John Hersey

former data scientist and music producer. now helping companies leverage AI

[John Hersey @john_hersey1]

A seller lists a practice for 1.2x revenue. The buyer offers 0.6x after due diligence.

The gap is not the multiple. It is what the buyer sees in the file.

No SOPs. Client list in the owner's head. Three high-margin clients who only work with the partner.

Buyers pay for cash flow they can run without you. If the practice only works when you are in it, the price reflects that.

[John Hersey @john_hersey1]

@kushalbyatnal @ExtendHQ Greenbergs is easily S tier IMO. My personal favorite. If you’re within delivery radius of WV or Bed Stuy, def give it a go

[John Hersey @john_hersey1]

A law firm put a clause in their RFP: disclose AI use and show the fee reduction.

The real conversation is not whether the work got done faster. It's that the professional now spends time on the work that matters instead of the admin in the middle.

The client gets more judgment, less admin. That's the efficiency worth pricing.

[John Hersey @john_hersey1]

I modeled about 1,000 hours a year of manual work at one client.

Most of it was categorization, reconciliation, and pushing data into QuickBooks.

The interesting part: nobody at the firm felt this as pain until they saw the hours on paper.

Routine work is invisible.

[John Hersey @john_hersey1]

Firms at capacity cannot execute a fee increase.

You lose clients, which frees up time to take better ones. But you already turned away the better ones last month because you had no capacity.

Can most firms afford to lose clients and replace them at the same time?

[litquidity @litcapital]

Throwing all of my company’s confidential presentations, customer agreements, and financial models into Claude just to respond to one email

[John Hersey @john_hersey1]

A practitioner said their firm hired two entry-level staff to add capacity. The new hires needed training. Training required time from the one senior accountant the firm had. That senior was already the bottleneck.

The firm now had more bodies and less throughput. The constraint moved up, not away.

[John Hersey @john_hersey1]

Most CPA firms on the market are priced far above what a buyer will pay after due diligence.

Buyers value sustainable cash flow independent of the owner. Not revenue.

The valuation gap is a documentation gap.

[John Hersey @john_hersey1]

A firm short on capacity hires entry-level staff.

Six months later the constraint is worse. The new hire needs supervision the firm does not have capacity to provide.

Hiring at the bottom compounds the problem when the bottleneck is mid-level reviewers, not bodies.

[John Hersey @john_hersey1]

The IRS said billing for manual labor not actually spent when AI was used may violate Circular 230. Large clients are adding AI questions to RFPs and expecting fee reductions.

Firms automating work have to decide: reduce fees or defend value on something other than hours. Most have not made that decision yet.

[John Hersey @john_hersey1]

The advice to raise fees assumes you can afford to lose clients.

But if you are at capacity, you cannot say yes to better clients when they arrive. And firing bad clients does not free up capacity if you are the bottleneck.

Pricing becomes a usable lever after the capacity problem is solved, not before.

[John Hersey @john_hersey1]

@grok @Jrocks1971 @EricLDaugh Does that mean if the war continues at current supply levels then prices will pretty much stay where they are?

[John Hersey @john_hersey1]

@grok @Jrocks1971 @EricLDaugh @grok my understanding is the bottleneck is in refinery restriction rather than gross supply. How true is that? If true, how is that being responded to in the market?

[John Hersey @john_hersey1]

I get a custom newsletter every morning. Grok, GPT, and Claude research topics I care about and debate what gets put in. Could tune it to whatever subject you want

Lmk if you want your own version

[John Hersey @john_hersey1]

The IRS indicated that billing clients for time not actually spent when AI was used may violate Circular 230. Large clients are adding AI questions to RFPs and expecting fee reductions.

The gap between time spent and time billed is closing. Firms that relied on charging for hours they did not work are facing a margin problem they do not yet see.

Automation is visible now. Clients have the same tools.

[John Hersey @john_hersey1]

AI tools hit about 85% accuracy on first import and 90%+ on returning clients, according to Bobby Huang.

The work shifts from preparation to review. You still need someone who knows the right answer to check the output.

Total work hours do not drop. Work density increases.

[John Hersey @john_hersey1]

The IRS indicated that billing clients for time not actually spent when AI was used may violate Circular 230.

Large clients are adding AI usage questions to RFPs and expecting fee reductions.

The gap between time spent and time billed is closing.

[John Hersey @john_hersey1]

A practitioner said the IRS indicated billing for manual work you did not do when AI did it may violate Circular 230. They also said large clients are adding AI questions to RFPs and expecting fee reductions.

Firms using AI to cut prep time in half have not decided whether to reduce fees or defend value on something other than hours. Most are still billing as if the work took ten hours when it took three.

Is that gap closing whether firms are ready or not?

[John Hersey @john_hersey1]

A practitioner said a CPA firm sold to private equity. Within 18 months, fees went up 40% and clients started leaving.

PE firms optimize for 20% annual returns and plan to exit in 3 to 7 years. Do they care what they leave behind? The buyers win, the sellers get paid, and the clients redistribute to independent firms that did not sell.