Flip The Switch Episode 49: Matt Garrett

John Saunders
By John Saunders

PAT: Today on Flip the Switch. The guys sit down with Matt Garrett, the co-founder and executive chairman of TGG accounting. TGG is not your typical accounting firm. Matt has created a business model that helps struggling businesses avoid bankruptcy and ultimately maintain long-term profitability.

Matt talks us through his passion and desire to teach business owners the right way to manage their books and their businesses through sound accounting practices.

Let’s get into it.

00:57 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. This is episode, once again, 49.

01:03 PAT: Is it episode 49 again?

01:05 AUSTIN: We made a little error. Just a little one. And talked extensively about 49 last episode. But that was 48. This is 49. And we still don’t have a player or anyone to go along with this number, so you’re just going to have to live with our error.

01:20 PAT: We do have a former football player who joins us on the podcast today though, to talk about his accounting businesses and his career path. Matt Garrett. Very exciting.

01:28 AUSTIN: Yeah, this was a really interesting interview because he’s taken a typical accounting firm and made it atypical. He approaches the business at a completely different way, honestly, and a different clientele. So if you are interested in Finance or accounting, you’re probably going to like this one. And if you’re not, you should definitely listen because he talks a lot about just making good decisions with your books. And what to pay attention to when you are doing accounting.

01:55 PAT: Don’t spoil it. Let’s get into it.

So with us today we have Matt Garrett. Entrepreneur, Author, Executive Chairman at TGG accounting. Matt, thanks for joining us today.

02:06 MATT: Yeah, thanks for having me.

02:07 PAT: We always like to start off with just a little bit of background on who you are, where you come from and kind of what you’re all about to familiarize the listeners a little bit.

02:14 MATT: Sure. Quick history. I’m a local San Diego product. Went to high school in San Diego. Went to college at Vanderbilt in Nashville, Tennessee. Started my first company out of school. Was a dot-com back in the early, early days of the dot-com side of things.

Sold that to a public company out of Atlanta called Wave Systems in ’99. Moved back to San Diego.

02:39 PAT: Good call.

02:40 MATT: Yeah, it was an easy place to boomerang back to. And started my second company in ’01. After doing some night school in accounting, because I realized in my first entrepreneurial venture that I really needed to understand finance and accounting. That it was the language of business and that I was completely lost.

03:02 AUSTIN: Just nonchalantly mention that you started 2 businesses within a couple years of each other, which is pretty incredible.

03:09 PAT: I’d love that to be part of my opening anecdote on a podcast one day.

03:10 AUSTIN: Absolutely. And just thinking about the turn of the 2000s really, in ’99. Was that a strategic move for you saying this is a market that is emerging? The dot-com. And then I’m going to sell before it gets maybe a little bit too large or just to kind of back into your thought process on what it takes for an entrepreneur to have that mindset and kind of how you arrived at that.

03:31 MATT: Okay, so I guess a starting point for it… and the genesis of starting the business itself was out of necessity. I had no really good job offers coming out of school.

I played football in college and so my opportunities were nothing other than football, and I wasn’t doing that. I wasn’t good enough to do that, so…

03:52 AUSTIN: What position did you play?

03:53 MATT: I was wide receiver.

03:55 AUSTIN: Like a Eric Decker going on.

03:57 MATT: Eric Decker but 3 inches shorter.

04:00 AUSTIN: Okay.

04:01 MATT: Which doesn’t work out so well. And probably not as fast.

But no, it was a great experience. And trying to play was a great sort of character building thing. And it was great to play in SEC and all that, but coming out, I really didn’t have any job credentials.

And so a guy that I went to school with was doing web development. And at the time, that was ground-breaking stuff. And I said, “Why don’t we put all the catalogs online that we still get all the time?”

So we literally went out and we built a place called “Ishophere.com” Which was… we put catalogs online. Many of them we built websites for, believe it or not. Big catalogs, like LL Bean, J Crew, Victoria’s Secret… All the ones… you still get them today in the mail.

The business model was essentially that’s a really inefficient way to deliver the advertising for their products. Let’s put them on in one online shopping center, and have them shop for them.

04:54 AUSTIN: Wow. So this is essentially the same idea as Amazon, if you think about it.

04:57 MATT: They were our number 1 competitor at the time.

05:00 PAT: That’s crazy to think about.

05:02 MATT: I’m obviously not Jeff Bezos.

05:04 AUSTIN: Jeff Bezos might not be a human being.

05:06 PAT: We have a theory that he’s not from this planet. Did you see they hit a trillion dollar market valuation today?

05:11 MATT: It’s crazy.

05:13 PAT: It’s absolutely crazy. I kind of want to go back to something that you touched on a little bit too. So you were a student athlete in college… what did you study at Vanderbilt?

05:20 MATT: Football.

05:21 PAT: Football. Got it.

05:23 MATT: Yeah, I got a degree in Organizational Development. Which 95% of the football players do.

05:28 PAT: Gotcha. Okay.

05:29 MATT: It’s the football major.

05:30 PAT: Yeah. Bad radio. He’s winking at us right now.

05:32 MATT: Yeah, sorry. I say it tongue in cheek because it’s true. And it’s not that the football players are dumb. I mean, I would tell you we had to be at football practice starting at 11:30 AM…

05:43 PAT: And the SEC… It’s like a full-time job.

05:45 MATT: Yeah. And we didn’t leave the athletic facilities until 9 PM at night. And that’s 6 days a week.

05:49 PAT: Yeah. And that’s tough, you’re trying to balance a workload…

05:53 MATT: Yeah, school was… and you’re studying a lot in actual football. Learning all the plays, and learning how all this stuff goes… studying defenses and everything else.

School for most of us was just getting through it. I wasn’t one… there was a few especially at Vanderbilt… there are a few really smart kids that are like, “No. We’re going to be a doctor.” Like, one of the defensive linemen got his JD MBA in like 5 years.

06:17 AUSTIN: That’s incredible. That is one of the most difficult…

06:20 MATT: You find weirdos like that, but I was not that guy.

06:24 PAT: And then you decided to go back and go to night school to understand accounting. I kind of want to dive into that too. What prompted that realization that you needed to understand financial language? Was it a goal that you had? Or was it just in that experience of scaling dot-com?

06:38 MATT: It’s a great question, because it goes back to the original sort of what did I see? I ended up getting in a fight with my partners. We raised 5 million dollars. I was 24 years old and trying to figure out what to do with this business.

We had 79 catalogs, we had 35 employees, we’re just jamming. And I thought this was amazing. And then the money that came in said, “We want you to turn left and stop trying to make money. And instead just gain traffic.”

And I thought, “We already have a lot of traffic. That’s the dumbest thing I’ve ever heard of.” And so I railed against that. And they said, “No, you’re the dumbest thing we’ve ever heard of. You’re out.”

And conveniently said, “We would like to buy you out. And by the way, we have the option to do that.” And so they negotiated with me, and that’s how I ended up selling. So it was just dumb luck that I ended up selling in January of ’99 right before dot-com crash. Just dumb luck.

07:28 PAT: Blessing in disguise, really.

07:30 MATT: It was actually. It was a really… I got some money out of it, but I was also kind of pissed off. Because I came back to San Diego and talked to some people who really understood the Internet space and found out that I really left a lot of money on the table. Probably an extra zero off of my purchase price.

07:42 AUSTIN: I mean, you were really on to something with that business model, too. That business model has not gone away. It’s only gotten larger. More people are doing it, so when the dot-com boom happened, and the bust, of course, it was not necessarily those business models that are still today. So I think you were on to something.

But I imagine that’s gotta light a fire under you, right? You seem like a very competitive person. So at this point you’re thinking, “Well, I gotta do something else.” clearly you have the ability to start and make a successful business.

So what did that look like when you came back to San Diego, and you’re kind of deciding what’s the next steps?

08:15 MATT: Yeah, so that’s what led to night school. I was pissed. I was not happy.

And I wasn’t unhappy with them, I was unhappy with myself. I didn’t feel like I was equipped or had the knowledge to be successful in business yet. Which is why I went to night school.

And when I did it was phenomenal. Like, accounting made sense. It was like, “Oh, so that’s why that goes there. And that’s how this works together. And this how these pieces fit together.”

And accounting’s this beautiful thing that’s black and white. And so there’s a right and a wrong answer. And for me being in business, that was a very comforting thing.

And so the night school classes… I only took 4 or 5. Didn’t get a degree or anything. But it just really set me on the right footing for the next stage of my life.

08:54 PAT: Okay. Cool. And then going into that next stage of your life, you now have this foundational knowledge in accounting and finance. What is the next move? What do you do to try to apply that somewhere?

09:02 MATT: Yeah, so interestingly I thought that maybe I would go get my CPA. Cause I had enough credits now to do that. So I was actually volunteering my time at my own CPA’s tax firm. I was like, “I’m going to learn this stuff. I’m going to come and prep tax returns.”

So for 2 seasons, I just prepped tax returns for free.

09:20 PAT: How was that experience?

09:21 MATT: Ridiculous. What I learned is that the tax law is really complex, but that 99% of the people, it’s really easy. And so I was getting so fast at doing tax returns, I was timing myself to see if I could beat my last record. And just keep going, right?

So I learned the tax law through doing that. And then I learned accounting, so I designed… I decided what I was going to do was go try to help the 1% business owner folks with their taxes. And design tax strategies that were meant for Fortune 500 companies and bring them down to small businesses.

So that’s what I did in ’01.

09:59 AUSTIN: Yeah, and so where does that philosophy or strategy come from? Are you creating this based off of something you’re learning in your night classes? Or maybe just by experience with doing tax returns? How do you formulate this plan?

10:10 MATT: A little bit of both. Little bit of both. I had gotten some experience… my father happened to be a tax lawyer too, so we just bugged the snot out of my mom. At every family dinner, we were talking tax law. I was really into it.

10:23 AUSTIN: Wow. Imagine those family dinners, right?

10:27 PAT: Compelling.

10:28 MATT: Super-exciting. Everybody else is like, “Can you guys leave? We’re having a nice dinner here.”

And so that’s how it kinda came up. And my dad… all the credit in the world goes to him, because he fast-forwarded my knowledge on that by at least 10, 15 years. And so I started my own company, but truly was calling him every other day, going, “So how does this work?”

And I was able to build it up because the concept was interesting. I’m a very sort of egalitarian in the way that I think about things. And if the Fortune 500 has it, why doesn’t small business have it? That doesn’t make any sense.

And so that was my whole motivation was we’re going to go deliver this to these folks, and that resonated and seemed to work.

11:07 PAT: Definitely. And looking at your next entrepreneurial endeavors after that point, were those always in that same small to mid-size business, tax consultation arena? Or what did that look like?

11:20 MATT: Yeah, so I sold that to a public company in New York in ’05. My whole goal in life was to try to retire by 30. I thought that was the epitome of winning. That if I could do that, then I would have won.

And I did, and then I looked around and was like, “This sucks.”

11:34 PAT: Bored.

11:35 MATT: None of my friends are retired. I keep calling them to go surfing and they’re like, “What’s wrong with you idiot? We can’t go.”

11:40 PAT: It’s Wednesday at 10 AM.

11:43 MATT: And I’m like, “But low tide’s at 11:30.”

Doesn’t matter. So I was only unemployed… well I’ve been unemployed I guess, since I graduated college. But I was only shortly out of starting to do something.

So after I sold that… but I really learned a lot out of that experience. I learned a lot about accounting. I learned a lot about making sure that my numbers were right and how to sell my business correctly. And sell it to the right people.

And so the next venture was, yes, in that same vein but not in tax…

12:15 AUSTIN: I just want to go back to something you said right there. Selling it correctly. That is a really interesting idea that I don’t feel like you could really ever know about until you experience it. What are some maybe mistakes you might have made the first time around? Or I know we’ve talked about it a little bit, but… Or maybe something you picked up on that “Hey, I need to tell… if someone’s going through a valuation. A potential sale. They need to know this, for sure.”

12:37 MATT: Yeah, so the first time around, I really didn’t understand my numbers. And I know that seems silly, but I didn’t understand my numbers.

I also didn’t have a personal goal. I didn’t know what I wanted to get out of it.

The second time around, I knew the companies that were buying companies like mine in that space. And I teed it up… I mean, I tell this story… It’s like when you go to the 8th grade dance and you have that little girl you have that crush on. And you stand in the mirror and you comb your hair for like 30 minutes. Cause you want it to be perfect.

You pick out the shirt, it’s the right shirt, it’s the wrong shirt. And then finally you get the right shirt.

When you’re going to go sell your business, you want to make sure that you comb your hair and you put the right shirt on. You’ve gotta look the way that that person… that buyer is going to expect you to look. You’ve gotta start engendering trust from literally the very first impression that they get of you.

And so that was a really big learning experience. From the first one where I screwed that up… to the second one where I really targeted the buyer, I knew they were buying in my space, and I knew what they were looking for. And so I put the financials together to look exactly like what they wanted.

13:39 PAT: There you go.

13:40 AUSTIN: Yeah, that’s quite the idea there. And I imagine was very difficult to do. The attention to detail I think, is what I’m picking up on. Which seems really impressive.

What are some skills that helped you get better at attention to detail? Or was this something that you grew up on with your parents? How did you develop that attention to detail?

13:58 MATT: Motivation. I’m actually not that detail of a person naturally. I never picked up my room when I was in high school.

14:06 PAT: I think we’re all right there on that one.

14:07 AUSTIN: I was just about to say that.

14:10 MATT: I didn’t fold my shirts. But what you find is that if you’re not detail oriented and if you’re not paying attention to the small things, then the big things don’t work. And I had enough failures to be frustrated with enough failures to say that I’m going to pay attention to the details.

A long time ago, somebody gave me some great advice. A guy that I’d done some business with. And I was asking him… he was able to spend 3 months in Maui, 3 months in Alaska and 6 months in San Diego every year. And didn’t work very much. And I was like, “That looks awesome. How do I do that?”

And I think I was in my mid-20s, and he said, “Well, here’s the thing, Matt. It’s super-simple. Prepare for the day, the day before. And prepare for the week, the week before. And just pay attention and live your calendar.”

I was like, “All right.”

And so I do that, and I’ve done it ever since. And it keeps me kind of organized, and it keeps me focused on my priorities. I keep a streaming to-do list, and I make sure that that to-do list is prioritized by… I use Stephen Covey’s stuff, so the most urgent and important.

15:11 PAT: The urgency/importance matrix?

15:13 MATT: Right. Yeah. Try to stay out of the tyranny of the urgent and doing these things that don’t really matter but are in your face.

And I’m not always successful at it. But I think being aware, and trying, you get better at it as you go.

15:26 PAT: It’s interesting because it’s definitely a commonality that I hear. I listen to a lot of podcasts where they interview business leaders, and CEOs and founders and that seems like the detail oriented nature of a lot of those entrepreneurs is what makes them successful. But it’s funny, because kind of like you, a lot of times it’s very specific within their niche.

Which tells me that they’re very viciously passionate about what they are doing to the point that they don’t want to skip a beat. It’s a big deal to them if they miss something or let something slip through the cracks.

At TGG accounting where you’re currently Executive Chairman, you guys help the small to mid-size business ensure that they have correct financials. Is that truly… I guess where does that passion come from? Does it come from that first experience where you didn’t necessarily know what you were doing? Or kind of what was that?

16:14 MATT: Yeah, it came from both. It was sort of a collective part of my experience, which was I saw again… If you can imagine, I was talking to my friends–most of my friends from Vanderbilt who are non-football players, the smart kids, went to New York and worked in finance. And they were doing high finance stuff.

And I told them in ’06, “I’m going to go start a business where we’re going to give accurate financials to small business owners.”

And my buddy goes, “So how do they make decisions now?” I’ll never forget that conversation…

16:49 AUSTIN: “Wait, that’s a business model?”

16:50 MATT: I’m like, “Yup. Okay now I know I’m onto something.” Because I knew that all these business owners had bad financials. And so I knew that if I could get them the numbers, that they would have a much different failure rate. According to Brookings Institute, 11% of businesses under 100 million fail every single year. One in 9.

And those businesses are failing primarily… they think it’s because of a lack of cash. It’s not. It’s because they don’t see the cash cliff coming.

And so I wanted to change that. I think that’s an abysmal problem in this country. We have roughly 30 million people that are totally displaced because a small business went out of business every single year. That’s an insane number.

When we’re talking about health epidemics that affect a million people… this is literally displacing 30 million people, and I believe if you can show a business owner that they’re going to run out of cash, they’ll do something about it. They’ll sell more, they’ll cut expenses. They’ll go raise money.

They won’t fail. These people are smart. They’re motivated. They have their homes on the line, for Christ’s sake.

17:48 PAT: Right. They’re more in it than…

17:51 MATT: They’re more in it for sure. So I just wanted to give them the tools. And I wanted to say, “Listen. I have seen the power of good accounting. It’s helped me in my life. I think if I can teach you that, and if I could teach our folks how to do that, then we’re all going to be in a better place.”

18:05 AUSTIN: And do you think you could explain to us just the concept of the “cash cliff.” I heard you say that and that kind of stuck out in my head. What does that look like for a business that might be running into that problem?

18:15 MATT: Well, it can look a bunch of different ways. So, for example, the most obvious way is a business that’s say a startup and they think they have plenty of cash, and then all of a sudden they’re going “Oh wait. We’re in trouble.”

The less obvious one is a company that’s more established. And all of a sudden sales start to peak, and go from 5% growth to 50% growth in a year. And all of a sudden you’ve got orders that you have to fulfill. You got a vendor in China. You gotta send them 100,000 dollars before they even start making it. You gotta send them another 100,000 dollars when they ship it to you and you get it.

Then you have to send it and sell it. And then you sell it, and you have to wait another 60 days to get paid.

Well if you don’t plan for each one of those steps, and all of the operating expenses in between that cash cliff can smack you in the face, because you go, “Well, it’s really only 200,000 dollars of stuff.” But you gotta wait 6 months to get it back.

So you have to see that… that cash cliff could come in month 4. And you go, “Well, our sales are amazing. Look. We’re growing 50%.” Yeah. And you just ran out of cash. And that happens all the time.

So the one side is you’re not selling enough. You’ve got too big of expenses. You haven’t quite hit your business plan.

The other one is you’ve achieved your business plan, and you forgot to plan for the cash.

19:28 AUSTIN: Right. And then so if you’re identifying this problem, what’s a typical solution look like? You say maybe off the top of your head from an example is this…? Do you look specifically at cutting costs right away? Are you saying “You need to ramp down distribution?” What does this look like?

19:42 MATT: It’s a great question, because there’s only 3 things you can do. And I mentioned them before, but you can raise revenue–meaning go sell. You can cut expenses. Or you can get financing.

But I do these talks all around the country and I ask people, “If I told you you were going to run out of cash in the next 6 months and I said there’s only 3 things you can do. Those are the 3 things. How many of you would absolutely go out of business?” Nobody raises their hand. Cause no one’s going to go out of business.

So the most important thing that I can do is simply provide the information. I don’t need to have the solution. They’re going to understand their business, their industry better. But if they don’t see it coming, they can’t fix the problem

20:20 AUSTIN: So you’re basically an informational highway is kind of what I perceive you as. They don’t know that this problem exists, and you’re literally building them the bridge to say, “Hey, this could be a very life altering moment for you 6 months to a year, if you don’t take care of this. Here’s your options.”

What does that look like…? I know you do a lot of your talks… but maybe in the beginning how did you get in front of your clientele and let people know about this?

20:42 MATT: So we just started with a handful of clients. And what we were really doing was helping them position for sale. So I said, “Look. I know how to sell businesses. I’ve sold a couple of my own. I’ve consulted with people about how to sell their business.”

And we started cleaning up their books. And then magically they didn’t want to sell. Because they were making too much money.

20:59 AUSTIN: Right.

21:01 MATT: So all of a sudden it was like, “Hunh. Maybe we have something here.”

And so then we focused all of our energy on systems and processes and building all those for an accounting department. How do we organize an accounting department so that it’s the most effective, most efficient, completely eliminates fraud and theft–which happens in an obscene number of businesses. And then sets the business owner up for it with a framework to actually understand the numbers. Because if you feed them a spreadsheet that’s 50 lines long, most people… at least I would… completely glaze over.

21:31 AUSTIN: And what does the fraud and theft look like? That caught my ear really quickly. Is this maybe cyber-hackers? Or just people pulling it over with how much something costs? Or what does this look like?

21:41 PAT: Paying themselves a high salary.

21:42 MATT: It’s funny you mention that.

21:44 PAT: Did I get it?

21:46 MATT: Payroll fraud is the number one fraud in this country. The single biggest incidence of fraud. And I will tell you that at least the national statistics put out by the Certified Fraud Institute are that roughly 30% of small businesses will have accounting fraud in their life cycle.

22:01 PAT: Why do you think that’s more prevalent in a small business? Is it because… cause I would think like the visibility is almost higher…

22:10 MATT: That’s a good question. I would tell you that it’s a little lower, because you don’t have layers. So in a big business… I mean, look, you can always have the Enrons of the world where literally they have to have 20 people in on the fraud.

But that’s extremely unlikely. Most of the time it’s one person. And that one person is committing that fraud on their own.

And so, for example, we just caught a lady in Denver who was a comptroller at a certain place… we went into her office in Denver, and we talked to the business owner and said, “You gave Susie a raise. Congratulations. She must be doing great.”

And he said, “No we didn’t. And worse than that I sign all the paychecks. Susie did not get a raise.”

And we said, “Well, here’s the report from the payroll company. It shows Susie actually did get a raise.”

And he says, “What?” So what she did, was she went into the payroll system and increased her salary and also increased the withholdings so that the net check looked exactly the same. So when he signed them, he thought he was still signing the same check.

And what she was doing was just going to wait until the next tax filing, and she’ll get a bigger refund.

23:13 PAT: That’s crazy. That’s terrible.

23:18 MATT: It’s terrible, but what’s terrible is that people actually go to that much effort to commit fraud where they could go to jail. As opposed to just going to that much effort and get a raise.

23:26 PAT: Better at their job and get it the honest way.

23:28 MATT: Right. But it happens all the time.

23:29 PAT: Do you find then that… so there’s always that. There’s that incidence where there’s like crime being committed. People that know what they’re doing and they’re trying to pull one over.

How often do you find it that it’s due to inadequate training? Or inadequate practices?

23:42 MATT: Well I would say that the biggest thing that I found in accounting… So I go to speak to accounting schools all the time. And I’ll tell you, the big gap that we have right now is that your top students in any accounting school across the country… if you went any of them how many of them want to be bookkeepers, you would get zero that would raise their hands. Nobody wants to be a bookkeeper.

But every small business pretty much just needs a bookkeeper. So what happens is you get the office manager trying to put something into Quick Books because it’s easy, and then they put it in wrong. And they get 9 out of 10 transactions right, and 1 out of 10 wrong. And in this world… in accounting if you get 1 out of 10 wrong, it’s all wrong.

24:20 PAT: Yeah. It affects every other…

24:22 MATT: It’s not like you got an A minus. You got a 90%, you’re like “It’s okay. I did pretty well.”

No. You got one out of 10 wrong. It’s all screwed up.

And worse, if that happens month over month over month, the books don’t make any sense.

24:33 PAT: It compounds.

24:35 MATT: Yeah. So that’s the real problem. And I see it time and time again. What we try to get out there and tell people and top accounting students is they don’t just have to go to tax or audit. They can actually go into business consulting. You can help business owners with your skills. And try to get back to a point where accountants are doing real accounting. Not people who are not equipped or trained or have the skills.

24:55 AUSTIN: Sure. Yeah, and I was just thinking about that is a very entrepreneurial mindset, right? To go more of the consultation side of that. Is that typically something that you might be able to teach in school, you think? Or maybe that’s lacking in school? Or how do you get more accountants to be aware and potentially entrepreneurial?

25:14 MATT: Well that’s a great point. We are building something we are calling TGG University, which is a series of classes that are going to teach accountants how to do accounting in certain industries. And in 2019 we’re going to come up with certificates.

So we’ll have a certificate in manufacturing, a certificate in service businesses, a certificate in retail. And this is the best practices for accounting for those.

Now I haven’t gone to the undergrad level. I’m thinking about trying to teach the bookkeepers. So trying to teach all the people who are working inside of those companies these different systems and processes so that they can get better at their jobs.

But it would be really cool to take it down to the undergrad level and start to build that out.

25:53 AUSTIN: Yeah, absolutely. I think a little bit about digital marketing, where there’s really nothing in undergrad for people to learn. I do SEO and you can’t learn SEO in school right now. That’s not a course.

And if they do, it’s going to be pretty bad. So there’s just like a big gap in a potential career that someone could have. A great career too that’s really growing if they knew it existed and knew how to do it. So it sounds like you’re kind of on that path too.

26:16 MATT: I’d love to be on that path. I would tell you, you guys are awesome because you’re so far ahead of technology. Accounting’s been around for 500+ years. Our challenge is the tax code is literally 21,000 pages long.

And so the best schools are being funded by PwC and Ernst and Young, and Deloitte and these places. And what do they want? They want tax accountants and they want auditors.

So every school is grooming you to either be a tax accountant or an auditor. They’re not grooming you in the middle. And so we gotta think about how to make that a better reality for people.

But the challenge is, honestly, these accountants… they may only take 4 or 5 accounting–true accounting classes–in order to graduate with an accounting degree. Because they have to take all the tax classes, and all the audit classes. And all the systems and integration classes. And all the government accounting classes that don’t apply to anybody that doesn’t want to work for the government.

27:04 AUSTIN: It seems like when I was in undergrad the ultimate goal of the accountants was to get hired by the Big 4, right?

27:08 MATT: For sure.

27:10 AUSTIN: And that was their goal, right? I wanna work for Ernst and Young and that was it. And then they get in and they’re doing audit. And they’re working 6 days a week, but seasonality’s involved… and they just seem to hate it. And then I’ve seen multiple extremely brilliant people burnout and go a different direction. Some sort of finance.

And do you think that that type of dream or maybe those companies are part of the problem of why we’re not having a better perception of accounting and why people don’t know that there’s more out there?

27:38 MATT: I don’t know that they’re the problem. They’re doing what’s in their best interests. And those companies need to be working with the Sempers and the GEs and the giant companies of the world. The Amazons and whatever… They need accountants to come in and do all that stuff.

The challenge really is I believe there’s a different option for people who want to help. Because if you’re auditing Apple, are you making a difference? Kinda, maybe. But it’s like 5 degrees removed.

What I love about what we do is our folks right out of college are interacting with CEOs day 1. And if they really care and they really want to put their effort in, they can use their talents to make that person’s life better today.

28:22 PAT: And they’re immensely… I’d assume… immensely grateful for what you guys are able to do for some of those companies. I’m actually a little bit curious about the lead generation aspect of it. Do you seek these companies out? Because a lot of times they don’t know that they have a problem. And you’re uncovering it for them.

Or is it more in-bound? I’m just a little curious on that.

28:40 MATT: It’s fascinating. And it’s a great question.

We used to. What I’ll tell you is that I believe that our reputation is the single biggest marketing tool that we have. That the best marketing we have is to do an amazing job for the people that we’re working for.

And so we get almost all of our business through referrals. ‘

The challenge is we still have to weed through the referrals. I learned a really important lesson maybe 4 or 5 years ago, where I was just like… I’m kind of sales guy. So it was like, “All right, you want help? All right, we’ll help you.”

And what I failed to do is see whether or not they really wanted what we were giving them. And what I learned is that we really only want to help people who want what we provide.

Which is we teach you how to run your business by the numbers. If you just… if your comptroller just got hit by a bus or just quit and you want somebody to come in on a temporary basis and fix things, that’s really not a good spot for us. We want to have a long-term relationship where you really want to run your business by the numbers.

Because if you do, you’ll value what we do. And I only wanted to work with people who valued what we did.

29:38 PAT: Yeah, that’s a very… I feel like it’s a conversation that we’ve had here before as well. I think that it runs along the same vein because the offering is a little bit niche. But the people that really need it are the ones that will appreciate it the most. And provide that case study worthy type referral for you guys.

29:57 AUSTIN: And that’s almost a self-esteem check on the company, right? If you’re thinking about it… when you’re a younger company that might not be an option. And right now maybe you’re getting so good, and you’re reputation is so good, you can take a check on your business and be like, “I can provide this service perfectly. People know I can. And I’m going to just do that.”

And I think that that’s a really amazing place to be for a business.

MATT: It is, though you have a really good point, which is it’s challenging. In the early days of the business we took on anybody and everybody. Would I do it the same way now? I don’t know, but it got us to where we are. I mean, for sure, there’s a big part of that.

And today maybe it’s a part of the evolution of the business now that I’m thinking about it. Where we got to a spot where we could be… for lack of a better term… be a little bit more picky. But I will tell you that it improves the quality of life for everybody. Because if clients are really thrilled with what you’re doing, the people who are working on those clients–my employees–are super-happy.

30:49 AUSTIN: Yeah, and that seems to be a common themes with pretty much every business I’ve seen started. You gotta take whatever you can get is pretty much the mentality…

30:56 PAT: It’s almost like you’re getting feedback from the market as to what your service will do. You need a big sample size to be able to test accurately and see “Oh, here’s what we could do for this type of company.” You start to get almost… not templates in place… but you have knowledge that something will work. And then that’s when you’re able to a) Sales guys sell with more confidence. And then b) really train your team up efficiently to provide that service in a cost effective way.

31:20 AUSTIN: And it’s just so difficult I think to be confident. And your idea working out perfectly. And you have a specific niche of a client that you might want, but you’re too afraid to just only go after them for fear of going out of business in your first couple years. This is at least what my thought process would be, and why you’d open the door to everything.

But I wonder if maybe that’s not the best mindset to have. And maybe you should just focus on waiting for that type of business to come in the door.

31:43 MATT: Well, I don’t know. How did you guys see it? Have you ended up in situations where you’ve felt like, “Oh, we took that client on, and maybe we shouldn’t have? They don’t really want what we’re doing.” Did it work out well, or did it work out poorly for you?

And what I mean by “well,” is maybe the relation didn’t work out well, but did it build a bridge to the next opportunity. Because sometimes that’s ultimately that’s still working out well.

32:06 AUSTIN: That’s a great point. And I think if you took it in a vacuum you’d be like, “That was a shitty relationship,” right? Or, “We didn’t generate that much cash off of it.”

But you also have to think about the experience that you now put in your back pocket, right? It’s either that red flag you now know is a red flag…

32:21 PAT: You can read the writing on the wall…

32:25 AUSTIN: Or that difficult, awful situation of a technical problem occurred and now I know it exists, right? So next time I can identify it and move on.

But yeah, I think that there’s a lot to be taken from both. And I can’t imagine… I haven’t been able to start a business yet… I can’t imagine the feelings at night, or just trying to stay alive. Or wondering how to stay alive, I guess.

32:45 PAT: Yeah, I think for me too it’s like even if the situation itself externally is negative, there always like a lesson that can be gained from it too. So now you have a running list of best practices, and you have–more importantly–a list of tactics and things that you know just don’t work. Right?

“We tried it on this client. We have another client that’s in a similar industry, similar financial situation, similar service level. We shouldn’t do that. We’ve already tried it.”

So I think that in the long-run is better. But certainly it’s frustrating. And when teams are not getting along on the client side and the agency side for us, it can be a little bit of a tumultuous relationship.

But there’s always good that can be gleaned from it…

33:27 MATT: Do you guys have a running list of “don’ts?” You know what I’m saying? A running list of “This is a no-go with client” for one reason or another?

33:35 PAT: I think it’s always… for us, it’s always a little bit more reflective of who… You have to know you’re audience a little bit, right? No two clients are ever going to be the same. It’s tough to put a blanket on that and be like this is something…. I mean there’s obviously things that you should never do with a client.

But that list is a little bit short. It’s a little bit more… In my experience, situational I would say.

33:54 AUSTIN: Yeah, Pat’s more on the audit side than I am, so he’s had a bit of more understanding on this. But we typically, it’s gotta be a pretty big issue for us to push them away. Lack of budget, right off the bat. Or a failing business that we can identify right away that doesn’t seem savable so to speak. Or maybe a very tumultuous individual.

Kind of the way I look at Internet marketing is there’s still a significant amount for business owner’s to learn. And you could be the smartest guy in the world, but if you don’t know it exists yet, or how it functions it might be a really difficult relationship right off the bat, right?

But there’s still a ton to be taught, and then a ton to be successful at. So even if it’s a difficult situation in the beginning, if you can tell someone’s willing to work with you and learn, it might be worth it to stick it out. 6 months to a year from then they could be pretty savvy and understanding of how you–me–can make them more money.

So it seems to be worth it at least to try it out in an industry that’s pretty new.

34:49 PAT: Yeah, and one thing that I would say too, I actually see a lot of similarities between the digital marketing world and accountancy. Or people that do accounting consultation or whatever it might be.

You have your hard metrics, you have your numbers… but at the end of the day, you need to still communicate those into management decisions to a POC. And I think that that is really where… we kind of talked about with the undergrad thing–accountants or kids that study accounting in school. They learn how to do some accounting. And then a bunch of stuff that they don’t need to know.

And they never really learn how to communicate that in a managerial way where it’s going to be an impactful decision.

Marketing is the exact same thing. You learn market research, and honestly some outdated and kind of antiquated tactics. Like print marketing, direct mail, stuff like that.

But you never learn what it means or why it’s important. And so just being in the business world is when you start to learn how to tie those ends together a little bit.

So I think that’s another big piece of it too. You need to understand that when you’re working with a client, they have a need. And you need to help them as best as you can. Whether that means by looking at their books or by providing new traffic to their website or whatever you’re doing… at the end of the day it’s all the same thing. You’re trying to help inform. And you’re trying to do it in a way that they can understand.

And that sounds like something that TGG does as well.

36:09 MATT: Yeah, I mean, our entire mission is to make business owners’ lives better through excellent financial management. But the only way you do that is by actually getting them to manage their business in an excellent way, right?

So I tell all my folks, the first thing you want to know are what are their personal goals. And business owners are a little bit taken aback sometimes when accountants will ask them, “What are your personal goals? Why are you in this business?”

“What do you mean, ‘why am I in this business’? We’re growing it to 15 million.”

“No. Why are you doing it?” Because ultimately then you can frame the communication back to them in a way that helps them understand how what they’re doing in their business on a day-to-day basis reflects back into their personal life.

“Oh, you know, I really want to help my son. He’s got a disability, and I’ve gotta make sure that I’ve got financial stability for that. And so I really want to get to consistent cash-flow.”

Oh, all right. Now it’s got meaning. As opposed to I just gotta get to consistent cash flow. “Well why? You’ve got all these opportunities out here. That doesn’t make any sense.”

37:09 AUSTIN: That’s such a fascinating way to think about it and look at it. I mean, I very rarely have heard that. Someone trying to tie, I guess… it’s emotional to a degree. To tie emotions to business. And to make it mean something. And that doesn’t happen that much.

Typical goals that we run into with KPI is what you’d expect. Generate more revenue. Generating more revenue is awesome, but I’m going to care a lot more if I know the person. And we do get to do this with the small to medium businesses. Where I know the person on a little bit more personal level. And I can kind of feel their world interact with mine. I’m going to care a little bit more. So it seems like you figured that out.

37:47 MATT: I don’t know about figured it out. But what we try to do is start with that in mind. At least at the core… the only reason we’re here… accounting is the tool for us to be able to help people. You guys use digital marketing, some people use medicine, whatever it is… but accounting is our tool to teach them how to make their lives better. If we’re not conscious about what it is that they want in their life, we’re missing the entire boat.

38:12 PAT: Speaking of ways to make people’s lives better… bad segue way here… you also wrote a book. So I kind of wanted to talk to you a little bit about that.

38:19 MATT: (laughing) Reading makes no one’s life better.

38:21 PAT: You like that one? I guess, what was that experience like? And more important, what motivated you to put these ideas that you already have in practice down on paper for everybody to see and access?

38:33 MATT: Yeah, I wanted to get it out to a wider audience. I wanted to make sure that the experience that I had had that wasn’t unique to me, by the way. I’ve talked to lots and lots of people who really do want to get good numbers and can’t figure out how to do it. I wanted to show them a path and what it really means.

And for a handful of people who think, “I think I want to do that. I just feel like I’m flying blind right now.” I hear that all the time. “I’m flying blind. I don’t know really where I’m at.”

I wanted to show them a clear path to getting out of the clouds and into some clarity. Into some understanding exactly where they are and where they’re going.

And then verify that with the numbers. So that was really the motivation behind the book.

39:10 PAT: And so the book kind of speaks to the tactics that are proven to be successful at TGG.

On a personal level, just what was the experience like writing a book?

39:21 MATT: On a personal level it was really hard. I’m not much of a writer. I like to express myself more through speaking than writing, and react to people’s emotions and facial expressions and questions and that sort of stuff. I’m much more comfortable doing that so the writing process was difficult. Took a lot of discipline.

I’m happy that I did it. I think I could have done a bit better, and I’m looking forward to sort of taking a second bite at the apple and going back after it. And figuring out the mistakes that I made the first time, and making new mistakes.

39:57 PAT: Trying to learn along the way.

39:59 MATT: Yeah.

40:00 PAT: Well what else is kind of on the horizon line? You have the book, you’re thinking about maybe doing another version of that. You have the keynote speaking–you speak all over the country to business leaders, and help them understand why living by the numbers is important.

I guess, what does the future hold for Matt Garrett? What’s the next thing on the list?

40:17 MATT: It’s interesting that you say that. I used to think that kind of the key to business was coming up with the next great idea. What’s the next great idea? And so I change the way that people look at this, and I’m going to bring big business accounting to small business owners.

I believe right now in my life that execution is going to be the big hurdle that I have to overcome. That I just have to get better at what I do. And better, and better, and better. And that we at TGG have to be more efficient and more effective. We have to constantly be coming better at delivering the message. You talked about communication.

And so my real goal over the next 5 years is just simply to expand the quality and the breadth of what we’re doing at TGG. I don’t have any goals of any… like… big, new ideas. It’s just literally, do what we do every day with discipline. And do it better.

41:15 PAT: Where does that motivation come from?

41:19 MATT: I want to make an impact. I realized being retired was like… okay… but I hadn’t really made anybody’s life better. And that felt hollow. It didn’t feel like enough of a life for me.

And so I still have a lot of ambition around helping people who are taking the biggest risks in our country. And I believe those are small business and entrepreneurs. They’re reaching out there and putting their entire net worth on the line. Their family on the line to try to make something happen.

And I want to help support them.

41:53 PAT: Matt, thank you so much for coming in and speaking with us today. Definitely appreciate it.

41:56 MATT: Absolutely. Ton of fun. Thank you guys.

42:01 AUSTIN: Once again, a big thank you to Matt Garrett for joining us on the show today. We’re still in awe of his story and his desire to help business owners figure out their books. His really incredible passion.

And my favorite part is his desire and what seems to be coming, is his want to teach others and undergrad students and maybe graduate students about maybe an alternative career path.

42:23 PAT: Yeah, this was one of the coolest interviews maybe we’ve ever done. Because I know barely nothing about accounting/finance. And I think that a stigma or I guess, an attribute of that…

42:30 AUSTIN: Yeah, we’re digital marketers.

42:31 PAT: Yeah, we’re digital guys. The issue is that the way that it’s taught in school is boring. But when it’s explained that you can actually help a failing business, or help scale a company, or be more sound in your financial decision making at any level… that’s something that I think everybody would be able to get behind.

But it’s just not framed up that way. And I think that Matt does an outstanding job… kind of like we talked about in the interview… of basically taking those accounting trends and those accounting metrics and turning them into insights for decision making from management teams.

Because before it was like, “Okay, there’s DADE, which is an acronym for accounting. Not even sure… I don’t even really remember what that is. Right? And there’s all these metrics and credit, debit, whatever…

But hearing just how it impacts the business and has that ripple effect was pretty eye-opening. It’s very inspiring in a way to see some of the impact that he has had on some of these companies.

43:24 AUSTIN: Yeah, we’re definitely going to keep in contact with him, and hopefully have him on again if he comes out with this other book he was talking about, or maybe just get an update on his business and just hearing the stories about the people he’s helped and the things he goes through is really interesting. So we’re looking forward to the next one. We hope you liked this one.

And one last note–he is a surfer, so you know he’s cool.

43:42 PAT: Big surf guy. All right, you guys. Thank you so much for joining us on Flip the Switch, episode 49, part 2. We’ll be back again next week with more great content for you guys. But until that time, this has been Pat Kriedler, Austin Mahaffy, John Saunders and Joe Hollerup signing off.

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John is the Director of Web Development at Power Digital and thrives on the balance between creative and strategy. Using his experience in CRO, John approaches website builds with the user in mind, combining psychological and technical aspects of design.