E162: Reconciled CEO, Michael Ly Shares Lessons Learned from Acquiring Accounting Firms - Watch Here

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Reconciled provides industry-leading virtual bookkeeping and accounting services for busy business owners and entrepreneurs across the US. Their team is experienced in M&A, and they hire the best talent available. Reconciled sets the standard for consistency and quality that you can count on.

Visit https://www.reconciled.com/

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About The Guest(s): Michael Ly is the CEO of Reconciled, a company that provides bookkeeping and accounting services to small businesses and startups. With a background in accounting and finance, Michael has built his company through mergers and acquisitions, gaining valuable experience in the process.

Summary: Michael Ly, CEO of Reconciled, shares his journey in the accounting industry and how he built his company through mergers and acquisitions. He discusses the challenges and lessons learned from acquiring other firms and offers advice for business owners looking to buy or sell a business. Michael emphasizes the importance of seeking help and advice from others, highlighting the generosity of people in sharing their knowledge and experiences. He also stresses the value of reaching out to industry experts and business owners for guidance and insights.

Key Takeaways:

• Building a successful accounting firm requires providing affordable, accessible, and predictable bookkeeping services to small business owners.
• Acquiring other firms can be a strategic way to grow and expand your business, but it requires careful planning and integration.
• The transition period after an acquisition is crucial and should be given sufficient time to ensure a smooth integration and cultural alignment.
• Seeking help and advice from experienced professionals and industry experts is essential when navigating the complexities of mergers and acquisitions.

Article:

How to Successfully Navigate Mergers and Acquisitions in the Accounting Industry

As the CEO of Reconciled, a leading provider of virtual bookkeeping and accounting services, Michael has had the opportunity to navigate the world of mergers and acquisitions (M&A) in the accounting industry. Over the years, He has learned valuable lessons and gained insights that can help small business owners and entrepreneurs successfully buy or sell a business. In this article, we will share his experiences and provide guidance on how to navigate the M&A process in the accounting industry.

The Challenges of Accounting in Small Businesses

Accounting is a critical function for any business, but it is often overlooked or neglected in small businesses. Many small business owners rely on outdated methods, such as keeping receipts in a shoebox or using Excel spreadsheets, to manage their finances. This lack of proper accounting practices can lead to inefficiencies, errors, and missed opportunities for growth.

Recognizing this common problem, Michael founded Reconciled in 2016 with the goal of providing affordable, accessible, and predictable bookkeeping services to small business owners. Our mission is to streamline financial processes, prepare businesses for growth, and help them make informed decisions based on accurate and up-to-date financial data.

From Accountant to Entrepreneur

Michael's journey in the accounting industry began at a young age. Michael started working in accounting at 16 and continued to gain experience in various roles throughout his career. After studying accounting and business at Arizona State University, He joined a local accounting firm and later became the CFO of a company in Seattle, Washington.

In 2011,  Michael and his wife moved to Burlington, Vermont, where he continued to work with small businesses and startups as a consultant and interim CFO. It was during this time that I noticed a common problem among small businesses - the lack of trained accountants. Most small businesses relied on untrained individuals, such as the owner or a spouse, to handle their accounting needs. This led to inconsistencies, errors, and a lack of financial visibility.

Driven by his passion for helping small businesses succeed, Michael launched Reconciled in 2016. Our goal was to provide an affordable, accessible, and predictable bookkeeping service that all small business owners could access. We focused on leveraging technology and remote work to deliver high-quality accounting services to our clients.

The Power of Mergers and Acquisitions: Growing Through Integration

In the accounting industry, most firms are small and struggle to grow beyond a certain revenue threshold. This is often due to the mindset of accountants, who see themselves primarily as accountants rather than business owners or entrepreneurs. As a result, many accounting firms remain small, with limited capacity to serve more clients or expand their services.

Recognizing this challenge, Michael decided to pursue a growth strategy through mergers and acquisitions. In 2020, he developed a thesis and playbook for acquiring smaller accounting firms and began actively reaching out to potential sellers. Michael hired a buying broker and leveraged his network in the industry to identify potential acquisition targets.

According to Michael Ly, CEO of Reconciled, "Get help. I benefited tremendously from people to get help. And don't be afraid to ask people for advice in that process. Reach out to anybody. Reach out to Ron. Reach out to me. People are more giving than you realize. They're willing to give a lot of free advice. And I found that in my journey as I started my business and then went out and started acquiring, there were so many people that were supportive."

The first acquisition we completed was in November 2020, when we acquired a firm in Tallahassee, Florida. This acquisition allowed us to test our integration process and prove our model. Since then, we have completed two more acquisitions and are actively pursuing additional opportunities.

The Importance of Preparation and Integration

Through the process of acquiring and integrating accounting firms, Michael has learned valuable lessons that can help others navigate the M&A process. One of the most important lessons is the need for thorough preparation and alignment with your team. When acquiring a firm, it is crucial to ensure that your team is on the same page and understands the purpose and goals of the acquisition.

Michael Ly emphasizes the importance of preparation and alignment, stating, "I underestimated the amount of time and preparation  His team needed to fully align with the acquisition. he also underestimated the resistance to change that can arise when integrating a new culture and way of doing things. To mitigate these risks, it is essential to provide ample time for integration and clearly communicate the expectations and timelines to all parties involved."

Another important lesson is the need to get the previous owner out of the business as quickly as possible. While the previous owner may have valuable insights and knowledge, their presence can hinder culture change and impede the growth of the business. It is crucial to set clear expectations and timelines for the transition and ensure that the previous owner is fully committed to exiting the business.

The Future of Reconciled: Empowering Small Businesses and Entrepreneurs

Looking ahead, our vision for Reconciled is to serve 10,000 small businesses and entrepreneurs across the country on a monthly basis. We aim to impact 100,000 jobs in the communities where these businesses operate. By providing affordable and accessible bookkeeping and accounting services, we want to become the go-to brand in the industry and help small businesses thrive.

To achieve this vision, we will continue to focus on organic growth and strategic acquisitions. We will leverage our expertise in mergers and acquisitions to identify opportunities that align with our mission and values. By expanding our service offerings and investing in technology, we aim to provide comprehensive financial solutions that meet the evolving needs of small businesses.

In conclusion, navigating mergers and acquisitions in the accounting industry requires careful planning, preparation, and alignment with your team. By seeking help and guidance from experienced professionals, small business owners and entrepreneurs can successfully navigate the M&A process and position their businesses for growth. With the right strategy and mindset, the future is bright for those who embrace the opportunities that mergers and acquisitions present.

If you are interested in learning more about navigating mergers and acquisitions in the accounting industry or have any questions, feel free to reach out to me on LinkedIn.  Michael is always happy to connect and provide guidance. Remember, getting help and seeking advice from others who have gone through the process can make a significant difference in your success. Don't be afraid to reach out and start the conversation.

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