We recently ran across this great article in the Journal of Accountancy, penned by Jeff Drew, and wanted to share it:
Accountants who think they want to launch their own business should not proceed unless they have a clear vision of their company’s purpose and a thorough understanding of what it really means to become an entrepreneur.
Those were among the main points made by a panel of accountants-turned-entrepreneurs during a roundtable discussion recently at the AICPA’s E.D.G.E. Conference in Orlando, Fla. Speaking to an audience of young CPAs, the panel members emphasized that entrepreneurship is an extremely difficult endeavor that requires passion, persistence and the right t people in the right roles, starting at the top.
“Just because you’re a CPA doesn’t mean that you can run a firm that does CPA work,” said Jason Blumer, CPA/CITP, managing shareholder of Blumer & Associates, a South Carolina-based firm that provides accounting and consulting services to “creative clients.”
During their discussion, the panelists covered a number of entrepreneurial pros, cons, and lessons learned. Here are the highlights, broken up by topic:
To start your own business, you must be a business owner first.
Management and other accountants looking to start their own company need to understand that entrepreneurs are business owners first and that they will do very little, if any, actual accounting in their new role, the panelists said.
“Entrepreneurs get paid for what you own, what you do, and the risks you take,” said W. Michael Hsu, CPA, founder, and CEO of California-based DeepSky, an outsourced accounting department for entrepreneurial companies with annual revenue of between $1 million and $10 million. “If you want to just do a job, you should go work for someone else.”
Or as Blumer put it: “If you love to do auditing, then don’t start your own company.”
Those who do start their own companies will need to hire others to perform the frontline work. Scott Price, CPA, managing director of Align CPAs, a Florida based firm that specializes in Service Organization Control (SOC) audits, hired an accountant from Ernst & Young to handle his firm’s methodology for doing SOC audits.
“I’m not the best CPA in our firm or our best technician,” said Price, a former Arthur Andersen employee who founded his first company, SAS 70 Solutions, when Arthur Andersen went out of business in 2002. Price sold SAS 70 Solutions in 2009. Align is Price’s second entrepreneurial venture focused on auditing financial, information technology, and other controls at service providers such as data centers.
“I get excited about what we’re doing in the business,” Price said. “I love to inspire employees.”
For starters, a purpose.
Entrepreneurs need more than excitement and inspiration to make their business work. The panelists emphasized the importance of having a well-defined niche and clear goals for their businesses.
Blumer, for example, said he wants the consulting work and business advice provided by his firm to “change people’s lives.” Hsu spoke of the need for accountants to learn the language of business so they can translate their technical knowledge into advice business owners can use to grow their companies. Price established the first CPA firm in the niche he occupies now.
Of course, finding your niche is easier said than done. It took Hsu two years to find that his passion was working with entrepreneurs. Roundtable moderator Donny Shimamoto, CPA/CITP, CGMA, founder and managing director of Hawaiibased consulting firm IntrapriseTechKnowlogies, said he believes that accountants can pursue their niche in their current jobs before looking to launch a company, though Blumer and Price expressed skepticism, with Blumer saying that it’s hard to pursue your own path in someone else’s company. Price said that it’s easy for people to use their current job as a crutch that keeps them from getting their business off the ground.
Hsu, who quit his job and drained his savings to start DeepSky, said prospective entrepreneurs might be better served to keep their current jobs, especially if they have a family to support, and work on building their company at night. “You can do a lot of work from 7 p.m. to 2 a.m.,” said Hsu, who called night hours an ideal time to register a company, meet with other entrepreneurs, and get ready to open a business.
Struggle, stress, and support.
Whatever the approach to launching the business, prospective entrepreneurs must be prepared for sacrifice and struggle. Price and Shimamoto, for example, both sold their houses to either start or grow their businesses. Hsu didn’t take a salary for nearly two years.
“Being an entrepreneur is harder than being a CPA,” Blumer said. “You screw up a lot more.”
For many, launching a business is a crusade that consumes enormous amounts of time and energy while exposing entrepreneurs to financial, mental, and emotional stresses.
“If you want work/life balance, don’t start a company,” Hsu said.
Those considering a foray into the entrepreneurial realm should seek out business owners, whether in CEO groups or individually, who can provide advice and encouragement.
“Starting a firm is hard,” Blumer said. “You need a coach.”
A mentor told Hsu that his company shouldn’t be his life; it should make his life better. Entrepreneurs must prioritize family, friends and other relationships and activities that provide rejuvenation and relaxation— not an esay task when you are under pressure to meet payroll.
“There is a lot of responsibility when employees are depending on you,” Price said. “But you have to set priorities.”
One way Price has done that is to construct barriers between his home life and his work life. For example, he never travels on Tuesday nights. On those nights, he will be home with this family. “No exceptions,” he said.
All of the panelists emphasized the importance of employing the right people. To do that, entrepreneurs must be willing to hire people smarter than them, Price said.
“I want to be the dumbest guy in the firm,” he said. “I want to hire smart people, an allstar team.”
To do that, employers must have a system for finding the right people. Blumer’s hiring process is designed to identify self-starters who will thrive in the results only work environment (ROWE) he has established at Blumer & Associates. His employees all work remotely and are not required to work a set schedule or fill out a time sheet. It’s the results that matter, he said, not the time worked.
That sentiment is shared by Hsu and Price, whose firms also do not track employees’ time.
“We hire adults,” Price said. “They understand they need to get the job done.”
Still, entrepreneurs must accept that not everyone is as driven as they are, Price said. Instead, business owners should strive to learn what their employees enjoy—and excel at—doing. Management should talk to employees about their goals, both at work and in their personal lives.
“If they want to learn guitar, ask how that’s going,” Price said. “That builds rapport.”
Strong relationships can help entrepreneurs place workers in the roles most beneficial to the business and to each employee.
Employers then can design reward and compensation structures that work best for each employee, Price said.
For example, Hsu said, flexible schedules, work/life balance, and corporate purposes are emerging as major motivators among younger members of the workforce.
“Employees are willing to work less for less pay,” Hsu said. “They learn extremely fast and want to know how the firm is changing the world.”
These younger, idealistic workers are merging into a melting pot of people who hold a variety of views on what they value in their professional lives. Employers must recognize those differences and adjust their policies accordingly, Hsu said.
“Not everyone wants to be managed the same way,” Hsu said. “ROWE works for some employees, but others want their hand held and to work 9 to 5. There’s nothing wrong with that.”
Blumer, meanwhile, takes a different approach. He demands that his employees believe in the firm’s mission and mindset. To accomplish that, his firm relies on an intense hiring process that can last as long as three months. The goal, Blumer said, is to “weed out” job candidates not suited for the Blumer culture.
“If you want an entrepreneurial CPA firm, you need to hire the right people,” Blumer said.