[IMGCAP(1)]Many years ago my boss, Bernard D. Kleinman, had a client that was a creative genius in the advertising industry, and was being courted by many other firms. He liked his job, position and respect and had no desire or thoughts of leaving. But, as a gentleman, he listened to whoever approached him.

Well, one of the offers from a newly formed agency seemed to present an opportunity that was too good to be true. It was not like anything else and he seriously considered switching—mainly for the even greater creative freedom and expression he would have.

He met with Bernie and asked him about the financial package and in particular wanted to discuss what he would be giving up in the way of stock ownership growth potential. In those days advertising agencies were mostly privately held businesses with employees owning shares. This is sort of like any professional services firm—the older partners own the largest share and younger employees “earn” the right to purchase ownership shares as they progress up the ladder. The valuations could be anything, but at that time was based on book value.

Well, this client owned some shares that he would have to give up when he left for the new job, and he wanted to know his loss, although the new employer said they would make up his loss if he came to them.

Bernie understood the bigger picture of the market and figured that the new company would have to go public in order to raise funds for its growth. He didn’t know when or how, but knew it would happen. He asked if he could speak to the prospective employer and requested our client receive an equal percent of ownership in the new company that he was forfeiting in the company he was leaving. This reasonable request was granted, and when they went public in about a year, the shares our client was able to sell through the IPO made him a very wealthy man.

I had a firsthand view since my role throughout this process was to crunch the numbers, meet with the client and actually calm him down, explain what my boss was suggesting and also help the client visualize the creative opportunities he would have. I learned from this to look outside the box of the immediate transaction and what it means from a life-altering vantage point; the anxieties seemingly successful confident people have; and the almost total lack of security many people have when presented with “numbers and money” alternatives.

Being a CPA in these situations is mostly about being a friend to the client and showing them the alternatives in a clear way that they can engage, grasp and relate to.

Edward Mendlowitz, CPA, is a partner in WithumSmith+Brown, PC, CPAs. He has authored 20 books and has written hundreds of articles for business and professional journals and newsletters plus a Tax Loophole article for every issue of TaxHotline for 27 years. Ed also writes a blog twice a week that addresses issues his clients have at www.partners-network.com. He is the winner of the Lawler Award for the best article published during 2001 in the Journal of Accountancy. He has also taught in the MBA graduate program at Fairleigh Dickinson University, and is admitted to practice before the U.S. Tax Court.  Ed welcomes practice management questions and he can be reached at WithumSmith+Brown, One Spring Street, New Brunswick, NJ 08901, (732) 964-9329, emendlowitz@withum.com.