How One Firm Limited the Risk of Being Small
Can a sole practitioner survive by remaining small and limiting services? One CPA found a way. Ron Stewart doesn't do audits. He also has no interest in having any partners in his six-person CPA firm in Monroe, Louisiana. His intention is to provide mostly tax, consulting and accounting services to agricultural and other small businesses as well as to individuals in his corner of northeastern Louisiana, and he has done so with great success. He always had known there were risks for small firms, but he never had to confront them until late 1990, when his firm faced the greatest challenge in its history. His experience forced him to explore new options that would limit the kinds of dangers faced by all small CPA firms. As a result, he hammered together an innovative agreement he hopes will ensure his and his firm's continued financial well-being. ACCENTUATE THE PERSONAL Stewart worked in industry, academia and for a local and a large national firm before he opened Stewart & Company in Monroe in 1980. He wanted to run his own shop and to provide the kind of personal attention he felt his small business and individual clients were seeking. He had never performed an audit and decided early not to offer a wide range of services but, instead, to concentrate on his own strengths. (For a profile of Stewart's firm, see the sidebar on page 63.) Choosing the kinds of clients he wanted to serve was simple because of his location. "At management of an accounting practice conferences, they always tell you to find your concentration by looking at your top 10 clients. Three of our top 10 clients are very, very large farming families that have from 5,000 to 10,000 acres of some of the richest farmland in the Mississippi Delta, so we have a concentration in agriculture. We also have a concentration in small business because there isn't any big business in this area." Stewart understood there were many advantages to being small, along with some disadvantages, such as limits on resources and services the firm could offer. "From 1980 until about August 1990, although I talked about the disadvantages of being small, I guess I never believed in them or thought they would affect me." His mind was changed in 1990, when one of his five associates, a reservist, was activated to Saudi Arabia as tensions in the Persian Gulf flared. When war finally broke out in January 1991, the spouse of one firm member and the son of another were involved. "So three of the six families in this organization had their lives totally turned upside down by this war," Stewart recalls. A BAD SEASON "What was brought to my attention was that I was experiencing the risks of being small," he says. One person was gone. The husband of another, Cynthia Avallone, was away, leaving her with two small children, one under a year old. Those two staff members traditionally were the major producers during tax season. "I would come in every morning praying that Cindy would show up, that she wouldn't get into a car accident or have some other emergency," he says. A firm offered to lend Stewart extra staff for the tax season crunch. "But furnishing me with some people who didn't know our systems and procedures, during a war, during tax season, would have meant my own people would have had to spend their time training them." Instead, Stewart flew in a former staff member from North Carolina for two two-week stints because she was familiar with firm practices and clientele. The 1991 tax filing season became the worst tax season Stewart spent in his career. "Not because of how it turned out, because it turned out okay. But because of how it could have turned out." Stewart found himself confronting serious doubts during the season about whether his staff could perform their work on time and about what it would mean for his firm if they could not. FORMING A NETWORK In the midst of his crisis, Stewart was approached by another firm that wanted to explore mutually beneficial opportunities. …