Are you in need of an accountant year-round?
Scott Hoppe is the CPA of Why Blu, a fully distributed accounting firm that supports their clients year-round. Why Blu specializes in tax planning spanning from individuals at start-ups to large companies.
Since creation in 2014, Why Blu’s goals have remained the same. They give back to their community, do exceptional work, and pay attention to the details.
Why Blu values the planet donates 10% of profits they make to eco- friendly charities.
We love to see communities thrive, that’s why we donate 10 percent of our profits to our communities every year.” – Scott
Besides leading Why Blu’s tax team, Scott has a doctorate in accounting and master’s in taxation.
Learn more about how Why Blu keeps their clients happy year-round by listening to this episode of The Thoughtful Entrepreneur above and don’t forget to subscribe on Apple Podcasts – Stitcher – Spotify –Google Play –Castbox – TuneIn – RSS.
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0:00
Welcome to the thoughtful entrepreneur Show. I'm Josh Elledge, founder and CEO of up my influence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show, where I'll reveal how you can be our next guest on one of the fastest-growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go in with us right now we've got Scott Hoppe. Scott, you are the founder and CEO of Why Blu and you're a CPA and by the way, Why Blu is whyblu.com. Thank you so much for joining us. Yeah, thank
0:51
you for having me.
0:53
Well, Scott, explain what Why Blu does and who you serve.
1:00
Why Blu is a full-service accounting firm. We're based out of San Francisco, California. And you know, we work with a lot of individuals in the in the tech industry, as well as businesses. So we're about 60% individuals. And they normally have things like restricted stock units options and tax planning around their equity. Whereas the business side of things, it tends to be businesses that are on the startup phase to about a million to $15 million of revenue and, and varying complexity there.
1:35
So on your personal services that you offer to your audience there we tend to be who,
1:42
yeah, so you're looking at founders are one element of it. And there's there's usually options that they get that we call founder shares that we do tax planning with. Otherwise, you're looking at people that are at the Google's Facebook Microsoft slack. My lot of tech companies where they've gone from pre IPO and we help the people through IPO.
2:10
And Scott, you've gotten a lot of recognition is kind of a smart dude. At least that's kind of what I've gathered by, you know, you're you're right up in California CPA. And so why would somebody want to work with you who is in that space right there? They're the owner of a company, founder of a company. They've got some shares. I mean, they're definitely upwardly mobile. Why would they work with you as opposed to just go into a regular old h&r block CPA kind of provider?
2:43
Yeah, I think I think what you're really getting out of this is having somewhat that intimate knowledge of of what you're working with and what you're holding. likely it's it's new to you and the tax planning. Opportunity. One of the most common mistakes we see is a lack of tax planning. People think These, these grant documents that show like how much information they have, how many stocks they have, and they don't do anything with it and they really miss out on some great opportunities. Something that an h&r block, just they don't have the sophistication, even even really, really good CPA is outside of the Bay Area. It they just don't face the equity like we do. So that allows us to be really strong when you look at markets like San Francisco, New York, Boston, where there's a lot of tech companies and a lot of options and equity going around.
3:35
And so what is typically the process then for when somebody begins a relationship with you like what what does that look like?
3:43
Yeah, you know, we, from a from our standpoint, is we try to make it as easy as possible for you to come in the door to say hi and to schedule an appointment. So most people will either go to our webpage, the white blue.com site and there's a schedule button right there. that pops up. You can email me directly at Scott at why blue. And we can set up an appointment just like that. After we get through our initial call, we make sure like, Hey, you know, founder, this is a we have a lot of expertise, we have a lot of value we can bring to you, then we'll go into the next steps around, like, let us see those old tax returns, let us see some of those documents so we can really make sure that what we talked about, we have the support for to to get you going.
4:27
You know, I don't know if it was just me. I mean, our business obviously did much better in 2018 verses 17. We got nail tax-wise and adjust. It's really painful. I mean, we're there big changes for for business owners. Between 2017 2018
4:48
Yeah, totally. We had those drastic changes with the Trump tax law. So the TCJA is the short, shortened version of that. And what we saw was corporate secret. Which could be a lot of these, you know, a lot of the the tech companies, that's how we operate because we want to raise money. They got a huge reduction in in their tax rates. But individuals, they didn't necessarily get that same big drop, the top individual rate went from 39% down to 37%. And there was there there was a little bit of a, an adjustment where they said, Okay, look, if you have a partnership, you have an LLC, you have a business like this, we will give you a a 20% deduction on your income just for running it that way. And, and we did that to try to level the playing field between this big C Corp drop, but the lack of individual dropping income tax rates and that that was a benefit but it opened up a lot of it wasn't as big of a shift as we were hoping for. Even though it was snowing. That positive. What we saw as a bigger issue was actually this, like, hey, you're running a business. If you're a sole proprietor or you're an S corp, we get into these two things like what entity should we be? So a little bit of tax planning goes into entity selection. But the next most important piece to the tax planning is, is entity management. And, and sometimes that can be like entity mismanagement. So let's say you didn't talk to me and you set yourself up as an S Corp. And you're like, Whoa, I still got dinged. What the heck? Well, yes, I'll be that we probably are looking at a level of entity mismanagement at that point. And we need to start diving in deeper that could look at looking really at what are the owners being paid? That could be that's you and can we optimize what we're doing there to cap some payroll taxes? can we can we, you know, support a lower a lower salary without getting trouble. And those are the steps that we take with our business owners.
7:05
You know, just generally, is there a kind of a rough guideline in determining when a business goes from LLC to say an escort?
7:15
Yeah, you know, from, if we're talking about most business owners, let's say like professional service firms, it's, it's somewhere between 100 and 150,000 of net income as a sole owner, is the time that I want to start considering moving away from sole proprietor into an escort. If we're well beyond that, that revenue threshold and we're not an S corp, we may be leaving some money on the table. Sometimes there's not ways we can be an escort may because we made a partnership. Yeah. So what we start getting into something pretty advanced and that that's going into hybrid entities where, where we can we can Have escorts as the partners in the partnership and adding that layer in allows us to get the best of both worlds. However, I definitely consult a CPA on that because now you're working with a lot of tax code and a and the nuance of it's very challenging, but the benefits if the money's there is worth it.
8:21
Are there some general things that you think that really smart clever CPA is know that most business owners just don't know? Haha.
8:30
Yeah, having a having a really not undervaluing a bookkeeper. And, and that's because it's the beginning of the information flow that really supports your tax returns. But more importantly, forget about filing your tax return. Forget about the bookkeeping. What you want to focus on as a business owner and where you want your CPA to be involved in. Isn't the black and white area that it's this really it's this. It's not hindsight information, it's the foresight information, it's working on KPIs and, and trying to form like, what's a good business dashboard that's going to help me keep the pulse of my business? Likely, likely, what you're going to do is go through a phase and exploring Well, what are good KPIs for me, you're going to develop them, and they're probably not all going to work out. So after six months, maybe a year, you revisit it, you sit down together, and you see like, Am I getting the information I need to, to not only help me know what's going on with my company, but my managers are they are they understanding what these metrics mean to help them run the business as their own? And that's, that's kind of the evolution that's the spot I want to you want to start at. And to get to that spot. You have to think back and go Okay, who's who's on my team to support that? Do I have a solid bookkeeper getting information and timely and right that can get us there and am I on an accrual method versus A cash method, small little nuances like that.
10:04
Yeah, you know, and I think that there is a point in evolution, like, let's say, it's just someone who's listening to us, and they have a marketing agency, and businesses going really good. Let's say they're up to like 234 hundred thousand dollars a year. And now they're starting to pay themselves more and more. And at some point, they're going to probably want to maybe bring on you know, again, of course, they've got the bookkeeper and the end the, you know, the tax preparer or the CPA on that end of it. But at some point, they're probably going to want to look at, you know, some sort of a fractional CFO or expanding the role of some of their staff to help them make business decisions based on numbers and stuff as opposed to like a magic eight ball and some Smurf berries.
10:51
That's right.
10:52
Yeah, it's like, how does someone get into that? Like, how does someone begin that process of forecasting and so forth?
10:59
Yeah, you're right. So you're, you know, that's actually one of the first things we want to ask someone at the gate. And and we're going in and we're saying, Hey, are you here looking for a tax preparer or a tax advisor? And if there are companies at kind of what you're describing, they're likely asking for an advisor. And you say, Okay, good, because you know, the real difference between a preparedness and an advisor is your prepare is not necessarily going to be your advisor. However, your advisor is always going to be your prepare. So you have your team where it's at, they served you up to this point, but there's likely going to have to be a new sheriff in town and you're going to have to re up your team and make sure that who you have there, they have the expertise and they're willing to help you. Not from not from where you were, but where you are and where you're trying to go.
11:50
And at what point Scott would someone know that they should probably contact you.
11:56
We we do the best when you start when you haven't been there, yet. You've gotten the business, you're going, you're at the 500,000 mark, and you're on your way to a million, we find that getting into KPIs dashboards, and that you get the best return on that investment when you're in that million to $2 million range. And that's where you can start going, Okay, with this information, I have the team that can help support me, we can go from 2 million to 15 million before that, if you're at that $500,000 spot, that's still that's still a good place to begin as long as you're on that trajectory. Because we may not want to go full board to you know, you don't want to you know, everything that we reintroduce brings in a level of cost and you want to make sure that you're not, you're not spending way more than you need to like, you know, let's just say that marketing firm example, we want to maybe keep it to one to 3% of your gross revenue is being spent on accounting and I just made tailor the services down that You may want but aren't appropriate for your size.
13:03
Scott, one final question is obviously so your background, you worked with other tax firms. And eventually you made the shift to doing this independently. What was the impetus for that?
13:17
Yeah, you're right. I was, um, I was at PwC and San Francisco and, and I and I got a great experience going at the biggest firm in the world. And, and I stepped out. And I worked, I started the start the practice because I wanted to work at the firm, I always wanted to work at that didn't exist. I want to be at the most digital forefront firm out there. No paper, nothing like that. And I want the latest tools. And I wasn't I was having a hard time finding that. So I set out on my own to do that. And I really feel the need and the initial need for myself and then in turn that actually serve my clients really well to we're- we're looking not to sit down at an office. Maybe with that big leather chairs a little stuffy, a lot of wood. They wanted something fresh to
14:05
know a nice, nice. Well Scott- Scott Hoppe, you're the principal, the founder of Why Blu. And again, that's on the web at Why Blue whyblu.com. Scott, thank you so much for joining us.
14:21
Yeah, I appreciate I appreciate a lot, Josh.
14:24
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