Art of Accounting: Why some small firms want to remain small

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A benefit of writing these columns is the emails and calls I get from colleagues who share what they are doing. Here are some of their comments:

• Remaining small makes it easier to control my staff and know what they are always doing.

• Because I always know what my staff are doing, I don’t need to use time sheets.

• Since I have fewer clients, I can keep in better touch with them.

• When there is a screw-up, I usually find it quicker and can fix it quicker.

• I developed a “network” of specialists that I can call on when clients need services I cannot perform, making it easier for me to keep current with what I do know. Some of these are international tax issues, forensic investigation and business valuation consulting (as opposed to actually working on the matter), merger and acquisition consulting, cost segregation and transfer pricing studies, and due diligence assignments.

• I like keeping my overhead low. If I grew, the overhead at some point would jump up and that would cut into my profits…until I would eventually get enough new business to cover those added costs. That would take time and add much more pressure than I would like.

• Staying small keeps me from having to pay certain employee benefits.

• If I got larger, I would need to become completely paperless and that would increase my costs substantially.

• I don’t want to grow, and the next time my rent goes up, I will merge my practice into a firm that can absorb me without adding any new costs.

• Once I grow, I will probably need to add some partners or higher-level staff and then there will be office politics and I don’t want to get caught up in that.

• What I am doing is working well and I don’t want to upset the applecart…just that I would like to make a little more than I am now.

• I don’t want to have to account to anyone for what I am doing, and keeping it small keeps me independent.

• I love my interactions with clients and the work I do and do not want to get involved with the non-client work necessary when you run a firm.

They are all valid comments for the people who told them to me, but some I don’t agree with and I could even write lengthy columns about a few of them. However, the above comments represent reasons why some accountants remain small and, for the people who provided them, they work very well. One person’s potion is another’s poison. You can never go wrong doing what works for you.

There are 46,000 accounting firms and I am sure there are more than 46,000 ways of successfully running a practice. Those who provided the above comments are all successful to the extent they want or need to be.

Keep the comments coming. My email is emendlowitz@withum.com.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or emendlowitz@withum.com.

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Practice structure Client relations Partnerships Small business Ed Mendlowitz