Howard’s Inner Circle, No. 17: Seeking Solutions

I loved doing mazes as a child and I thought I had an original approach to solving them. A couple of years ago I planned to use a maze as an opening exercise for conference attendees. After giving them time to solve the maze, I explained my theory which I had held onto for over forty years and no longer believe. You see, prior to my presentation, Justin, the art director of my company had looked at the maze and said the best way to solve that particular puzzle was neither from the start nor the finish, but to begin from the middle. He was right!

Howard’s Inner Circle, No. 16: Entries in My Black Book

Not sure all my readers know what a “little black book” is. Wiktionary defines the phase as “an address book, especially one in which the details of previous lovers are recorded.” Don’t think that applies to mine, a looseleaf binder with about 80 encased-in-plastic pages of quotes and paraphases from books I have read.

Periodically I reread my black book to see if what I captured still has value. Also, I revisit it when I feel out of kilter and want to achieve a better balance, or improve my interactions with others.

Here are five quotes that particularly caught my attention today:

“If I ask people what they think of me, they are usually polite. But if I ask them if they’d be willing to tell me what other people say about me, I give them the opportunity to say things without putting them in an awkward position of criticizing me to my face.”

“The word listen contains the same letters as the word silent for good reason.”

“You learn in life the only person you can correct and change is yourself.”

“The more innovative your ideas, the smaller the number of people who will understand it.”

“I know G-d will not give me anything I can’t handle. I just wish he didn’t trust me so much.

Maybe Wiktionary’s description as “an address book, especially one in which the details of previous lovers are recorded.” isn’t so far off. Without giving specific attribution, the five quotes are by Sam Horn, Katherine Hepburn, David Maister, Mother Teresa, and Harry Beckwith.

© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.

Howard’s Inner Circle, No. 15: Dramatic Changes in Tax Planning

I met Dean Zerbe a number of years ago when he became National Director in alliantgroup's Washington, D.C. office. He was formerly a Senior Tax Counsel on the Senate Finance Committee. I took a liking to him immediately and was lucky enough to hear him speak last week at a Firm of the Future free breakfast hosted by Philip Whitman of Whitman Business Advisors and Robert Fligel of RF Resources.

Dean Zerbe understands intimately the dynamics of tax legislation and is especially attuned to the changing winds in Washington. I like that his free newsletter is only sent out when he has something important to say. Most importantly he pulls no punches when he describes the factors and the players that influence tax legislation.

There were some keys points he made that morning indicating to me that accounting firms should be making changes in their approach to tax planning, and in identifying which clients and potential clients are impacted by tax legislation.

Tax legislations’ increased industry focus.--It was particularly evident in the recent health reform legislation according to Zerbe that taxes were imposed on industries or a tax benefit was given to an industry. Take the therapeutic credit/grant which is a limited $1 billon program which ends once that amount is allocated. Interestingly if a qualified company picked by the IRS can’t use the credit it gets a grant. Zerbe points out the IRS form for applying was expected to come out momentarily and there is a very limited time to file. He expects future tax legislation to continue to focus on specific industries as that is easier than changing tax rates in general. Another example of this continued type of focus is a controversial proposal trying to increase payroll taxes for S corporations where shareholders are professionals.

Taking the penalty.—Zerbe expects more companies to pay the penalty for not proving medical insurance benefits as that will result in a greater savings than continuing to pay the benefits. He predicts taking the penalty as increasingly being viewed as a viable option in other situations.

Choosing to pay the estate tax for those dying in 2010.--Zerbe predicts one option that Congress might select is allowing certain estates of those deceased in 2010 subject to carryover basis to pay an estate tax instead and get a stepped-up basis for the property. If this option is adopted or the carryover basis rules are left alone, there are significant fiduciary obligations for these executors and administrators and planning opportunities for the disposal of property with a carryover basis with regard to heirs.

Watch out for tax whistleblowers—According to Zerbe, underpayment of tax whistle blowing is on the increase such as the reporting of companies taking advantage of promoted tax shelters. With downsizing, a move to independent contractors, and the informality of e-mails, it should come as no surprise that a disgruntled ex-employee might seek a reward from IRS. What is fascinating is the number of law firms who are specializing in this. Just do a search on the Internet.

Highlight costs of compliance-- CPAs and the organizations representing them need to put a greater effort in convincing Congress to calculate the costs of compliance when a tax law change is proposed suggests Zerbe. The figures could be included in Congressional reports the same way the revenue impact of specific law changes are displayed.

© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.

Howard’s Inner Circle, No. 14: What is a Community?

Some might suggest a dictionary is the best place to find the definition of the word “community.” Others might point to the entry in Wikipedia. After reading, Wikipedia at http://en.wikipedia.org/wiki/Community, it is readily apparent that the definition depends upon the context in which you are using that word.

You no longer have to live in the same town, nor have direct personal and business contacts, or vote in the same local election to be part of a community. The Internet, e-mail, and other technologies have really broadened what constitutes a community and how many members can belong at any particular time. Also a member of a virtual community takes many forms including being an observer, a registered member, an active participant, and a community administrator. The form can change in an instant. Unlike geographic communities, there are often few ties (a job, home, family, etc.) which bind you tightly. You can simply leave that community and go to another if it doesn’t serve you well.

What do you look for in a virtual community? How about a mission statement you feel comfortable with, that the members believe in, and try to follow. Throw in a code of ethics and list of responsibilities for all its members and participants, including advertisers? How about transparency and full disclosure? And like some geographic communities, security, comfort, and diversity. Deep down a community that promotes the common good, while still encouraging, within reason, self-interest.

Much of business is obtained from referrals. In my experience, writing about CPA firms for many years, they were often the result of a CPA’s relationship building skills with clients and other professionals in the immediate geographic area. The problem is those geographic communities don’t have the stability they once had. Globalization, changing economic conditions, and technology are decimating some communities and creating new ones, often at a dizzying rate.

What communities you belong too is an important decision. In the past, it often revolved around the geographic location and great thought and due diligence would occur before joining a particular community. Because of the ready instant access and the need to participate within these virtual communities, I believe similar standards should be applied in selecting all the communities that we “live” in.

© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.

Howard’s Inner Circle, No. 13: Two Diverging CPA Firm Business Models

Being a detached, independently paid and unpaid observer of CPA firms for over two decades allows me to freely comment.

The early successful business model was a firm with a number of rainmakers, often as little as two or three. They were great at business development especially via one-to-one contacts, and also adept at maintaining and working a tight referral network where referrals were expected to go both ways.

Over time, this well-established model has morphed itself into two new distinct business models. One is where those rainmakers have become the executive committee of a CPA firm that runs in a corporate style. Where previously, firm policies and strategies were hashed out in open discussion at partner meetings, decisions are now made at closed executive committee meetings. And no matter how it is sugar-coated, it is understood who are the powers-that-be, and how getting into the inner sanctum, the management committee, is only done by invitation or by a successful power play.

Contrast that with the second business model that also developed from the earlier rainmaker model. These are firms that strive to operate as a team with management building consensus and having a real understanding of the importance of the various individual’s contributions in the firm’s successes.

If I were to predict which of these two models will prove better, I would select the later. This modified team approach:
• Grooms successors;
• Encourages collaboration;
• Has greater multi-disciplinary capacities;
• Rewards innovation
• Promotes a firm-wide project management instead of a capture-what-you- kill mentality;
• Is more susceptible at building real working alliances;
• Taps well into intergenerational resources;
• Promotes widespread mentoring in both directions;
• Supports technology at all levels; and
• Is structured for everyone to be focused on their roles in business development.

In both models relationships remain the key, and referrals are still the main source of new business. The real difference is the lack of community in the corporate model. Although lip service might be given; it exists only in name and spin. The second model, the modified team approach, with a real manager rather than a CEO, truly promotes community. This approach will turn out better in the long run as all indications are technology, globalization, outsourcing and many other factors are permanently changing the rules of the game. Businesses and professional firms will be seeking to become members of various communities and will do so only by building trust and cultivating loyalty as the basis for relationships. Only one of these diverging CPA firm business models lives that.
© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.

Howard’s Inner Circle, No. 12: The Current Decrepit State of “Journalism”

One article entitled, “Ditching a $500,000 Salary to Teach Lit,” says it all. I found the article on Yahoo! Finance at http://finance.yahoo.com/career-work/article/109420/ditching-a-500000-salary-to-teach-lit?mod=career-worklife_balance. It was provided by CCNMoney.Com and written by a contributor.

What I expected as I read the title was a story about a difficult decision and how the transition went. The hope was to learn from this individual’s experience. I would have never read the article if the title, although a bit longer more accurately read “Ditching a $500,000 Salary and Selling Your Business at Age 50 for $6 Million to Teach Lit.” We can work at shortening my title if you want, but you get the idea. By the way, there were three bold faced tips in this short article on how he did it. They are 1. By Taking the First Good Offer; 2. By Investing Conservatively, and 3. By Drawing Down Cautiously.

This is the current state of “journalism.”

© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.

Howard’s Inner Circle, No. 11: What Is the Best Book You Ever Read? Why?

I read a lot of self-help and business books and always get a few kernels of brilliance from them. However, the self-help books often bother me as many are constructed as workbooks filled with exercises and warnings if you don’t do the exercises you won’t get anything from the book. The business books are also heavy-handed, as authors after making one keen observation apply it in every context he or she can think of to prove its worth.

The most recent book I read was Paper Airplane by Michael McMillan mentioned by Tim Storey in Utmost Living. It was very good, but not my favorite. It tried to be too many things: a self-help book, a business book, and camouflaged with brilliant design work, also as a children’s book. In the end, it reminded me of my favorite book.

Tom and Pippo Make a Mess by Helen Oxenbury is hard to find as I believe it is out-of-print. I discovered this so-called child’s book at well over age 50, when it was brought to my attention by Alex’s father. He had been reading the book to Alex for many years (my guess at least eight). Alex, a remarkable young man, who has fought with tenacity since he was born at a birth weight of 21 ounces, loves the book, and often, after his father finishes reading it, rips up the book and makes a mess.

Every adult and child can benefit from its message whether as a gentle reminder or as a wake-up call. Unlike the many self-help and business books, Tom and Pippo Make a Mess has an ever so-light touch, and encourages the reader to think and reach his or her own conclusions. Equally important, the book’s message with Alex’s comment resonates louder the more times you read it or have it read to you.

What’s your favorite book? Why?
© 2010
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The above is from the newsletter, Howard’s Inner Circle, which periodically appears on the blog, “Instigator” at http://howardwolosky.blogspot.com/. It may be reproduced in full if that fact is stated and Howard Wolosky is credited as the author.