In 2021, when a ripple of notifications lit up the iPhones of Apple users prompting them to upgrade their operating systems, a tsunami of Christian Rivera's clients were forced out of business.
The iOS 14 upgrade allowed users to opt out of being tracked for targeted ads across apps, a death knell for many smaller sellers relying on mobile advertising, and a number of the retail business clients Rivera served at E-commerce Accountants, the accounting and bookkeeping firm he founded in 2018. Specifically, these clients were drop shippers, or entry-level online retail businesses that take customer orders without keeping stock on hand, and they composed the majority of Rivera's clientele at the time.
So, as he had before and would again, Rivera pivoted.
"That change had a huge impact on the online seller community," he explained. "It wiped out a massive portion of the market, especially drop shippers. They no longer had reliable data from Facebook to market to. It forced us to pivot away from drop shippers. In summer 2021, we focused on more established sellers with brand value and inventory in the U.S."
That has paid off for Rivera. He is proud to share that success now, and does so with continued promotion and business development efforts, but back when he first left a Big Four job to venture on his own, he recalled a different feeling.
"I was a little embarrassed and wouldn't even tell people what I was doing at first," he shared. "Now, I tell people I grew a seven-figure accounting firm. Back when I was starting out with nothing, and was leaving a really cushy accounting job, it was a difficult thing for sure … . When I was leaving EY, people were literally telling me I was making a mistake. That was probably the biggest obstacle for me to get over."
The next one would come when Rivera initially geared his business to rideshare drivers, but quickly realized their low income couldn't fuel a very profitable business. Still, he had left a secure office job with the goal of becoming very specialized, and he continued with that mission.
"When you leave to start an accounting firm — people thought I was crazy, [because you usually] work for one of your clients when you leave … . I was leaving for uncertainty. I started my own accounting firm with the concept of niching down. At EY, with most clients, you had to pretend to understand what they do; you're not an expert in the space … How can you give good, quality tax advice if you're not an expert in their space?"
After his "Uber accountant" idea was scrapped, Rivera met an online seller in 2017 and decided to become an industry expert. "They were really making a lot of money, and had complex issues that other accountants couldn't understand," he said. "Online sellers are underrepresented in accounting communities — not a lot of accountants are specialized enough to handle taxes, bookkeeping, sales tax [etc.]. At that time I was rebranding, in 2018ish, and the rest is kind of history."
Learning curve
Now, for E-commerce Accountants, "The name says it all," according to Rivera, with a focus on e-commerce entrepreneurs with between $1 million to $10 million in annual revenue, that are mostly direct-to-consumer businesses with their own websites, payment processing, and an established brand. For these clients, the firm provides full-service accounting, including bookkeeping, income and sales tax, and CFO services. Rivera originally imagined starting a tax firm, he shared: "I had no experience in bookkeeping, sales tax, CFO services… I had a lot to learn."
At the beginning of this learning curve, one of Rivera's first e-commerce clients had an outsourced CFO who had fumbled their finances. "The client approached me, asking 'Is this something you can do?'" he recalled. "I was honest with them: 'I don't know anything about bookkeeping. If you are patient with me, I'm willing to figure it out.' They said yes."
When confronted, the outsourced CFO threw the client's bookkeeper under the bus, though the bookkeeper was "95% right" and just needed more training and guidance. So Rivera hired him as E-commerce Accountants' first (and current) employee. The duo got to work building the business, but a few months later, the Supreme Court's South Dakota v. Wayfair decision threw their new firm for a loop. The case decided that states may charge tax on purchases made from out-of-state sellers even if the seller does not have a physical presence in the taxing state.
"We were beginning to onboard new e-commerce clients and a lot of different states were trying to collect sales tax," Rivera explained. "It's a big issue; it's even affected small clients. We had to build our sales tax practice out of scratch — another milestone. We hired someone part-time to do sales tax returns. I had a lot to learn back then. As an entrepreneur, at the beginning, you wear a lot of hats."
Rivera was also in a hurry to drum up more sustainable business, which he did via virtual events and social media networking. Then they crossed paths with an online influencer. "We had a YouTuber, someone with 200,000 subscribers or something like that, promote us. Their accountant messed up, miscalculated their tax by $100,000 or something, and we came in to fix it. This was a major e-commerce influencer, and they put us on their YouTube channel and we got 90,000 views or something — a big jolt in traffic."
Still, that surge came almost exclusively from drop shippers and entry-level e-commerce businesses, Rivera explained, which even before the iOS update were an unpredictable revenue source. "They were not very sophisticated business owners, and retention was low," he said. "They come in to make money, and if things go wrong, and they couldn't adapt, they go out of business. The retention time for some clients was six to eight months. Very low."
An influencer market
When the iPhone update forced E-commerce Accountants to make the shift away from this client base, they focused on sellers with more stable revenue numbers, Rivera said. The typical client became LLCs that were solopreneurs, often with one or two other partners and a handful of employees in the U.S. For many, sales and traffic still come from online advertising, relying on Facebook and TikTok ads and search-engine optimization. A few of these clients are even online influencers who don't need to spend any money on advertising, Rivera reported.
One client is "on pace for $20 million in sales this year with zero venture capital funding," Rivera shared. "Him and his wife — she's an influencer on Instagram — have a line of clothing that just got picked up in [retailer] PacSun. It's been really cool to see their growth." For yet another married-couple client, the "husband handles operations and fulfillment, and the woman has a line of fitness clothing. She posts TikToks three to four times a day and does six figures a month in gross revenue."
Regardless of revenue numbers or subscriber count, Rivera finds his spectrum of clients all have similar issues. "From an accounting standpoint, it's interesting," he explained. "Whether a person sells leggings versus sells BodyArmor versus whatever else — the branding, website or the way they operate might be different, but from an accounting standpoint, there's the same exact issues. ... It's how we've been able to grow and have diverse e-commerce clients."
Now, the goal is to find a technology solution for these clients to pull their data from e-commerce platforms like Shopify and TikTok to give a real-time estimate of profits.
He's also contemplating yet another pivot: "One thing we are considering is when the iOS update happened and we took a hit, a lot of clients were wiped out. Right now, there is a lot more comfort. But if something disrupts e-commerce accounting we could take a massive hit. We are considering, and are in the early stages of, pivoting in another space simultaneously … to expand into cryptocurrencies."
