CPAs as CEOs?

November 30, 2015

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by Derrick B. Stark, CPA
SCACPA member since 1996

Years ago, Norm Brodsky made the case in Inc. Magazine that accountants are historians and are the last place entrepreneurs should look to develop strategy. He went on to explain:

“That's how they've been educated, and that's how they think. They can do a great job of explaining what has happened in the past. But making things happen in the future? Forget it. They don't even know the right questions to ask, let alone how to get the results you're looking for.”

Ouch!

The accountant in me took umbrage, but I immediately recognized the validity of the question -"Are CPAs good strategists, entrepreneurs, and executives?"

While Brodsky may have unfairly referred to accountants as historians that are only competent as tax preparers, I think he hits on the much broader, if less obvious, point that we are really good at the things for which we are educated, trained, and practiced.  We are not trained to tolerate risk.

In fact, our expertise encourages us to minimize and avoid it.  And yet, the most elementary understanding of investing and finance teaches us that the higher the risk, the higher the reward we should demand.  We are trained, however, to challenge assumptions and calculate risk.  What is professional skepticism if not the objective challenging of assumptions?  Learning to determine risk tolerance, to live with as much as we can to maximize the potential rewards, is the critical bridge to technical knowledge and strategic value.


Our company, MiraVista, operates in a niche area of health care, and a few years ago, we were struggling with declining reimbursement rates like everyone else in our space.  My accountants, and even my own experience, advised that we should focus exclusively on the largest and most profitable clients.  In fact, our competitors were employing that very strategy because it was, it seemed, the least risky approach given the circumstances.

As we analyzed further, however, we recognized that the status quo was probably the most risky posture we could assume.  Outsourcing only makes sense for our clients up to a certain size, after which, it is far more cost effective to manage medical billing in-house.  Moreover, pursuing ever larger accounts focused all of our resources on a shrinking pool of prospective clients already aggressively courted by competitors with far deeper pockets than ours.

Tolerating the risk of not following the herd forced us to reevaluate every assumption, and to do so, we sometimes had to abandon objectivity.  Strategy does not always have the luxury of objectivity; living with risk is a very subjective proposition indeed.  We reconsidered our assets and competitive advantages.  We studied the needs of the entire prospective client population and brainstormed ways to deliver on those needs. 

Ultimately, we decided to buck the status quo.  In fact, we cut ties with some of our largest clients by helping them move their medical billing operations inside.  We repackaged the work that we do to solve the problems of sophisticated, medium-sized clients (a much larger, and increasingly profitable market for which few are aggressively competing).  Our approach seemed much more risky when using historical performance and conventional wisdom, but of course, it has a happy ending or I would have picked another example for this article.

Accountants have the potential to make very successful business advisors, CEOs, entrepreneurs, and other strategy leaders by embracing their education and experience and recognizing that those tools must be applied in completely new and sometimes counterintuitive ways.  Instead of minimizing risk, we should focus on maximizing returns and reward without taking more risks than we can accommodate.

Derrick B. Stark, CPA, is a member of MiraVista LLC in Columbia. He currently serves on SCACPA’s Editorial Board Task Force and the CPA Ambassadors Task Force.

Click here – To read the Inc. Magazine article visit http://www.inc.com/magazine/19960601/1689.html

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