Friday, August 23, 2019

You Don’t Always Get What You Pay For

In our line of work, we get asked about value and valuations on a daily basis. It’s only natural CPA firm owners who have worked most of their adult lives to build up a profitable practice and are now ready to take a step back want to know what they can expect to be paid for their years of sweat equity. 

The answer unfortunately isn’t always so simple – there are multiple factors that go into determining a fair valuation for a firm. It’s not a basic asset sale or service where you pay a set price and in return acquire a business or sign up for cable.

I realize this is a bit far afield from accounting, but I wanted to regale you with a value-oriented vignette regarding my local newspaper.

In full disclosure I’m a print newspaper junkie. I read two papers religiously with my morning coffee- my local paper and one of the New York-based tabloids. The newspaper closer to home keeps me up to date on what’s happening in terms of news, taxes, culture and education within my zip and area codes. But like many print businesses, it’s suffered at the hands of digital publishing in terms of readers and revenue.

Friday, August 16, 2019

“Forgive” Does Not Mean “Forget”

I grew up the product of a mixed marriage. No, not ethnically or religiously, but rather politically.

My father at the time of my youth was a staunch Goldwater Republican, while my mother was “All the Way with LBJ.” The old man has since mellowed a bit, but my mother with the curious exceptions of being a fan of GOP lifer Pat Buchanan as well as anti-immigration, has steadfastly clung to her Democratic roots.

In full disclosure, I have tended to lean more toward my father’s beliefs as opposed to my mother’s especially during Presidential and Gubernatorial elections. The opposite has been true however in local and county races.

But on to today’s missive.

One of the many issues that has surfaced during the initial round of debates among the expansive field of Democratic candidates for the Oval Office is the obscene costs of a college education and the subsequent $1.6 trillion in outstanding student loan debt.

Two of the candidates, Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, have posited the absurd solution of canceling all student debt – yep, all of it.

To put that $1.6 trillion figure in perspective, that’s more than the gross national product of England, France or Italy.

Friday, August 9, 2019

The Right Way to Market

Like most folks, I regularly get solicitations in the mail - whether snail or electronic - from various entities looking to drum up business. If it’s not an insurance company promising they can cut my auto and home rates in half, it’s financial and estate planners warning me about the dangers of suddenly expiring without a plan or will.

But lately I have been getting inundated with e-mail and or phone requests for the following: to meet in person for a custom-fit suit; with representatives from a sales lead generation company; a pushy sales person wanting to immediately speak to the person in charge of our company’s phone system (that was a quick hang-up); a staffing firm wanting to know if Transition Advisors is in the market for senior level tax managers or auditors; and finally, a clinic that recently opened in my neighborhood that specializes solely in stretching.

As I am to flexible what a rusted bolt is to a pair of pliers, the last one hurts just thinking about it. I predict I will be able to perform a full split about the same time our national deficit is eradicated.
Believe me I have tried to put a stop to this.

Painfully I have discovered that contacting the “Do Not Call” registry has been about as effective as the time my principal ordered a series of “no smoking” signs put up around school property.

Which in a sort of roundabout way brings us to my message de jour – the right way and the wrong way to announce a merger to your accounting clients. It’s more about packaging as opposed to marketing.

Tuesday, July 30, 2019

Don’t Ask Me Again!

There are certain phrases I hear with alarming frequency that well, have me reaching for the antacid.
For example, “It’s not the heat, it’s the humidity.” I’m sure you can drum up many more.

But there’s also the most annoying business-related phrases. Again, for example: “At the end of the day.” “Let’s think outside the box” and perhaps my most loathsome – “Let’s get all our ducks in a row.”

If I had hair, I’d be tempted to tear a good portion of it out each time some mush wit utters one of these overused expressions.

I’d like to add one more to that.

“What’s the multiple?”

I can always count on repetitively being asked that question each time I’m counseling a firm that is contemplating a merger. To be somewhat fair they want to know how much their practice is worth. And many don’t stop until they get an answer.

“What’s the multiple?”

Please repeat that because I didn’t hear it the first two times.

“What’s the multiple?”

Okay for the last time, I’m going to explain the concept of CPA firm multiples.

Determining a firm’s multiple is should be viewed as cause and effect. It’s critical to remember that the multiple is the effect – determined in large part by several distinct variables, which we refer to as the cause. Let’s examine each in depth.

Friday, July 26, 2019

Where Would We Be Without It?

There’s a great deal about my parents’ generation of which I still don’t understand how they did it.

For example, knowing just how to adjust the rabbit ears on the TV antenna as to focus on a clear picture.

My father was a master at this, knowing precisely what angle to tilt one of the arms in order for us to catch the latest episodes of “The Man from U.N.C.L.E.” or “Get Smart.”

Or, having to frequently change the records on the stereo system once the album sides were completed. If only they could have hung on for another 40 years until the advent of playlists.

And I won’t even go into having to use a rotary dial. Imagine having a phone that didn’t tell you who was on the other end and you took your chances. One evening, it was my 7th grade math teacher wanting to speak to my parents about my less-than-stellar grades, but that’s fodder for a future column.

But nostalgia aside, what was the greatest product introduction of the past 20 years?

If you speak to a veteran CPA, they’ll convince you that the PC was the product that helped revolutionize back-office accounting. And there’s little doubt about its effect on firms across the country in the early 1980s. Today, accountants often work on as many as three screens at a time – something that was unthinkable as recently as 15 years ago.

E-mail? Social media platforms? The Tesla?

For my money it’s the GPS. Period.

Tuesday, July 9, 2019

If You Can’t Beat ‘Em…….

There’s an old story which tells of a youngster who sported a pretty decent pitching arm for his age and in sandlot games he regularly struck out the side.

More often than not his team won.

One day he came home obviously moping when his mother asked what was wrong.

He replied sheepishly – “I had a no hitter going until the big kids came home from school.”

I’m sure a lot of us have felt that way at one time or another – in an athletic contest or otherwise.

The same “bigger is better” logic could also be applied to CPA firms.

With quantum changes pending in the marketplace - particularly in technologies such as AI, blockchain and robotics which threaten to automate much of the Type 1 work  – the smaller firms may soon find themselves unable to compete with their larger counterparts in  terms of resources, platform of services and perhaps most of all – human capital.

This is not your father’s accounting firm, but it never ceases to amaze me how many firm owners still adhere to that antiquated strategy. You can run a firm in 2019 like you did in 1985 and those that do face a Sisyphean task in attempting to do so. The results are obvious – lost clients, no succession plan and an inability to mine new business.

So, as things go farther and farther south those firms often find themselves at an unpleasant crossroads – scramble to find a merger partner or soap the windows and padlock the door.

Tuesday, July 2, 2019

We’ve All Known a Culture Like This

As a 30-year fan of the genius-like corporate cartoon parody Dilbert, the creator Scott Adams once unveiled a character called “Meeting Moth.”

The Meeting Moth was someone who when peering through a conference room window and witnessed a meeting, began flapping his wings uncontrollably. We’ve all known colleagues like that, folks who have had absolutely no involvement with a meeting yet rubberneck like opposite lane drivers viewing a five-car pile-up.

I had more experience than I’d like to admit about meetings – fruitful or not – as I’ve probably attended more than the Geneva Convention should allow. I worked 12 years for a company that – I kid you not – on more than one occasion scheduled a meeting to determine when we could schedule a meeting.

Our-then publisher once sent out an email at 4 pm on a Friday afternoon calling for a mandatory all-hands-on-deck, no excuses meeting at 6:30 that evening. Amidst the grumbling of delayed restaurant reservations and missing out on various Happy Hours throughout the city, he stood up and said with a straight face, “we’re really not having a meeting I just wanted to see how quickly we could all get together should we need one.”

I believe it took three people to restrain several irate employees who threatened to throw him out the window.