Exercise profile: The TikTok boom — and bust

In 2021, when a wave of messages lit up Apple users’ iPhones, forcing them to update their operating systems, a tsunami of Christian Rivera’s clients was forced out of business.

The iOS 14 update allowed users to opt out of being tracked by targeted ads in apps, the death knell for many small sellers who rely on mobile advertising and the retail business clients Rivera served at E-commerce Accountants, Bookkeeping and Accounting. The firm he founded in 2018. Specifically, these customers were drop shippers, or entry-level online retail businesses that accept customer orders without inventory, and they made up the majority of Rivera’s customers at the time.

So, as he would do before and again, Rivera rolled.

“This change has had a huge impact on the online seller community,” he explained. “It destroyed a lot of the market, especially drop shippers. They no longer had reliable data from Facebook to market. This forced us to avoid suppliers. In the summer of 2021, we focused on more established sellers with brand value. and inventory in the US”

It paid off for Rivera. He’s proud to share that success now, and he does so through constant promotion and business development efforts, but when he first left a Big Four job to start out on his own, he recalls a different feeling.

“I was a little shy and at first I didn’t even tell people what I was doing,” she shared. “Now, I tell people I’ve grown a seven-figure accounting firm. When I started with nothing and left the accounting job, of course it was difficult… . When I left EY, people were literally telling me I made a mistake I let it go, that was probably the biggest hurdle for me to overcome.”

Christian Rivera

The next would come when Rivera initially organized his business for drivers, but quickly realized that their low income could not make the business very profitable. Nevertheless, he left a secure office job to become highly specialized and pursue this mission.

“When you go to start an accounting firm – people thought I was crazy, [because you usually] Work with one of your clients when you go…. I was going for the uncertainty. I started my own accounting firm with a niche concept. At EY, as with most clients, you will have to pretend to understand what they are doing; 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 retailer in 2017 and decided to become an industry expert. “They were making really big money and had complex issues that other accountants couldn’t figure out,” he said. “Online sellers are underrepresented in the accounting community – not many accountants are specialized enough to handle taxes, bookkeeping, sales tax. [etc.]. At that time I was rebranding, in 2018, and the rest is kind of history.”

learning curve

Now, for e-commerce accountants, “the name says it all,” Rivera said, focuses on e-commerce entrepreneurs with annual revenues of $1 million to $10 million who are mostly direct-to-consumer. Own websites, payment processing and an established brand. For these clients, the firm provides full accounting services, including bookkeeping, income and sales tax, and treasury services. Rivera originally envisioned starting a tax firm, he shared, “I had no experience in accounting, sales tax, financial services…I had a lot to learn.”

At the beginning of this learning curve, one of Rivera’s first e-commerce clients had outsourced financial resources. “A client approached me and asked, ‘Is this something you can do?'” he recalls. “I was honest with them: ‘I don’t know anything about accounting. If you’ll bear with me, I’m willing to find out.” They said yes.”

When confronted, the outsourced CFO threw the client’s accountant under the bus, even though the accountant was “95% right” and just needed more training and guidance. So Rivera hired him as the first (and current) employee of E-commerce Accountants. The duo set to work building the business, but a few months later, the Supreme Court’s decision in South Dakota v. Wayfair scuttled their fledgling firm. The case ruled that states may impose sales 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 starting to bring in new e-commerce customers and a lot of different states were trying to collect sales tax,” Rivera explained. “It’s a big deal; it’s even for smaller clients. We had to build a sales tax practice from scratch—another milestone. We hired someone part-time to do sales tax returns. I had a lot to learn then. As an entrepreneur, you wear a lot of hats in the beginning.”

Rivera also rushed to build a more sustainable business, which he did through virtual events and social media. 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 screwed up, miscalculated their bill by $100,000, and we stepped in to fix it. It was a major e-commerce influencer, and they put us on their YouTube channel, and we got 90,000 views or something like that—a huge bump in traffic.”

Still, that increase came almost exclusively from drop shippers and entry-level e-commerce businesses, Rivera explained, which were unpredictable sources of revenue even before the iOS update. “They weren’t very sophisticated business owners and retention was low,” he said. “They come in to make money, and if something goes wrong and they can’t adapt, they go out of business. For some clients, the shelf life was six to eight months. Very low.”

influential market

When the iPhone upgrade forced e-commerce accountants away from that client base, they focused on sellers with more stable revenue numbers, Rivera said. A typical client has become LLCs that were solopreneurs, often with one or two other partners and a few employees. For many in the U.S., sales and traffic still come from online advertising, relying on Facebook and TikTok ads and search engine optimization. Some of these clients are even online influencers who don’t need to spend money on advertising, Rivera reports.

One client “is doing $20 million in sales this year with zero venture capital funding,” Rivera said. “He and his wife – she’s an Instagram influencer – have a clothing line that they just launched [retailer] PacSun. It’s been really cool to see them grow.” For another married couple client, “The husband does operations and performance, and the wife has a fitness clothing line. He posts TikToks three to four times a day and makes six figures a month in gross income.

Regardless of revenue numbers or subscriber numbers, Rivera finds that a range of her clients have similar issues. “From an accounting point of view, it’s interesting,” he explained. “Whether a person sells leggings and sells BodyArmor somewhere else – the brand, the website or the way they operate may be different, but from an accounting point of view, it’s exactly the same issues… That’s how we’ve been able to grow. And have a diverse e-commerce clientele.”

Now, the goal is to find a technology solution for these customers to pull their data from e-commerce platforms like Shopify and TikTok to measure profits in real time.

He also discusses another point: “One thing we’re looking at is when there’s an iOS update and we get hit, a lot of customers are lost. Right now, there’s a lot more comfort. But if something disrupts e-commerce. We could take a massive hit. We’re looking at it and we’re In the early stages, simultaneously flipping into another space… to expand into cryptocurrency.

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