Who’s the Smartest Person in the Room?

While BC STATS seems to have it figured out, SMALL BUSINESS BC manages to give pointless, and frankly condescending advice to their “clients”.

As a CPA with a public accounting practice, I too own a small business and can give you pretty good accounting and tax advice. These days we are told to sell ourselves as “trusted business advisors”.

After a few decades in the the trenches, I am an expert at what I do, but I need to acknowledge that my small business clients are the ones with the expertise in their respective fields. I need to understand their businesses adequately in order to provide tax and regulatory compliance advice.

When it comes to your business – you’re the smartest person in the room!

Most successful entrepreneurs worked hard and were probably very smart. Does that mean we should hang on to every word?

 

Startups By The Numbers

Success has a lot to do with luck and timing  – being in the right place at the right time – so we need to take what successful entrepreneurs and investors tell us with a grain of salt. Warren Buffett – one of the world’s most celebrated investors – credits his citizenship and his sex as two of the key factors in his success. He had a one in one hundred and sixty chance of being born an American male in the first half of the 20th century. Without those advantages, he acknowledges he wouldn’t have been nearly as successful.

Clearly Warren Buffet is also hard-working and intelligent, and he wouldn’t have been successful without those attributes either. However there are probably a lot of very hard-working and intelligent rickshaw drivers who spend their entire working lives as rickshaw drivers.

The study referred to in TECHCRUNCH shows that the age and experience of the entrepreneur are key factors when it comes to execution. 

There are countless experts posting business advice on the internet. They are the business equivalent of FAKE NEWS…

They provide general advice in exchange for “eyeballs”. However business advice requires context to be relevant:

  1. Where is your business located? (i.e. what tax jurisdiction?)
  2. What is the risk profile of your business? (How likely is it that you will be sued?)
  3. Is your business adequately financed?
  4. Is the business model sound?

For early stage investors doing your diligence, consider whether your target company has had a CPA involved in compiling his financials. While not a guarantee, it might help the kind of mistakes made in a “party-round” by this Y-Combinator alumni…

Investors shouldn’t blame entrepreneurs for their own sloppy due diligence.

For years, the entrepreneur neither hired an accountant nor prepared a detailed budget. At one point he stopped paying the company’s outside lawyers, leaving his sales team without a legal expert to review the contracts they negotiated with customers. Presumably he was the smartest person in the room.

If you’re interested in a company with “traction” make sure that a CPA has had a look at historical data, before you invest. Even a “Notice To Reader” disclaiming liability won’t likely protect a CPA who carelessly compiles financials that are later relied on.

While your CPA may or may not be the smartest person in your room, they have the skill, the experience – and the liability insurance – to ensure that these kind of blatant errors don’t occur, or that the impact is mitigated.