In a recent conversation, David Toth, Chief Growth Officer of Winding River Consulting, sat down with Tim Petrey, Managing Partner of HD Growth Partners and MPB | Leadership Accelerated alumni. Below is a summary of their conversation.
Tim Petrey got his start in the accounting industry amid the financial crisis in 2008. When he started at HD Growth Partners (then HD Davis Associates), there were just three employees.
After just a few years at the firm, Tim became Managing Partner and has overseen growth that’s accelerated rapidly in recent years, Today, HD Growth Partners has over 70 employees. The firm has revenues of over $7.5 million and has received multiple awards for its culture: being named as a Best Employer in Ohio by Crain’s for the past two years running, as well as being recognized by Accounting Today as one of the Best Accounting Firms to Work For and The Best Firm for Women.
After just a couple of years at the firm, Tim was thrown into the deep end. At the age of 25, he became the firm’s Managing Partner. The firm was small – barely touching $500,000 in annual revenues, but under Tim’s leadership, that soon started to change.
“We were growing at a gradual clip. For me, it was like drinking from a firehose. We became really good at making micro-acquisitions: buying solo practitioners and other small firms with revenues of just a few hundred thousand dollars.”
This continued up until the end of 2019, when the firm hit a bit of a ceiling. They’d reached $2.5mm in revenues but were struggling to break through to the next level. Tim and his team had been laying the foundations for growth by launching new advisory services. The pandemic proved to be something of an accelerator for all of these initiatives, as Tim reflects:
“We got together as a leadership team and decided it was really important to be there for our clients when they needed us most. We were really active in educating clients on PPP and were really early to helping clients understand how they could benefit from Employee Retention Tax Credits. Educational content had been a big driver in the past, but leaning in on this new type of content really put us on the map. After that, growth was a different monster.”
HD Growth Partners’ DNA was as a tax preparation firm, but Tim was increasingly realizing that scaling their tax business would be challenging. And so, HD Growth Partners started to build out other business units, eventually moving into Client Accounting Services.
A major growth driver has been the firm's white-glove payroll services. Their clients wanted it: they’d worked with big-box providers and weren’t getting the level of service they were used to with Tim’s team.
Tim had spotted a gap in the market: a luxury, done-for-your payroll service that would effectively allow businesses to outsource their payroll. Bringing the vision to life would take a big investment – Tim knew he had to spin off the payroll business and create a team of experts with intimate knowledge of their clients’ businesses.
As Tim started to build out the payroll solution, he intentionally took a very different approach to managing the firm. He hired a fully remote workforce, moved to ACH billing instead of managing accounts receivable, and built a completely decentralized business that gave employees more autonomy.
Clients loved it:
“Quite frankly, I’ve been slamming my foot on the break to try and control that growth. As a result of those simple foundational concepts we built the business on, the payroll business has grown like wildfire. It’s been really special to watch”
While attending Winning Ways a couple of years ago, Tim met the team from Ascend; a growth partner for regional firms backed by PE firm Alpine Investors. Tim’s decision to join the Ascend platform wasn’t something he’d planned – he’d always been focused on building a successful independent firm:
“I never saw us merging up into a larger firm – we wouldn’t have the independence we need. But the Ascend platform is built for that. When I met the leaders of the other firms that were part of the platform, I really felt like I was around ‘my people’ - entrepreneurial CPAs who are focused on growth and trying new things.”
Right now, HD Growth Partners are only a few months into their relationship with Ascend, but it’s already been a really positive move for Tim and his team. From Tim’s perspective, it’s a move that could also benefit other regional firms like his.
“In order for us to start competing at the level we want to compete at, we wanted to not only focus on the middle market, but to dominate that market. Our goal is to be the best provider of advisory services to small and medium businesses that can’t afford top-tier consultants or the full C-Suite of executives.
Getting there means dedicating a different level of resources: we need to attract and retain the best people, we need to invest in technology, in AI, and in using offshoring in the right way. Being part of the Ascend group brings us so much value in these areas.”
It’s an approach that Tim sees as a win-win for everyone. He’s doubling down, continuing to evaluate acquisition opportunities that help HD Growth Partners expand into new markets and provide better experiences for the employees and clients of the smaller firms they’re aiming to acquire.
But when Tim first announced the news in January, his employees weren’t quite sure what to make of it:
“The announcement fell flat a little bit. I was super pumped, but as I looked around the room, I realized that my team didn’t really know what this meant for them. Private Equity does have something of a unique reputation, but Ascend isn’t like that. But once I told them more about Ascend and their people-first model, they got a lot more comfortable with the long-term strategies we’re putting in place.”
Tim has built a culture of transparency at HD Growth Partners, and the importance of that trust was underscored here. He encouraged his team to ask him plenty of questions, telling them everything he did know and being honest about things he didn’t.
In recent years, Tim’s focus has shifted away from billable work to building the internal capabilities of the team at HD Growth Partners. It’s a huge change, and one that hasn’t always been easy.
“You have to be willing to make the investment – and it’s a big investment. I say this humbly, but I’m a great practitioner. It's been a huge driver of our growth over the years. Stepping out of those client relationships was intimidating – what if I wasn’t a great CEO?”
In Tim’s view, the challenge speaks to some of the structural problems in the accounting industry. The partnership model has caused a lot of firms to become stuck. Partners are too focused on realization rates, billable hours, and their book of business. They’re not following the advice they give to their clients: to work on the business, and not in the business. And over time, that focus on their individual profits above the value of the firm is stunting the firm's growth potential. That view, in part, is why Tim is focused on building a better future for his team at HD Growth Partners.
Connecting with other leaders who’d been down this path before was a huge help to Tim. At MPB | Leadership Accelerated he connected with experienced leaders like Gary Shamis and Chuck Mullen.
“More people need to find these communities of like-minded people. It’s great to hear from people like Gary and Chuck that have done what we’re trying to do, but it’s also great to have a community of peers that are working through the same issues.”
In today’s accounting industry at the moment, the only constant is change. Whether it’s the generational workforce gap, the proliferation of AI and other new technologies, cybersecurity, compensation, or something else, there’s no shortage of issues for leaders to navigate.
For Tim, deciding how to approach these issues was relatively straightforward: did he want to tackle these issues alone, or did he want to tackle them with the intelligence, resources, and firepower of the Ascend platform?
In the long term, Tim is hugely optimistic about the future of the firm’s partnership with Ascend.
“Ascend isn't the traditional “hurry up and flip” PE model – it’s a much longer-term strategy. We strongly believe it’s a much better model for our people than the traditional partnership model. We’re giving people equity early: we want them to have significant financial events in their thirties, not much later in life.”
But Tim’s goals aren’t just financial – he wants to change the perception of public accounting:
“We will change the game. We will change the view of public accounting. We won’t be the stuffy accountants working on Excel all day – we’ll be change makers that help businesses win and make a difference in their communities.”
When Tim first got handed the keys to HD Growth Partners, he confessed that he didn’t really know what he was doing. In the years since, he’s learned a lot, but it hasn’t always been easy.
“There are going to be times when you feel like you’re wrong – especially when you’re trying to do something outside the norm. But if you truly believe in something and are dedicated to it, you can do something special.”
Tim credits MPB | Leadership Accelerated as playing a huge role in his evolution as a leader.
“The sense of community was invaluable. Being able to connect with a group of like-minded leaders was extremely powerful. I’d tell anyone who wants to grow their firm, or grow within their firm, that MPB | Leadership Accelerated is exactly where they should start.”
Applications for the next cohort of MPB | Leadership Accelerated are now open. Join us in Chicago in October 2024 for a rigorous boot camp focused on building the next generation of leaders in the accounting industry.
Watch the full interview here: