Magazine article Talent Development

Diary of a Consultant

Magazine article Talent Development

Diary of a Consultant

Article excerpt

In last month's entry, we learned how Claw Zahn Associates began its steady climb toward sustaining its own existence through project management, careful calibration of accounts receivable versus accounts payable, and some progressive client management and sales techniques. This month, David provides insight into how he and his partner Jeff juggle the wants, desires, and needs of the business against the realities of budget and need for frugal spending habits.


October 16: Every Nickel Counts

Based on our ccess in the first few months, Jeff decides to accelerate his plan to move to Texas and work in a state that doesn't have a state income tax. What was something "off in the near future" has now become a "we are outta here by summertime" decree. Already salivating at the savings they'll derive, Jeff's wife Bev is contacting realtors and interior decorators in the greater Dallas area. This is all moving too fast for me. I feel as if I'm being swept up in cresting waves of the surf and am about to be pounded onto the shore with an unceremonious thud. What started as big dreams and unclear visions are quickly becoming realities. Am I ready to do this? We just started the firm, and now we're expecting it to absorb the cost of moving one of us to Texas and perhaps me and my family following in a few years when my kids are out of grade school. As much as Jeff and I had discussed a move when we planned our launch, having it become real causes me to swallow hard.

The sudden focus on savings, costs, and projected sales as a way to help fund Jeff's move leads me to become fiscally conservative. I tell my wife I'll be packing a lunch of peanut-butter-and-jelly sandwiches for the next few days. Even though I'm making more money than ever before, I'm also more fearfully aware of the pay cycles of our clients. Cash-flow projections and calculations flood my mind continuously, and I catch myself wondering whether each project will be the last. Ordinarily, my perspective and approach to situations are at odds with sound accounting principles. For instance, I like to round off and estimate expenses and find it onerous to track receipts and document mileage for each business trip. Our accountant doesn't agree, as you might imagine, but then he's not that much fun to be around and says the "service" (his nickname for the IRS) isn't a lot of fun either. After lunch, I dedicate the remainder of the day to reacquainting myself with ways to squeeze, massage, and cajole my money to work harder for me.

October 18

We meet with our accountant to see what we can do to hold onto our money in preparation for the fourth-quarter estimated tax payment and the end-of-the-year payment we'll have to file in April. Wanting to be proactive, we might as well discuss our options now and choose a course of action. Allow me to briefly summarize what this highly paid professional told us:

"At your current income level, you owe the feds 39.5 percent of every dollar you earned. The state also wants its cut of the pie--another 4.5 percent. Social Security and Medicare payments will bite off another 13.9 percent or thereabouts because you pay employer and employee portions."

When we ask how we can minimize those expenses, he smiles (see, accountants do have a sense of humor) and says, "Basically, you have two options. One is to pay those amounts; the other is to go to jail for nonpayment of taxes."

After a quick conferral, Jeff and I decide to pony up. As our accountant leaves, Jeff renegotiates his fee from a retainer to hourly (no sense paying outlandish sums for such terrifically insightful advice). Trying to be sympathetic to our plight, our accountant offers this comforting recommendation: "I suggest you buy a building. At least then we can deduct the mortgage." I hold my tongue but think, I went into business with Jeff, but now it seems the service and feds are my silent partners and our accountant is talking about what "we" can do. …

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