At age 17, the probability of my becoming a CPA and creating a successful public accounting practice was similar to the probability of David slaying Goliath. My goal was to graduate from high school and work for one of the local manufacturing companies, such as Firestone or Bethlehem Steel, earning decent money as a union worker.
My parents had other ideas since neither of them had college educations and always regretted not taking the educational opportunities offered to them by the U.S. Navy. They were persistent in convincing my brother and me to at least try college. This was my first important piece of career advice.
It wasn’t until later in life that I realized the monumental financial sacrifice and commitment my parents made so we could attend college. Without this opportunity, who knows what path my career would have taken? A few years later, all those manufacturing plants in our area closed.
I initially attended Kutztown University with the goal of becoming a math teacher. During my initial college semester, however, one of my assignments was to observe a high school class, and I realized I wasn’t suited to guiding students (especially ones like me). I decided to try accounting instead; as Kutztown did not have a college of business at the time, I transferred to the local Penn State Berks Campus.
My second major piece of advice came while working in a small country grocery store in my hometown the summer after my sophomore year at Penn State. I had worked there since I was 13, and the owner, Butch Boyer, had become my mentor. He trained me in customer service and taught me that while profits were important, one must never lose sight of doing something simply because it is the right thing to do. That summer, Butch suggested I contact his accountant for part-time summer employment so I could experience public accounting before I continued pursuing my accounting degree. Even though I was one of his key employees, he was willing to sacrifice his needs to better my future. I contacted his accountant, worked three days a week, and after the summer was offered a job upon graduation and the opportunity to work there for the next two years during school.
The firm where I started only comprised three partners and four staff, but they applied for Penn State’s internship program to help me obtain college credit, and I began my full-time public accounting career in December 1972. After six years, I became a partner, and four years later, in September 1982, I decided to venture out on my own.
With only a handful of small business and 1040 clients, no staff, and twin 3-year-old sons at home, I started my own firm in the spare exam room of a gracious friend and client, Dr. Gregory Lignelli. He told me to work hard, charge a fair price, and be honest, and I would have more work than I could imagine. Once again, I was the recipient of very sound advice. My wife Judy provided the faith and confidence that allowed me to pursue my professional goals. Without the love and support of Judy and our children, I would never have achieved this level of success.
The downside of trying to build a firm on your own is the time commitment and attending client parties, community events, fundraisers, chamber of commerce events, and more. I attended every function possible, and in the first 20 years it was rare to have a year with less than a 25% growth rate. As much as I enjoyed this, I was not home very often, and I caution younger professionals to make time for your family.
Growing a Practice through Personal Engagement
In 1973, I attended my first tax seminar in Philadelphia, led by Sidney Kess. Mr. Kess shared a story about his friend who owned a small firm but was able to retain large-firm clients. His friend said that during client meetings, after reviewing the financial statements and tax returns, he would present new ideas. Sometimes the clients would implement or have him investigate some, all, or none of these ideas. The important factor was the client knew he was thinking about them, which demonstrated his concerns and dedication to them, solidifying their relationship for years to come.
Mr. Kess’s advice became the most important aspect of my firm’s success. The term now used is management advisory services (MAS), but it traces back to the concept of building relationships. When meeting with prospective clients, I would tell them that technically we were as proficient as any other firm, but no one would care about their account as much as we would. Prior to the sale of my firm, I had three clients with annual fees exceeding $100,000 per year and a total fee volume of $850,000. The staff consisted of myself; Cindy Smith, another dedicated, experienced CPA; and a part-time support person.
I have been working with two of these clients over 35 years and multiple generations. With respect to my largest client, I began working with the second generation of shareholders and am now working with the fourth generation. Each generation has expanded and grown the organization in size and profits. As a professional, this has been an incredible experience, and during the next five years I will be grooming my successor to continue this path.
All of my clients began as much smaller organizations with significantly lower annual fees. Creative thinking was an integral part of their growth and success, which has also directly correlated to the success of my practice. As practitioners, we all understand billable hours, realization, and profitability; however, don’t let these concepts prevent you from investing additional brainstorming time to generate new ideas for your clients. The benefits and dividends will pay off in profits, growth, client loyalty, and additional referrals. As a professional, there is no greater recognition of your abilities and success than the reference of an existing client to a friend or business colleague to procure your professional services. My experience has been that clients do not leave firms because of fees, but because they feel we have forgotten them. CPAs are far more valuable to our clients today in the area of management advisory services because of our knowledge and expertise. Some of this expertise is obtained by trial and error, some by observing other successful accountants and professionals, some by continuing education, and some simply because we have been doing this for so many years that we have learned how to create MASs.
The financial statements and tax returns we prepare are mandatory and may be deemed necessary evils by most clients. Rather than that being the end of the engagement, however, we should use our expertise to become a revenue generator for our clients and develop tailor-made programs through creative ideas and planning regarding taxes, profitability, cash flow, financing, succession planning, and estate planning. I am a firm believer that CPAs can always come up with a new, beneficial idea for even the smallest client. Through this process, you can increase fees and build loyalty with your existing clientele, which is far easier than finding a new client and developing a long-term and profitable relationship with them.
A few years ago, I made the decision to develop a succession plan for the benefit of my family, staff, and clients. After two years of research and interviewing with three firms, in January 2017 I sold my practice to Herbein + Company, Inc., a large regional firm based in Reading, Pa. The primary reason the partners were interested in my firm was the percentage of large commercial accounts combined with the MAS practice we had developed over the years. This is another important reason to develop a strong MAS practice segment, as it adds value and is more attractive to potential successor firms.
Naturally, the financial aspects of the sale were important, but another essential aspect was the integrity of the firm that would acquire mine. After spending 35 years building, nurturing, and developing your own firm, it is far more stressful to part with than selling a few shares of corporate stock.
Herbein + Company was founded by Carl D. Herbein, who I have known for the past 45 years. Carl started with a few staff in the early 1970s, and today the firm has eight offices throughout Pennsylvania and one in New Jersey, with a total staff of approximately 200. The integrity of Herbein + Company, along with its personality, reliability and dedication to the community, showed it was exactly the type of firm I wanted to handle the future of my clients. It has been over 1½ years since the merger and not only I have found this to be the perfect fit for my firm’s succession plan, but now we have far more resources and experts to utilize and provide more MASs.
The demand for creativity and personalized strategizing for clients in our profession is at an all-time high, which also correlates to enhanced profits. Today’s young CPAs have an enormous opportunity to build a quality practice or enrich their client book with their current firm.
My suggestion to young professionals is to take the time to listen to the advice from others and use this knowledge and experience to explore the opportunities available to you. Think outside the box and be proactive; the results will be astonishing. I was very fortunate to have the help of others along the way to propel my career. The advice and opportunities are out there; you only need to recognize them and use them to energize your career.