Ready to launch
For Luke Dawson, digital disruption and a shake-up of the compliance world present accountants with some of the biggest opportunities yet – if they’re willing to embrace change.
It was a particularly exciting day to call Luke Dawson, IPA member and founder of new accounting firm Rocket Factory, for an interview.
I asked Mr Dawson why there was no information available on his latest venture, to which he replied: “Well, that's because it only started today!”
Rocket Factory – a new start-up for Mr Dawson, a tax accountant – is a digital accounting firm with ambitious plans to build a futuristic business focused on automated software.
“Rocket Factory is my take on what an accountancy practice should be,” Mr Dawson says.
“But it's a bit different to what everyone's talking about doing,” he adds.
While the conversations could only paint an early vision of Rocket Factory, Mr Dawson’s enthusiasm for innovation prompted a zealous discussion about the accountancy industry in an era of emerging technologies.
In Mr Dawson’s view, there is ample opportunity to build better accounting firms in Australia.
“I think that a lot of accountants stick with what they know – they don't want to push the envelope from a business point of view,” he says. “They're happy making the money they're making, the way they've always done it. They don't see reason to change.
“I'm more focused on where technology is going and trying to build something.”
Mr Dawson has had an extensive career spanning more than a decade in tax and commerce accounting. Extending his expertise into the technology sector, he founded accountancy software Stryke Tax.
Prior to the launch of Rocket Factory, Mr Dawson was co-founder of a Perth-based accounting start-up, Resonate Business Consulting, which he started three years ago with two friends, who are also owners.
One of the partners recently bought him out of this venture and Mr Dawson took some of his preferred clients and started Rocket Factory “as the next step”, he says.
Building a scalable digital accounting firm
Rocket Factory is a digital accounting firm targeting small businesses that might range from the $0 start-up stage up to $2 million in revenue.
What’s most intriguing about Rocket Factory is Mr Dawson’s ambitious vision to create a digitally branded accounting service.
“I've been playing around in the software space in the last couple of years,” he says. “The things that matter to a software company are things like scalability and take-up by users. We have some different KPIs that you measure compared to an accountancy practice.”
“So my take is that I want to build a practice that's scalable – that's not reliant on the relationship with the accountant and the client, but rather with the firm and the client,” Mr Dawson explains.
Rocket Factory’s model is a radical shift away from the traditional face-to-face relationship between accountants and clients.
Rather than varied individualised accounting, Mr Dawson’s business model aims to streamline and automate necessary services tailored to the specific needs of small businesses.
“We’re offering completely fixed-price fees based on revenue turnover for the client,” he says. “We think that's our niche [SMEs with between $0 and $2 million in annual revenue], where we think we can make a difference.
“Once businesses get bigger than that, they probably want that one-to-one advice, and we can let other accountants do that.”
Based on his experience in both software and accounting, Mr Dawson says his theory is that specific advice isn't scalable, because it relates to a one-to-one relationship with someone.
“So if you want to grow fast, you need a lot of senior accountants and you're selling time for money,” he says. “We're trying to build a business where it's scalable, where we're selling results for a fixed price. It's basically a product type service.”
A key feature of Mr Dawson’s business plan is the pursuit of seeking the “right” client who would benefit from Rocket Factory’s consistent service offering.
“At Resonate, we did a fixed-price model for all of our clients, but they were all different. I think that's where the problem lies – that everyone's got a different service level,” he says.
“So I'm trying to build something where everyone has the same service level and it's one of three prices – that's it.”
Drawing on his vast experience in taxation accounting, Mr Dawson has identified the common needs of small businesses that would fit Rocket Factory’s one-size model.
“They don't [necessarily] want that one-to-one advice; small businesses can be price sensitive,” he says. “We're trying to give them the things that they need and not try to upsell them into things that they don't.
“Because we're heavily focused on using technology to do the heavy lifting for us, it's easier to charge less and deliver a better service.”
Automating the compliance game
By leveraging client data using available software – such as Xero, Receipt Bank, Crunchboards and Mr Dawson’s own Stryke Tax – Rocket Factory hopes to deliver a real-time business monitoring and efficient tax service.
“Business activity statements, instalment activity statements, fringe benefit tax returns, income tax returns, financial statement preparation – basically everything that's related or required from a tax compliance point of view – that's all offered,” he says.
Mr Dawson sums up Rocket Factory as “a compliance-based business”.
“Everyone keeps saying that compliance is dying and it's becoming price sensitive,” he says. “So what I'm trying to build is something that is making compliance price sensitive.”
At a time when the industry is moving from compliance to reliance-based accounting tailored towards highly personalised and flexible services, Mr Dawson’s vision seems to stand firmly against the current.
Rather than shifting away to a higher service business, Mr Dawson is instead enthusiastically driving the downward value of compliance accounting through Rocket Factory’s scalable model.
“We have to stick to our guns and say that our business is the compliance and the scalable model. The stuff outside of that we'll give up that profit to maintain what our business is,” he says.
“A lot of accountants don't like to do that – they try to be everything to everyone – and that's why you can't scale up an accountancy firm.”
Rather than compromising his business model, Mr Dawson’s solution to meeting the needs of those that sit outside Rocket Factory’s offering is a reliable referral service.
“You can't be an expert in everything, but we can be an expert in tax. We might not be an expert in helping a specific business get out of a specific jam but we know someone that is,” he says.
“We can work with that business and that person to help them fix their problem – and that's the way of the sharing economy.”
Like website Airbnb, which gave consumers alternative accommodation options and so disrupted the hotel industry, Mr Dawson believes the distributed notions of the sharing economy could change the role of accountants to benefit small businesses.
“You can shop around, you can go to different places. If we can be that place that points people in the right direction then that's fine,” Mr Dawson says.
“I'm happy to give up the revenue because they don't fit our model, but I want to help them find the right accountant for what they need,” he says.
“Traditionally, accountants have always grabbed every client they could, without thinking if they fit their ideal client profile. We're building our business based on the clients that we want. That's who we're chasing; the ones that don't fit our model we don't take on,” he says.
“But we'll help them find a different accountant based on what they need,” he adds quickly.
Steadfast and focused, one couldn’t help but feel excited about Mr Dawson’s rebellion against the trends, to innovate upon what others are trying to avoid in the accounting industry.
The right path
While Mr Dawson’s current focus on small business aligns well with IPA’s support for SMEs, his journey with the IPA began much earlier in his career.
“The path to becoming a full IPA member was a good fit for me because initially I did an Advanced Diploma of Accounting at TAFE, I didn't go to university,” he says of his transition from study to practice.
“So I did that straight out of high school and then got a job as a tax accountant. The IPA made sense because they offered a different entry pathway to CPA or CA – that worked for me,” he says.
After completing the IPA program, Mr Dawson went on to successfully achieve his Graduate Certificate, then his Masters of Commerce.
“Because I didn't do university to start with, the IPA had the best pathway for me. And probably the least pretentious as well,” he says.
Recently, Mr Dawson attended the IPA’s regional congress in Western Australia. “They asked me to speak there, which was interesting! That was good,” he says, “it was good to meet the other practitioners that went.”
The IPA’s focus on practical experience and application offered more value to his membership. “I'd say they represent the accountant a lot better than the other two bodies,” he says.
“The IPA is a bit more of a battler, like they'll go to battle for us a bit more than the others. I think we get more out of our fees that we pay each year.”
Mr Dawson commended the IPA’s advocacy concerning recent ATO legislation covering financial planners.
“The IPA was really vocal in that and they spent a lot of time trying to get that right,” he says. “They really took the lead on some of those conversations.”
He is positive about his experience as an IPA member: “They're trying to help accountants, and not just IPA members but accountants in general,” he says.
As he prepares his start-up venture for take-off, the future looks bright for IPA member Luke Dawson. With his ambitious goals, Rocket Factory is an accounting firm to stay tuned into.