Golden Business Ideas

BY STANLEY ZAROWIN

Risk Can Be a Good Thing
It sounds like a contradiction to say, “Playing it safe can be risky.” But, in fact, it’s prudent advice, and too often ignored by the faint of heart and unimaginative manager.

The critical words are can be. Consider this scenario:

For some time, your well-established CPA firm, situated in a small Midwestern town, has been offering, in addition to basic accounting services, computer technology consulting. While your firm has faced some competition, none of the other local accounting firms has had the resources to challenge you in the technology field and it’s become the business’s lucrative cash cow.

Lately, the firm’s conventional accounting business has been a bit sluggish; thus revenues from consulting have been critical. Your firm has been selling the same accounting software packages for many years, and you have been reluctant to make the investment required to take on new software products or even to develop the necessary expertise.

Then one day a client mentions another CPA firm has made a sales pitch focused on the benefits of the new, more powerful accounting software. The competitor, it turns out, had hired two CPAs who are recent university graduates with a specialty in computer technology.

Clearly it’s decision-making time. As managing director you confer with your partners to weigh the risks and opportunities of investing in new technology. Playing it safe is a rational choice; it conserves cash and doesn’t cut partners’ income. And who’s to say that the tried-and-true software you’ve been selling isn’t still good enough for most of your clients. Not only is it risky to invest in new technology, but also there’s no assurance your clients will be better served by it.

The partners, sensing your conservative bias, come to a consensus: We’ll play it safe and sit tight for the time being.
After a few months, one of your smaller clients, considering a major expansion, realizes he needs more advanced software and transfers his business to the other firm. A few months later, another slips away—for much the same reason.

Then one of your very small clients leaves. It turns out that the technology competitor set it up with one of those low-cost, do-it-yourself accounting software packages. You’ve resisted promoting such packages, fearing it would further reduce your income.

The loss of business is slow—too slow to sound an alarm of impending disaster. By the time you recognize the trend, it’s irreversible. This new, once small competitor now is established locally as the advanced business technology maven, and you’re left with a stable composed of mostly no-growth clients who, like you, failed to recognize that taking a risk sometimes can be smarter than playing it safe; or maybe they just didn’t have the courage to move forward.

If the scenario hits home, maybe it’s time to reassess your tolerance for risk. In this fast-moving business environment, it is not unreasonable to conclude you must “either grow or die.”

Learn From Younger Employees
Don’t dismiss the ideas of those youthful workers who just joined your company. Although it’s true they lack your years of hands-on experience, just think of all the new things they learned in business school—about computers, systems management and other high-tech topics.

Advice: Become their mentor, and while you teach your new protgs the ropes, pick their brains.

STANLEY ZAROWIN is a freelance writer in Zionsville, Indiana. Mr. Zarowin retired from the JofA in 2003. His e-mail address is zarowin@mindspring.com .

An Invitation
The JofA publishes a monthly collection of Golden Business Ideas and invites readers to contribute their favorites (for attribution, if you like).

Send your ideas to contributing editor Stanley Zarowin via e-mail at zarowin@mindspring.com or regular mail at the Journal of Accountancy, Harborside Financial Center, 201 Plaza Three, Jersey City, NJ 07311-3881.

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