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Michael Ly has scaled his virtual bookkeeping company, Reconciled, to 40 employees and about 10 part-time contractors, building revenue to $6.1 million in annual revenue since founding it in 2016. The company, which relies on cloud-based tools, serves small business customers who want to outsource.

Reconciled’s growth has picked up steam as Ly, the CEO and founder of the Burlington, Vt.-based company, has embraced a growth-through-acquisitions strategy to win market share and increase its own enterprise value. The company increases the value of the firms it buys by converting them from an hourly billing model to a more profitable, fixed monthly fee.

Ly first deployed his acquisitions strategy in November 2020, when, through a broker, his company purchased the Bean Team, a small bookkeeping company in Tallahassee, Fla. The next deal was Accounting Services Group in Tempe, Ariz. And in July 2022, the company acquired HR Business Solutions. Revenue has grown from $2.6 million in 2020 to $4.6 million in 2021.

The company’s Big Hairy Audacious Goal is to serve 10,000 entrepreneurs on a monthly basis and impact 100,000 jobs in the community. “Our big vision is to become a market leader in the accounting space,” says Ly.

Off-market deals

Ly uncovers acquisitions targets through a buy-side broker, networking at industry events and brokers or owners who self-list online on hubs such as Accounting Practice Exchange, which he likens to “the Google of public accounting listings.” So far, the deals have focused on companies with less than $1.5 million in annual revenue.  

 “We get in front of them with an email or phone call because they fit our target profile,” says Ly. “Then we start a conversation. Almost every firm we spot has not been publicly for sale.”

Building a team of advisors

In addition to his mergers & acquisitions (M&A) broker, Ly relies on a team of experienced pros, such as a CPA experienced in (M&A) and a good M&A attorney. 

Even with this team in place, Ly has had to devote a good part of his schedule to M&A activities. “It’s a full-time job,” he says. “If you’re going to go out and acquire something, it’s not something you can do on the side. It’s literally a full-time job. Expect to work a ton.”

Low-cost capital

To finance its acquisitions, Reconciled relies as much as possible on SBA-backed loans, secured through MultiFunding. “It offers the friendliest terms and is the cheapest form of capital,” Ly says. He will also turn to non-SBA commercial loans and equity capital from a group of angel investors and venture capitalists that has a relationship with the firm. 

Blending cultures

Reconciled spends about a year to fully absorb an acquisition into the parent company. “We spend time cobranding in the marketplace until the current customer base knows who we are,”  he says. “Then we transition over to Reconciled contracts.”

To ease the transition, Reconciled has created a culture document that it uses in onboarding the employees of the acquired companies. “We immerse them in Reconciled’s values and culture,” says Ly. 

Even with systems like this in place, pulling it off can take time, and patience, he has found. “It’s not going to go exactly the way you expect,” says Ly. “There are going to be challenges. Just knowing that ahead of time and being okay with that really helps.” 

Verne Harnish
Verne Harnish
Verne Harnish is founder of the world-renowned Entrepreneurs’ Organization (EO) and chaired for fifteen years EO’s premiere CEO program, the “Birthing of Giants” and WEO’s “Advanced Business” executive program both held at MIT. Founder and CEO of Gazelles, a global executive education and coaching company with over 150 coaching partners on six continents, Verne has spent the past three decades helping companies scale-up. The “Growth Guy” syndicated columnist, he’s also the Venture columnist for FORTUNE magazine. He’s the author of Scaling Up (Rockefeller Habits 2.0); Mastering the Rockefeller Habits; and along with the editors of Fortune, authored The Greatest Business Decisions of All Times," for which Jim Collins wrote the foreword. Verne also chairs FORTUNE Magazine’s annual Leadership and Growth Summits and serves on several boards including chairman of The Riordan Clinic and the newly launched Geoversity. He is an investor in many scale-ups. A father of four, he enjoys piano, tennis, and magic as a card-carrying member of the International Brotherhood of Magicians.