Sunbelt Business AdvisorsBrian Mazar
Top 10 Signs You Work in Public Accounting
10. You lecture the neighborhood kids selling lemonade on ways to improve their processes.
9. You get all excited it's Saturday so you can wear casual clothes to work.
8. You refer to the tomatoes in your garden as deliverables.
7. You find you really need PowerPoint to explain what you do for living.
6. You normally eat out of vending machines and at the most expensive restaurant in town within the same week.
5. You wear gray to work instead of navy blue to make a bold fashion statement.
4. You know the people at the airport and hotel better than your next door neighbors.
3. Ask your friends to "think out of box" when making Friday night plans.
2. You think Einstein would have been more effective had he put his ideas into a matrix.
1. You think a "half-day" means leaving at 5 o'clock.
Top 10 Signs You Work in Public Accounting
Agenda
3 hour tour…
• Business Ownership
• Effective Leadership
• Succession Planning
• Business Valuations
Business Ownership
Do you have what it takes?
A 10 Point Checklist
Business Ownership Checklist
a. I do things on my own. Nobody has to tell me what to do.
b. If someone gets me started, I follow through well enough.
c. Easy does it. I don’t put myself out until I have to.
1. Are you a self-starter?
2. How do you feel about other people?
a. I like people and can get along with just about anyone.
b. I have plenty of friends; I don’t need anyone else.
c. Most people irritate me.
Business Ownership Checklist
What's an extroverted accountant?
One who looks at your shoes while he is talking to you, instead of his own.
a. I can get most people to go along when I initiate something.
b. I can give the orders if someone tells me what we should do.
c. I let someone else get things moving, then I take part if I feel like it.
Business Ownership Checklist
3. Can you lead others?
4. Can you take responsibility?
a. I like to take charge of things and see them through.
b. I’ll take over if I have to, but would rather let someone else be responsible.
c. There’s always some eager beaver around wanting to show how smart he is. I say let him.
Business Ownership Checklist
What is an auditor?
Someone who arrives after the battle and bayonets the wounded.
Business Ownership Checklist
5. How good an organizer are you?
a. I like to have a plan before I start. I’m usually the organizer when the group wants to do something.
b. I’m fine unless things get too confusing; then I quit.
c. Something usually occurs that presents too many problems. So I just take things as they come.
6. How good a worker are you?
a. I can stay motivated as long as I need to. I don’t mind working hard for something I want.
b. I’ll work hard for a while, but when I’ve had enough, that’s it.
c. Easy does it. I don’t put myself out until I have to.
Business Ownership Checklist
What is the definition of a good tax accountant?
Someone who has a loophole named after him.
Business Ownership Checklist
a. I can make up my mind in a hurry if I have to. It usually turns out fine, too.
b. If I have to make up my mind quickly, I later think that I should have decided the other way.
c. I don’t like to be the one to decide things.
7. Can you make decisions?
8. Can people trust what you have to
say? a. You bet they can. I don’t say things that I don’t mean.
b. I try to be on the level most of the time, but sometimes I just say what is easiest.
c. Why bother with the truth if the other person doesn’t know the difference?
Business Ownership Checklist
Newton's Laws of Accounting
1. For every accountant, there is
an equal and opposite accountant.
2. Both of them are wrong.
Business Ownership Checklist
9. Can you stick with it?
a. If I make up my mind to do something, I don’t let anything get in the way.
b. I usually finish what I start – if it goes well.
c. If things don’t go right immediately, I quit. Why beat my brains out?
10. How good is your health?
a. I never run down!
b. I have enough energy for most of the things I want to do.
c. I run out of energy sooner than most of my friends.
Business Ownership Checklist
There are just three types of accountants:
those who can count and those who can't.
Tally Your Score
• JUST a pic
• Tally + calc1 + 1 = 2
2 + 2 = 4
3 + 3 = ?
Effective Leadership
What is it?How to be it!
Definition
Principles
Traits
Knowledge & Communication
Effective vs. Ineffective
Effective Leadership
•Challenge Status Quo
•Visionary
•Ethics and Integrity
What is Leadership?
Art of influencing and directing
Obtaining confidence and respect
Earning loyal cooperation to achieve goals
What is Self-Leadership?
Bringing out the best
Enjoying life
Learning self-discipline
Improving personal performance
“Managers who want to lead others effectively must first lead the one in the mirror… They need to learn self-leadership.”
─ Charles Manz
Effective Leadership Thoughts
Whose responsibility is it to keep a leader’s passion up?
The leader’s… YOURS!
Who is your toughest leadership challenge?YOURSELF!
Who is the person who has the most influence on you?
It’s not your spouse… it’s YOU!If your business is to survive, you must learn to lead it, not just manage it.
Why Do You Need Leadership?
The GE Analogy
“People in leadership have so much energy and passion that they engage and impassion the people around them.”
― Jack Welch
Self-Assessment
1. Take responsibility for your actions and the actions of other people?
2. Know yourself and seek self-improvement?
3. Develop your people?
4. Set the example?
5. Ensure that a job is understood, then supervise it and carry it through to completion?
Ask yourself how effective you are…
Self-Assessment
6. Know your subordinates and look after their welfare?
7. Make certain that everyone is kept well-informed.
8. Set goals that are attainable?
9. Make sound and timely decisions?
10.Know your job?
11. Instill trust and teamwork?…then build on your strengths and neutralize your
weaknesses
Traits of an Effective Leader
Do you possess these traits?
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Leadership TraitsCompulsive
• Poised
Conscientious
• Self-Disciplined
Courage
• Moral & Physical
Decisiveness
• Prompt
Dependability
• Reliability
Dominance
• Assertive
Emotional Stability
• Well-Adjusted
Enthusiasm
• Energetic
Initiative
• Take Lead
Integrity
• Moral Character
Self-Assurance
• Self-Confidence
Social Boldness
• Risk-Taker
Tough-Mindedness
• Poised
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Key Personality Traits
Charisma
• Strong Presence
Empathy
• Understanding
High Energy
• Alert & Focused
Intuitiveness
• Trust “Gut”
Maturity
• Empowerment
Team Oriented
• Spirit
Actual Leadership• Know your job.
• Know yourself.
• Know your employees.
• Keep your employees informed.
• Set a good example.
• Assign tasks the right way.
• Train your people to work as a team.
• Be a good decision maker.
• Learn to delegate.
• Do what you do well.
• Step to the front of the line.
Effective vs. Ineffective Leader
EFFECTIVE
• Guides People• Inspires Enthusiasm• Says “Let’s Go”• Makes Work
Interesting• Relies Upon Co-
Operation• Says “We” • Encourages Creativity• Asks Questions• Delegates
INEFFECTIVE
• Drives People• Instills Fear• Says “Do”• Makes Work
Drudgery• Relies upon
Authority• Says “I,” “I,” “I”• Dictates Tasks• Gives Orders• Controls
Topic Thoughts
• What traits are you proud to say describe you?
• Was there a trait you would not consider desirable?
• What trait do you want to make more descriptive of you?
BREAK!!!
Succession Planning
The concept of succession planning is an important part of a company’s strategic planning.
Applications of Succession Planning
Is it only in family owned businesses?
Is it only in large firms?
Is it beneficial for every business?
Elements of Succession Planning
What is involved?
• Preparing for the future
• Every key position is a candidate
• Every key person is a candidate
Key Issues
• What is the long-term direction?
• What are the key areas?
• Who are the key people?
• How does it fit into your strategy?
• What are the career paths of the employees?
• Are you proactive?
Strategies for Succession Planning
• Move people along quickly
• Expose to other disciplines
• Be sensitive to culture
• Be aware of individual’s capabilities
• Be mindful of the corporate structure
What strategies should be considered?
Requirements for Succession Planning
• Well-trained people
• Good candidate pool
• Flow of people through departments
• Matching needs with resources
• Goals for key personnel
• Defined career paths
• Input of ideas
Pitfalls of Succession Planning
• Lack of formal written plan
• Rigid inflexible plan
• Too long of a wait time
• Superficial approach
• Unqualified people
Succession planning can have a few pitfalls if you’re not careful.
Advantages of Succession Planning
Succession planning can have more advantages if you work it properly.
• Involved capable people
• Improving the company
• Employee Involvement
• Good reputation
Succession Planning in Action
How does succession planning fit into
strategic planning?
• Developing key people
• Addressing needs and current
capabilities
• Creating an objective
The Timeline
How long should succession planning take?It’s NEVER finished.
Over what time should you plan?It should be years IN ADVANCE.
What will succession planning bring?PEACE OF MIND for the future.
To properly train a successor, the firm needs sufficient time.
Outline for Succession Planning
• Where are you in the planning process?
• What has changed inside the company?
• Where do you want the plan to take you?
• How will you get to the future?
Where are you in the planning process?
• What positions are you planning for?
• What key people have you designed for succeeding to higher positions?
• What are their experience, education and training schedules?
• What has changed since your last review?
• What other candidates can you identify?
What has changed inside the company?
• How have the current candidates performed to date?
• What jobs have changed and how?
• What new issues emerged that may lead to a change in the plan?
What do you want the plan to accomplish?
• What will you look like in 3 to 5 years?
• What will your key people be doing then?
• What openings will you need to fill?
• What new disciplines will the company require?
• How does your succession plan fit with your expansion?
It should be clearly defined where you want your succession plan to take you, especially in light of your current strategic plan.
How will you get to the future?
• Who will be involved?
• When will you start the plan?
• How will you judge progress?
• Is each candidate right?
• What are your control measurements?
• What is your alternative plan?
You must have a clear understanding of where you are today and what you want the company to look like in the future.
BREAK!!!
Business Valuations
How much is a business really
worth?
What method is best for each type
of company?
Valuation Considerations
Single most important decision is determining the value
Publicly-held corporation
Privately-held company
Team Approach
• Internal– CEO/Owner– Majority
shareholder(s)
• External– CPA– Business
Broker/Advisor– Legal Counsel– Investment
Advisor
A good team is composed of strong internal and
external members.
External members are powerful intermediaries.
Why Use an Intermediary?
• Lack of in-house expertise
• Less room for error
• Learning curve to steep for a one time transaction
• Too important not to
Roles of an Intermadiary
• Match maker
• Perform Business Valuation
• Confidentially screen prospects
• Assist in structuring deal
• Act as buffer during negotiations
• Mediate disputes over price and terms
What is a Business Valuation?
– Formalized report
– Opinion regarding estimated value
– At a given point in time
Valuation Guidelines
– Nature of business and history
– Economic outlook (General and Industry)
– Book value and financial condition of business
– Earnings capacity
– Dividend capacity
– Goodwill or other intangible value
– Market price of comparable companies
Reasons for Valuing a Business
– Selling or Buying a business
– Mergers
– Obtaining financing
– Dissolution of shares or partners
– Buy-sell Agreements
– Retirement of owner
– 3 D’s (death, divorce or disability)
– Litigation
– Estate Planning
– Gift, Estate or Inheritance Taxes
Valuation ProcessData Gathering
• Financial Statements – most recent 3-5 years
history
• Federal Income Tax Returns – most recent 3-5 years
• Underlying support/ documentation for selected information
• Prospective financial information
• Leases or other legal agreements/contracts
• Economic and industry information
• Market data
Valuation Process
• Description• History• Operations • Customers• Employees• Facilities• Ownership
Company Background
Valuation Process
Financial Analysis
• Historical trend including ratios
• Determine add backs to normalize earnings
The taxable income reported on a small business tax return
is rarely an indicator of the true earnings realized by the
business owner.
Valuation Process
Actual Earnings
– Earnings before interest, taxes depreciation and amortization (EBITDA)
– Extraordinary and non-recurring items
– Effect of LIFO inventory valuation
Valuation Process
Seller’s Discretionary Cash Flow
– Actual Earnings– Owner’s Compensation– Owner’s Benefits
• Vehicle costs• Health, life and car
insurance• Charitable
contributions• T & E (personal)• Non-business
maintenance costs• Rent subsidies, etc.
Valuation Approaches• Income
– Capitalization of Earnings/Cash Flow
– Discount Future Earnings/Cash Flow
• Market– Earnings Multiples– Price/Earnings– Price/Revenues– Price/Gross Cash Flows– Price/Net Asset Value
• Asset– Net Book Value (adjusted)– Appraisal of Tangible
Assets– Intended use of Tangible
Assets– Identification of Intangible
Assets
Valuation Methods
– Based on 3, 5 or 10 year projection of revenues, earnings and cash flow
– Discounted to present value based on appropriate discount rate (cost of capital, risk adjusted)
Discounted Cash Flow
Valuation Methods
– Comparable transactions in the industry
– Rule of Thumbs
– Industry benchmarks
– Local market conditions
– If comparable is public-held company and target is privately-held, the P/E ratio is usually discounted due to liquidity differences
Multiple of Earnings
Valuation Methods
Stability of Earnings ◄► Overall Marketability
Rating Characteristics of the Business
Ease of Financing ◄► Competition
Industry Growth ◄► Number of Strategic Buyers
Customer Concentration ◄► Company Growth
Reliance on Owner
Key Considerations
Estimating the value of a mid-market company
– Stability of historical earnings
– Reasonable future projections
– Verification of information
– Assets included in sale
Valuation Checks
• Due Diligence
• Investment Analysis
• Return on Investment
• Payback period in years
Price vs. Value
• Common misconception– Price = Value
• Price is influenced by– Deal terms– Financing arrangements – Earn-outs– Stock versus cash– Buyer synergies
• Many types of Value– Fair Market Value– Seller’s Perceived Value– Synergistic Value
Fair Market Value
“FMV is the amount at which the business would change hands between a willing buyer and a willing seller when the former is not under compulsion to buy and the latter is not under any compulsion to sell AND both parties having knowledge of therelevant facts.”
Discounts
Minority Interest Discount
Marketability Discount
Key-Person Discount
Minority Interest Discount
• Relationship between the interest being valued and the total enterprise
• Impact of minority interest
• Range from 20% to 40%
Marketability Discount
• Deals with liquidity interest
• How quickly and certainly it can be converted to cash at the owner’s discretion
• Range from 10% to 33.33%
• Applied to either controlling or non-controlling interest
Maximizing the Value of Your Business
• Develop an Exit Strategy early
• Understand the Valuation Process and Variables– Apply to your business– Changes to increase value
• Value the business before you sell– No fire sale valuations
• Understand who the buyers are– Financial
• Investment– Strategic
• Synergy
Ways to Improve Value
• Increase profitability
• Reduce/eliminate costly perks
• Extend/renegotiate supplier and customer contracts
• Evaluate company policies
• Extend leases
• Obtain employment contracts on key employees
Team Approach
• Internal– CEO/Owner– Majority
shareholder(s)
• External– CPA– Business
Broker/Advisor– Legal Counsel– Investment
Advisor
A good team is composed of strong internal and
external members.
External members are powerful intermediaries.
Role of Business Broker/ Advisor
• Pre-qualify potential buyers
• Address confidentiality issues
• Arrange buyer seller meetings
• Encourage due diligence
• Assist in the development of an offer
• Represent the seller in the offer/ acceptance stage
• Arrange for bank financing
• Coordinate closing
Summary: Words of Wisdom
• Bottom line is only the tip of the iceberg.
• A fool and his money are soon audited.
• If you need accounting to prove it, it was probably not true in the first place.
• An accountant is a man hired to explain that you did not make the money you did.
• Accountants are witch doctors of the modern world.
The End
Do you have any questions?
That’s all folks.
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