that is because they just kept falling back on doing compliance activity, tax audit work, whatever it was, because that was comfortable. Advisory is uncomfortable. You're not dealing with something that if the client doesn't do it, the government will penalise them for not doing it.
Bianca Basilio: Yeah.
Mark Holton: advisory work, business development work is not compulsory. It's not regulated. It doesn't come with a penalty if you don't do it. So it's harder to engage. It takes a different mindset. It takes a different strategy. I've seen so many firms look to change their strategy, but they're not executed. Yet expect clients to do so. And I think that's what separates a typical accounting firm from a high performance firm or high performance business. And that is if you're going to set a strategy, execute it, hold yourself accountable, get someone to be your accountability person to ask the sort of questions and follow you up and drive you nuts. Otherwise, it's nothing more than a bit of paper that everyone thinks is a great idea. And if that strategy document includes
Bianca Basilio: yeah it's also super right just act like plan act yeah yeah
Mark Holton: an area where you're going to offer new services to existing clients, when you're going to use those new services to leverage new, better quality A-class or B-class clients, then commit to it. know, resource it, change the model, do whatever's necessary. It's not negotiable.
Bianca Basilio: Exactly.
Mark Holton: See, when I work with an accounting firm on strategy, I break it down into five key areas. And the first area, the most important one is financial management. Because at the end of the day, we're doing it for the love. We want to see financial rewards come back. But those financial rewards will come back if you can get the other four right. The second pillar is people. Right people, right job, right task, right pay rate.
Bianca Basilio: Exactly.
Mark Holton: And if that isn't following that model, you will not profit to the level that you want to. The third pillar is your procedures, your processes. Are they the most efficient they can possibly be? Do they need revision? And not just in compliance activity, but advisory activity. You need systems and processes there. You need to be able to have a regulated model where the right person at the right pay rate does the right task. And Bianca, I see too many accounting firms having too many people too high on the employment roster at too high a realizable rate of return doing too low level work in advisory because they've never trained and developed their team to do it.
Bianca Basilio: Yeah.
Mark Holton: The fourth one is clients. They might annoy you, but they're necessary. Are you looking after them the best way you possibly can? Do you know what your ideal client is? And are you hunting for it? And are you culling bad clients on the basis of that criteria? Too few firms have ever sat down and put it on paper. And lastly, probably equally as importantly as services, what else can you offer the client to build better, more successful, more profitable, cash rich businesses that are worth more tomorrow than they're worth today? And if that's how you want to run your business, that's how you want to set up a strategic plan to do so, then there's no excuse for failure.
Bianca Basilio: Amazing, love that the five pillars are fantastic. So what do you like, when do you usually realize a firm won't scale when you don't see these pillars happening?
Mark Holton: because they won't commit to their strategic plan. It's easy to put in a plan, for example, under services that I want to offer business advisory work to one client per month over 10 months at an average of $1,000 a month, for example. That's easy. It's a copy and paste. The question then is how do you do it? So you go back to your first pillar, which is people. Do you have the right people? Do they want to do this work? If you don't have the right people, where are you going to find them from? And then how do I set up a business advisory division that concentrates just on that? Because if they're concentrating on doing all their tax work and audit work, and you're going to drop this on top of them, they're never going to get to it. They'll always fall back on what they're comfortable with. So how do I resource that model? What systems and processes under the processes pillar do I need to put in place to make sure that advisory can be done by the right people in the right firm at the right pay rate? I can't emphasize that enough because if you don't get that right, you can't scale it. And if you can't scale it, who's going to do it when you're on holiday or you're not there or you're sick or whatever?
Bianca Basilio: Exactly. is that one.
Mark Holton: Okay, I know you can scale an accounting firm based on compliance because everybody basically knows what to do and everybody's involved. Advisory is not treated with the respect that it needs to get it going. You know, and then clients, let's let's just go and take the top 20%. That's all just the top 20 % of your clients and love them to death. Set yourself a goal of doubling their compliance fee in the next 12 months and hold yourself accountable to it. You know what you gotta do? You gotta build a business within a business. Not add pressure to an existing model that if you sat down and thought about it will crack if you put more pressure on it.
Bianca Basilio: There's no ready for it.
Mark Holton: You know, we don't go and build a second story on a house that has a faulty first story. It makes no sense. We've got to get that scalability right. And it comes back to three things, systems, processes, and people. Without those three, and the most important one there, Bianca, is people. Without them, you're better off seriously not even going down that pathway.
Bianca Basilio: One of the... Yeah.
Mark Holton: Just do compliance work, so you're blue in the face and you'll still make money. But you won't build better clientele. And if another practice goes down that pathway of advertising that, good luck holding on with them.
Bianca Basilio: Yeah. Listen. So I assume like how can you tell very quickly if a firm is a real business or it's just like a practice?
Mark Holton: because it's willing to take clients to the next level and do whatever's necessary to put in the systems processes people to get them there. I'll give you an example, Bianca. A firm I know very well in Australia has had everyone try advisory over the last five years. And it went like that.
Bianca Basilio: So when you see a firm death, yeah.
Mark Holton: because they got too busy, they had too many clients, they had other pressures running the practice. They bit the bullet a couple of years ago and went out and employed a business advisory manager and set it up as a separate division within the firm. The success that they've had... because one person and a bit of support are now, you know, with budgets in place and KPIs in place, are focusing on that. And all the partners need to do is feed the client into it. The mistake is getting busy partners, busy seniors, busy managers to become busier. That's where it files.
Bianca Basilio: So when you see a firm that really is a business, what type of systems are usually already in place behind the scenes?
Mark Holton: Well, look at, you look at, you've got to look at what I call diversified services as distinct from compliance activity. Compliance activity, there's a me and a one systems, processes, checklists, you know. One of the things I challenge every firm with with processes is have you sat down and mapped out a job scoping plan from the moment it comes in to the moment it leaves.
Bianca Basilio: exactly.
Mark Holton: So if somebody comes in as a new employee, they can see exactly how you do business. A lot of firms struggle with that when they go offshore because they haven't documented well enough what they do onshore and they struggle getting offshore with staff to do it. But with compliance, it's all systemized. Then everyone in the firm has a little role to do.
Bianca Basilio: The offshore will expose the issues.
Mark Holton: And the partner sits at the top of the tree. If you think of it like a tree, the partner sits at the top. What should the partner be doing? And that's engaging existing clients, developing new opportunities for clients. Too often they're too heavily on the tools. When it comes to an advisory job coming in, who's going to do it? Well, the partner, because only they can.
Bianca Basilio: Yeah.
Mark Holton: because we haven't invested enough time, resources, activity in training, you know, the next level, the next level, the next level, the next level, you know, and that's where it falls.
Bianca Basilio: And it's so simple, right? It's just that you map out your workflow and you can see exactly how it looks like. It's so simple when you think about it, but people don't do it, really.
Mark Holton: because they're too busy doing what they always do and they're too comfortable doing what they always do. I can say that I've been in the game for 40 years. know, if people don't like it, I don't care. What are going do to me? I'm on the end of my career, not the start, but I've seen an awful lot in 40 years. know, and well, 30 years ago, I pushed my firm, some screaming into advisory. If I had to do it again, I'd do it totally different. At least I had a go.
Bianca Basilio: Exactly. Yeah yeah it's the truth isn't it yeah so No. Yeah. Yeah, exactly. Experience. So what do owners think matters that actually doesn't?
Mark Holton: least I tried. Well, when you're talking about working with business owners, you've got to get inside their head. You know, you can't be thinking like an accountant. Let's be honest, how many business owners come into their accountant, the accountant puts financial data in front of them, they sit there with glazed eyes, because all they want to really know is how much tax do I have to pay? You know?
Bianca Basilio: It's like...
Mark Holton: We're not telling stories. We're not financial storytellers. We're not turning numbers into knowledge. We've just got numbers. Numbers are wonderful. Accountants love them. Business owners like cafe owners and builders and farmers and everybody else, they're not financially trained. At the end of the day, and I'll say this because I've learned this over the years,
Bianca Basilio: Yeah.
Mark Holton: Why do you want to add more value to a service that they have to come to you for? That they can't do themselves? And everybody does the same way, even though you think you're different, they're not. Why are we trying to add so much value to the compliance model and so little value to the business advisory development enhancement model? What do I think owners want? They want to know whether or not they're doing things right. They want someone to talk to to be able to bounce ideas off them. You know what else I really believe they want? And I know this for a fact. They want to see the financial impact of key business decisions before they're made. Because half the time they make a decision, then their advisor finds out later too late. They want a service that I call scenario planning.
Bianca Basilio: 100%.
Mark Holton: And that is tell me whether this is good or bad now so I can make that decision tomorrow knowing it's the right one. Now that's easy to say. When it comes to a firm, you've got to have your infrastructure in place to be able to deliver that when the client needs it. Not call them back for two or three days or email them a week later.
Bianca Basilio: Exactly. Exactly.
Mark Holton: They need it now. So unless your systems, processes and people resources are right, then all you'll be doing really is failing a client in a service model. Clients want our accountants to be better business development people. Help them make more profit. Help them strengthen their cash flow. Help them put in structures so that when things are due, they've got the cash there to pay it. And more importantly, help them make their businesses worth more tomorrow than they're worth today.
Bianca Basilio: That's so resonating. I just want this service as well. I just want someone to give me like, what is this structure that works for you?
Mark Holton: Look, some of them Bianca, some of them will say, I only want you to do my tax return. Great. They're not an A-Bowie or B-Class client. They're a C. So if you want to keep doing that, then allocate that resource and take your high-powered staff, your potential development staff into another sphere. You know, if the client doesn't want it, advisory won't suit everyone. Financial planning doesn't suit everyone. Every client doesn't need human resources advice or IT advice, but the top 20 % are the top 20 % because they do it well. So if I can take 10 clients, I can launch advisory services with them.
Bianca Basilio: is Yeah.
Mark Holton: Even at a thousand dollars a month, that's 12,000 by 10, 122,000 more dollars than what you currently got. And all you're doing is enhancing the relationship with an existing good client. You're making it sweeter. You're making it stickier. They're less likely to leave you and they're more likely to turn what I call a walking, talking billboard and go out there and tell everyone how great you are.
Bianca Basilio: Okay, Lina? Exactly. So why do you think like I feel like I wouldn't say most firms struggle with this business advisory? It's like fear or comfort, identity?
Mark Holton: What is the downside of that? It's definitely comfort. It's a lack of confidence. It's a fear that the client might ask something that I don't know the answer to. Who cares? If they asked you a complex tax question and you didn't know the answer, then what would you do? I mean, you wouldn't just tell them anything and hope it's right. You take a step back. and say, look, that's a really good question, it's a complex issue, let me invest a couple of hours, which will cost you X amount, and get the right answer for you. What's the difference? They ask you something you don't know, that's a piece of gold that you got in your hand to deliver something new.
Bianca Basilio: Fantastic. Yeah. And you know for the next one the SQS is, right? So that's it. Learning curve.
Mark Holton: Yeah. To answer the question even more, I think it's a lack of what I call the two C's, which is commitment of board level to change the model to allow something else other than compliance to work and a distinct lack of capacity in the individuals on the firm.
Bianca Basilio: I love that. I love the perspective. Yeah, fantastic.
Mark Holton: The other thing it needs desperately is a business advisory implementation plan. It needs a plan from start where you are today to where you want to be in the future. It needs goals and needs budgets and needs KPIs. know, I mean, if I said to you today, how many clients do you want to work with? And you told me 10. And I say, well, if we get 10 in 12 months, what's the next goal? What's the next goal for the next three years? What do you want? How much income do you want to earn out of this? How much profit do you want to make?
Bianca Basilio: Because I, you need clarity. Yeah.
Mark Holton: You've got to plan the day to execute tomorrow. And one of the biggest mistakes firms make is go out and buy software. Then think, what will I do with it? one of the biggest mistakes firms make is go out and buy software. Then think, what will I do with it? They put the cart in front of the horse. They put the cart in front of the horse. The cart's gotta remain behind the horse. You gotta work out what type of services you wanna offer the client, what type of clients you wanna offer it to, what type of ⁓ charge rate you're gonna go out there with, how much it's gonna cost you to deliver. And when you got those ducks in a row, then we look for software to help you become more efficient.
Bianca Basilio: Exactly.
Mark Holton: Not go out there and buy software then think, well, what do I do with it? Because you know what you'll do with it? Nothing. Then you'll hold onto it for about six months because you're not going to get rid of it. And 12 months later, you'll get rid of it. And then you go, you look at the return on investment, there is none.
Bianca Basilio: Exactly. I like, what I say exactly that. None, completely. Because usually people tend to install systems and work around the system, but it's the opposite. The system needs to work around your workflow and your people. think that's the opposite.
Mark Holton: Totally. Software is an aid to deliver. If you don't know what you're delivering, to whom you're going to deliver it and how much it costs, good luck.
Bianca Basilio: Exactly. Yeah. So many ways to, yeah. So, would you say that this is the biggest, when the owner usually become the biggest bottleneck in the firm?
Mark Holton: one not letting go. Two, expecting their team to do more than what they're currently doing when they don't even know if the team are comfortable with it. Three, failing to look at the model in the future that's going to satisfy their strategy. And four, committing to a strategy and not executing it.
Bianca Basilio: Yeah. It was the hardest. Yeah.
Mark Holton: and blaming everything and everyone for that.
Bianca Basilio: But not themselves. Yeah. And what's the hardest responsibility for them to let go of?
Mark Holton: ⁓ when a good client brings in a job that might not be compliance based and because they can do it, they do it without thinking, can I take Bianca, train her, let her have a go at it? And I become the reviewer, not the doer. Cause I've never invested the time in Bianca to give her a chance. Not knowing well enough whether their staff actually want to be. working in this space. Just assuming because they're good at what they do, they'll be good at something else. I asked a firm the other day, of your staff, how many of them are financial storytellers? And the partner looked at me like I was talking another language. So how many of your staff actually want to tell stories to accountants, want to take them on a journey that starts with once upon a time and ends with happily ever after, but the critical thing is what's in the middle.
Bianca Basilio: Exactly.
Mark Holton: And he looked at me like I was talking a different language. He doesn't know his team. And I said to him, very blatantly and honestly, moving into this space is the wrong thing for you to do to work out whether you've got the right staff. And if you haven't, you've got to find them from somewhere.
Bianca Basilio: That's it. Exactly. That's amazing. ⁓ That's very valuable. So when you look, going back to the systems, right? So we need to have systems working well for you. When you look at the most accounting firms today, where do you think automation would actually make the biggest difference?
Mark Holton: Okay, good question. It's made a huge difference already. When we look back at the old days of how we had the handwritten tax returns, then we moved to word processes, then we moved to computer systems and electronic lodgements and digital submissions, that's just phenomenal. I think anything that's done manually in an accounting firm can be automated and will be. The real challenge for us in the future is AI. ⁓ We're talking a lot about it. ⁓ I hear it day in, day out. I receive social media posts, people wanting to sell me a 30 day AI course and I'll be the most dangerous person in the world. Well, I don't want to be the most dangerous person in the world. I'm quite happy doing what I do. So they're pushing the wrong way to me. The challenge with AI and other services, undoubtedly in the future, we're going to have more data than we've ever had before.
Bianca Basilio: Hahaha Exactly. Yeah. Yeah.
Mark Holton: We're going to have more intelligence about the client, their business, their industry than we ever have before. The question, Bianca, is what do do with it? And how much do you charge for it? And you can't charge anything for it unless you turn it into a service. So I've got all this information, all this intelligence, brilliant stuff.
Bianca Basilio: Exactly, but this helps the case,
Mark Holton: You know, I can go into anything and say, give me some data about this industry and KPIs about this industry and the rest of it. But what are you going to do with it? Sure. It's going to make us more efficient. Robotics are going to come in and I think they'll have a major impact on the compliance activity because anything's any cognitive structure, you know, can be automated. So we're to be doing stuff quicker. We're going to, you know, we're going to have
Bianca Basilio: That's that one.
Mark Holton: the implication of technology when it comes to lodgement of tax returns is changing. Just have a look what's happening in the UK with their making tax digital project. Hasn't hit Australia yet. Will it probably? When? Who knows? But then we've got all this other data. I saw an example recently using the internet, using AI, of doing a complete analysis of the hospitality industry in one part of Australia. And it was showing, you know, what type of client stays, how long they stay, ⁓ how much they spend, what they're willing to spend, et cetera, et cetera, et cetera. And I can basically take it all, it and look beautiful. And I put it in front of a client. But we're gonna do that for nothing.
Bianca Basilio: You
Mark Holton: So what does that service call? How much are gonna bill it for? Because I'll go back to what I said earlier with the compliance model, why you trying to add some value to something that the client has to do, can't do themselves and already come to you? If you're gonna do something, make the client's business better, more profitable.
Bianca Basilio: Exactly. Exactly. You need to leverage what you can get with AI as well. The information, it's ⁓ so many things you can get with AI.
Mark Holton: What will the future hold? I think we'll be looking at real-time benchmarking and real-time budgeting before we know it. We won't be looking at benchmarking that's 12, 18 months old. It'll be real-time. We won't be sitting down there with budgets that were prepared 12 months ago. They can be updated. They can be reviewed. They can be managed online. They can change as people put transactions in. I think AI will have a major impact on what we do as well as machine learning. But until someone can explain to me how do I turn it into a service and how much I bill it for and can tell me what other firms are billing it for, I'm excited but I'm not enthused.
Bianca Basilio: Exactly. Do you think the industry is actually ready for this deep automation or there's still resistance?
Mark Holton: I don't think it has a choice. When you look in the UK, was the industry there ready for making tax digital? They didn't have a choice. The government said, we're going to do it. It's probably the best thing, you know? If you don't have a choice, then you've got to bite off more than you can chew and chew hard. If you have got a choice, you can procrastinate. So I think my advice to firms in AI is get involved. Don't treat it as something nice to look at.
Bianca Basilio: second. Yeah, well. 100 %
Mark Holton: start to make it part of your strategy.
Bianca Basilio: and leverage, yeah.
Mark Holton: It involves leverage, learn.
Bianca Basilio: 100%. Yeah, but do you do you still like, especially in Australia, do you feel this resistance between in the accounting firms?
Mark Holton: No, I think I don't think there's enough knowledge to make a resistance.
Bianca Basilio: ⁓ really? So it's a step back?
Mark Holton: I think everyone's sort of amazed by what they can do. They've got chat GPT or some other sort of application they can jump into occasionally. I don't think they're making it part of their workflow enough. And I don't think they have the strategy around it to implement it as part of their workflow. It's not to say it won't be done. I think it'll have to be done to remain competitive in the future.
Bianca Basilio: Exactly. And if you have to be, yeah. And do you think this is knowledge issue? they need to. And also lack of time, right? Probably too busy with this, you know, day to day.
Mark Holton: That's a significant problem. It's lack of time, lack of capacity, lack of the right staff, and then falling back into what we've always done. That's what needs to change.
Bianca Basilio: Yeah. it's still about AI. Like it's getting a lot of attention right now. ⁓ And when you look the noise, where do you think is generally fits ⁓ like inside a couch firms in a practical way?
Mark Holton: I think certainly the availability of high quality data and knowledge about the client, their business. ⁓ What it doesn't tell us is what's important to the client from the client's perspective. I call that a WITI, which stands for what's important to you. I think that's something we still need to address.
Bianca Basilio: love that.
Mark Holton: How do we know what a client needs if you never ask them? But through AI, we'll have availability of, let's be honest, if you're gonna do a presentation these days, why don't you go into AI first of all and ask them to do it for you? And then turn it into a PowerPoint presentation and teach it how you like things and teach it how you want it formatted and laid out and what your template is. Why aren't we trying to invest in AI to do the 95 % of the tasks we used to have to do ourselves?
Bianca Basilio: Exactly what I see in accounting firms have most to gain with AI capacity, right? They have like they'll gain capacity to work in the...
Mark Holton: They will undoubtedly gain capacity to do other diversified things. That doesn't mean they will because if they don't have the right staff, the right systems, the right processes, but they need to start to invest in that now. They make up too many lame excuses for not doing this stuff. I will do it after Christmas. Christmas is the greatest excuse in the world to do nothing.
Bianca Basilio: Exactly. 100 % agree. I know.
Mark Holton: Then when they get back, I'm a bit busy. You know, because I haven't been here for the last few weeks, so I'm a bit busy. Particularly in Australia, it's a pain because we stop in late December and don't come back to mid-January. Then they don't want to see us do anything until February. Then there's the next deadline, the next deadline. Their strategy's wrong. The other thing I see with firms when it comes to strategy is they do a strategic planning day, but they don't hold themselves accountable every year.
Bianca Basilio: Yeah. Yeah. Is it?
Mark Holton: Yet I sit on not-for-profit boards in Australia and have for 30 years and we do a strap planning update or a strap planning day every year. Accounting firms do it, create a plan, put it in a drawer and forget about it. There's no accountability. And that comes from the top. That accountability has to be there at board level. So accountability drives performance. AI will only be beneficial to the part where their strategies are being executed. I think you'll see an impact on AI when it comes to compliance activity without doubt. I think you'll see more robotic bookkeeping and robotic inferences coming into play. I've got no doubt about that.
Bianca Basilio: 100%.
Mark Holton: ⁓ I think you're going to see a million and one apps launched and loaded out there that can do just about anything you want. The question is when you get off the merry-go-round and how many do you buy and how many can you use? ⁓ I've seen more developments in business advisory software than I've ever seen in my life. I think the market at the moment doesn't know which one to use. So there's a bit of an issue there around what do I buy? What do I use it for?
Bianca Basilio: Exactly, it's a lot of noise and you get overwhelmed with so many information that you have.
Mark Holton: an awful lot of noise. It's fraught with danger, not utilising it, grabbing it, not just sitting back and saying, I'll wait to see what happens. I think we've got to be on top of it. And if you're going to be on top of anything, comes back to, is it part of your strategy? Strategy needs to drive performance, not the other way around. And that's where I see firms not doing it well enough and not getting their clients to do it well enough.
Bianca Basilio: Exactly. up soon. That's important. So there is anything like in this that you'll be cautious about?
Mark Holton: I've things, new technology's never scared me. It never has. ⁓ I think it scares some people. ⁓ Lack of knowledge, does it scare me? Probably not. Just haven't got the time to get as much as I need. But if something new's there and somebody tells me about it, I'm the first one to have a look at it and give it a trial and give it a go. I have companies coming to me with new ideas and advisory saying, I have a look at it? The next question is, how do I get accountants to buy it? Accountants will buy anything, by the way. They will buy anything that's shiny. Then they will think, what do I do with it? Wrong story.
Bianca Basilio: Yeah. Yeah, for sure.
Mark Holton: So I don't think there's any great fear out there at the moment. In fact, I think there's more interest in business advisory with accounting firms than I've ever seen. But the problem and the failure to implement hasn't changed. It's like 30 years ago, we had no software, but clients were still asking for help. So we did what we did. And the software of choice was Excel. The software of choice today is still Excel. So how far have we grown in 30 years?
Bianca Basilio: Yeah, I do love Excel, but we need to, you know. Yeah.
Mark Holton: Accountants lobby Excel Bianca. We do spreadsheets when there's no need for a spreadsheet. That's how we're built. That's in our DNA.
Bianca Basilio: Yeah, well the good thing, some automations still use Excel, so that's good, we can still use Excel for some things.
Mark Holton: I tell you, every practice, let's say a client comes in today and needs a cashflow done. 90 % of the time they'll do it in Excel, even if they got cashflow software, because it's easier and quicker. The challenge is next time when you've got to update it, you've got to do it again. So there is efficiency there, but...
Bianca Basilio: Exactly. So... For sure.
Mark Holton: What do I think the industry is scared of? I think it's scared of change to a certain extent. I think it's too comfortable, definitely. I've been saying that for years. I think it needs something like the Brits have done, and that's all of a sudden the government changed the whole model in this making tax digital thing. And all of a sudden there's a whole stack of compliance income that's gone. Sort of makes you stand up, doesn't it? And you look at
Bianca Basilio: It is.
Mark Holton: Right around the world, who created the compliance model? The government. Who's got the ability to change it? The government. What has the accountant got to say about it? Nothing. Yet we're so reliant on that source of income. Yet we say to clients, don't put all your eggs in one basket. Look to diversify. Maybe we need to take some of that advice ourselves.
Bianca Basilio: Exactly. Hahaha Yeah. second. So if a firm want to change only one thing this year, why would you give them the highest return? What do you think that is? ⁓
Mark Holton: Sit down today, review your strategic plan if you have one. Look at it as what have you achieved over the last 12 months. Mark yourself out of 10 on what you said you do compared to what you did do. Look at the next three years if you want, but make sure you've got strategic actions in place for the next 12 months. Because if you don't deliver the next 12 months,
Bianca Basilio: I forget the important is the action,
Mark Holton: The next three years ain't gonna happen. Plan today, execute tomorrow. Develop strategies that are realistic, not too many, but then from that point, hold yourself accountable to it. Strategy updates need to be part of every board meeting in every accounting firm.
Bianca Basilio: So what do you think stops them from doing it?
Mark Holton: time, resources, ⁓ nobody's there jumping up and down asking the sort of tough questions they need. And then when they put someone in, they don't like what the person keeps doing, so they get rid of them. Lack of commitment. They're not committed enough. They all say they are. They all say, we'll do it. They start well, then...
Bianca Basilio: they don't. So disruptive question here, so do you think some firm owners don't actually want to build a real business even if they say they do?
Mark Holton: Yes, particularly those ones getting towards retirement that are just looking on getting a return back on the investment they've put in. It takes a while to develop a high performance business like that. It doesn't happen. It's not like turning on a light switch. doesn't happen overnight. It takes a while. Someone that might be looking at the next two or three years before they get out, they're just looking at how do get my money back? How do I transition into retirement? I understand that perfectly. I've seen numerous examples of it. The plan to change the model is too late.
Bianca Basilio: Yeah. So when you.
Mark Holton: because they're going to get out. The challenge should be the next layer of owners who are looking at the next 10 years, the next 15 to 20 years. What sort of business do they want to build? Could they build a business that actually diversifies and is worth more in the future than it's worth today?
Bianca Basilio: Yeah. So when firms resist these systems and strategic part of it, why are they actually afraid of losing? What would you say it is?
Mark Holton: I don't think they're afraid of losing. I just think they're so used to doing what they've always done.
Bianca Basilio: Yeah. So what did they choose instead? Comfort? Just, you know, what they know.
Mark Holton: Which is it. because it's profitable? Because everybody's saying that compliance is dead and isn't? No. You know, it would never be dead in my lifetime, but you'd be fraught with danger to think it's going to stay the way it always has.
Bianca Basilio: It isn't, definitely not. Yeah. Do you think there is a cost for this choice of not moving forward as a business advisor?
Mark Holton: The cost is another firm does it, goes out there, promotes it, and all of a sudden your high quality A-class clients that you think they love you don't love you that much. It's losing high quality clients to firms that are offering more than you.
Bianca Basilio: in
Mark Holton: And that's the day you gotta look yourself in the mirror and say, why didn't I do this? Why am I waiting to lose something to realise that I should have done it, gone down a different path to hold it?
Bianca Basilio: Yeah. 100%.
Mark Holton: I hope the industry in the future doesn't do that, but I know it is.
Bianca Basilio: So for anyone listening who wants to follow your work or connect with you, where's the best place to find you?
Mark Holton: Yeah, probably the easiest one these days is to get me at markholton.com.au. That's mark, M-A-R-K, Holton, H-O-L-T-O-N, one word, .com.au. And that's probably the easiest way to get me Bianca.
Bianca Basilio: Mark, thank you. That was incredibly valuable. I really appreciate your time and your perspective here.
Mark Holton: It's been more pleasure, I've enjoyed the chat
