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.

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 7^th 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.

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.

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.