Blake Oliver Talks About the Earmark App for CPAs

Blake Oliver of Earmark - Podcast Transcript

Scott:	Hey, it’s Scott Orn, Kruze Consulting, and thanks for joining us on Founders and Friends for another awesome podcast. Let’s give a quick shout out to the Kruze Consulting accounting team. We’re very fortunate. We have a ton of people at Kruze who work on the monthly books for our clients and get them all set up, due diligence ready, rocking every month, answering all the clients’ questions, making all those adjustments. There’s no better moment for a founder and for us really, when a founder says, “Hey, I think I’m going to get a term sheet. Are my books ready for diligence?” And we get to say, “Yes, they are. Fire away. Send them over, give them access.” That is a great feeling. It’s the feeling that lets us know we’ve done a job very well done, and nothing is better than watching that cash at the bank account. So, if you are a venture back startup, you’re going off to fundraise, maybe check us out. Check us out at Kruzeconsulting.com. We love what we do at taping here. I think we have 575 clients. Clients raise over a billion dollars a share so we know what we’re doing, and hopefully we can help you be successful in your fund raise. All right, let’s get to the podcast. Thanks.
Singer:	(singing). It’s Kruze Consulting, Founders and Friends with your host Scotty Orn.
Scott:	Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting and today, my very special guest, Blake Oliver of Earmark. Welcome, Blake.
Blake:	Thank you, Scott. So good to talk to you again.
Scott:	Yeah, we’re doing a home and home series here. I did your podcast a couple weeks ago or maybe a month ago [inaudible] and we had a good time and you have a super cool new business that I love called Earmark CPE. And I thought I’d have you on just because there’s a lot, actually a lot of accountants that listen to this podcast and so want to kind of make sure they’re aware of Earmark and maybe you can start just by giving your background a little bit and how you had the idea for Earmark.
Blake:	So, I’m a CPA who got a start in accounting as a bookkeeper and I was in the right place at the right time when cloud accounting became a thing. Cloud accounting, that term means we’re taking desktop accounting software, we’re putting everything in the cloud. This is when SaaS started to become like a big thing in the accounting profession and I’ve always loved technology. So, I was working as a bookkeeper, doing data entry essentially and discovered this whole world of automation and the potential for automation just blew my mind. And within like a year, I had automated 80% of my own job. And I realized that there was a big opportunity here to offer bookkeeping services to clients remotely and so I started a company called Cloudsourced Accounting. This was back in, I don’t know, 2010 maybe. Maybe a little before that. And it was just me freelancing to start. Freelance bookkeeper, but I started hiring other bookkeepers, building up this business and we were doing it for fixed fees so couple hundred bucks-
Scott:	That was new too. That was a new thing too. Yeah.
Blake:	Couple hundred bucks a month. I would pay hourly bookkeepers to do the bookkeeping. I’d manage the relationships, set up all the tech, all that. Now, there’s a lot of companies that do this, a lot of firms, a lot of startups, you may have heard of Bench and Pilot and there was Scale Factor, which is now Defunct, but-
Scott:	Kruze Consulting.
Blake:	Kruze consulting. Well, but you guys do a whole lot more than what I did. I was doing like…
Scott:	That’s one of our baseline things we do. Yeah.
Blake:	QuickBooks Live actually is an example of this with a built-in subscription-based bookkeeping. So, I was doing that and I sold that business. I went to work for a large accounting firm thinking that I need to learn how to be a real CPA because I was getting my CPA while I was building that business. It was like, while I was [crosstalk].
Scott:	You were young. You did this basically out of college, which I always like to point out to people. Way more advanced than me and you recognized the opportunity really young in your career is pretty cool.
Blake:	Except I cashed out too soon. I should have left my chips on the table. That’s the-
Scott:	I think I remember asking you why you were selling, like that quizzical look of what’s going on.
Blake:	I just had a kid and so I felt like the business was at the point where I think everybody gets to this point where it’s sort of like up and running and it’s like toddling along but anything could come along and destroy it. One person quits and your disaster.
Scott:	Yeah. It’s hard. It’s hard. Yeah. You go through this like, I call it like the death valley of you have to push through to be able to have enough amazing people on your team to be able to withstand those shocks and then once you do that, the amazing people recruit other amazing people and you get really strong, but there’s those like two or three years of severe vulnerability, both kind of work life balance, but also financial vulnerability that’s really tough to handle. So, I know exactly what you’re talking about.
Blake:	So, I had the baby on the way and somebody happened to just fall into my lap saying I’ll buy your business. So, I sold it, which, it was nice. It gave me a little bit of stability at an early point in my life. So, then I went to work for a large accounting firm, hated that. I lasted eight months. Couldn’t do that. From a technology standpoint, it took me like eight months to get them to turn on Microsoft Teams because that was a new thing. This idea of team chat.
Scott:	Yeah.
Blake:	I really needed this to manage my clients. Couldn’t deal with it. So, you might ask what happened after eight months. Well, I got recruited into tech, so I like to write and blog and talk. You may be able to tell that already. A company called FlowCast out in LA, which makes software for accountants said, “Hey Blake, why wouldn’t you want to come and become a product marketer for us? You get to get paid to go do webinars and talk to people.”
Scott:	Yep.
Blake:	I said, “Oh, that’s interesting.” And I signed up with them and that’s how I got into the whole technology world. So, I did that for two years, made webinars for accountants, continuing education classes.
Scott:	You were kind of a gift for them because I remember talking to their CEO at one point. You really understood the accounting channel probably better than they did. It was interesting, but I remember being like, oh, thinking, oh, that was smart, they hired Blake because you lived it. You know what you’re talking about.
Blake:	To be fair Flowcast, they were on exactly the right path when I joined already, where they were super, super focused on their core target customer, which is corporate controllers in midsize companies. If there’s anyone out there in startup land listening and wants just a lesson in marketing, look at what Flowcast did with their messaging because they were so perfectly targeted and they still are, I think to corporate control.
Scott:	I had him on the podcast maybe like two years ago. He was very good, very good.
Blake:	The focus is what made them successful and so it was great getting there, being there, learning, all that stuff. And then I went to work for a company called Giraffe, which makes FP&A software and I was the head of marketing there. So, getting to really learn about technology companies and marketing and left there and started Earmark. So, Earmark is an app that gives you continuing education credits, which all CPAs are required to get. Certified public accountants have to get 40 hours of continuing education every year to maintain their licenses. It does that in an app on your phone. So, compare this to the traditional way of getting CPE credits, which is going to a conference and sitting in a room for eight hours a day or attending a webinar.
Scott:	I see my wife, Vanessa Kruze, who’s our founder of Kruze Consulting like literally grinding through these things on her computer and oftentimes, it’s towards the end of the year where she wants to be doing many other things besides that, but she’s got to get her CPE in. You told me about this and I was like, “Oh my God, this is a great idea. This is an awesome idea.” But it’s true. All basically CPAs have to do it.
Blake:	And what I’ve heard studying startups, paying attention to this now that I’m in this world of tech is, look for the pain. Where is the pain in your profession, in your industry and for a lot of CPAs, it’s really the CPE is the big pain point. At the end of that renewal period, you realize, oh no, I have to get 20 hours. How do I do it? So, a lot of people end up just sitting on their computer for days.
Scott:	People focus on the hours and I know at Kruze, we all… I’m not a CPA. I’m a CFA, but [inaudible] but tons of CPAs on our team. But it really is a valuable learning opportunity or moment to like refresh on some stuff. A bunch of our people are doing like lease accounting right now, like the CPAs on that because a bunch of lease accounting standards change. So, it’s yes, you need the hours, it’s very important to do it, blog it, do it correctly, but it’s an honest to God learning opportunity that people can take advantage of and take a breath and learn something new. But what I think is so cool about what you’re doing is it’s like a, like you said, it’s an app. It’s like, you can move around, you’re not stuck in this really kind of negative learning situation, stuck at your desk, wishing you were somewhere else. You can absorb this content in a variety of ways, moving around, doing different… It’s just so much better. It’s like the way the world works now versus the way the world works 10 years ago.
Blake:	Right. People aren’t logging into Facebook on their laptops anymore. They’re doing it on their phone. This is what we’re [crosstalk].
Scott:	Or watching YouTube videos on their laptop. They’re doing it on their Apple TV or their phone or whatever. Right. You’re totally right.
Blake:	We have people that do their CPE while they are driving to work, while they’re doing chores and one of my members, we call them members because we’re a community of learners, one of my members said I was at the spa getting my nails done and I was learning about tax. So that’s what we want to do, is make it convenient and make it so convenient that you actually take classes you want to learn and need to know. So, it’s not just whatever’s convenient with your schedule. It’s actually what you need to learn.
Scott:	What you’re curious about. Yeah.
Blake:	What you’re curious about, what will help you professionally? CPE is so inconvenient most of the time that most people just take totally irrelevant stuff. That’s one of the big complaints.
Scott:	I know that’s what was so exciting about Earmark.
Blake:	Yeah. That’s what we’ve been building. I started it last year. It’s been in development part-time for a long time. Launched it in January of 2022. So, we’ve been out on the market for what, like two months, three months and we’re up to 1200 users on our app.
Scott:	Oh, that’s awesome. [inaudible].
Blake:	It’s not like we’re monetizing it yet. It’s all free at this point, but we will have a premium subscription option coming soon that’ll give you features like a built-in podcast player and whatnot. And we’re just trying to grow the library of content. Well, once this episode posts up, we’ll be over a hundred hours of CPE because we’re recruiting all these podcast hosts, who’ve been creating, like you Scott. You create this educational content. Now you can add CPE to it.
Scott:	For someone like me who’s doing that, it’s a nice little, it’s like maybe it’s a little extra incentive for someone to try my podcast for the first time or find one of our YouTube videos or something like that and listen to that on a subject that they’re interested in. So yeah, I think my first reaction was, this is super cool and then I said, “How do I get my podcast and videos into Earmark?” You know? You’re the Netflix of CPE basically.
Blake:	I want to be like, I’m not sure exactly what the right analogy is, but YouTube of CPE might be what we are now because we let people contribute content for free. I don’t want to charge you to put a course on my app and then we will help you create the course. If you don’t have the time to spend three to four hours filling out our template that you need to fill out to get the CPE, according to the regulations and the rules, which is rather onerous, in my opinion, we have folks that will do it for you. So, you just pay us.
Scott:	Oh, no way.
Blake:	Yeah. That’s really what we’re doing right now is [crosstalk]. Just pay us 500 bucks a month, we’ll put every episode of your podcast on Earmark for you as soon as it drops. Well, like a week after it drops, it’ll be on the app as a course and then you can tell all of the people listening, “Hey, come get CPE, download the Earmark app, take your quiz, get your CPE.”
Scott:	Yeah.
Blake:	I can tell you, I’ve been obviously pushing this heavily on my own podcast. So, I have a podcast called the Cloud Accounting Podcast.
Scott:	You’re cloud accounting royalty. That podcast is like the number one podcast for accounting people. So, you’re being shy here, but yeah, that’s a great podcast.
Blake:	We’re over half a million downloads, which in the world of podcasting is like, it’s decent, but in the world of accounting podcasts, which is a smaller market, it’s pretty great.
Scott:	It’s really big. Yeah.
Blake:	So, we have a big following and I’ve been pitching Earmark CPE on Cloud Accounting Podcast and every episode goes on Earmark and our downloads are up 40% year over year.
Scott:	No way.
Blake:	Year today. So, I know there’s demand for this. It will create more listeners for your show if you have an audience of CPAs or certified management accounts or enrolled agents. And I just know this from my experience making webinars. When we add CPE to a webinar at one of these companies I worked at, Flowcast or Giraffe, we would double our audience.
Scott:	Just remember this as we’re talking here, but one of our clients at Kruze was [inaudible] at Tubi TV and they’ve gone on… I forget what they got bought for, but it’s publicly disclosed. It’s like four or 500 million bucks. But he was in a very similar situation to you probably 10 years ago and he did exactly what… He started just going to like the long tail of content and finding all these people with existing libraries who wanted to make it more accessible over Apple TV and Roku and things like that. It’s kind of very similar to how someone like me can pay you to get it, the CPE and all that kind of stuff established for the video. He did the same thing and then all of a sudden, the flywheel starts spinning so fast that everyone comes to you and you really do become the Tubi TV or Netflix or YouTube of this category. So, I’m really happy for… I’ve seen it work. [inaudible] [crosstalk] executed the strategy perfectly.
Blake:	I might be coming back to you to ask for your advice on that.
Scott:	I’ll put you in touch them. Yeah.
Blake:	Yeah. Well, it’s funny too, because I’ve been in the marketing team in two apps, two technology companies, but I’ve not been the founder. I’ve only founded a bookkeeping company.
Scott:	Yep.
Blake:	So even though I have, I think a pretty decent amount of experience in tech, the whole fundraising thing totally completely overwhelms me. I am fortunate to be in a place where my podcast, the Cloud Accounting Podcast generates sponsorship revenue. So, I’ve been bootstrapping Earmark’s development for a year and there’s a part of me that doesn’t want to take money at all, ever if I don’t have to.
Scott:	Yeah.
Blake:	But then I also hear from other founders, they’re like, “No, no, you have a good idea. You could go get $10 million or something,” but I don’t want to spend all my time just fundraising.
Scott:	I can take you through the same diagnostic I take other founders through and we’ve also gone through it at Kruze, which is, I always ask, do you like having a boss or not? What’s the answer to that Blake?
Blake:	Well, considering that I spend about two years at every organization I’m at, no, I generally don’t.
Scott:	Yeah. Well, it’s like a boss for an idea that you created. That’s usually the biggest thing like venture capital has become your boss.
Blake:	Right.
Scott:	It is, it’s like sexy and cool to raise money and Kruze is bootstrap. We’ve had to make do being under resourced at times and that’s very stressful, but sometimes I remind myself of like all the conversations I don’t have to have with my investors that I don’t have or all the board meetings or all the board decks or all these things and some of that stuff makes you a better operator. Board meetings can give you great advice, make you more disciplined on your every two months reporting, things like that. But you spend a lot of time managing your board members and you spend a lot of time answering questions about someone who just got funded, who may be a peripheral competitor, or you might have a disagreement about the direction of the company. I think probably the biggest thing for most founders are, is their idea going to be an IPO-able company, because that’s really where the VCs need you to go and if your company can sell for 20 to 50 million bucks and you don’t need outside funding, that’s actually a pretty nice place to be because you’re the one who gets to make that call. You get the proceeds from that and you don’t have someone blocking an acquisition or making you grow faster than as natural growth and then you start compromising a lot of that stuff. That’s the criteria. So, I wouldn’t rush into it if I were you. You seem like you have a good thing going and you’re building the catalog. To me, I would think building the catalog would be expensive and hard. That’s probably what I would think you would need to raise money for, but if you’re doing it without that, then you’re in a good spot man.
Blake:	Right. Using other people’s content and [crosstalk] being the platform. Right.
Scott:	Tubi TV raised very little money before they really got going because they did exactly what you’re doing.
Blake:	It’s a small enough market where it’s not going to inspire a bunch of competitors who come in VC funded and then try to like take it because that’s what tends to happen. If you have a good idea and you don’t raise money, then isn’t it very possible that you’ll just get outspent by somebody who copies your idea and they have the money so they can win.
Scott:	Yeah. I’ve kind of learned through experience that being outspent is not as… Let me say it this way, in business school, they always kind of teach you to be really terrified of your competitors or things like that-
Blake:	Right.
Scott:	…because you assume that your competitors can execute really well. You almost give the benefit of the doubt to your competitors too much and in the market, we plan, we have tons of competitors that raise hundreds of millions of dollars and we are doing very, very well because we focus on execution, we focus on quality. So, I sometimes think that’s a myth. Now, if you’re doing something like grocery delivery or logistical, or like hardware, things like that, things that can’t be done in a capital efficient way, then yes, raising capital is usually a requirement. I don’t know man, you’re in media, media’s scalable, digital media scale… You’re in a really good spot.
Blake:	All right. Well that gives me hope.
Scott:	I wouldn’t rush into it personally. That’s just me though.
Blake:	I really appreciate that.
Scott:	If you do raise money, let me know because I’d probably be interested. [crosstalk].
Blake:	All right. Adding to my list, Scott. Check, please.
Scott:	Sound like you got a lot of good stuff going though. When I’m using Earmark, am I able to do some searches and look for special stuff? How does the consumer experience or the accountant experience work?
Blake:	To be completely honest, we are still working on our user experience. It’s sort of an MVP still at this point, but it’s enough where people will keep coming back, but the idea is that you will be able to filter courses by category, by NASBA field of study, which is the official category that they use for the CPE.
Scott:	Oh. Yeah.
Blake:	You’ll be able to follow instructors, get push notifications when courses go live on a channel. So, creating that gamified experience too is also something that I really like. I love gamification and education. So, stuff that was-
Scott:	Are there any bragging rights embedded in this? Knowing my wife, Vanessa Kruze, the overachiever, I can see her taking a lot of pride in scoring very high on the Earmark tests after consuming content. Is there stuff like that where you can have… Or some other accounting celebrities out in the world, I could see them having like battle of network stars, but for battle of the accountant CPEs.
Blake:	Well, I know that-
Scott:	Is that possible?
Blake:	One of the things that is popular right now is these quiz apps. People like taking little daily quizzes. So, I thought, what if we could have a database of tax knowledge?
Scott:	Oh, that would actually be super helpful. Yeah.
Blake:	And you get like a daily quiz and then you find out… You challenge other people too. You could like challenge your coworkers and you see who has the leader board and the quiz is timed so it’s not like you can go look up the answers. There’s just not time to do it or something.
Scott:	I think that’s really smart.
Blake:	It could be fun.
Scott:	It’s almost like the language apps. There’s a lot of language apps have been very successful too.
Blake:	Yeah. So, it’s going beyond this actual checking the box CPE thing and trying to make CPE useful for accountants.
Scott:	Hey, it’s Scott Orn, and we’re going to take a quick break from the podcast to give a shout out to the Kruze tax team. Gosh, it’s so nice to have an in-house tax team, I can’t even tell you. We have some really amazing professionals on the team. It’s over, I think it’s 13 people now. And we do everything from your federal, state income tax return, state franchise tax filings, R and D tax credits. Those are pretty popular these days. And guess what? They’re there for you when you go through diligence. A lot of people don’t know this but you actually go through tax diligence, not just operational kind of financial diligence, but you do go through tax diligence. So, it’s nice to have Vanessa Kruze on the phone, with your VCs and with the accounting firm they hired to diligence all your stuff and the law firm they hired to diligence all your stuff. Vanessa knows what she’s doing. She’s done this a million times and it’s not just Vanessa. We have a really great team of tax professionals that will do those calls too. It’s kind of sometimes the difference between getting around clothes or having it take another two weeks because something was disorganized and the tax compliance wasn’t done correctly. We hear those horror stories from clients that come to us. So, hey, if you want Kruze’s tax team on your side, we’re here for you. Check us out at Kruzeconsulting.com. Thanks. What I was talking about earlier is, yes, there is a hour’s requirement and CPAs need that, but there’s also a lot of accountants out there that aren’t CPAs yet or working up towards it or life circumstances. We see this sometimes where people, they had kids at a certain age or they wanted to, or are coming into accounting later or whatever. Makes it a little more difficult to be CPA, but they’re still phenomenal accountants and I would think those people, this would appeal to them too, in the sense that they’re getting the continuing education with… They don’t have the hour requirement, but they’re still learning a ton and it could spark them into getting their CPA once they start realizing that they can nail the stuff and how smart they really are, how knowledgeable they are.
Blake:	Even if they don’t need the hours for their license renewal, we could gamify getting the hours on Earmark. Just get badges. People love getting reputational badges. We could have our own certificates if you earn enough hours in some area.
Scott:	Well, there’s a lot of accounting for, I know we do this where we, if you pass your CPA, we will reimburse you for your CPA study materials and so that’s another kind of opportunity there too. I think the other kind of cool thing about Earmark is, you’re in this, regardless of whether it’s CPE or C… You’re in the right category of like people really in this generation are taking self-improvement and getting better at their job and just taking a lot of pride in what they do. It feels different. It feels like this is something that this last five or 10 years where people really embraced. You see it with all the online learning and things like that and you’re doing it for the accounting profession, which we love and care about. There’s really kind of no limits to what you could do. You just got to be patient, build it up, build the catalog, don’t get over your skis, but you’re in a really good spot.
Blake:	Well, thank you.
Scott:	Yeah.
Blake:	Something that I wanted to ask you about Scott-
Scott:	Fire away.
Blake:	If you don’t mind me.
Scott:	I always love it when the guest becomes the host. It’s like my cognitive load goes down. I don’t know if people are watching this could see me just relax as you said that.
Blake:	Okay, good. I love it too so I’m going to totally do it to you.
Scott:	Fire away.
Blake:	One of the things we’ve been talking a lot about on the Cloud Accounting Podcast, or at least I’ve been monologing to my co-host about is-
Scott:	Mr. David, is it David Leary?
Blake:	Yeah. David Leary, yes.
Scott:	David Leary sent me an email two weeks ago asking me some great stuff.
Blake:	Oh, awesome.
Scott:	He comes into my life every nine months or so. I get like a highly detailed email from him asking for staff or a phone call. He’s awesome.
Blake:	Asking for your free advice. Yeah.
Scott:	I don’t mind. He’s actually like a really entertaining… There’s a reason why you guys do a good job on the accounting podcast because he’s entertaining and he’s also not afraid of having some takes. He has strong opinions.
Blake:	He’s brave too because he’s not an accountant, but he’s willing to tell accountants what he thinks honestly.
Scott:	Yeah. He’s awesome.
Blake:	A great example is the episode we did where he talks about the tax organizer that he had to fill out because he switched from doing his own taxes in TurboTax to hiring a firm to do it.
Scott:	Okay. Yeah.
Blake:	And he said, it’s actually more work for me to hire a firm because I have to fill out more forms because the TurboTax form is automated.
Scott:	He’s probably forgetting that it’s going to be way more accurate and better form.
Blake:	Right. And that’s the selling prop we talked about in another episode actually, that the number one thing that people hire a CPA for or an EA to do their taxes instead of doing it themselves is the accuracy.
Scott:	Yeah.
Blake:	It’s the accuracy.
Scott:	It’s easy to get it wrong, hard to get it right.
Blake:	It’s very easy to get it wrong, hard to get it right.
Scott:	There’s many thousands of dollars of repercussions for him so anyway. Yeah.
Blake:	But there’s many things we can learn as service providers from tech companies about how to deliver a good customer experience, which is what we were trying to ultimately say, but the way it came out was like, “I feel attacked.” That’s what some of our listeners said. Like you said, David is not afraid to say what he thinks and it’s very helpful, but to get back to the question I had. Okay. So, we’ve been talking a lot on the show. I have been talking a lot about my experience going from accounting into tech and also the way that tech founders think about accounting versus the way accountants think about accounting and the future of the CPA. So I feel like one of the big problems with accounting and the CPA license is that I feel like nobody really, like people just don’t care as much as they used to about gap financials and especially in the tech world.
Scott:	I kind of disagree with that a little bit or accrual. There’re some things around gap that are, like the lease accounting, what we were talking about.
Blake:	Yeah.
Scott:	But I would actually segment that because there’s tons of bootstrapped entrepreneurs or people running small businesses that, honestly, they probably can get by on cash accounting.
Blake:	Right, right, right.
Scott:	And that’s where you see like the bench of the world do. I always say, bench is great if you’re running a coffee shop or something like that, but when you’re dealing with sophisticated investors like venture capitalists, so like Earmark, say Earmark decides to raise $10 million, you’re going to need accrual-based financials for many reasons and one of them is just, the investors are required to ask for that. They need gap-based financials. The other thing is, you’re sitting in a board meeting and you paid a couple extra vendors that month or whatever and what you see is your financials are bouncing around like crazy. You don’t have accurate financials. The investors are asking you why is your burn double this month? What’s going on? You also can’t give them accurate like, how many months of cash you have. I would take your question and segment into like two worlds, the professionally financed and companies kind of trying to change the world kind of thing, and then the ones that basically need a tax return. The small businesses or bootstrap companies need to have accurate financials, A, to kind of run the business for sure, but they’re less vested in that emotionally and just kind of less time, but they really need to be able to do a tax return.
Blake:	Yes.
Scott:	That’s the breakdown I see.
Blake:	I’m with you on that. The accrual accounting is essential as you’re growing and once you have investors and you got to do it. I guess what I’m talking about is more of like the way that we do accounting for subscription businesses. Now that I’m building one, seems kind of broken.
Scott:	Say more. I’m curious.
Blake:	Okay. Well, I’m a big fan of, I’m not sure if I’m saying his name right, Tien Tzuo, founder of Zuora. He wrote this book called Subscribed, which I’m holding up on the video and you can’t necessarily see on the podcast if you’re listening, but in this book, Subscribed, which is an excellent read, I recommend it to anyone who’s building a subscription model business, he has in his book and I just happen to open up to the right page, I’m amazed, what he calls the subscription economy income statement. Reading this kind of opened my eyes in a way that accounting education never did, what I learned in school to the fact that really, when you think about it, the generally accepted accounting principles that we follow don’t really do a good job of giving us information to evaluate a subscription business.
Scott:	Yeah. It’s a really interesting point. You’re talking about like LTV, cost acquisition, things like that, right? Like long term value of the customer is what LTV.
Blake:	Yeah, yeah.
Scott:	Basically, how to value, that kind of stuff.
Blake:	Scott, you probably know this off the top of your head. What are the metrics that we care about when we’re investing in subscription businesses? It’s usually not the gap numbers. It’s a lot of like that stuff you mentioned, like cost to acquire a customer, number of customers, average ticket value.
Scott:	Return.
Blake:	Return.
Scott:	Feeds into LTV. Yeah.
Blake:	Hiring, all this personnel stuff.
Scott:	Yeah. The interesting thing about LTV divided by CAC is that functions as like a shorthand for things like churn and how much you’re spending on customers and things like that. So that is the metric of choice and if you can get to a 5X LTV to CAC, you are an awesome business and are going to be huge. Four, very, very strong. Three, starting to get kind of like, are you fundable or not? But that is like the number, but you’re right. What we kind of see is people need their accounting done gap accrual wise and then oftentimes they will have a dashboard that they funnel. They pull some of their financial metrics in like cash burn, cost acquisition, things like that, but the more marketing team also is populating like number of leads, number of clothes, number, all that kind of stuff and so it’s a little bit of a hybrid and that’s, I think, I keep waiting for… I just released a podcast with David Greenbaum from OnPlan and you worked at Giraffe, who are great. Martin’s a great guy, great company. I have a small personal investment in Giraffe just for full disclosure and then we’re seeing like Mosaic and Causal. A lot of activity in the kind of FPNA SaaS world and that is, I think at the end of the day going to be one of the, they are going to kind of own that dashboard thing. QuickBooks and people like us are going to own the accounting and taxes and then there’s going to be another tool that’s going to have pulling all this other stuff because you got to be able to access Salesforce and things like that to actually get that accurate stuff. It’s a really interesting idea because we’re doing it through Excel templates because we kind of find that even though it’s not cool, it is actually very flexible and easy and because Note like, even though it’s a subscription business, there’re many different subscription businesses, right?
Blake:	Right, right.
Scott:	And so, you need to be able to have the flexibility to do that kind of stuff and you can still kind of templatize and get the economy to scale out of the template, but I think you’re making a really great point here.
Blake:	So, it comes back to like, okay, when you think of a subscription business and this isn’t my quote, I heard this somewhere else, but a good way to think of a subscription business is that it’s building an annuity. Your customer base pays you MRR or ARR, whatever it is and so you are spending sales and marketing dollars to acquire those customers and grow that intangible asset.
Scott:	Totally.
Blake:	If you think about it, your customer base is an intangible asset and yet in accounting, we don’t put that anywhere on the balance sheet.
Scott:	Yeah.
Blake:	So, it’s really weird to have these companies with no book value that are incredibly valuable. It actually doesn’t make sense anymore.
Scott:	Yeah. It’s a legacy of like most valuable companies used to be like manufacturing companies, like GE making jet engines or things like that, or food companies, having Tyson Foods or things like that. You’re totally right, but that’s why there’s this need for extra reporting and that’s…
Blake:	Yeah.
Scott:	I don’t know though. I don’t know if I would advocate for that to be… I kind of want to think through this for a second, but-
Blake:	Yeah. Yeah. I don’t have an answer, like I’ve just been thinking about this and nobody wants to talk to me about this because it’s like a super nerdy intersection of tech and accounting and so I try to talk to accountants who don’t know anything about technology or technology businesses and they’re like, “Accounting’s fine. It’s worked great for a hundred years.”
Scott:	Yeah.
Blake:	And then I talk to tech people-
Scott:	Well, I think the danger is also, if there was like a mandate to include some of that stuff, you end up with, it’s almost like big government, like you start having, you over require and make everything less… You just increase the compliance burden for a lot of stuff.
Blake:	Right. Potentially.
Scott:	And many companies are different and so then you end up like one size fits all subscription book, subscription asset on the balance sheet for lack of a better word. And Netflix is reporting that and Earmark is reporting that. And by the way, we have a subscription business at Kruze too so we’re reporting that, but they’re all very different businesses. But I think your point is, the way I would kind of answer it now is like, it’s a very healthy thing for entrepreneurs to have that visibility and you are building an asset, you are building like this book of business of people who are going to be with you for a very long time and so having those reports and it’s actually why I think having a good financial model and a good dashboard is actually really important. And I talk about it in pretty much every prospect call.
Blake:	Yeah.
Scott:	Like doing that stuff is extra work and a lot of times I see entrepreneurs saying, “I’ll wait, I’ll do it later. I’ll do it later. I’ll put it off.” But the earlier you can get… It’s kind of like brushing your teeth.
Blake:	Yeah, yeah.
Scott:	Or eating healthy or exercising. It gets you into a good habit and it has all these improvements in your life, especially when you’re talking to your investors or perspective investors that have a huge benefit.
Blake:	And this is why, if you’re a startup founder, you can’t just go to any accountant and have them do the books and expect to get anything useful out of them because gap accounting, like you said, built for the industrial age, it’s built for railroads. Why do we have the accounting standards we have? It’s for manufacturing railroads in the 1800s, and that was the last time it really changed and it was solidified forever in the 1930s when we got the SEC. And so you at Kruze, you guys create a whole lot of stuff in dashboards that isn’t in the traditional financial statements, like [crosstalk] balance sheet, right?
Scott:	Yeah. You have to go to someone who specializes in your industry. Actually, there was a lady on the Cloud Accounting Podcast. This is probably like three or four years ago. It really stuck with me. She was like the go to accountant for wineries.
Blake:	Jeanie [crosstalk].
Scott:	I still remember her because she had this incredible checklist and we have all that stuff for startups and we talk the startup financing game and that whole speech I gave about having all your stuff ready and be due diligence ready and things like that, like that is, I give that speech eight times a day because it’s so important and it really is the make or break thing when you get into like either M&A or fundraising, which is like, that’s this niche, the venture back startups have that requirement. They are raising money from outside. If you are a winer, you should be working with the best winery accountant. If are in media, you’re a little different because you’re like a startup media company, but say you’re a production company. You’re the company that just raised $200 million that I think it’s called A24. Right?
Blake:	Right, right.
Scott:	That does like Euphoria and all this kind of things. Those guys and ladies better have a damn good accounting firm that handles production media stuff, because there’s so many moving… And if you own a barbecue restaurant, you better have a good accountant who understands restaurants. It doesn’t matter what, but trying to get the one size fits all, you’re just going to end up with like a super mediocre product that probably is not going to be accurate. That’s the thing is like accuracy is like the most important thing and if they don’t understand your industry, you’re not going to have accurate financials. It’s just kind of that simple.
Blake:	And you’re going to have generic financials. So, I think this comes back to like the thing that I’ve, that’s been percolating in my head, which is that what we learn in school as accountants, the accounting we learn in school is very generic and it really fits a certain type of business, like inventory heavy manufacturing. We all learn how to do that but that kind of income statement balance sheet is not going to be enough to manage any other type of business these days.
Scott:	Yeah.
Blake:	That’s why you-
Scott:	I would go one step further and say, it probably won’t be accurate if they don’t understand the industry because all day long, we have people coming to us saying like, “I have this accounting firm, I think something’s off. I don’t know what. Can you look at my books and tell me what is required to work with Kruze.” And because you ran an accounting firm so you understand this. You probably put a ton of pride in what you’re doing, good training, accurate financials but the people who don’t understand your industry, they’ll probably take a shot, but it often ends up inaccurate. So, this assumption that any accountant can do any kind of business, they can just be the jack of all trades. Vanessa always says, “You don’t go to a restaurant that makes Italian, Chinese and Korean food. You go to one of those three.” So, it’s actually a faulty assumption that people make a lot. That’s why I kind of say like, go one step, like just find someone who actually understands what you’re doing.
Blake:	Well, I’m sure there’s diners in New York that make everything right but you generally don’t go there for the food.
Scott:	You eat food there at 2:00 AM.
Blake:	Yeah. You eat there at 2:00 AM.
Scott:	When you’re drunk.
Blake:	When you’re drunk.
Scott:	Not when you’re trying to run a business.
Blake:	Yeah. Anybody can take the default QuickBooks chart of accounts and shove transactions into that, but that doesn’t-
Scott:	That’s what happens. Yeah. Also, getting back to your subscription economy stuff, like revenue recognition, that gets jacked up all the time.
Blake:	Oh yeah.
Scott:	Or you see people just doing cash accounting for subscription businesses and it like breaks your heart.
Blake:	Yep.
Scott:	I feel like I got on a soapbox here a little bit, but I do think-
Blake:	No, it’s good.
Scott:	Yeah. It’s like-
Blake:	I’m with you on this Scott. Like the shame is that in our accounting programs in school, why aren’t we teaching people how to do the accounting for these different types of businesses instead of shoving everybody through the same, here is tax, here is how to audit financial statements.
Scott:	Yeah.
Blake:	And the most we get in managerial accounting, which is what we’re talking about is like cost accounting, which is based on making widgets and putting cost in inventory and stuff and nobody makes widgets anymore.
Scott:	No. And I think probably the answer is it’s hard. It’s hard to have that expertise and it’s not a, I mean, the education… This is again, if I can bring it back to Earmark, what’s cool about what you’re doing is the educational system in general is like a very kind of industrial approach to education. People sit in rooms, they learn from a teacher, they all read the same book, all this kind of stuff and what I was trying to say earlier, probably not articulate enough, for the last five or 10 years now, all these additional resources to get better at your job, to learn different things, to just go deeper are now available and Earmark is the quintessential version of that for the accounting profession. It’s pretty freaking awesome and so you’ve kind of made, in a very roundabout way, we made the point [crosstalk] on why Earmark is so interesting.
Blake:	Well, and now I’ve kept you talking long enough that we have met the minimum threshold. This was my-
Scott:	That was not planned folks. That was not planned.
Blake:	This was my secret plan the whole time was-
Scott:	If you listen to my podcast, you know I usually go 25 minutes, but Blake successfully got me on this soapbox here.
Blake:	And that’s because in order to meet NASPA’s requirements for continuing education, we have to hit a 36.2-minute audio duration threshold, which we have exceeded now by 10%. So, I’m confident we can take this episode and put this up on Earmark for CP credit.
Scott:	I love it. Well, we should wrap it up, but maybe tell everyone where to find Earmark, how to reach out to you. If you have a library and you want it to be on Earmark, how to reach out.
Blake:	Go to earmarkcpe.com, earmarkcpe.com. I am Blake Oliver. You can just shoot an email to blake@earmarkcpe.com. If you want to learn more, put your show on Earmark. If you have content that’s targeted toward accountants, bookkeepers, CPAs, CMAs, enrolled agents, they are all coming to Earmark and we’re growing that community.
Scott:	I love it. I love it. Give my best to David on the Cloud Accounting Podcast.
Blake:	Will do.
Scott:	And take care, man. You’re doing great work and I think you really figured something out here and I’m very excited for you and I look forward to watching my wife, Vanessa walk around our house instead of sitting on a computer, staring at a CPE video, actually enjoying herself, walking around and probably learning a lot more because she’s an active listener.
Blake:	You can walk up and down those hills in San Francisco, right?
Scott:	We’re in the verbs now.
Blake:	Oh, I forgot.
Scott:	Yeah. We got plenty of chores to do though.
Blake:	There you go.
Scott:	Yeah. I don’t know. To me, it’s just like the whole, what you’ve created here is like exactly the right moment in time and I’m just excited for all the accountants at Kruze and all the accountants out there to actually just have access to stuff that’s going to make them better. And I find, I know this is at Kruze, but I think most accountants are like this, they take a lot of pride in what they do. They want to have the right answer. It’s incredibly satisfying to give good advice and do the right thing for your client and you’re on part of that pathway to just getting better and being able to give your clients good advice.
Blake:	Well, thanks, Scott. Appreciate it.
Scott:	All right, buddy. I appreciate it. Great talking to you.
Singer:	(singing). It’s Kruze Consulting, Founders and Friends with your host Scotty Orn.

Blake Oliver from Earmark discusses the Earmark app which empowers CPAs to earn Continuing Professional Education credit easily from their smartphone

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