Academic journal article Journal of Accountancy

Kick the Tires of a New Niche; CPAs Who like Cars, Entrepreneurs and an Active Environment Should Woo Dealership Clients. (Practice Development/Consulting)

Academic journal article Journal of Accountancy

Kick the Tires of a New Niche; CPAs Who like Cars, Entrepreneurs and an Active Environment Should Woo Dealership Clients. (Practice Development/Consulting)

Article excerpt

EXECUTIVE SUMMARY

* AN AUTO-DEALER NICHE IS recession-resistant. In a poor economy dealers might want to cut CPA services but will need help with expense and inventory control. There are essentially five revenue streams in any dealership, and owners can adapt profit lines to fluctuations in the economy, making for stable businesses.

* TO GAIN FAMILIARITY WITH the structure of dealerships and the car industry, a CPA should read industry periodicals and skill-building books and take courses.

* CAR INDUSTRY CPAs PREPARE INCOME TAXES and perform tax planning, employee benefits planning, business valuations, litigation support, succession planning, outsourced internal audits and internal control reviews.

* SERVICES IN THE RETAIL AUTO ARENA include Lifo inventory valuations, factory relations and approval packages, financial analysis by division, fixed operations reviews and operational guides, and analysis of financing alternatives.

* IN A DEALERSHIP THE REVENUE "PIE" is divided along these lines: 50% to 60% of gross from new-car sales, 30% to 35% from used-car sales, and the rest from parts, service and the business office. The profit margin on a new car is about 6%.

* A CPA SHOULD ATTEND ASSOCIATION meetings to get to know dealers and build a comfort level with them as well as learn about industry issues. Two good places to network are the NADA and AICPA conferences.

Are you the "David Letterman" of your office? Not the office comedian, that is, but the person who takes a vacation the week of the Indianapolis 500 to go to the speedway. No? Then perhaps you detour past car lots just to see what's new--or keep a well-thumbed copy of The Hemmings Motor News Book of Studebakers in your bottom desk drawer.... If your affinity is for wheels, why not cultivate a dealership clientele?

Even if you're not car-crazy and are just a levelheaded CPA cruising for business growth, there are opportunities in this specialty, say experienced practitioners. Here's a look under the hood.

A SPECIALTY WITH TRACTION

Dealerships offer CPAs corporate clients with healthy, steady revenues, and many have in-house accounting staff to ease data gathering, sources say. They're big enough to support fair fees and generally are prompt payers. Most dealers have a sales background and are decisive, independent people with a "Just get it done" attitude. Once they know a practitioner understands their business, they freely recommend him or her to colleagues.

Diane Weinhold, CPA and partner at Diane Weinhold LLP, in Orange County, California, has worked in the retail auto industry for more than 40 years and has gained perspective from living through many up-and-down business cycles. The industry is recession-resistant, she says. In a poor economy dealers may want to cut the CPA services they buy, but "they need you more in a downturn" for expense and inventory control and keeping a close eye on cash flow, she says. "They're affected by economic cycles, but very few go bankrupt," Weinhold says. (See "The Business Floor" page 31.)

Deb Gammon, CPA and sole practitioner in Chicago, agrees that the niche is stable and says many small-town dealerships have been around seemingly "forever." She adds that "a lot of dealers want their CPA to be involved" in helping them develop business ideas, which opens a door to a range of work opportunities.

Jim Downey, CPA, CVA, of Downey & Associates in Braintree, Massachusetts, is an industry specialist who says retail auto dealerships have been spared the roll-ups that have affected office supply stores, hardware stores, pharmacies and other Main Street bread-and-butter businesses. The auto-industry consolidations that have occurred are not nationwide "category killers" that wrest accounting business away from local CPA firms, he says.

Rebecca Dunsworth, CPA, a tax partner in the Dealer Services Group at Crowe, Chisek in Oakbrook, Illinois, says she likes the niche because "there's always something new" in the way of product lines and promotions. …

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