The Inc. Network
The Perfect CPA
We've had to switch accountants a few times, and now we use a major international firm. It's hard to trust anyone with confidential financial information, so how do you know when you've made the right choice? What criteria do you use?
Grand River Interiors
Grand Rapids* * *
If your latest accounting firm specializes in the fiscal areas that concern you most, and if it proactively helps you set and reach your goals, you're probably safe. A company that is burned by (or outgrows) its CPA should look elsewhere, but trading one firm for another with a fancy name is myopic. The shared trust you want, after all, often takes years of working side by side. We're crossing our fingers that you've assessed your needs. Now it's time for a postmortem.
Take a look at what keeps you awake nights. If, say, compensation issues are your foremost worry, pick a firm with a benefits expert. If you want better banking relationships, choose one with strong bank ties. (One with a senior staffer on the board of a reputable bank will do.) Andrew Lewis, CEO of DayStar Digital, in Flowery Branch, Ga., knew he had picked a winner when his Big Six accountant found DayStar a chief financial officer specializing in growing high-tech companies like his. The Big Sixer reorganized and updated DayStar's procedures and helped make decisions that will continue to pay off after the company goes public.
Another key test: how good are your accountants' diagnostic skills? Do they talk about trends and provide charts showing how you stack up? "Listen for things like 'Gross profit is down by half a point' or 'Operating costs are higher than the industry norm," advises Jerry Atkinson of the American Institute of Certified Public Accountants (AICPA), in New York City. Bill Morgan, CFO of oil-reclamation company Noble Oil Services, in Sanford, N.C., was sold on his accountants' competence when they evaluated the company's human-resource needs, analyzed its corporate policies, provided computer consulting, and answered every question.
It's also smart to see if all the doors at the firm truly are open. Make sure you're not denied access to top managers and hired guns. Noble Oil's Morgan wanted a take-charge firm that catered to growing companies like his. "We also wanted a friendly partnership like the one we have with our bankers," he says. Morgan had candidates visit his company so he could judge them as individuals on his own turf. And he gave them every opportunity to get to know him.
It never hurts to get an outsider's opinion, either, so see if your accounting firm participates in the AICPA's private-company monitoring program, by calling 800-272-3476. Banks and bonding firms look favorably on that audit.
My specialty-coffee company ships to small accounts and a growing number of larger ones. How do you decide which size account to go after?
Name Withheld* * *
Position yourself in the niche most compatible with your personality and long-term goals. Do you want to run a one-person show or build a company? Do you want to stay local or go national? And how much time and money are you really willing to invest? "If you're a passionate bean lover looking for steady income, target smaller accounts; if you're willing to risk taking on volume and would prefer building business skills, go for the mass market," advises Jay Endres, owner of Roastery Development, in San Mateo, Calif.
Though seductive in their promise of heftier returns, large accounts often demand price concessions; flawless execution of volume orders; and support for merchandising, installation, and maintenance. To accommodate them, you'll need to hire people with operational and organizational skills, computerize your records, and buy industrial-size equipment. But if you play it smart, says Endres, "every penny spent to attract big players means real dollars for you." Dennis Boyer, CEO of Gourmet Coffees of America, in Boca Raton, Fla., would agree. His fully automated 350-employee company grows 50% annually by serving large accounts.
The thought of tracking the needs of hundreds of small customers at once can be dizzying, but if you want only to serve your region's bean lovers and feel comfortable with your current small accounts, stick with them and take on new ones cautiously. That's the approach at Uncommon Grounds Coffee. Fully 60% of its 300 accounts are small, and because no one account makes up more than 10% of the Berkeley, Calif., company's sales, losing one doesn't hurt cash flow. "They keep us in business," explains Uncommon Grounds' partner Orrel Lanter, "by allowing us to be more flexible." Selling those accounts variety -- for example, a high-end product that doesn't appeal to the masses -- has increased Lanter's margins.
For more information, join the Specialty Coffee Association of America (SCAA; 310-983-8090; annual dues start at $100) for starter subscriptions to Tea & Coffee Trade Journal , World Coffee & Tea , and The Gourmet Retailer . The SCAA also offers educational programs and "Avenues for Growth," a report ($100 for members) on trends in the specialty-coffee market.
Forging alliances is a way of life out here in Silicon Valley, but is this management strategy just as hot in other corners of the country? Could you recommend books or organizations that teach companies how to forge mutually beneficial alliances so they can ultimately become "network companies"?
Judith Cadigan & Associates
Palo Alto, Calif.* * *
Pick up the Wall Street Journal . Chances are, you'll find plenty of announcements of link-ups between companies of every shape and size, and in every corner of the country. The Corporation for Enterprise Development (202-408-9788), a policy consultancy, spearheads the research on who's forming what kinds of alliances where. And its enlightening reports on industry-specific networking, legislative initiatives, and rural perspectives show that the phenomenon isn't just bicoastal. "Everyone's doing it," says Joe Mancuso, president of the Center for Entrepreneurial Management, in New York City. "And they're doing it everywhere."
Introduce yourself to the concept of networking for profit with Tom Peters's Liberation Management (Knopf, 1992, $27.50). Some chapters will have you wondering why any companies ever chose vertical integration in the first place. Strategic-alliance consultant Beth Perdue of CPInternational, in Boston, likes Charles Handy's provocative The Age of Unreason (Harvard Business School Press, 800-545-7685, 1989, $12.95), because "it shows you what a pared-down company should look like." Jordan Lewis's Partnerships for Profit (Free Press, 800-257-5755, 1990, $29.95) is good for the basics of designing and managing a strategic alliance. "Lewis is at his best when he's teaching how to choose partners and develop effective relationships," observes Perdue. Mancuso, on the other hand, praises A. David Silver's Strategic Partnering (McGraw-Hill, 1993, $29.95): "Dave's appendix of partners is one of a kind."
Another recommendation comes from Harry Brown, president of Erie Bolt, a maker of metal parts in Erie, Pa. Brown, who outsourced his way from near-failure to profitability (see "Make Love Not War," August 1988), says Jessica Lipnack and Jeffrey Stamps's The TeamNet Factor (Oliver Wight, 800-343-0625, 1993, $25) is a cutting-edge how-to on cultivating and sustaining mutually beneficial teams. Brown adds that when his managers run into bottlenecks, they instinctively refer to The Goal , by Eliyahu Goldratt (North River Press, 800-486-2665, 1992, $19.95). "It challenges our thinking," says Brown. "It assures us that we're not just a manufacturer anymore. We're part of a business system."
One more resource: the Networking Institute (617-965-3340), in West Newton, Mass., helps companies form their own networks through consulting, workshops, publications, and software.* * *
Discounts 'R' Them
The 99 Cents stores are booming in the suburbs. I'd like to start something similar. What do you know about this kind of business? And what are the keys to success?
Discount retailers profit from the sheer delight consumers feel when they're stretching a buck. With the U.S. economy still looking limp, it's no wonder shoppers are hitting factory outlets, wholesale clubs, and dollar stores in record numbers. Today at least 10 major chains operate 1,250 dollar stores nationwide; the rest are independents. There's room enough for new players, but it's anyone's guess whether upstarts can endure: high rents and ineptitude have already tumbled many operations. If success means longevity, the keys are finding dependable suppliers and knowing what sells.
Relationships with loyal suppliers are essential in this business; regrettably, you won't find them overnight. Even with their head start as wholesalers, the founders of 98 Cent Clearance Centers, a 29-store chain based in North Highlands, Calif., have spent the past 15 years determining which suppliers consistently come through in the clutch. It's taken trade-show appearances, countless referrals, and lots of handshakes, says partner Eric Leon, who recommends wholesaler shows sponsored by the Associated Surplus Dealers/Associated Merchandise Dealers (800-421-4511; shows are free to buyers). Ask for the association's latest Exhibitor's Guide, which lists up to 4,000 dealers. Its monthly journal, TradeNews , read by more than 80,000 buyers and sellers of surplus goods, is crammed with informative articles.
Leading chains claim that keen merchandising and negotiating skills helped them get and stay ahead. Gary Kastel, communications director for Value Merchants, parent of Everything's a $1 stores, based in Milwaukee, says it helps to have a nose for product quality and an ability to sense value among similar products. "Recognizing what customers want is one thing. But you must consistently provide what they want." That takes negotiating the best possible deals on every level, from leases to store design to product. The National Retail Federation (212-631-7400; memberships start at $95) is great for instructional workshops and networking.
As for market research, demographics are crucial. Discounters thrive on volume purchases, so shoot for a location accessible to at least 50,000 people within a three-mile radius. Heavily trafficked commercial districts or shopping plazas work nicely; what's ideal is a lot next to a large anchor retailer that's lured the value-conscious for years.
The Small Business Administration has brochures (50¢ to $1 each) for start-up retailers on selecting a location, writing a business plan, buying, and marketing. Call 800-827-5722 for a directory of the brochures and videos offered.
It's important to operate efficiently and seek advice from competitors and suppliers. Too often, start-ups make the mistake of trying to sell more when they should be focusing on buying the right product. Selling comes naturally, observes Kastel, "when you know who to buy from and when." n
-- Reported by Karen E. Carney, Vera Gibbons, and Stephanie Gruner.