| Unlike executives with publicly-traded | | | | observed that some small business owners are |
| companies who are accountable to its | | | | in a perpetual state of crisis management |
| shareholders, small business owners don't | | | | since they are putting out one brush fire |
| have the luxury of resigning at the first | | | | after another."There's no plan and they are |
| signs of trouble. Instead they have to come | | | | pulled in all directions," said St. John. |
| to grips with whatever problems have hit | | | | "Smaller businesses don't have five people to |
| their business and hopefully seek help from a | | | | delegate to so it kind of implodes and it |
| professional to repair the damage before it's | | | | really becomes quite depressing. They lose |
| too late.Many business owners realize that | | | | their ability to manage and are dealing with |
| they're wearing too many hats so they decide | | | | one crisis after another."Another clue that |
| to hire another employee. That suggestion | | | | the business is in trouble, St. John says, is |
| invariably comes from their spouse who | | | | when the owner no longer has time to interact |
| reminds them that they haven't been home for | | | | with the family."If their life is their |
| dinner in many weeks and they haven't spent | | | | business they will typically end up in |
| enough time with their kids."Spouses have a | | | | divorce," he said. "They've adopted another |
| way of bringing you back down to earth and | | | | family and it's running their life. They |
| telling you that your life is out of | | | | think workaholic is a good word instead of a |
| balance," said Gene Polley, a senior business | | | | bad word and they end up being a specialist |
| advisor in Fiducial's San Diego office. "The | | | | in crisis management instead of being a |
| first warning sign is that you're working in | | | | business manager."Depressed business owners |
| the business and not on the business so you | | | | know the solution to their problems but |
| need to get another employee."Owners are | | | | instead of laying out a course of action they |
| constantly putting out one fire after another | | | | let it go on."It becomes a Catch-22 cycle and |
| so it seems like they're getting a lifeline | | | | they don't know how to break out," he said. |
| when they bring an employee on board to help | | | | "They need someone to throw them a lifeline. |
| with the increasing demands."It could be at | | | | They want to turn it over to |
| any phase of the business where things get | | | | somebody."Unfortunately, not all clients seek |
| out of kilter," Polley said. "It could be | | | | sound counsel from their advisors and so they |
| production, sales, marketing or | | | | enter into some sort of arrangement that |
| collections-you name it."Spinning out of | | | | extracts a painful price. Such was the case |
| controlA crucial moment for the business is | | | | when one of St. John's clients refinanced |
| when it gets to the point where the owner can | | | | their home to help fund their cleaning |
| no longer do all of the accounting in-house | | | | business without consulting with him. They |
| with whoever had been doing it up until then. | | | | fell victims to a scam, were afraid to ask |
| That's when they recognize that things are | | | | for an attorney and ultimately lost both |
| spinning out of control."It's very difficult | | | | their home and their business property."By |
| to figure out when you need to hire somebody | | | | the time they knew about it [the fine print] |
| else in your business," he said. "They | | | | the deal was too well-established," he said. |
| always think the first employee is going to | | | | "They thought they had an opportunity but by |
| fix all the problems. They think that | | | | the time we had found out about it, it was a |
| suddenly their life gets easier until they | | | | done deal."While advisors can analyze |
| discover that this person can't wear as many | | | | financial data and explain its relevance to |
| hats and things are going to start slipping | | | | clients, business owners can't benefit from |
| through the cracks."Polley cited the example | | | | the advice if they don't let give their |
| of a computer reseller who tried to use the | | | | advisors the complete picture."We can only |
| in-house receptionist in a variety of job | | | | make our recommendations from the information |
| roles until she became the most important | | | | clients provide to us," St. John said. "If |
| person in the business. She was doing the | | | | you're not disclosing anything then we're |
| books, had signature authority, sent out the | | | | going to fall short to be able to provide you |
| checks and balanced the checking account. | | | | good direction. If our data is flawed our |
| What anyone failed to notice, Polley says, is | | | | recommendations are flawed."Don't ignore |
| that she had a criminal record in the | | | | vital informationWhat becomes frustrating for |
| background since she had discharged a firearm | | | | business counselors is having clients ignore |
| in the commission of a grand felony auto. | | | | vital information that's sent their way."Most |
| The computer reseller paid for not doing his | | | | of our clients don't even read the financial |
| due diligence to the tune of $170,000 the | | | | statements we provide for them" said Mark |
| receptionist had embezzled from the | | | | Gabriel who handles client acquisition and |
| company."That was the point he realized he | | | | consulting duties for this father, Ken, a |
| needed to expand his accounting assistance," | | | | Fiducial franchisee in St. Claire Shores, MI. |
| Polley said. "But it was a $170K wake up. I | | | | Gabriel is well aware of the tell-tale signs |
| came on board to help prosecute and do | | | | when a business owner is in way over their |
| forensic accounting since she had walked off | | | | head."When they start getting a lot of |
| with all the accounting records. We had to | | | | government notices by then the horse is out |
| reconstruct a whole year worth of | | | | of the barn," he said. Other panic attacks |
| records."One of Polley's new clients owns an | | | | occur when "they're completely lost, they |
| airport shuttle business. They initially | | | | can't make ends meet, they're running out of |
| brought him in to do their bookkeeping and | | | | money and people are pressuring them from all |
| taxes but it wasn't long before employee | | | | sides."Hiring employees for the first time is |
| theft was exposed and they suspended giving | | | | another area where business owners go off the |
| out financial information to him until they | | | | rails, Gabriel says."People hire employees |
| could replace the entire office staff."They | | | | without having clearly defined duties for |
| couldn't understand why they were losing | | | | them," he said. "They don't know how to |
| money when they were busy all the time," he | | | | train them and they don't know how to pay |
| said. "I showed them a couple of records | | | | them." In his experience, great |
| where drivers were putting in $100 of gas and | | | | entrepreneurs "are not good at delegating or |
| driving 30 miles a day. It was obvious | | | | managing employees."Before enlisting the help |
| somebody was turning in gas receipts that had | | | | of a hands-on advisor, Gabriel noted that |
| nothing to do with the company | | | | some business owners decide to hire a |
| vehicles."Business owners don't always know | | | | business or corporate consultant that charges |
| when to ask for help because it's usually a | | | | from $3,000 to $20,000 and make |
| friend, spouse or acquaintance that suggests | | | | recommendations that end up hurting the |
| that they seek assistance."Somebody used to | | | | business they were intended to help."I have |
| doing it himself doesn't immediately seek | | | | not met one business owner that had a good |
| help," Polley said. "They've been successful | | | | experience with one of these consultants," he |
| doing it on their own so they try to resolve | | | | said. "I've never seen one yet that's worked |
| things themselves."After the alarm sounds and | | | | out right."Rather, Gabriel says the |
| Polley's called in, the first place he looks | | | | professionals owners should enlist are |
| is the company's financial records. The red | | | | accountants, their bankers and other business |
| flags are raised when tax penalties have not | | | | associates.A long-time restaurant owner |
| been paid, were paid late or someone comes in | | | | called Gabriel in to help inject some new |
| and does an audit because something wasn't | | | | life into the business which was in need of |
| done on a timely basis.Other signals that | | | | refurbishing. He soon found out that they |
| things are out of control are when April 15 | | | | had been using the same menus for quite a |
| rolls around and the business has a huge tax | | | | while and that the prices hadn't been raised |
| liability or if the operation shows a profit | | | | in several years so he told them they that |
| but there's no money to pay bills.Paying the | | | | had to change. The owners were leery of |
| price for bad decisionsJerry Shriner, a | | | | doing that thinking they would drive |
| Fiducial franchisee in Pickerington, OH, | | | | customers away while the waitresses feared |
| meets each month with his clients and goes | | | | they would lose tips.The owners eventually |
| over their profit and loss (P&L) statements | | | | decided to raise prices 20% but the business |
| from top to bottom so their inventory makes | | | | increased because of the perceived value of |
| sense, expenses are not out of line and | | | | the food and the waitresses ended up getting |
| working cash is monitored."We can't solve all | | | | more tips since the tickets were higher.The |
| the problems but this certainly helps," said | | | | need for a good advisorThere's no denying |
| Shriner who's been offering counseling advice | | | | that most small business owners are very good |
| and tax planning to many long-time clients | | | | at what they do. But when it comes to |
| for 20 to 30 years.He's heard just about | | | | understanding why sales are up or are down |
| every plea imaginable from business owners | | | | they do not understand all the factors |
| but he dreads hearing the words "I've made a | | | | involved."That's when they need an |
| bad decision" the most. That's because they | | | | accountant," said Roger Bierman, a franchise |
| have got themselves involved in some sort of | | | | relations manager for Fiducial for the |
| egregious transaction without consulting | | | | Alaska, Northeast, Northcentral and Northwest |
| their trusted advisor and have paid the | | | | regions. "They may have a bill that covers |
| price.One of those who learned the hard way | | | | three months and is expensed all under one |
| was a restaurateur that decided to lease some | | | | month. A good system would be expensed |
| equipment, a new security system, for his | | | | evenly over those three months."Bierman says |
| family style restaurant. The client told | | | | business owners need to have industry |
| Shriner after the fact that it seemed like a | | | | standards to go by so they will be able to |
| good deal at the time. But as things turned | | | | fully grasp what they're looking at when |
| out, he was charged a whopping 33% interest | | | | given a detailed monthly report on their |
| for this equipment which put quite a dent in | | | | operation. This enables them to look at |
| the bottom line.Having monthly reports at | | | | their figures and make comparisons based on |
| hand is always a plus but if owners don't | | | | data for a full year to date."If you have |
| look at them on a regular basis they could | | | | last year's figures to go by it gives you |
| suffer the consequences by making a bad | | | | something to go on," he said.Having been in |
| decision. To prevent that from happening, | | | | the industry for 35 years, Bierman has seen |
| Shriner says it's essential that | | | | too many entrepreneurs place too little |
| entrepreneurs enlist the help of a | | | | importance on having a good accountant |
| professional "that wants to work close with | | | | because they think an accountant is involved |
| them."A client that came to him in March | | | | only with taxes."It's more than doing tax |
| owned two corporations and wanted him to take | | | | work, you need a partner that is willing to |
| care of his accounting. When Shriner | | | | take a close look at your business," he said. |
| examined the owner's data they saw that his | | | | "They want to pay the least amount of taxes |
| profit was $600,000 which seemed to be too | | | | required by law but if they don't have an |
| high. He suggested that the client file an | | | | accountant that's involved in the business |
| extension which paid huge dividends for him | | | | then they'll never be able to do |
| since the income tax was reviewed and | | | | that."Business owners need a good advisor to |
| recommendations made that saved the client | | | | help them, someone who understands their |
| $82,000 in federal taxes.Shriner noted that | | | | business. Without one, getting into a |
| the CPA who originally worked for the client | | | | start-up enterprise is a dicey |
| did not spend the time necessary to keep | | | | situation.Bierman cautions would-be |
| track of his borrowing because he had heavy | | | | entrepreneurs that before they make the |
| credit card debt."They did not take the time | | | | investment in any business, they need to |
| to review things on an ongoing basis," he | | | | realize that it's a 24x7 commitment and they |
| said. "The client and CPA did not meet. | | | | need to have the right staff ready to go. If |
| They just dropped the statement off and some | | | | they get themselves in trouble it's usually |
| clerical person put it together. Once they | | | | because they haven't exercised due |
| put it together it was wrong but it balanced. | | | | diligence.Back in his days as a Texaco |
| These firms are more interested in balancing | | | | service station owner, Bierman made sure he |
| than in getting it right."That's not the case | | | | knew every facet of the business."I taught |
| with Shriner."We take that personal attention | | | | myself how to do a tune-up because I never |
| and we get involved," he said. "We work a | | | | wanted anyone to say 'hey Roger you need me |
| lot harder for our money because we do a lot | | | | to do this,' " he said. "Whatever the |
| more for it."Losing the ability to manageOver | | | | business is, if you're the owner you better |
| the years Rocky St. John, a Fiducial | | | | know how to get it done. |
| franchisee in Colorado Springs, CO, has | | | | |