Peter Fehrenbach

An accountant can serve many types of roles for CEOs, from hands-off keeper of the books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“I’ve been on both sides of the aisle,” says Marty Doerr, member-in-charge of the Tax Services Group of Brown Smith Wallace LLC, who earlier worked for a decade and a half as head of the tax department at May Department Stores. “I would just say, from a CEO perspective, it’s really helpful if he includes his CPA, whether it’s in-house or his adviser, as part of the team. Sometimes the CEO thinks of the taxperson as the guy who’s supposed to give him the answer after he’s given him the facts. But they need to be involved in helping create the facts.”

Sales of real estate and major asset purchases are two of the critical transaction types for which business executives should seek expert financial advice beforehand rather than afterward.

“You can’t have that input unless you’re at the table when they’re doing the transaction,” Doerr says. “That’s what I mean by being on the team. It can save a lot of hassles and probably taxes and maybe penalties, if you can weigh in before those transactions have already happened. It’s a matter of having somebody there who has their tax antenna up all the time.”

The unpredictability involving the upcoming election and how it will affect next year’s tax rates makes CEO-accountant interaction even more crucial this year.

“It’s so uncertain right now what’s going to happen with [tax] rates,” Doerr says. “Of course it’s an axiom that you don’t let the tax issue wag the dog, but most people think rates are going to go up next year. And any time we’re into that kind of a situation, particularly in an election year, it makes tax planning that much more difficult. So I would encourage management to keep the dialogue open.”

Marty Doerr, member-in-charge of the Tax Services Group of Brown Smith Wallace LLC, is responsible for overall client service and technical oversight of the tax practice, as well as training staff on best practices and new tax developments.

HOW TO REACH: Brown Smith Wallace LLC, www.bswllc.com or (314) 983-1200

An accountant can serve many types of roles for CEOs, from hands-off keeper of the books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“If you want to derive the most benefit, you have to work with your accountants year-round,” says Steve Christian, managing director at Kreischer Miller. “If you just want a scorekeeper who prepares a financial statement and a tax return and don’t want to include him in your team of advisers, you certainly don’t need to. But most progressively minded companies try to surround themselves with good advisers. And the way you become a good adviser is to intimately know the company you’re advising and spend as much time with them as you can, 365 days a year.”

Often, accountants can steer a company clear of pitfalls that might have adverse tax or financial consequences.

“Sometimes you enter into a transaction — you buy a company, you buy some equipment, you do something related to a transaction — and it will have some negative impact as to the financial statement or the tax returns,” Christian says. “Our value takes place by guiding you through the impact of transactions, as opposed to the value of preparing a return or preparing a financial statement. That’s why we really think you need to call us before you act rather than after you act.”

Advice on best practices in a client company’s market sector is another area in which accountants can provide value.

“CEOs know their companies intimately, but unless you belong to a peer group or something like that, you may not have many opportunities to see what best practices other companies are utilizing,” Christian says. “Meanwhile, your accounting firm may support 1,000 different clients out there. So while we may not have the answers to everything, we can tell our clients what we’re seeing is happening with other companies, and they can use that information take advantage of best practices.”

Steve Christian, managing director with Kreischer Miller, has a range of experience providing business advisory, audit, accounting and tax services to a variety of businesses, including privately held companies, partnerships, and SEC registrants.

HOW TO REACH: Kreischer Miller, www.kmco.com or (215) 441-4600

An accountant can serve many types of roles for CEOs, from hands-off keeper of the books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“If you think about just the tax piece of it, the tax law changes so fast and it’s so politically charged that it’s a bit of a lightning rod for an awful lot of what’s going on,” says Mark LaPlace, director of tax services with GBQ Partners LLC. “The speed with which some of these law changes take place significantly impacts the way executives operate their businesses. So that makes having regular dialogue with your financial team paramount.”

With the upcoming election and with several federal tax provisions set to end this year, tax rates are going to change dramatically next year.

“The query then becomes what decisions that CEOs are contemplating making might have a very different tax result if the decision is made in 2012 versus 2013,” LaPlace says. “You want to try to avoid some of the rate changes that are already on the books that are going to take place next year. You could do this by accelerating income, accelerating stock options or — even though this is a bit of a counterintuitive position — you might want to defer certain tax deductions because next year’s going to be a higher-rate year.”

LaPlace says his firm has begun factoring regularly scheduled meetings into its proposal process when taking on new clients.

“We’re proposing that we meet at least quarterly and, ofttimes, more often than that, depending on the size of the company,” he says. “We’ve gotten very systematic in our shop in saying that’s part of our process of accepting a new client. We lay it out there up front. And we’ve been amazed at how this creates great dialogue, which then avoids some of the negative circumstances you can run into. We’re finding this to be a very effective technique.”

Mark LaPlace, director of tax services with GBQ Partners LLC, specializes in tax planning and consulting for middle market and entrepreneurial companies, and tax and financial planning for professional athletes and other high-net-worth individuals.

HOW TO REACH: GBQ Partners LLC, www.gbq.com or (614) 221-1120

An accountant can serve many types of roles for CEOs, from hands-off keeper of books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“Usually, by the time the end of the year rolls around, there’s very little ability to interact proactively before things occur,” says Walter McGrail, senior manager of Cendrowski Corporate Advisors. “Year-end planning is basically summarizing what you did. There may be some limited opportunities to postpone or accelerate some things. Whereas meeting throughout the year is clearly a more well-intentioned way to get to the bottom line of maximizing tax savings.”

It’s almost always best to give your accountant an opportunity to weigh in ahead of time on most nonroutine types of transactions.

“After a major transaction has occurred, the only thing you can do is post-mortem type tax planning,” McGrail says. “When it’s already cast in stone, all you can do is take a look at the documentation and advise what the tax ramifications will be. But if you had been put in touch with somebody earlier, perhaps through some proper tax planning you could have changed the character of income recognition or postponed the taxability for a year.”

CEOs who consult with their accountants regularly and ahead of time on major transactions are much more likely to get good value for the services their accountant provides.

“These are the types of things that help make me an investment rather than an expense,” McGrail says. “The two things that your tax adviser should be able to help you with are making sure you take into account the most advantageous tax rates and, whenever possible, delaying paying taxes to the following year. Delaying a tax payment by a year saves the present value of that money. Character and timing are always the biggest issues in the tax planning arena.”

Walter McGrail, senior manager of Cendrowski Corporate Advisors, provides tax and business consultation to public, private, and family-owned businesses, as well as accounting malpractice defense and forensic accounting services.

HOW TO REACH: Cendrowski Corporate Advisors, www.cca-advisors.com, (866) 717-1607

An accountant can serve many types of roles for CEOs, from hands-off keeper of books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“The more contact we have, the better,” says Leif Erickson, associate director in the tax department of SS&G. “It’s really crucial, especially right now, with everything that’s going on. There’s so much uncertainty out there with regard to the tax law and the new things that are coming on the horizon.”

A key area that Erickson says he’s been helping clients with is business combinations, in which a companies seek to buy a portion of another company and they need to decide whether to structure the transaction as a stock acquisition or an asset acquisition.

“Getting us involved on the front end can help to at least lay out the tax consequences of structuring the transaction this way or that way,” Erickson says. “And a lot of times, the tax ramifications are not necessarily at the forefront; the tax side isn’t really going to be the driving force behind the decision. But it’s at least something that the CEO and CFO can think about — these are the things that are out there, these are the benefits, these are the things that maybe we want to negotiate as part of the deal.”

Another important area is inventory management, especially when inventory quantities rise quickly over a short period.

“A client recently came to us, and they’d had a tremendous spike in their inventory and were experiencing tremendous price increases,” Erickson says. “So we looked at it, and we said, ‘Have you looked into LIFO [last-in, first-out inventory accounting]? They hadn’t given it much thought. By switching them over to LIFO, it produced huge savings. The first year, I think we got a $700,000 reserve for that client, so that was an added deduction of $700,000. We were able to turn it into a big positive with regard to the tax side of things.”

Leif Erickson, associate director in the tax department of SS&G, specializes in corporate and individual tax planning, FAS 109 calculation, LIFO studies and cost segregation studies.

HOW TO REACH: SS&G, www.ssandg.com, (330) 668-9696

Monday, 30 April 2012 20:01

Reliable counsel

How often do CEOs need to talk to their accountants in order to effectively manage their company’s finances? Obviously, this question can’t be answered with a simple blanket statement: “X times a year for a total of Y hours should do the trick.” There are too many different types of businesses, each with different amounts of expertise and unique needs of their own.

But if you talk to even a small number experts in the accounting field, a couple of themes emerge. One is that when CEOs are contemplating unusual transactions, it’s always better to err on the side of having too much contact with their accountant than not enough. Another refrain is that any time a CEO has any doubts or unease about an upcoming transaction, it’s definitely time to call your accountant to let him or her know you have something you need to talk about.

“Typically, in a larger company, the CFO would take on that role,” says Mark Koziel, vice president of firm services and global alliances for the American Institute of Certified Public Accountants. “But what about the CEO who doesn’t have the C-suite and the finance function inside their organization? That’s where, in particular, we talk a lot about being the trusted business adviser for that CEO. Especially in family-owned businesses, you see this a lot. You need that financial adviser, but you may not need them full time, so you can lean on your CPA on a regular basis throughout the year.

“They should be there for part of the strategic planning sessions. If the CPA knows what’s going on throughout the year and is present for discussions about important things like expansion, employment and succession, then they can be better informed for when they do the year-end planning and consulting.”

The benefits of touching base periodically with clients throughout the year, not just at year end, is a common theme among those with experience in the accounting field.

“When you meet with clients during the year, you can go over their financial statements, among many other things,” says Sharon Cook, president of the National Society of Accountants. “You can make sure they are doing everything properly. And you can make suggestions about some of the other things they need to do, for taxes and for other financial purposes.”

Think, talk, transact

Talking to your financial team throughout the year enables your experts to make suggestions in advance of key transactions that can greatly alter the tax and financial impact of those decisions.

“When you get to year end, depending on what the CPA is doing for you — if it’s a compiled financial statement, an audited financial statement, a tax return — there are definite tax implications that could be affected,” Koziel says. “And maybe some decisions would have been made another way if the CEO had considered the tax implications of what they were about to do.”

Making assumptions on your own rather than asking professionals for guidance can lead to unpleasant surprises. Accountants come across these types of situations frequently in their daily interactions with clients.

“A situation that I find clients often have problems with is, for example, in a year in which they’re expecting a large profit, they want to be able to reduce that,” Cook says. “So one of the first things they think about buying is a car, because they think they’re going to be able to write that car off in full in the first year. Then, by the time you get the books and you’re ready to do the tax return, you have to tell them, ‘Guess what — you’re not going to be able to do that. You’re going to have some limits in terms of what you can deduct this year.’”

For many types of nonroutine transactions, getting advice beforehand from your accountant or finance team is almost always the wisest course for business executives to follow.

“Some of the types of transactions that should be discussed ahead of time would be, for instance, any type of big-dollar purchases that they’re looking at,” Koziel says. “Buying versus leasing is one that needs to be looked at carefully, such as whether you want to buy or lease a building. Another important one is business expansion: If they’re looking to buy a business or even sell their business, the whole M&A transaction and how that will take place is a very important thing to consider.

“Major investment decisions along the way could have significant impact. And succession of the business — that’s another huge issue. You should be having big-time conversations about that early on.”

Other nonroutine transactions that should be reviewed carefully ahead of time include borrowing money, major equipment purchases and like-kind exchanges.

“Before you do a like-kind exchange, you should definitely talk to your accountant to make sure it’s done properly so it won’t be disallowed somewhere down the line,” says Cook. “There are many types of like-kind exchanges. It could involve property that they own. A lot of times, especially in smaller businesses, it may involve cars or equipment that they have around, where they can exchange it and therefore not pay the tax that they would have had to pay if they had sold it directly to someone else.

“Any time a CEO wants to make a big expenditure on any kind of equipment, they need to talk to their accountant to make sure they’re getting the benefit of everything they have, especially if they want to borrow money to pay for it. Because if they want to borrow money, they’ve got to figure out, ‘What is that going to do to my bottom line? Is this something I really need to do, and is it right for me?’”

Multifaceted advice

An accountant’s value to a CEO or a client company isn’t limited to figuring out the tax effects of transactions before they’re entered into. There are many other types of general business issues for which an accountant can provide valuable advice.

“Strategic planning is a big one,” Koziel says. “One of the best services a CPA can provide to a CEO is to just get them in a room for a day and sit down and talk about the business. Do a strategic planning session. Make it formal, kind of like a board of directors meeting.

“Having frequent conversations throughout the year is useful in many ways. The beauty of the CPA environment is you gain a lot of knowledge about particular industries. Take construction, for example. Typically, the CPA has more than one construction contractor client, so they see good habits and bad habits that are out there, based on other businesses in that market. And they also can sometimes translate things to other types of businesses. Maybe it’s a customer service strategy in a certain retail business that could be replicated in, let’s say, a not-for-profit that you might have as a client.

“The ability to observe how a variety of different businesses operate and being able to assess the good habits from the bad habits and recommending the good habits to other types of businesses that are in their client base — these are valuable services that CPAs are in a position to offer.”

Another important service that accountants can provide is keeping tabs on key financial line items to watch for significant changes, then investigating those changes to determine the factors that are causing them, and, if needed, recommending ways to counteract the changes.

“If you keep in close contact with your clients, especially if they’re doing their own accounting in-house, one of the things you can do is review their gross profit percentages,” Cook says. “Are they staying consistent? Are they changing dramatically from one period to another? What’s the cause of that? And you can sit down and go over that with them and see if there’s a problem. It may be in their inventory control, if they have inventory. Or is the cost of their regular purchases going up? And if so, what do they need to do to offset that? Does that mean that they need to find a way to increase sales? Or do they need to have better controls on what’s in inventory and how it’s coming out of inventory?”

The definition of trust

One of the accountant’s main goals is to achieve trusted business adviser status with his or her clients. It’s a prestigious standing, and it must be earned over time.

“It’s about giving your clients the absolute best service you can provide,” Cook says. “To be able to review and make sure they’re handling their affairs properly, to produce good financial statements, to have the best possible relationship between the accountant and the CEO, and ultimately, to make sure that their business prospers. That’s the key. That’s what you aim for.”

Koziel concluded by telling a story — “the ultimate story of a CPA as a trusted adviser,” as he calls it.

“I was at lunch with a CPA friend of mine about a month ago, and he says to me — because he’s heard me say time and again: ‘Trusted adviser, trusted adviser’ — he says, ‘You know, I never really understood the meaning of “trusted adviser” until just this past weekend. I got a call from the wife of a client of mine. The client is a construction contractor; he owns a construction business.’

“This guy was a huge car buff and had a warehouse full of antique cars. He was in the warehouse tinkering one day, and he fell to his death off of a ladder — changing a light bulb, of all things. So he says to me, ‘I’m sitting there last weekend, and this client’s wife calls me. … A little while later, I’m in her living room. It’s the wife, the two daughters, the two son-in-laws and me.’ He says, ‘That is the trusted adviser relationship. That’s exactly what you’ve been talking about. The only one that they felt comfortable enough with — the only one they felt confident enough with as the outside consultant to the family — was me. It’s almost like I was part of the family.’

“That’s the type of relationship that you start to see in these businesses with their CPAs,” Koziel says. “And as a CEO, if you don’t have that trusted adviser relationship now — well, we’re talking about your life’s savings. Whether it’s invested all in the business or whether it’s held in other types of assets — these are your life’s savings. Who are you going to trust with those types of decisions? And you’d better have that person with you year-round, to help you make better decisions all along the way.”

HOW TO REACH: American Institute of Certified Public Accountants, www.aicpa.org; National Society of Accountants, www.nsacct.org

One thing MedSynergies Inc. has gotten good at is growing fast. The company’s revenue has been rising at an eye-popping rate, 30 percent plus for eight years running. But a byproduct of that whirlwind growth is that it’s difficult to find and retain workers who can keep up the pace. Sometimes people get left in the dust.

“The biggest issue we face is getting and keeping quality people,” says J.R. Thomas, CEO of Irving, Texas-based MedSynergies, which manages business operations for health care providers. “It’s tough to recruit and develop human talent while growing so quickly.

“Our growth comes in spurts,” Thomas says. “It’s not a linear model, and that can make it hard for people. The issue of the skill sets that are needed, the talent level that’s needed, coupled with the inadequacy of the educational system we have today, plus the complexity of people’s personal situations — this all creates serious challenges in terms of getting and retaining talented workers.”

MedSynergies’ leaders began to notice the problem eight years ago. “In 2004 we did a large transaction to put private equity in the company to grow it, and we hired a lot of people,” Thomas says. “We received plenty of impressive resumes, but we found that some of the people we hired had performance issues that weren’t evident through the interview process or the reference process. We weren’t getting the value we thought we should get. It became a real problem.”

This led to an uptick in employee turnover, which produced a slew of issues for MedSynergies. “When you start to get into a situation where you’ve created a hyper turnover rate, you start to lose the culture of the company you’ve built,” Thomas says. “You start to see tension develop between the people who’ve been around for 13, 14 years and the new people you’re bringing in. You have to find a way to reinvigorate your company’s culture and teach your fundamentals to all the new people — your mission, your tactics, your strategy. As one of our people said, ‘We have to “MedSynergize” these people in how we do business.’

“The cultural aspects of turnover are a substantial investment,” he says. “It can be an expensive process. But if you don’t deal with it, you can’t grow over the long term.”

In the eight years since its growth started accelerating, MedSynergies has experienced mixed results in recruiting and developing staff. “Overall I’d give us a B or a C,” Thomas says. “I’m not sure anyone ever gets an A in that process. And it’s an ongoing process; I don’t think it ever gets completely resolved. You just try to keep getting better at it.”

Train the troops

MedSynergies has undertaken a number programs and initiatives aimed at improving its recruitment and development of employees, with varying degrees of success. One of the first was a training program the company’s leaders dubbed MSI Boot Camp.

“We looked at this problem in 2004 and saw that it wasn’t going to go away,” Thomas says. “In fact, we began to see that the magnitude of the problem actually gets bigger as you grow. And this isn’t a matter of simply identifying a problem and then solving it. You can get better at mitigating it, but I don’t think you can solve it.”

New business was rolling in, so MedSynergies’ leadership team had to set up the new training program on the fly.

“At the time, we didn’t have a lot of time on our hands to create PowerPoints, to have great thoughts about how we were going to build our culture and onboard people,” Thomas says. “I think most small companies have that problem because everybody wears so many hats. We had to move. We had operations, we had new customers, and we were trying to hire people and grow. So the decision making was pretty quick.

“We started the boot camp and started walking our employees through things like the life of a claim and our five key metrics, which are one of our cornerstones — the foundational elements of a physician’s practice,” Thomas says. “It’s one of the things you’ve got to do right first because it’s a precedent to everything else. There’s some pretty core stuff you have to do. And very few people do it well. It has a lot of process rigor around it.”

Boot camp was an apt name for the program, as Thomas describes it.

“It was two 10-hour days, roll up your sleeves, hard core,” he says. “We covered areas like what you tell the client, what it means, how it impacts the company. And we got good results. One byproduct of that process is we found out some people at various levels of the company had skill sets that were above what they were hired in at. And we found the converse was true, too. Some people who were supposed to know it all and be an immediate impact player couldn’t dribble the ball.

“So it helped us evaluate, from a senior management perspective, our talent level in the company at that point. It also helped our ability to recruit, and it started building a culture about how we do our business.”

Go back to school

Another step MedSynergies took was aimed squarely at the problem of recruitment and the shortage of suitable talent.

“One of the big obstacles we face is that the level of talent we need at all levels of the company to meet our growth needs exceeds the ability of the city and the region of North Texas to supply it,” Thomas says. “We are really struggling to find talent at $12 to $15 an hour all the way up to $100,000 a year — and even above that level.”

MedSynergies is partly addressing this problem by partnering with a local institution that Thomas says is overlooked by many businesses in the Dallas-Fort Worth Metroplex.

“Probably the biggest unknown, unappreciated asset in Dallas-Fort Worth is the Dallas County Community College,” he says. “It’s huge. It’s one of the largest assets that, economically, we don’t know anything about. Most people don’t. I didn’t.”

A MedSynergies client who is involved with the community college convinced Thomas that his company would benefit by partnering with the school.

“We committed to do a couple things with the community college,” Thomas says. “One is we wrote a check to build a portal to help their students get jobs. So what they’re in the process of doing now is building a website where students can put their resume out and apply for jobs.”

Thomas says that part of his motivation for entering into this partnership was selfish. “I wanted access to their best and brightest to hire, at all levels of the company,” he says. “The community college is a great economic tool, and it’s a great societal tool. These are kids that are really working their way up. They either go on to four-year colleges or come out with a two-year degree, and they turn into great employees and do a phenomenal job.

“The other part is we want the community college students to look back and say, ‘They helped me get a job, so therefore I want to perpetuate the program,’” he says. “So it’s not just a charitable event. It’s really a business enterprise to pay back the school that’s done so many great things for you.

“I have high hopes for that,” Thomas says. “I think it will help our hiring process, and I think it will have some societal benefits for the community college and raise some awareness about how good a job they’re doing. They’re doing absolutely phenomenal work at the community college level. So I’m real enthused about that.”

Identify your stars

To help with employee morale and improve information sharing, MedSynergies has launched a monthly executive-employee communication program called Lunch With Leaders.

“It’s a monthly luncheon,” Thomas says. “It’s an open sign-up-to-have-lunch-with-an-executive program. Lunch is provided, and it’s a free-ranging group discussion. So you’ll hear things like, ‘I don’t understand my benefits. Are they better? Are they worse?’ Or there will be discussions about topics like working from home and other policy issues. It’s a great format to communicate with employees throughout the organization, because we find that they know a lot about what’s going on, while many of us sitting with C’s in front of our titles don’t really know that much about what’s going on.”

The Lunch With Leaders program has another important benefit. By fostering interaction between executives and employees, it makes it easier for MedSynergies’ higher-ups to identify who the company’s future leaders are likely to be.

“We’re trying to identify our superstars,” Thomas says. “There are probably 45 people in this company who are outstanding, phenomenal talent. And at the other end, there are probably another 45 people that the company will do great things without. And identifying both is very important to us.”

Asked what advice he would give other executives facing a similar predicament dealing with the dearth of available talent, Thomas says trusting your judgment is crucial.

“When you start to have a concern and you start to think there’s a problem or a potential issue, that means there is one,” he says. “Don’t second-guess yourself. You need to think about some of these issues, and you’ve got to continue to review your management team and your staff, and if you have a concern or issue, you need to trust yourself. You need to communicate it and deal with it immediately. Don’t wait.”

Another piece of advice Thomas offered CEOs is to be willing to admit you’re fallible.

“We all have egos, but sometimes you’ve got to be able to say you made a mistake, and address the mistake and move on,” he says. “We’ve done that. It’s not fun; it’s not easy. But when you tell someone ‘I made a mistake’ and you correct it, you build trust in that employee — whether it’s lateral or above you or below you. It doesn’t matter. They’re all important.”

Measure success

Asked if he thinks MedSynergies has turned the corner toward resolving its problems with attracting and retaining talent while maintaining its rapid growth path, Thomas says he sees signs that the company is improving, and he feels that constant improvement should be the goal because true resolution isn’t possible in this case.

“It’s an evolutionary process, and I don’t think we’ll ever truly resolve it,” he says. “But we’re making a lot of progress. We’re seeing better employee satisfaction. We’re seeing more referrals from existing employees for jobs. We’re getting more job applicants for open positions than we used to have. On the other hand, we’re also seeing a downside: We’re starting to see our people being recruited by other companies. People say, ‘Hey, I want to hire from MedSynergies because they have some knowledge we can use.’ But that’s part of the deal.

“If you’re doing the right things as the CEO of the company, the average performance of the employees should continually improve,” Thomas says. “In other words, on the bell curve, you’re constantly trying to move your average toward the right, which is better performance. And as you move the bar to the right, you’ve still got to deal with the part that’s to the left — the people who are not performing to the level that the job needs.

“And it never ends. You’ll never get to where everybody is an A performer. It’s mathematically not going to happen.”

HOW TO REACH: MedSynergies Inc., (972) 791-1224, www.medsynergies.com

 

THE THOMAS FILE 

Name: J.R. Thomas

Title: CEO

Company: MedSynergies Inc.

Born: Little Rock, Ark.

Education: B.S. in zoology, University of Arkansas; MBA, University of Texas

What’s the most important thing you learned during your years in school that you use today?

It has nothing to do with the technical components, the debits and credits and pension accounting and microeconomics and macroeconomics. The most important issue about going to school is who you’re sitting next to. Because business is about people and the things they have to deal with, the issues and pressures and performance. And it’s not about psychology or sociology. It’s about how people make decisions and how you’re going to attach and relate to that customer.

What was your first job, and what did you learn from it?

When I was growing up, I worked on our family farm. Among other things, we had a commercial hay and straw baling operation. In high school, my brother and I baled 44,000 bales of straw in a month. And the concept of quit never existed. We were greasing a hay baler early in the morning in the dust and dirt, and we’d come home at 7 o’clock at night, dirty as hell, sunburned, mosquito bitten. But the value of that is we learned that when things get tough, you’ve got to put the hammer down and keep going.

Do you have any overriding business philosophy that you use to guide you?

There’s no substitute for work. Go to work every day. Have a blue-collar mentality. Bring your lunch pail to work.

What trait do you think is the most important one for a CEO to have in order to be a successful leader?

You have to have integrity and respect. There are lots of smart people out there, but to get people to charge a hill, it’s about more than organizational structure or market opportunities or empowerment. It’s about these people sitting side by side with you. Are they going to march up the hill with you? They’ve got to trust you and trust that you’re going do the right thing.

Five years ago the economy was humming along, and Service Foods was humming right along with it. The Norcross, Ga.-based gourmet food supplier was growing steadily throughout its five-state Southeastern base. But CEO Keith Kantor was uneasy, because he felt his company was vulnerable. Many of Service Foods’ customers regarded the company’s home-delivered fare as a luxury. If the economy were to turn sour, some customers would start cutting their household budgets — and luxuries would be among the first things they would cut.

“Several years ago, I started to feel like we were headed toward an economic downturn,” Kantor says. “I thought the boom would still continue for a period of time, but with all the signs we were seeing — debt going up, oil prices going up, prices going through the roof, especially in real estate — I didn’t feel like it would last. The bubble was going to burst.

“So I got our leadership together and I said, ‘This is what I think is going to happen, and this is why I think it’s going to happen,’” he says. “And everybody basically agreed.”

Service Foods’ leaders had to do something to reduce the company’s level of vulnerability. After a series of brainstorming sessions, they concluded that Service Foods had to radically change how customers perceive its products and services. It had to change the perception of its offerings from luxury to necessity.

“The overall strategy we came up with was we had to change how customers regard our products and services from a ‘want’ to a ‘need,’” Kantor says. “What I mean by that is, while we’ve always sold mainly all-natural foods, before we made this transition, we simply marketed it as the highest-quality, best-tasting food you could get. And even though a lot of the food we sold was all-natural, we weren’t pushing that aspect of it. That wasn’t one of our key points.

“So we decided we had to switch how people think of our offerings from a ‘want’ — you know, to want high-quality, great-tasting food — to a ‘need’ — where all of the food we offer is all-natural, and it’s needed to maintain a healthy lifestyle. And we knew we would have to create a lot of new services to back that up.”

Break it down

Making the transition from “want” to “need” would be a laborious undertaking for Service Foods. The company’s leadership broke it down into several strategic components, each one an extensive, time-consuming project of its own:

  • The company would have to ensure that all of its food offerings were all-natural, and it would have to get them certified as such.
  • It would have to hire and train a team of health professionals — nurses, dietitians, chefs, fitness experts — to educate its clients about nutrition and related aspects of healthy living.
  • To reflect its new identity as a purveyor of all-natural foods and healthy lifestyles, Service Foods would have to become more tech-savvy in its use of social media, and it would have to overhaul its website and its marketing program.
  • To be able to effectively lead this new kind of company, Kantor, who at the time held an MBA and a bachelor’s degree in biology and chemistry, decided he would need to obtain two more degrees: a master’s degree in nutritional science, followed by a doctoral degree in the same field.

“To make the transition, we had to do a huge number of things, and we had to do them fairly quickly,” Kantor says. “We had to resource all of our foods and make sure we got them certified by the USDA as all-natural. That in itself was a big project. You rarely see the USDA all-natural seal, and now it’s on all of our foods.

“It was a long, time-consuming process,” he says. “First we had to get the USDA’s approval to label our products all-natural. Then we had to get the approval of the All Natural Food Council of North America and the Natural Products Association.”

At the same time Service Foods was moving through this certification process, Kantor, in his early 50s, decided it was time to go back to school.

“Although I already had my master’s, I went back and I got another master’s in nutritional science,” he says. “Then I went on to get my Ph.D. in nutritional science. I knew I needed to do this in order to make sure I had tool and skills I would need to head up this program.”

Get the right people

The staffing component was central to Service Foods’ evolution from purveyor of high-quality, great-tasting food to a company that would be able to guide people on how to lead healthier lives.

“We had to hire a team of registered nurses, registered dietitians, all-natural chefs and fitness experts,” Kantor says. “Fortunately, I have family in some of those fields, so that made it easier in some ways. My wife is a nurse. And my daughter is a fitness expert. So she set up that part of the program for us.

“Adding all these health professionals to our staff has greatly increased the value of services we can offer our clients,” he says. “It makes it clear that healthy living and mitigating disease are central to our company’s mission.

“Now, if you’re one of our clients and you want to talk to a dietitian, you can do it virtually 24/7, online and through all the social media. The same thing with a nurse; the same thing with fitness experts. And we even have some doctors and dentists that do this for us.”

Another component of the transition is that Service Foods now accepts referrals from doctors and insurance companies.

“We get a lot of referrals through a company called Vital Healthcare Group, which has about 7,000 doctors in their group,” Kantor says. “What they do is, they’ll tell us this patient has this particular health problem, so please put them on the proper diet. So if somebody has diabetes, we’re able to put them on the proper diet for diabetes, with the proper food. And if somebody has a history of cancer in their family, we can put them on the proper diet for that. Heart disease, et cetera, all those things. So now, you can get the great-tasting, super-high-quality food, but the reason you’re doing it is different. You’re doing it for healthy-living reasons, for the health of your family, versus because it tastes good.

“In addition to that, we’ll send to the doctor in electronic form a list of what we’re giving the people, and they actually break it down into grams and milligrams of cholesterol, carbohydrates, protein, et cetera, and then the doctors can actually put this information into their patients’ medical records, electronically. So this helps them with the diagnosis and treatment of their patients. And we also do this with supplementation — vitamins and minerals. We’re the first company in the United States to do this.”

Exploit technology

While Service Foods was converting to all-natural products, getting them certified, and hiring staff, the company also advanced its use of technology to deliver its new message, its new identity and its new services to its clients.

“We totally redid the website, making it very interactive,” Kantor says. “Now we not only list every product, we also include the nutritional breakdown and any allergens the foods contain, such as gluten, peanuts, MSG, et cetera. And we now have special calculators on our site so clients can see the breakdown of products they buy at stores or in restaurants. And we also had this all done on a mobile site to make it easier to use on the go.

“In addition, we developed our own supplement line called Purely Natural Supplements, and our site has videos on the products and a questionnaire so clients will know what they need. And we researched and had articles written on almost every major disease and on what foods and supplements will help.

“Lastly, with the help of my son Ryan, we became active in all the social media — Facebook, Twitter, LinkedIn, Flickr, YouTube — so we can keep our clients informed and make it easier for them to communicate with the health experts.”

As he has led Service Foods through its transition from a company whose products and services are regarded as luxuries to one whose offerings are considererd necessities, Kantor says the key thing he has learned that he would recommend to CEOs facing a similar situation is that it’s crucial to listen to your staff and to trust them.

“The most important thing you need to know is you have to listen to your people,” he says. “You know, you may be the CEO and the head of it, but all the ideas don’t have to come from you. You’ll just want to make sure the ideas are properly implemented. We broke everything down into teams and let them feel free to help and make suggestions and plan goals. That is by far the best way. You have to really listen closely to the feedback you’re getting. Ninety percent of it may be off base, but 10 percent of it will be good stuff — and stuff that you never would have thought of yourself.”

Kantor has one other piece of advice to offer CEOs looking to make a major transition in their company’s mission: “It’s going to take way longer than you think and cost way more than you think, so you’d better be prepared for that.

“If we had come up with this plan further in advance, it would have been much easier,” he says. “We did it in response to what we foresaw as a financial crisis coming on. But if we had been able to do it just as if it were a change in marketing strategy, we would have had more time to ease into it. That would’ve made it a lot easier.”

Turning the corner

Overall, Service Foods’ conversion took between three and four years to accomplish, and the company has at last begun to see tangible results.

“What happened is that mostly because of this transition, during the real recession we didn’t dip much at all, which was a huge thing for us,” Kantor says. “And we started gaining some market share. But at the same time, we were spending a lot more money to do a lot of the same things, and some new things, with a different purpose in mind.

“The volume stayed the same for a while. Then it started increasing, but the profit didn’t increase — in fact it decreased some because of the extra money we were spending making the transition: the sourcing, the labeling, the certifications, the marketing, the education. So the results we saw were that we didn’t lose market share, then we started to gain market share, but we lowered our profits to do it. Now that’s starting to turn, where we’re still gaining market share, and the profits aren’t deteriorating anymore. They’re starting to stabilize and slowly going up.

“The transition took us a number of years, but it obviously worked pretty good, because we’re now the No. 1 healthy living company in the country,” Kantor says. “But it took a long time and a lot of effort.”

HOW TO REACH: Service Foods Inc., (800) 872-3484 or www.servicefoods.com

 

THE KANTOR FILE

Name: Keith Kantor

Title: CEO

Company: Service Foods

Born: Bronx, N.Y.

Education: B.S. biology and chemistry, City College of New York; MBA, Chapman University; master’s degree, nutritional science, Kaplan University; Ph.D., nutritional science, Corllins University

What’s the most important thing you learned during your years as an officer in the Marine Corps Reserve?

If your people feel like you’re truly loyal to them and will go to bat for them, you will get that back tenfold. If you have the trust and loyalty of your people, you can do almost anything. Of course, as a Marine, I always relate it to battles and things like that, but of course it’s not quite that bad in the corporate world. It’s more petty and less deadly.

Do you have an overriding business philosophy that you use to guide you?

I’m very pro-American and pro-veteran. A lot of my employees are veterans or are in the reserves, and we do a great deal of stuff to back those efforts, like Toys for Tots. If any of my people are activated, they get paid in full. Not just the difference — they get paid in full plus whatever they get when they’re on active duty.

What trait do you think is most important for a CEO to have?

Loyalty. And, you know, sometimes loyalty can be a fault, when you don’t change things up quickly enough out of loyalty, but most of the time I think it’s a positive attribute.

What’s the best advice anyone ever gave you?

You can give somebody fish and they’ll eat for a day, or you can teach them to fish and they’ll never be hungry again. My dad told me that when I was little. I didn’t understand it very well then, but I do now.

How do you define success?

Leaving your mark on society in some form or fashion. That’s why we’re so excited about the new direction our company has taken. If we can truly make a dent in the health care crisis, that’s a legacy that any company or organization would be proud of.

Monday, 30 April 2012 20:01

Jim Forbes: Special Report on Accounting

An accountant can serve many types of roles for CEOs, from hands-off keeper of the books to proactive, fully engaged adviser. It’s up to executives to decide how heavily they want to rely on their accountants. But in general, the more interaction they have, the fewer financial surprises they’ll run into.

“Once something’s done, you can’t change it, obviously,” says Jim Forbes, tax principal with Skoda Minotti. “So we try to tell all of our clients that the more we’re involved on an ongoing basis, whether it’s in decision-making or just helping them forecast where they’re going to be at for the end of the year, the more effective we can be.

“If you’re not having somebody look at your taxes until the end of the year, you can end up getting a big surprise. Sometimes it’s a nice surprise; sometimes it’s not. But the key question is, does the client want to pay for service throughout the year, or do they just want to hire you to be the historian?”

One of the areas where accountants can provide crucial help is in monitoring quarterly tax estimates.

“If you don’t work with your CPA throughout the year, you might be underpaying [quarterly estimates] or, conversely, you might be overpaying,” Forbes says. “If you’re overpaying, you might look at it as a nice surprise. But really it just means you didn’t use you cash efficiently.”

There are many business situations for which accountants, if they’re consulted ahead of time, can provide valuable advice: buying fixed assets, making investments, timing the recognition of income, compliance with loan covenants, and monitoring pricing, material costs and margins.

“For most of our clients, we try to be involved on a regular basis, at least quarterly, because we can give them options — maybe it’s a way to reduce taxes or to run their business more efficiently,” Forbes says. “Of course, they may turn around and say, ‘That’s not what I want to do.’ But at least they’ll know what the options are.”

Jim Forbes, principal with Skoda Minotti’s Tax Planning and Preparation Department, has 17 years of experience working with small and mid-cap public companies and privately held C- and S-corporations.

HOW TO REACH: Skoda Minotti, www.skodaminotti.com or (440) 449-6800

If you run a technology business or a company involved in engineering, medical devices, pharmaceuticals or financial servies, the city of Allen has you in its sights.

“We’ve really been going after the technology companies,” says Dan Bowman, interim executive director of the Allan Economic Development Corp. “We’re a natural extension of the telecom corridor north of Dallas, so we find that a lot of the work force in this area is attracted here because of the educational opportunities. Our school district is ranked very highly, and we tend to attract families that are engineering- and technology-oriented.

“Also, we have a lot of medical device and defense-related companies. We’ve been going after pharmaceutical companies and businesses in the financial services sector, as well as information technology and software engineers.”

Asked what factors a company should weigh if it’s considering moving to North Texas, Bowman cited the area’s high-quality work force, its competitive real estate prices and Texas’s healthy economy.

“As you look at Allen, we have a little over three and a half million people in a 30-mile radius that can commute here, and a lot of them have skill sets that fit the types of companies we’re targeting,” Bowman says. “We have a highly educated work force. You’re not going to have to worry about whether you can attract the talent, because they’re already here.

“If you’re comparing us to the rest of the U.S., a lot of jobs are being created in the Dallas-Fort Worth area. Texas in general has had a robust economy. We weren’t impacted by the mortgage crisis the way other areas were. We were the last into the recession and the first out of it.”

The aspect that most sets Allen apart for firms looking to relocate is the speed with which the city can move a company through the zoning-permitting process.

“We look at the zoning, permitting and construction process almost like the private sector does,” he says. “Government has a tendency to take a long time; there’s a lot of red tape. But when we bring in economic development projects, we fast-track them. The city puts together task forces that include the planning director and the department heads, and they’ll work weekends, evenings — as long as it takes to get the job done.”

Two recent examples of this fast-tracking were Cisco Systems and Cabela’s.

“Three and a half weeks was how long it took Cisco Systems to get the zoning for their data center a couple years ago,” Bowman says. “That’s from when they submitted their paperwork to when they got the zoning. That’s unheard of. And for our new Cabela store, it took just a little over four weeks.

“We realize time is money. We don’t sit on permits. We make sure they move forward.”

HOW TO REACH: Allen Economic Development Corp., (972) 727-0250 or www.allentx.com

QUICK INFO

County: Collin

Incorporated: 1953

Population: 84,246 (2010 Census)

Land area: 27.1 square miles

Government system: Council-manager

Mayor: Stephen Terrell

City manager: Peter H. Vargas

Phone: (214) 509-4100

Web: www.cityofallen.org