Last of a Dying Breed

If you’re expecting a column loaded with sage advice on accounting M&A or succession planning, stop reading immediately.

There will be none of that today.

No, this missive centers around the recent passing of a journalistic dinosaur, a rugged veteran of the Aussie/London tabloid wars who would do anything to get a story and drank enough to fill a reservoir. This week Steve Dunleavy left for that great copy room in the sky at the age of 81- a fact by itself that thumbed its nose at any accepted principles of medical science. As one veteran journalist mused “Steve never took food with his meals.”

Many remember him from his strong right of center columns for the New York Post where he staunchly supported the police and firefighters or his stint as an on-camera reporter for the nightly “A Current Affair.”

But nearly everyone who ever worked on a New York daily had their own Steve Dunleavy story, from the time he lay nearly comatose in a snowbank only to have his foot broken by a passing plow, or when he slashed the tires on his own father’s car when they both were competing for a story in their native Australia.

The .001 Percent Solution

Last week I chronicled my battles with the climate and walking distance during the AICPA ENGAGE conference in Las Vegas, of which I’m admittedly still recovering. During the four-day confab, I received a voice mail from a firm that unknown to me was less than a mile from my office.

The owner, an affable man in his late 50s outlined what he thought he needed to get his practice where it needed to be and despite having no one on his bench to assume control and the fact that he wanted to work just five more years full time he had the perfect solution – acquire a smaller firm with young CPAs.

Ah, yes! I told him he had determined the best strategy to right his firm. Now, I said instead of engaging me to help, he’d have more success not to mention less expense, just rubbing the magic lamp and waiting until the genie appears.

It took him a while to get the joke which was not a good sign.

So, I painfully went through chapter and verse of a speech I’ve given perhaps 300 times since I came aboard this company. I explained that if regional firms generating 20 times his revenue were having trouble hiring, what makes him think his firm would be a sudden magnet for talent?

He wasn’t done.

Sin City Reality

There are at least two certainties I can count on when attending the annual AICPA ENGAGE conference in Las Vegas. One, I will walk in excess of five miles between my room – which invariably will be situated at the end of an unending hallway - and the conference center, and two, when I finally set aside some time to venture outside the hotel, the temperature will easily be in triple digits.

Well, according to the app on my phone, I walked 7.3 miles during the four-day meeting and the one afternoon I foolishly decided to walk the famed Strip, the Nevada heat welcomed me with a balmy 108-degree blast to the face accompanied by an official heat index of 124.

Hellish temperatures and marathon walking ventures aside, it was technology that took center stage in a venue where cheesy lounge acts and Elvis impersonators are more common than gambling chips. More specifically the impact that pending trends such as AI, block chain and machine learning will have on the traditional operating paradigm of a CPA firm.

At least five sessions that I attended spoke to the reality that much of what used to be referred to as Type 1 audit and tax work will give way to automation and those practices that gird for this massive shift will be the ones that grow and perhaps more importantly, survive.

More Delusion than Illusion

The other day (ever notice how many of my columns begin with those three words?) I received a call from a sole practitioner in the New York area who, as he nears 70, was thinking not of slowing down, but rather inquired as to whether I had any opportunities for him to absorb.

Seriously.

He thought that a young owner with a smaller firm would be willing to merge in with an elder statesman who obviously gave little or no thought to client transition or a buyout.

I thought to myself that this was as self-delusional as buffoonish New York Mayor Bill de Blasio declaring his candidacy for the Presidency in 2020. And had about as much of a chance of succeeding.

But my warnings fell on deaf ears.

He had no intention of slowing down anytime soon and certainly had no one in his firm to take over when he ultimately did decide to slow down.

That’s what colloquially is known as truly a man without a plan.

Not to be outdone, literally a day later I was contacted by a practitioner in New England with basically the same scenario, - in his mid-60s, no one on his “bench” but stubbornly refusing to consider merging up.

More than a Remote Chance

Back in high school I had a friend whose father was, often, home, when I came over to his house. I assumed he was unemployed, but then my friend explained that he was a financial planner, just when that line of work was beginning to make inroads to the career mainstream and that he worked from an office in their house.

His office was rather austere, a single telephone, rows of financial and accounting-related books on the shelf, an adding machine, certificates on the wall and an overflowing rolodex – remember those?

Desktop computers were still roughly a decade away from becoming an office staple.

As someone with two working parents – one based in an office and the other in a hospital lab, I found it hard to wrap my head around the idea of a home-based office. I wasn’t so sure I wanted to see my parents both in the morning and the minute I returned from school.

But that was then, and this is now.

I won’t go out on a limb and say that working “remotely” as opposed to the old vernacular of “working from home” has become the rule rather than the exception, but in a recent survey of some 200 CPA firms almost half (43 percent) had staff who worked exclusively from home. While more than 40 percent of those polled said that remote workers allowed them to hire outside their established geographic markets.  And some 82 percent indicated that they retained the remote worker even when said worker moved away.

Where does it all go?

Someone once asked legendary financier J.P. Morgan what kind of gas mileage he got on his newly purchased Rolls Royce.

Without blinking Morgan casually replied, “if you have to ask, you can’t afford the car.”

I can honestly disclose that the purchase of one of the world’s most luxurious automobiles was never a consideration in my household budget. So, asking about mileage on a car like that was sort of moot.

Not surprisingly, items such as mortgages, college tuition, food, clothing, power and telephone jumped to the front of the line at Chez Carlino in lieu of a $300,000 Rolls Royce Phantom or Silver Cloud.

But in a sort of related storyline I recently came across a survey that tracked household finances, with a spotlight on the average month expenses of what the poll termed “non-essential items,” as opposed to   monies dedicated toward savings and other critical financial targets like life insurance.

As it turns out, the average adult in the U.S. spends roughly $1,500 per month on these non-essentials, which, if my math is correct, extrapolates to about $18,000 per year.

Food and beverage costs top the list, specifically eating out, ordering take out, having drinks or buying lunch instead of brown bagging it. Others include “impulse purchases,” gym memberships (personally guilty), and even bottled water.

Two Blueprints for Succession Failure

When it comes to facing succession and ownership transition within CPA firms, experience has taught me there are two types of practitioners – those who are proactive to securing their next generation of leaders and those who continue to procrastinate despite repeated efforts to convince them otherwise.

Cases in point.

Late last week I was speaking to an owner in his mid-60s who runs a CPA practice in the Northeast. He has no succession plan, nor has he taken anything but cursory steps to rectify his situation. I had him meet with several firms and not surprisingly he found something he didn’t like in each – mind you nothing that could not have been easily overcome.

In fact, in one of his meetings, he deliberately put his feet on the desk of the managing partner and told him he didn’t want to go from owning a firm to becoming an employee.

That would be the Webster’s official definition of making a wrong impression. Trust me, I heard about it chapter and verse afterward from the buyer firm. I said when something like that happens, it’s obvious he wasn’t the least bit interested from day one.

Not to be outdone, earlier I had visited a long-time client, who, as he approaches 70, continues to log ridiculous hours when at that period in his life he should be more concerned about lowering his handicap.