- Starting your own firm
- A day in the life of a partner
- Merging firms
- Rules to live by
Stephen Mock is retired BKD Partner. Stephen spent 30+ years in public accounting. He started and ran his own firm for 18 years and merged with BKD in 2006. Do read the full post.
When I was in high school, I figured out that I didn't want to be a doctor. I took an accounting class and I liked it. I became interested in finance and investments. I have two degrees, one in accounting and one in finance. When I was in college, I realized I was really interested in helping people with financial matters. At the time I thought I wanted to be a stockbroker, but there weren't a lot of entry-level stockbroker jobs. I went to work for Pricewaterhouse. I found that I really enjoyed auditing. To me, it was all about understanding the business. There are no secrets if you strip search the financial statements.
I was driven to help people and become their most trusted advisor. After 5 years with Pricewaterhouse, I left and started my own CPA firm with no clients.
Yes. If I had to do it over again, I would have stayed 10 years to gain more expertise. When you have no clients and then get a client, you tend to hang onto them like a dog on a bone. You really care about making them happy because you understand how hard it is to get them as a client. I spent very little time marketing. We focused more on production because we figured out that if you make clients really happy, they’re going to tell others about it. And we managed to get some really fine clients this way.
It forces you to learn a lot of different things. I started as an auditor. You become a tax expert if you have your own practice, because that's clearly the focus for the local firms with small business clients. My approach was that I tended to get more involved in the operations and details of our client’s businesses, much more so than your average tax accountant. I served as the CFO for one of our clients. We grew it from $1 million to $185 million when I left. That allowed me to develop a lot of management accounting skills in addition to understanding tax and auditing. We also had clients going through transactions, both acquiring other businesses and exiting their business. This allowed me to gain expertise in M&A, which is how I ended up in the M&A practice at BKD.
We were able to grow the firm to 15 people. But Sarbanes Oxley was the real driving force behind merging with BKD. Historically, the top third of accounting graduates went to public accounting, the second third went straight into industry, and the bottom third went to work for the government. Sarbanes Oxley really increased the demand for new talent and public accounting firms started sucking up two thirds of graduates. It became really hard to hire someone with good skills. That led to us starting a conversation with BKD. We had a good team. They (like us) were struggling with the talent pool and the baby boomer transition. So, we solved each other’s problems.
That's how I ended up becoming a partner at BKD. I got a 15 year head start on my succession plan. It allowed me to eventually retire while providing a place for my clients to remain. It also provided job opportunities for my staff to continue their careers.
Well, there is a bit of a misconception that professional firms are acquired. I'm not saying it doesn't happen. But it's more the exception than the rule, especially with the bigger firms. What usually happens is you merge your firm into their partnership. You sign the partnership agreement and become a partner. And oh, by the way, there is a capital account that you need to fund. So, you get to throw some money into the pot. Then you bring your staff and your clients to the new firm. Another aspect of a merger is what happens upon retirement. BKD has a deferred compensation plan for retired partners. I participated in that upon my retirement.
When I had my own firm, it was heavily oriented toward client work. I was also the managing partner, so I had all of the administrative responsibilities. But my philosophy was that you can only do two things between 8:00 and 5:00 - bring on new clients or service existing ones. As I said earlier, we spent very little time marketing. So probably 90% of my time was in production. All the administrative duties are what nights and weekends are for. Staying focused on what drives your business is what creates success. The other stuff needs to be done, but that is what Saturday is for.
When we merged with BKD there was a bigger focus on client acquisition. While I was there, I spent about 30% of my time bringing on new clients.
I had a huge fear of economic need growing up. I'm too young to have experienced the Great Depression, but it’s all I heard about from my parents and grandparents. When I was 14 years old, I made up my mind that I was going to create a situation where I was free from worry about economic need. I was willing to do whatever it took. At points in my career I’d work 14 hour days. Often, when I was working for myself I had over 3,600 hours per year. The hours never bothered me. Even with that, I feel like I did a pretty good job balancing my personal life. But that’s a whole lot easier to do when you’re in charge of both your personal and business life.
But it can’t just be about money. You can make money doing a lot of different things. The main reason I stuck it out, which I mentioned earlier, is that I really enjoyed being that trusted advisor for my clients. My psychic income came from people thanking me for helping them complete an acquisition or get a new loan on more favorable terms. I found that it was a real fit for my personality. So that is what kept me going throughout my career.
I felt like I had to give my employees a reason to stay there. I wanted them to stay 30 or 40 years. I didn’t want to churn through them like the big firms. That provides a whole new perspective on how you treat people and what your expectations are in terms of how many hours they work. We still had a busy season, and it was hard. But I think we made it much more manageable than the big firms. I had employees who came from the big firms. One of them told me the only hours that mattered there were from 7pm to 11pm. That used to gall me. That’s fine if you’re a night owl, but I would get up at 3am and go to work because I’m more productive in the morning. But by 5:00 or 6:00, I was done. I figured out that people have different work schedules. If they’re getting their work done, what difference does that make? You don’t have to be watching them to figure out who’s doing a good job. That’s what the review process is for. If someone has 400 to-dos on their audit review or tax return review, there’s a problem. If they missed three or four things, that’s okay.
I think there's a clear difference in the level of expertise. The bigger firms have the resources to develop subject matter experts. And you can't duplicate that in the smaller firm. Given my career path and what I chose to do, I was a generalist my entire career. If I was going to tell somebody what they need to do starting out, it would be to develop industry expertise or technical expertise. Develop a deep level of expertise over the first 10 years of your career. You have to balance that with being able to carry on a conversation with somebody.
Circling back to your question, you're going to get broader experience in the smaller firms. You're going to become an expert in QuickBooks, which you're not going to know anything about if you're at PwC. It's a different skill set. It depends on what drives your interests.
You can either manage the business or let the business manage you. When someone rolled in on April 10th and wanted their taxes done by the 15th, I’d tell them to go to H&R Block. I’m not going to get run over by your lack of planning. I never bought into the culture of working all night. There’s always tomorrow, and you can extend the return. I tried to work with my procrastinators and push them to come in earlier, give them a blind extension or get rid of them. I had no patience for that. I was always done with returns on April 12th. If it was up to me, we would have been closed the 13th-15th. But everyone else in the firm wasn’t as enlightened as I was.
I would tell them to think about what they like about their current role and what they dislike. What part have they enjoyed the most? Try to determine a particular area that they are fascinated by. You have to find something that you’re really interested in. I found that if people have intellectual curiosity about a lot of things, they are going to be more successful in business.
Here are some quick thoughts:
I am involved in several different businesses as an advisor or investor. The key to retirement is that you must do two things every day: