As part of my series about the “5 Things You Need to Know to Create a Successful Service Business,” I had the pleasure of interviewing Ryan McInnis, founder & CEO of Picnic Tax. Picnic Tax is a tech-enabled accounting platform that is transforming the personal tax prep market. Prior to founding Picnic Tax, Ryan spent over a decade in the financial services industry at leading firms including the Blackstone Group, Oak Hill Advisors and Morgan Stanley. Ryan lives in New York City’s Greenwich Village with his wife, Maggie, and their two Shiba Inus, Arthur and Lou.
Thank you so much for joining us Ryan! Our readers would love to “get to know you” a bit better. Can you tell us about your backstory and how you got started?
My background is entirely in the financial services industry — I started out at an investment bank right after college and subsequently worked in private equity and at a hedge fund. Aside from a short stint in Philadelphia for business school, I’ve been in New York the whole time. Almost two years ago, following a number of frustrating tax filing experiences, I came up with the idea for a new kind of tax prep, one that would combine the convenience of online tax filing offered by services like TurboTax with the personal touch (and accuracy) of a real accountant doing the actual tax filing work. I like to call this new hybrid tax prep market the “online tax accountant” market, and my company, Picnic Tax, is a leader in this space.
At 35, I don’t fit the mold of the typical early-to-mid-20s tech founder, but I’ve found my decade-plus of experience to be incredibly valuable in helping me get this business off the ground. Having worked as an investor for my entire professional life, I know a good business model when I see one, and I think Picnic checks a lot of the boxes. I’m really grateful to have had a rigorous training that allowed me to develop a solid analytical skill set prior to venturing out on my own.
The other main thing I learned a lot about in my pre-Picnic career is management. I worked at some very well-run organizations and at some that were, let’s just say, a little dysfunctional. This range of experiences has provided me with a wealth of examples to draw on in the decisions I make as a CEO, whether it’s selecting prospective employees, interacting with investors, or just generally trying to figure out what type of organization and work culture I want Picnic to have in the long run.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?
Because it’s a tax company, Picnic operates in a highly seasonal industry, and there really isn’t much flexibility around the dates when certain things have to happen. When I was still thinking about Picnic Tax but hadn’t fully launched yet, my wife and I chose a February wedding date without realizing I would be trying to test the product on a beta basis that tax season. Needless to say, that February was not the calmest month of my life. I didn’t get a lot of sleep, and there was a lot of shuttling around the city trying to remember whether I was on the way to meet our wedding photographer or my web developers.
Luckily for me, my wife is extremely organized and was willing to take on most of the wedding-related tasks, but it was still pretty hectic. I guess the takeaway here is to make sure you don’t get married at the same time that you’re trying start a business? In all seriousness though, a real takeaway for anyone considering starting their own company is that it can and will interfere with your personal life at times. It isn’t fun, but the silver lining is that it makes you extremely grateful for supportive family and friends.
What advantage does Picnic Tax offer over H&R Block and similar services?
Picnic’s customer experience is entirely online, so it’s a fundamentally different product than what H&R Block is selling. H&R Block, amazingly, still does the vast majority of its business at its brick-and-mortar offices, the ones you see all over — in midtown New York, in strip malls, everywhere. It’s crazy to me that in 2020 people are still going in person and spending an entire Saturday afternoon sitting in a dingy H&R Block office when they could be doing the whole process from the comfort of their couch.
Besides the modern online experience that we offer, we also differentiate ourselves from H&R Block through the quality of our accountant network. We’ve spent a lot of time vetting and finding quality accountants, and this is something that H&R Block doesn’t do. It’s possible you’ll get a good accountant through H&R Block, but more likely than not, you’ll get a non-professional who earned an H&R Block tax preparer certificate by taking a short online course.
By contrast, Picnic works with professional accountants, many of whom run their own practices and use Picnic to increase their client base and cut down on marketing costs during tax season. It’s a fundamentally different value proposition to the consumer and one which really seems to be resonating with the market.
Does Picnic Tax take any responsibility for errors made by your recommended accountants?
Picnic Tax is not itself a tax preparer — we are a tech platform — so we aren’t legally allowed to take responsibility in that sense. Having said this, our incentives are aligned with the consumer here — it’s better for everyone involved if the taxes get done right.
We want customers to come back year after year, and we know that’s not going to happen if we entrust our customers’ taxes to someone who isn’t going to do a great job. All of Picnic’s accountants take a rigorous test as a prerequisite to joining the platform, and our acceptance rate is less than 40%. We research each of them individually — thorough vetting is part of what our customers are paying for.
How do you compete with the myriad “do it yourself” tax software options?
We don’t necessarily compete directly with the DIY tax software products. DIY tax software is really good if you have very basic or simple tax returns or a lot of free time. Most of our customers have slightly more complex returns and not as much free time — we do taxes for a lot of freelancers, independent contractors, investors, married folks, parents, and homeowners (especially those who rent their homes through services like Airbnb and have rental income).
When people decide that DIY tax software is no longer working for them, which is a very common progression as people get into their late 20s and early 30s, we want to be the service that these consumers gravitate toward. In that sense, we like to think of ourselves as a “grown-up TurboTax.”
It can be frustrating as a millennial to communicate with an old-school accountant who may not effectively utilize technology. Picnic Tax fixes this by streamlining the process of working with an accountant. In 2020, we’re used to having technology help us with a lot of administrative tasks in our lives, and there’s no reason why working with an accountant means your tax filing experience has to be antiquated.
Thank you for that. Let’s now pivot to the main focus of our interview. Extensive research suggests that “purpose-driven businesses” are more successful in many areas. When you started your company, what was your vision, your purpose?
Picnic’s overarching mission statement is to reduce information asymmetries within professional services industries. Both our customers and our professionals benefit from Picnic’s approach. Customers get access to better service providers and the providers get access to new customers more cheaply than they could trying to market themselves on their own. While we are starting with the tax space, we have aspirations to expand our model to many other professional services industries.
I stopped using TurboTax in my late twenties because I was just too busy with work to spend a whole afternoon on it, and every year I found the process of finding an accountant extraordinarily stressful. Some of the accountant options I found charged way too much given that my taxes were relatively simple, while other services I found online didn’t seem reputable. After a long search, I would eventually settle on someone who looked reasonably good on paper, but I still had no real way of vetting them, and I always ended up getting mediocre service.
I found it surprising that even in the age of the internet, it is so hard to adequately identify a good accountant. The asymmetric information inherent in this industry — where only the accountants themselves know whether or not they are truly good at their job — was clearly causing (and still is causing) enormous inefficiencies in the market.
I figured there had to be a better solution, so I started developing Picnic as a way to supplement the basic tax preparer licensing requirements with a testing/vetting process. The goal was to help people get through tax season with less stress and more peace of mind, but also to reward excellent accountants by providing easier access to clients. This prospect of a robust client pipeline incentivizes accountants to take our test and prove their qualifications, and it is the coupling of lead generation with the strict testing/vetting of our services providers that defines Picnic’s business model.
As I started thinking more deeply about how to make the tax market more efficient, it became clear to me that these information asymmetries exist in a number of other professional services industries. In general, consumers are not able to adequately vet and diligence professional service providers given the specialized knowledge of these providers. Online reviews are a mixed bag and not very reliable (and subject to manipulation), while most industry licensing requirements don’t do much to separate out the good from the bad — they generally prevent gross incompetence, but that’s about it.
Picnic’s innovative business model addresses these issues head-on and as a result, I believe it has the ability to eliminate information asymmetries in a number of different professional services markets. This is our overarching mission.
What do you do to articulate or demonstrate your company’s values to your employees and to your customers?
I try to articulate and reiterate the ideas I described above as often as possible. If I am communicating effectively, then everyone who comes across Picnic understands that we are trying to eliminate information asymmetries within services markets and that we are doing this by having strict quality control around the service providers who are allowed access to our platform. Making sure that all Picnic Tax stakeholders understand and appreciate our mission is one of the most important parts of my job.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
I’d say the number one principle that guides me through the ups and downs is to have a real focus on the fact that we’re building something for the long term. Our goal is not to build this as quickly as possible and then get it acquired ASAP. I would love to still be running Picnic 20 or 30 years from now and for us to have expanded into multiple services markets beyond tax. Having this long-term orientation puts the day-to-day in perspective and allows me to take a deep breath when things aren’t going as planned.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
I think we are still very much at the beginning of the journey and will be for years. That being said, towards the very beginning of this process, I had a number of issues with the web development agency I was using, and it got to the point where our ability to be functional for the upcoming tax season was in jeopardy. I didn’t seriously consider shelving the whole thing, but I certainly contemplated delaying launch by a full year. I just had to realize that everything didn’t have to be perfect immediately and that we were going to have to make do with the developers temporarily, test the product as best we could, and work extra hard to find better developers for the next set of iterations. It was painful, but we got through it.
So, how are things going today? How did your values lead to your eventual success?
Things are going great. We’ve grown our user base significantly since the end of last tax season despite spending very little money on marketing thus far. We do have a big marketing push coming this month though, which is exciting. We fully expect a knockout tax season in 2020.
As for the values that have helped me the most, working hard and always trying to stay positive are the two most important things and have helped me get through some challenging times in my life. Those two qualities will get you really far.
Having said that, you also have to listen to the negative feelings and not just bury your head in the sand. If you’re burned out, if you absolutely hate what you’re doing, if you’re finding it hard to be positive — don’t ignore that. You might need to make a change, and there is a point at which running into a wall over and over again isn’t helpful.
Based on your experience and success, what are the five most important things a founder or CEO should know in order to create a very successful service-based business? Please share a story or an example for each.
- Deliver great service, first and foremost — This may sound obvious, but happy customers are the only way to long-term success. Our best source of customers to date has been referrals from other happy clients.
- Be honest with your promises — At the end of the day, you can’t be all things to all people. What you want to avoid most of all is promising something to a customer that you can’t deliver. At Picnic, we don’t have the infrastructure to check every return and we don’t claim to do this, nor would it even be legal for us to do so, since we are a platform business. Clients who ask about this get an honest answer — we tell them that we connect them with high- quality accountants, but we are not ourselves a tax preparation service, so we can’t check the returns. We also point out the expertise and selectivity of our accountant network and provide details on the accountant vetting process. We’ve found that after explaining this, most people end up signing up for our service anyway. Customers appreciate honesty, and they will see right through any lies you tell them to win their business.
- Get to know your customers — This applies to all businesses, but it is particularly important in services businesses. If you take the time to get to know your customers, you can have honest conversations about what you’re doing right and what you could be doing to improve. Customer feedback is the most valuable currency in a services business and the only way to get in-depth customer feedback is by spending time with and truly knowing as many of your customers as possible.
- Don’t prioritize growth at all costs — Try to focus on getting the product right before you move on to scaling it. It’s much better — for the business and for the consumers — to have a functional but small operation than to have a huge organization that isn’t functioning well. Don’t try to scale until you can do so without compromising on the quality of service. One of our competitors did this to disastrous effect and now has a long way to go to rebuild customer trust.
- Be humble — This relates to a number of the previous recommendations and is more of an overarching theme, but if you’re not humble, you’re not going to be able to listen and be receptive to what customers want. You have to know that you aren’t always going to have the answers, and you have to be constantly and eagerly seeking feedback, even if it is bad. At the end of the day, services businesses are serving their customers, not the other way around.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
I’m incredibly grateful for my wife, Maggie, for many reasons — not least of which is her support and encouragement when I was contemplating whether to pursue Picnic a couple of years back. She’s been my source of stability through the entire startup process and has rolled up her sleeves to personally help numerous times, which is not easy — especially given her own busy work schedule. For example, she put her great creative skills to use in helping designing some of our first ads when we were short on time and in a crunch. Lawyers are typically not the most creative people, but Maggie never ceases to surprise me.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
It’s still way too hard, even in 2020, for most women to succeed at work and have families; I hope we can work harder as a society to fix this. My wife and I don’t have kids yet, but watching friends and colleagues over the years trying to balance their careers with kids has been incredibly eye-opening, and this problem is particularly acute when it comes to women in traditionally male-dominated industries, like finance and tech.
Some progress has been made over the last several decades, but not nearly enough. Most companies and organizations — in tech and finance, yes, but really in every industry — could be doing a lot more to make it easier to be a parent and still succeed at work. Particularly in the start-up world, where you get to design the whole thing from scratch, there’s no excuse for not making this an explicit part of your company’s culture.
How can our readers follow you on social media?
You can follow us on Instagram @picnictax or find us on Facebook. Also be sure to check out our blog, www.picnictax.com/blog for some really helpful tax-related Q&As and other information to help you get ready for tax season.
