David S-C.: Today I’m pleased to welcome Craig Cody. Craig is a Certified Tax Coach, Certified Public Accountant, business owner, and former New York City Police Officer with 17 years experience on the force. In addition to being a Certified Public Accountant for the past 15 years, he’s also a certified tax coach. As a Certified Tax Coach Craig belongs to a select group of tax practitioners throughout the country who undergo extensive training and continued education on various tax planning techniques and strategies to become as well as remain certified. With this organization, Craig has co-authored an Amazon bestseller book: Secrets of a Tax Free Life. Craig, welcome to the show.
Craig Cody: Thank you very much for having me today.
David S-C.: Craig, you have a really interesting background. Why did you start your business?
Craig Cody: Because I always had a love for numbers, and when I first went to school I was an economics major, and in the police department you have a retirement at some point, and it was something I decided along the way that I wanted to do something different, and I wanted to work for myself.
David S-C.: When you first retired, did you start the business right away?
Craig Cody: I actually formed the company, but I worked for a firm for a number of years that did a lot of international tax work. If you looked up my company, it was formed probably in 2000, 2001 when I left the police department, but I had a full-time job for a number of years at a real CPA firm.
David S-C.: What was the strategy behind that?
Craig Cody: The strategy was I wanted to be in control of my own destiny. When I was in the police department, you’re basically because you have a pension, you’re kind of locked in. You don’t have a lot of control over your own destiny, and once you’re in for so many years you just have to hang in there. When I got out, eventually I knew I want to have my own business where I make the rules, I make the decisions, I control what I’m doing.
David S-C.: How did you determine what niche to focus on as you launched your business?
Craig Cody: It kind of came by accident. I really wanted to focus on the estate planning area, but I guess about 10, 15 years ago they changed the rules, and they upped the estate exemption, so there was not a whole lot of business in that area. What happened basically was in reviewing some plans that we had done for some people on the estate side, we realized we were saving them significant money on the tax side, and that led us to get involved in the certified tax coach program, and focusing on tax planning and saving clients, keeping more of what they make.
David S-C.: I’d love to hear a little bit more about how the change in the estate tax law impacted you unexpectedly and how you felt about that when it happened.
Craig Cody: My goal was, when I went out on my own, to focus on estate planning, save people … The estate tax was 50% over a certain amount, over I think it was a million dollars at the time, and then it went up to around three and a half million. There were a lot of people with estates valued over a million, but there weren’t that many people with estates valued over three and a half million I think it was.
David S-C.: Right, which means that your marketplace changed instantly.
Craig Cody: It shrunk dramatically, so just tried to figure out how can we do this differently. I guess it was probably one year right around tax season when we were doing some tax work for a client, and we realized, “Oh, jeez, because of the planning we did on the estate side this person’s actually saving a lot of money every year on the tax side.”
David S-C.: What recommendations do you have for business owners when their marketplace changes drastically due to circumstances that are beyond their control?
Craig Cody: I think it’s the same thing that goes for business in general. You always have to be able to adapt and adapt rapidly to changes that are always going to happen, whether it’s technology. If you look at the tax prep business, that may be gone in another five years based on artificial intelligence. If you’re in the tax prep business and you’re not planning for something different now, you’re going to be in trouble in a few years.
David S-C.: What are some of the mistakes that business owners make with regard to changing marketplaces?
Craig Cody: They kind of bury their heads in the sand, and they’re not looking at the big picture and what’s going to happen in the future. Think of truck drivers. They say 5 or 10 years they’re all going to be driverless trucks, so if you’re a truck driver you better be looking for something else to do in 5 or 10 years. If you’re a business owner, the landscape is constantly going to be changing, and you need to be figuring out other ways to generate your money, and it could be niching down into something a little bit deeper like in my case. It’s not taxes, but you know what, AI and tax planning probably never going to happen.
David S-C.: Also, you made a pretty major change when you went from being part of the New York City police force to being an accountant.
Craig Cody: Yes, that was obviously a huge change. When I first made the change, I went from by day I was making paper copies, and by night I was in the police department supervising 75 people. That was a huge change. I learned a lot of things in the police department. I learned how to communicate with people, and that really has helped tremendously. I had to learn to communicate with people across all different socioeconomic fields in the police department, which now allows me to communicate better with different people when I’m doing accounting work.
David S-C.: Given the experiences that you’ve had, being part of a big organization as a police officer, being part of a smaller organization initially in your career as an accountant, and now being solo as an accountant, what would you say are some of the biggest challenges that those who are solo face?
Craig Cody: It’s all about cash flow. Somebody mentioned that to me a number of years ago, and it’s very true. When you’re on your own, you’re the guy that’s paying all the bills, you’re the guy that’s paying your own salary, so you have to make the money happen. If you’re working for somebody else, you might have a bad day or a bad week, in all likelihood you’re still going to get paid. When you’re working for yourself, that’s not always the case.
David S-C.: Correct. What advice do you have for solopreneurs to minimize those kinds of cash flow disruptions?
Craig Cody: Recurring revenue is a big thing. Systematizing it, so when you work with us, you’re on a monthly, flat-fee plan, and it’s an automatic ACH or credit card the 1st of every month. I don’t have to worry about collections. The money’s coming in the beginning of every month. It takes that whole part of it out of the equation. I’m not chasing clients to get paid. I’m not looking for checks. It happens automatically.
David S-C.: At what point in the development of your business did you come up with this particular revenue model?
Craig Cody: That came up after the real estate crash of 2008, 2009, so we had to refocus everything we were doing, and we started that in about 2010. If you’re working with us, it’s like a condition to work with us. This is the way we operate.
David S-C.: How hard was it to institute that kind of change and tell either existing clients or new clients that if you want to work with us, this is the model you’re going to follow?
Craig Cody: It was all head trash. I never had a problem with a client, it was all in my head. “Now, my clients aren’t going to do that.” My wife for years used to say, “You should take credit card payments.” I’d say, “My clients aren’t going to pay me by credit card.” I still hear about that today. We’ve never lost a client because of the fact that we get paid on a monthly basis, the first of the month via ACH or a credit card.
David S-C.: Now, for other kinds of solopreneur or service businesses of which there are many, and it’s a growing sector, what advice would you offer about how to make that transition to move your business from a transactional model where you’re chasing clients to get paid to a recurring revenue model where you’re getting paid on the first of the month by credit card?
Craig Cody: Figure out a way to do it, whether it’s getting involved in a mastermind group of your peers or maybe people that aren’t your peers. It’s all head trash. If you’re providing an ongoing service, there’s no reason you should not be able to do that.
David S-C.: Now, what about people like an attorney that doesn’t work with the same clients year in and year out, maybe the clients are episodic?
Craig Cody: That’s obviously a little bit tougher, but there are plenty of people out there that maybe those clients or on a small monthly retainer, a very small monthly retainer, and if you’re going to work with us, you’ll pay me, I’m just picking a number here, $50 a month, and then we will pick up the phone when you call us, and then it’s going to be X, Y, or Z down the road. I think it’s all, most of us, it’s head trash. If you provide a service that your clients work and you want that extra 25, 50, whatever it is a month, I think your clients will probably pay for it if you are delivering that valuable service.
David S-C.: What kinds of questions do you think solopreneur business owners should be asking themselves so they can figure out where the opportunities are for recurring revenue?
Craig Cody: What can I monetize that’s recurring? What is it that I’m providing clients, whether it’s access to me that I’m actually going to pick up the phone and I’m going to call you back within 8 or 12 hours? Figure out a way, talk with your peers, because it’s much easier to learn from what other people have done and what other mistakes people have made than figuring it all out, and reinventing the wheel yourself.
David S-C.: How did you learn this particular business strategy?
Craig Cody: I was part of a mastermind group, and I got beat up pretty bad at a meeting once because I wasn’t taking credit cards. It was actually out in San Diego and I actually signed up with a credit card company while I was at the airport, so peer pressure. I thought, just like everyone else thinks, “No. My clients won’t do that. I can’t do that.” I’ve learned most of our issues are usually just head trash, not reality.
David S-C.: What has the result been for you now that you’ve changed your business model?
Craig Cody: It’s huge. Our billing happens the first of every month, so we have a predictable stream of revenue that allows us to run our business, hire people, do what we need to do. I’m not worried about am I getting paid. You could get paid the first of the month or you get paid the 30th of the month, it makes a big difference.
David S-C.: Is there any difference in the kinds of services you’re providing to your clients?
Craig Cody: No. There is no difference as far as the service I’m providing, but now it’s like if you want to work with me, this is the way we operate. This is the way we do things. If you want to work with us, this is our billing policy.
David S-C.: Who’s your ideal client?
Craig Cody: Our ideal client is a business owner making money, that’s paying taxes. We look to be able to save them the first year about $20,000 a year in taxes, so somebody that’s making money.
David S-C.: What size business do they need to be?
Craig Cody: You know what, they could be a sole practitioner making $150,000 a year to a larger organization making $20 million a year. Our clients run the gamut, and they’re all over the country, thank God for the internet. In order to become a client of ours, the first thing we have to do is a tax plan, and we sit down via Skype or Zoom and we do an analysis of their tax returns, and we tell them how much we expect to save them every year. They pay us a fee for that. June will be seven years we’ve been doing it this way. Our fee is fully, 100% refundable if they’re not happy, and no one has ever asked for their money back, because it’s always instant gratification.
David S-C.: It’s pretty remarkable. Craig, whom do you know personally who has been really successful at smashing plateaus?
Craig Cody: God. That was a tough one to think of, because there’s so many out there. I think of a guy name Jaime Jay that runs Slapshot Studios. He’s out in Missouri. The guy has such a humbling story, and he now has a successful studio. He produces a podcast. He does a lot of media stuff. At one point in his young adult life his family was homeless.
David S-C.: He’s doing a great job. I know Jaime. He’s a good friend of mine.
Craig Cody: Jaime’s amazing.
David S-C.: Yes. He really is. What can we look forward to in the near future from you? What’s coming up?
Craig Cody: Well, I’m wrapping up my latest book, which it’s a new version of The 10 Most Expensive Tax Mistakes that Cost Business Owners Thousands, and it’s updated for the new tax code. We’ll be coming out with that in the next month or so, and we’re just going to continue to grow our business and save our clients lots of money.
David S-C.: Sounds great. How can listeners learn more about you and follow you?
Craig Cody: We’re actually going to offer your listeners a copy of our book 10 Most Expensive Tax Mistakes That Cost Business Owners Thousands, and they can go to our website at www.craigcodyandcompany.com/smashingtheplateau, and they can request a free copy of the book. Otherwise it’s 516 869 4051.
David S-C.: Sounds great. Craig, thanks so much for taking the time to join us today on Smashing the Plateau. My guest today has been CPA Craig Cody. Thank you again Craig for joining us.
Craig Cody: Thank you very much.
Listen to the full podcast here.