Over the last 16 months, CPA firms have had a front-row seat as witnesses of the unstable economy. Small businesses took the brunt of the pandemic head on with Yelp reporting that 60% of businesses permanently closed in 2020. So what is it that allowed the other 40% to stay open and thrive? Indicators point to certain business models, like Amazon, that were poised for success, but others believe that savvy business owners did amazing things to stay alive. And, though CPA firms in general were not hurt by the pandemic, there are lessons we can all learn from the 40% who made it work!
Small businesses and start-ups have a drive unlike others. Each day determines whether the business will survive and grow or wither and close. Most CPA firms, big and small, don’t have this dose of medicine daily. It’s in the blood of these entrepreneurs. Some build and sell their businesses just for the rush of starting over—these folks are called serial entrepreneurs. What do they have that the average CPA firm does not? I talked to four friends who run recently-started businesses in the Philadelphia area to learn how they make decisions for growth and what they think CPA firms can do to embody the start-up spirit.
Embrace Taking (Calculated) Risks
It’s no secret that CPAs are among the most risk-averse professionals; and they have good reason to be. They are responsible for the financial health of their clients and cannot afford to go off on a half-cocked whim. Conversely, the law in most states requires a CPA firm to be owned by CPAs. Hence, you have risk-averse leaders managing risk-averse employees. This can be problematic. However, start-ups weigh risk differently, more often, and they are more comfortable leaning into discomfort. For them, it’s about understanding the risk and all its potential downsides before jumping in.
“Self-imposed doubts and fears can be barriers to growth and risk taking,” says Michael Craig, principal and owner of Pennworth Financial, when asked about CPA’s hesitance at taking risks. Craig also believes the speed at which many high-performing companies grow and change is uncomfortable to CPAs. “I experienced a big failure and owned it; I learned from it. The downside of not taking risks is far greater than the downside of taking them.”
Kelly D’Amico, owner of Identity Gear, agrees with Craig and adds, “some risk-averse companies ignore business indicators and market trends for their industry.” The CPA business changes so infrequently that quick pivots in the industry are often viewed as “trends,” and not necessarily a shifting business indicator. CPAs should pay close attention to these small changes. Following the right ones, when calculated and justified, could lead to groundbreaking growth.
Engage Your Village
The saying is “it takes a village to raise a child.” The same can be said for growing a business. Our circle of influence, which includes mentors, investors, family, friends, and other non-competing business owners, can be a wonderful support system.
“I had to learn that I did not know it all. I am a very good chef, but the business end of running a restaurant is where I needed help,” says Jeremy Fernandez, owner of The Latin Café. “The wisdom from my inner circle is amazing, and all it took was for me to drop my pride and ask for advice.”
This is a hard one for CPAs. Accountants, as the expert speakers of the “language of business,” are expected to know how to run a business. But it’s OK to seek help. There are so many facets of running a business that have nothing to do with accounting, like managing people, marketing, public relations, business development, and I could go on.
“You have to first decide where you want to go, then identify the people inside and outside of your company that help you get there,” says Craig.
Debt is Not Always Bad
It is rather curious why “bad debt” is a definitive term in accounting, and “good debt” is not. It subconsciously makes one think all debt is bad. But, according to Patty Tawadros, CEO and founder of StudioX, this is not the case.
“I was told to stop looking at taking a loan and having debt as bad—but to view it as an investment in my company’s future,” says Tawadros. “Money talk is no fun for an entrepreneur.” Once a business can find access to capital, taking the step to secure it can be risky. Work with your banker to ensure the reasons you are taking a loan are for growth and not to meet payroll.
Go and Grow
My entrepreneurially-driven friends believe in taking risks if they are calculated and well thought out. And it should be something CPAs should become more familiar with if they want to innovate and move the profession forward. Leaning on your circle of influence and knowing when to access capital are also key takeaways.
For every business owner, the landscape looks different, and these pieces of advice may not pertain to you and your CPA firm’s situation. Talk to your business advisors before embarking on any change in your normal business methodology. There, I finally got to the disclaimer!
Good luck in instituting the mind of a start-up entrepreneur into the growth path of your CPA firm!
About Eric Elmore
Eric R. Elmore is the marketing and brand manager for Drucker & Scaccetti, a tax-focused accounting firm, in Philadelphia. He has more than 20 years of experience working with professional service firms helping them communicate to the world who they are, what they do and why it is of value to targeted audiences.