Jeff: Welcome to Deal Talk brought to you by Morgan & Westfield, I'm Jeff Allen. If you're looking to sell your company now or at some point in the future it's our mission to provide information and advice from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
We think of our CPAs as our tax guys, our go-to connections to help us keep the IRS off our backs, but in fact they do a lot more than that. And to talk with us about how important the role of the CPA can be to your business, I'm joined by Scott Shields. He's a CPA and founding partner at Shields Blice and Company CPAs in Ohio. Scott Shields, welcome to Deal Talk sir, it's good to have you.
Scott: Thank you so much Jeff, I'm very happy to here with you this afternoon.
Jeff: This is kind of a place where you can just fill us in. Give us a brief rundown of your history, of your firm, what you folks do there and who you serve.
Scott: Sounds good. We are a general practice CPA firm and we're made up of attorneys, masters in tax, CPAs, bookkeepers, CPPs which are known as Certified Payroll Professionals, and our whole concept here Jeff is to wrap around business clients who provide all the necessary services they need. Many of our clients use all of our services, many just one or two of them.
Jeff: This is a really good jumping off point I think really to start our conversation today ,Scott. Of all the services that a reputable CPA or CPA firm like yours can provide their clients, are there three or four in particular that you may believe that are probably the most important in helping a business owner to preserve or even improve the value of his or her business? What are those examples?
Scott: That's a great question, Jeff, and it's interesting. Going back to the stereotypical role of the CPA, let's start with our foundation which would be the financial statement preparation and the tax return prep. It's kind of what most people think of when they hear the decimation of a CPA. And it is the cornerstone to what we do, but we are so much more than that in this day and age. One of the things that has occurred over the last decade or so is there are so many more services that are available that we can receive extra training in and extra certification in. For example, you can be a valuation specialist where with additional education, testing, and annual CE hours we can assist business owners to determine what does my company really worth before I even go to the market to find out is this the next logical step? So we've got now three things laid down in our foundation. We've got the tax, we've got the accounting, we've got valuation, but one of the key things is also just general business consulting to be that sounding board for our clients, to be that voice of reason or that reality check, or that sanity check. So when they come up with an idea we may have already done that idea five, or six, or seven times, perhaps even that year. We can educate our clients as to what works, what doesn't work, and pitfalls to avoid. So I think we've grown in my profession from doing the basic accounting and tax work to becoming more of that advisor that they call and check with just to get some general business knowledge. Because he may have one, or two, or three businesses, a typical CPA firm several thousand businesses that we worked with.
We can educate our clients as to what works, what doesn't work, and pitfalls to avoid.
Jeff: Really, really good points. And it's true, I think we're all hung-up in the attitude we'll call our CPA that one or two times during the course of the year particularly around tax season and we're going to need to bring them in. We need to have that visit with them. And we tend to have kind of that narrow kind of view of just how important they are and of the types of services they provide. So I think it's really important that we pointed some of those things out, Scott, that you talked about just there. Ways that you are getting more involved with the clients to provide really value-added services that are all about not just preserving your long-term relationship with them but truly helping small business owners along the way with the operation of their businesses, helping advise them on ways that they can save money, preserve the value of their businesses, and maybe even improve the values at the same time. Let me dig in a little bit here with respect to from your perspective and having dealt with so many business owners throughout your career, what are some of the most common issues that you found in clients’ businesses during the sell-side due diligence process now I'm talking about that you knew might not just impact the value of their company but also possibly prevent the sale of their business. This is a show that is really geared toward those people who eventually have plans of selling their business. So I'd just kind of be interested to get your take on that.
Scott: When you’re selling a business it’s like any foundation to a well-built structure. That foundation does not start three or four, five, or even six months before you want to sell. It actually starts years before that, laying the foundation with the proper financial data. Jeff, I don't think I've never been involved in a sale where an educated buyer doesn't ask for at a minimum three years’ worth of financial statements and three years’ worth of tax returns at a minimum. We know going back to our basic math when we were in elementary school to draw a line I need really to have three points to determine whether that line's going up or down and what direction it's moving in. And that's why many times we get those three years’ worth of financial statements to lay the foundation so you can have a business owner that does become sale minded and he's coming off his best year ever, but when in fact when you look at the financial statements we've got accumulated losses because of previous four, five, or six years he has not made any money. So it's important to find out always being working with that trusted adviser, that CPA to be getting that financial statements prep for that potential sale. One of the problems we ran into in the accounting business with our clients is it's a double-edged sword. One of my jobs to make sure they pay the minimum amount of tax, the other is to make sure that the value of their business is as high as possible. And those things really are in conflict with one another constantly. So we've got to be very mindful of the fact that if we do have that sale that is potentially coming up in one, two, or three years, that we talk early and often to begin putting that foundation down for that sophisticated buyer and his advisory team to look at. One of the things I always like to avoid is presenting financial statements that actually cause more problems than they solve.
Jeff: Boy, and how, and you can just imagine the issues that that could ... You're talking about truly detrimental. And then what happens is it makes your job that much more challenging. You've got certainly the people on board, Scott, to be able to take on those types of challenges. But it could prolong the process. And the one thing that I'd like to get from you and I'm sure that you've talked to so many people and you can kind of see through your conversations and interviewing some of these clients, and going through the Q&A process, you can get a sense probably of those business owners who have it maybe a little bit more together and have kind of a stronger understanding of their own books than maybe some of the other guys who maybe they're just a little bit more hands-on involved in their business. They're trying to pay their bills, they're trying to run their business lean and mean. They don't have big staff so they find that they're working both in their business and they're working on their business. So maybe they don't have a bookkeeper, or they don't have a local accountant on staff there to be able to help them with their books. Is it true that in many cases the owners of a business just don't have a strong enough sense of their own numbers? They don't talk enough to the people that they have in-house that are supposed to be working on these things with them?
Scott: I couldn't agree more with you, Jeff. So often you have a business owner that may be good at what it is that he does. Whether he is an engineer, or whether he is a personnel, a programmer, and they're very competent in their field. But when you get into the numbers which really represents that business to the outside world, no matter how good a programmer he is or how talented of an engineer he is, but those financial statements represent us to the outside world, they have a basic lack of understanding between the most simple of documents. What is a balance sheet, what are my assets, my liabilities, my equity, how does a P&L work and how does it portray me to the outside world? And it’s possibly because they're working with an accountant, a bookkeeper, a CPA, that just doesn't take the time to explain to them or to educate them on how these documents really work.
One of the things I always like to avoid is presenting financial statements that actually cause more problems than they solve.
Jeff: We're talking with Scott Shields. Scott Shields is a CPA himself and founding partner of Shields Blice and Company CPAs. You have two offices in Ohio, is that correct, Scott?
Scott: That's correct, we do. We have an office right outside of Akron, in Fairlawn, Ohio. And we're also located in the cultural center of the universe, North Camden, Ohio.
Jeff: Very, very good. Let me ask you Scott. If you are advising people just for educational purposes today, what the most important criteria to consider when shopping for a CPA, or what questions should I as a business owner be asking if I'm interviewing CPA candidates for the first time? Share your view on the most important criteria you believe that are critical when shopping or hiring your CPA.
Scott: Education I think comes first for me, Jeff. I think that CPAs traditionally have been afraid to educate their clients, because they were afraid that that client would do their own tax return. I don't think that's correct at all. If they wanted to be a tax prepared they'd already be a tax prepare. So education is number one. Don't just tell me about the numbers. Explain to me why they are the way they are and what my options are. I always tell people our job is in education, advising, and giving you what we recommend you should do, but obviously the client always has the ultimate say in the decision making process. Number one is how is that person sitting across the table communicating to you. My industry which is a tremendous industry and I've been in it for over 30 years and I love it does many times attract the type of individual that are not good communicators. So number one on my list Jeff, communication. Are you understanding what that individual is saying, is he speaking in a level that is your layman's terms can you understand? Or is he talking about everything from debits, to credits, to other types of tax jargon that may be more impressive when you're talking with a CPA, or maybe going right over that individual’s head.
Number one is communication. Number two is I think that many of your listeners should ask for references. It's interesting because what person in their right mind would give you a reference that's not going to be good? That's what people think on the surface. But as a business owner, when you were interviewing on the telephone, those references you can begin to dig in to dig into things. How often does he meet with you? Does he really meet with you or is everything relegated to a staff and I never see that guy again? How technology competent is he? Is the individual well-known in the community? Is he involved with his church? All those types of questions you can get from talking with those references and get a better answer than from the CPA himself who obviously has a product to sell and wants to bring on a new client. So I think going down the road also with the references. Get three or four references, some individual, some businesses, some in your own industry, some in other industries, and then press those people. Ask the hard questions. Once again, they're going to be open, upfront, and honest with you, and they're going to give you great information. And perhaps you can read between the lines as to what that CPA's real strength and weaknesses are, and can they really help me position my business so that I can present it to the outside in the form of a potential sale.
Jeff: Your business is important to you, it's not only your family's lifeline, your livelihood, but it is also your employee's livelihood and lifeline in many cases, take it as seriously as you would hiring a employee, a key member of your staff. There's no reason as Scott just pointed out, you shouldn't ask for references. This is someone for Pete's sake who's going to have their eyeballs on your financial statements. They're going to have access to some really important information there, your money. And so you need to make sure that you ask the right questions, and one of those questions should be can I see some references? Give me three or four references, whatever the case may be. Final question before we go to our break here, Scott, if I'm considering selling my business when should I get you involved in that process?
Scott: I guess the short answer, Jeff, is as early as possible. Don't bring me in after you've identified a potential buyer. I could be involved way before that. When the first inkling crosses your mind that, wow, I need to begin to plan for my exit strategy, pick up the phone and call me. That's when the process starts.
Ask the hard questions. Once again, they're going to be open, upfront, and honest with you, and they're going to give you great information.
Jeff: I think that's a very short and simple answer and it's to the point and it makes perfect sense. Why your CPA should be one of your most important business resources. I'm Jeff Allen. I'll be back with Scott Shields when Deal Talk gets back after this.
At Morgan & Westfield, we believe in simplicity. That’s why we have one simple goal: to help you sell your business. To do that, we use a proven, simplified process that allows you to save up to 90 percent off standard broker fees. The Morgan & Westfield team can help you put together a package to present your business to buyers, advertise your business for sale, screen buyers, prepare an offer on your business, manage the due diligence process, and close the transaction. You’ll have access to the same resources and methods that brokers use for their large market clients, and all this without a long term contract, so you can even bring your own buyers without paying a commission. A complicated process that is simplified and executed well gets results. If you’re interested in selling your company or having it appraised, contact Morgan & Westfield for a free consultation -- 888-693-7834. 888-693-7834. Or visit morganandwestfield.com.
Jeff: Welcome back to Deal Talk. I'm Jeff Allen with my guest Scott Shields, and he is founding partner at Shields Blice and Company CPAs, and he himself of course a CPA. Scott, I want to thank you so much for joining us today. We're having a really engaging, I think a thought provoking conversation about how useful your CPA can truly be to you. Scott, recently I had found a survey online from a company called the Sleeter Group, and this was published on cpapracticeadvisor.com. They gave a number of interesting stats and statistics involving CPAs and business owners, and kind of the relationship between the two. Seventy-six percent of business owners polled in this survey by the Sleeter Group said that they didn't believe that their CPA was proactive enough in helping them. How can CPAs be proactive in helping their clients? If you can give us some examples that would really help to kind of clarify I think.
Scott: I don't doubt that poll for one second, Jeff. I run into that all the time. When I'm dealing with new clients one of the first things I ask is how often do you meet with your CPA? And you'd be surprised or aghast at the number of times they say, “When I sign my tax returns.” And to me it's just unbelievable. It needs to be an ongoing process. I tell people all the time. When you're going to buy a new vehicle for your business, I don't care if it's a Ford, Chevy, or a Maserati, my job is to tell you what the options are for that vehicle. Should you buy it, should you lease it, should the company buy it, should the company lease it, should you buy it or lease it, and then turn around and lease it back to the company. All those types of things need to be done early. I find out many times from clients that don't communicate well after the fact that something has happened and I can't help them with good tax saving ideas.
Number one is meeting on a regular basis. Also, many business owners are afraid to call their CPA because they're afraid to get that bill in the mail for that 11-minute phone call and get a bill for $50. They're afraid. One of the things I tell my clients all the time is you will never get a bill from me if you only take five, six, or eight minutes of my time. Most of the CPAs with that great experience can answer the vast majority of all the questions right off the top of our head, most of my phone calls after the typical pleasantries about the weather, and the family, and the fact that Browns lost their opener, and we're not going to go down that road Jeff. It's two or three minutes to get into the actual conversation.
Jeff: It just seems to me in this day and age it is more important than ever to find someone - I don't care whether you're a CPA or the local dry cleaner, Scott - someone who can really appreciate the value of customer service. It seems so basic. And in one time it seemed that it was pretty much inherent in our regular, everyday relationships that we had with the Maytag repairman, the milkman, the postman. Years ago you have these visions of what it was like back in the 50's, the old black and white images of how things used to be when businesses seemed to care a lot about you. But it's interesting, as I was reading some blogs, along with the Sleeter Group survey over the last several days in preparing for our talk today. It was interesting what I was finding about, and this goes back to what you're talking about, about how CPAs tend to duck in or show up during that once or two time per year period. They go in for a signature, they go in, and that's it to send their bill in. Sometimes they have their clients duped into thinking that they're doing a good job. "I'm not hearing from them or I'm not seeing them so everything must be okay." What you say is really, really refreshing. And what it does too, it takes that mistaken belief that many business owners may have that their CPA is a necessary evil when in fact there's no evil here at all. There's no adversarial relationship or reason to believe that there needs to be some kind of adversarial or relationship where it's a necessary evil and they're going to take your money. In fact, your industry has grown such that it provides such a tremendous wealth of services for the well-being of the business and the business owner because there are other things that you do also to ... I know that you can provide to the business owners personally as far as advising on retirement and other things like that. And that's for another show. But what I would like to ask you then as part and parcel to this portion of our conversation, most of us I think would like to work with the same people forever if we could. We love to have these long-term relationships whether or not we play a game of golf with someone or not, or go out to coffee with them, it all depends on just how you are individually. But how do we really know when our accountants are doing a good job for us and our business? I just told you, I gave you a loose example of that idea that, "I haven't heard from the guy or the girl for a while so I'm assuming everything is fine." But how do we really know when you are doing a good job for us and our business?
Scott: I think that is a great question, Jeff, and you almost have, it begs, how do you really know? And one of the things is go out and interview another CPA. You may be thrilled with your existing professional, go out and interview another one and take that guy's product, take the tax return he did for you last year and say, “I'm thinking about changing CPA's. I'm not unhappy. Tell me what you would do differently,” and then let's find out, many times we find and even in the medical profession, many times you get a patient that presents the same symptoms but you get two different answers. Which is amazing to me. I'm never offended. If you want to take my product down and show it to another CPA, go right ahead, because what we do is terrific, quality ,business advising, and good solid tax work. And then find out what he would differently. And when I do this, when people bring me in and I try to win a new client and I review their prior tax return, which I always requested that they bring at the first meeting because I want to see the direction they're coming from. Because I go over that with them line by line. And one of the things that clients say to me all the time is, "Oh my god, this literally is the first time a CPA has ever gone through my tax return line by line with me. Most of the time it is, ‘Sign here. Have a nice day."
If you want to take my product down and show it to another CPA, go right ahead, because what we do is terrific, quality ,business advising, and good solid tax work.
Jeff: Yeah, and as you can see, the difference that that can make and being able to share that time in close proximity, sitting down, going through line by line, that shows a real caring relationship there, and one that is really meant for the long-term I think. It certainly breeds a long-term trust. You need to be able to trust anyone that you do business with, because your business like I said, it is in fact your livelihood, and in many cases your children's livelihood particularly if you want to leave a legacy and you want to leave something lasting behind for them. I may be asking you to be somewhat redundant here, Scott, but is there anything that our CPAs really can do for us as advisors, or in terms of providing value added services. We may have touched on a couple of these things that maybe most business owners are just not aware of that their CPAs could probably do for them if only they'd ask. If you can you could feel free to cite examples at your own firm, maybe some things that you do differently that other firms don't.
Scott: Let's set aside the standard services of accounting, tax, payroll, bookkeeping, let's set those things aside right now. One of the things that my industry has been getting involved with more lately is the investment advisory service where we're picking up additional licensure and education so that we can advise clients. And we do that all the time. We have three CNPs on our firm. And one of the things they do many times is a reality check. You may be thrilled with your insurance guy, you may be thrilled with your investment advisor. But many times there is a product they're looking to sell and you just want an outside opinion. Do I really need $35 million worth of life insurance, those types of questions. And we can then educate you because we're paid for our opinion not to sell the product. From the investment standpoint absolutely a great place to go. Also, and you brought this up earlier, Jeff, is the succession planner, does my client have young kids, are they in college, are they getting out of college, are they going to be taking over the business? Let's form a plan to begin to get them educated from the bottom up. Sweeping a broom in the warehouse before they start signing checks and order people about to get them so they can take over that business. And one of the things that CPAs do very well is work on and provide a written succession plan on how to do that.
So we want to talk to our clients. I want to know what they're going through, what's going on in their lives so we can say, "Do you know that we can help you with this?" And I always hate to sound like a commercial because it sounds like, "Did you know I can sell you this,” which is not always the case. It's more along the lines of educate and inform and to help these clients find the way to their preferred outcome.
Jeff: When you think of it too, not only the education being important but if you have essentially a go-to resource, one place where you can go and you can have all of these services provided for you because you've got a number of different people all under the same roof who know what you're up against or what your challenges are with regard to your business or know where your business stands. They understand what your retirement goals are, they understand what your family's financial goals are, all of these things can be tied together in such a way that you have a well-coordinated effort. It seems to me, Scott, that would make dealing with a company, a CPA that provides all those services, very, very appealing.
Scott: It is, it's very convenient, and I hate to use things like one-stop shop or things along those lines. I like to describe it more as a wraparound service. Even if you don't want that service you can use that service as a reference or as an advisor for somebody else providing that service just to make sure that they're providing the best service available at a reasonable price. We get asked all the time to quote a payroll or to quote a service, when in fact I know that individual is out shopping. That's okay, we all do that. Just keep the relationship with your existing professional fresh and relevant.
Jeff: Very, very good points. Scott, we are just about out of time. We've had a very good conversation today and I really do appreciate you for everything that you've contributed. I was wondering if you might leave us though before we go with some key takeaways from our conversation today. If our listeners walk away from this conversation with just maybe three things that they need to remember today, whether we've talked about them or not, if you could share just a few things you think people need to know.
Scott: Number one on my list, Jeff, and I've said this a couple of times already this afternoon is communication. Does your CPA communicate with you? Not talk down to you, not throw facts at you, does he communicate? Just like our mothers said when we were seven years old, there's a difference between hearing and listening: is he listening? He may be hearing what you're saying but is he listening to what you're saying? And can he shift gears or provide additional services to meet those needs? And then lastly should be flexible, to be available, to return my phone calls, all those types of things so that I know that the individual questions or the individual concerns that I have are getting met in a timely manner.
Let's form a plan to begin to get them educated from the bottom up.
Jeff: And no doubt we could extend that list of probably 10 things Scott but we don't have a lot of time to do that now. That having been said there are those people who may have questions for you, they like what they've heard here, and they'd like to get in touch with you to find out more about how you can help them in their business, how can they reach you?
Scott: The best way to go about that Jeff is obviously the email. And I can be reached at firstname.lastname@example.org. And you'll also find us on the web with our internet site as well.
Jeff: Very, very good. That's Scott Shields there. Scott, thank you so much. We are out of time. We're going to have to leave it there and we're looking forward already to having you back on in the future. I hope that you'll agree to that.
Scott: Absolutely, Jeff, I look forward to coming back.
Jeff: Scott Shield, CPA and founder of Shields Blice and Company.
Deal Talk has been presented by Morgan & Westfield, the nationwide leader in business sales and appraisals. If you're thinking about selling a business or buying one call Morgan & Westfield at 888-693-7834 or visit morganandwestfield.com. And for more valuable information and insight from our growing list of small business experts make sure to join us again here on Deal Talk. I'm Jeff Allen, thanks again for listening. We'll talk again soon.