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