Years ago one of my former
bosses bestowed upon me this little pearl of wisdom that I have never
forgotten: “Sinners can always repent but stupidity is forever.”
You would be amazed, or
perhaps maybe you wouldn’t, how often I have found that to be true.
After spending three days
at one of the year’s top accounting conferences I continue to be amazed at how
some folks, each of whom has passed one of the hardest professional exams
currently given, still don’t get it when it comes to optimizing their own
business.
Picture Inspector Clouseau
with a pocket protector.
To wit: I had a sole
practitioner approach me at our exhibit booth and posit this incredible
scenario: He was preparing to acquire a small firm whose owner wanted to get
out after one tax season. The seller demanded a large cash payment upfront, which
the potential buyer was prepared to do – albeit going to a lending institution
to obtain it. Here’s the kicker – the seller offered no client retention guarantee
and the buyer didn’t ask for one. So envision this scenario: the mergee leaves
after one year, followed shortly by many of his 1040 clients and the buyer not
only has a client exodus to deal with but now debt service on the down payment
as well.
I don’t have to be Kreskin
to predict that this will not end well.
Another firm owner
sauntered by and confided in me that he was thinking of merging up. I patiently
explained how our process works and proceeded to ask him a number of questions
about his firm most of which he should have been able to answer off the top of
his head including his net revenue.
“Whatever is left after salaries and
overhead.”
That’s not exactly what I
would call as having a firm grasp of your firm’s metrics. Nor would that answer
impress any potential suitor. I explained to him that getting your firm ready
for a merger or at least making it the most attractive possible was much
like getting your house ready to put on the market – it seldom looks better
than just before it’s sold.
And just to make the
experience complete, yet another practitioner revealed that a long-term
employee was being considered for partnership – he was 56 and was not a
CPA. I laughed and told him honestly that
his candidate never made a commitment to the accounting profession, since he
hadn’t bothered getting his CPA certification and in fact, the only commitment
he had shown thus far was that of being an employee at his firm. And tenure
should never be a primary reason for partnership.
Case closed.
Folks, there’s a reason
that conferences offer sessions on everything from M&A to marketing and
IT and use seasoned professionals to
teach such classes. Even if you take away just 10 percent of what you hear, it
would avoid duh! scenarios such as those listed above.
Sadly though there are
those times when you just can’t fix stupid.
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