Friday, November 7, 2014

Folks, it’s Not Brain Surgery

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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