I am a Recovering Accountant
By Tom Kirk
Hi. My name is Tom. I am a recovering accountant.
When I chose accounting as my major in college, I had no idea what it would take to eventually become a CPA. I chose accounting based on my understanding of the economic principle of supply and demand. Accounting was the most difficult business degree at that time, with the highest attrition rate. I figured that if I could get through the almost five years of study for my bachelor’s degree, there would be so few of us left, and the need for accountants in the workplace would be sufficiently strong, that I could likely get a job upon graduation.
That’s what happened. I graduated, landed a job with a public accounting firm, passed the CPA exam and began delivering tax preparation and auditing services to the firm’s clients. Before long I had the opportunity to help start my own CPA firm. I am very thankful for the knowledge and expertise this background and training provide to me.
But I was experiencing frustration about being my clients’ historian. Accurately prepared, timely filed tax returns are important to stay out of trouble with the IRS. Audited, reliable financial statements are part of the foundation upon which much of our capitalistic system is based. I have built businesses around delivering these services and delivered them well. But these services mostly deal with last year’s numbers, last year’s financial decisions. Some CPAs do tax planning or budgeting for next year, but not much beyond that. There are just too many unknown future variables that cannot exist alongside the precision accuracy mindset that is hard wired into the DNA of most accountants and accounting firm. Accountants don’t like estimates and inferences, especially if forecasting is involved. Most of us prefer last year’s earnings before interest, taxes, depreciation and amortization (EBITDA), earnings per share (EPS), return on investment (ROI), etc.
This penchant for numerical precision, that is absolutely necessary for accurate tax return preparation, can a huge waste of time and energy in the early part of a forward looking business decision like the possible transition of the ownership of a company. Sure, you will want to know if the after tax proceeds from the sale of your business will be sufficient for you to accomplish your goals. But if you need $4M to $5M and your business is worth $1M to 2M you have more important issues to figure out than determining the exact amount of capital gains vs. ordinary income tax you might pay on the sale.
That’s why I am glad FirstWave Financial is part of a team of professionals who offer The Transition Roadmap Developer TM, a transformational process that takes into consideration the practical, financial and emotional aspects of your unique business transition challenge and delivers a customized step-by-step plan of actions. Together we help business owners who want to be proactive about transitioning their current business ownership answer the tough questions of why, what, when and who. By using our Future Wealth Projection tool we can hypothecate various what if scenarios to approximate your future financial condition under differing possible circumstances. This allows you to see the ranges of possible outcomes and determine if what you considering makes sense or what has to happen for it to work out as you desire. With this knowledge you are better equipped to negotiate, close and implement a successful transition.
The actions of your Transition Roadmap will include accurate tax return preparation and possibly audited or reviewed financial statements that may be required for financing. The tax returns and financial statements surrounding a business transition can be much more complicated than those that reflect normal ongoing operations. Precision and completeness are required for these steps and a CPA’s unique set of skills fit the bill.
All small businesses transition eventually. Be intentional about how you want this to happen. Call today and schedule your complementary consultation with one of our WealthCoaches TM to see if The Transition Roadmap Developer is the process you may want to investigate for improved clarity in this critically important area of your personal and business life.
You should not assume that any discussion or information contained in this publication serves as the receipt of, or as a substitute for, personalized investment advice from FirstWave Financial. A copy of the FirstWave’s current written disclosure statement discussing our advisory services and fees is available upon request.