|ANITA DENNIS is a Journal contributing editor.|
Imagine this scenario: A large corporation is undergoing a merger. It needs seasoned finance and accounting staff who have hands-on experience coping with all the quirks of acquisitions. However, the expanded company isnt in a position to hire new staff and, even if it could, the need for these people would basically evaporate once the merger is accomplished.
Because of changes in corporate attitudes and in the nature of employment itself, more and more companies find themselves seeking high-level employees for short-term projects. In 1990, four CPAs with backgrounds in Big 6 firms and in industry decided this development had created a marketplace niche they could fill. They created Accountants 4 Contract, a company that provides businesses with high-end accounting, finance, tax and business management talent for assignments that might last from a few weeks to a couple of years.
Problem: Capture a niche in the short-term employment
AN EXCITING TIME
Dan Maisler and two of his cofounders met while working together in the 1980s at Wells Fargo, which was in the midst of acquiring Crocker National Bank. We were all very much involved in the Crocker acquisition, he recalls. It was an exciting time because there were a lot of new challenges. We were breaking new ground. But although the company was pulling out all the stops to get the job done, we found there wasnt a lot of help available. The company didnt want to do any permanent hiring despite the big budget for the project. We had to scramble to find highly qualified people to work on the merger who wouldnt be permanent hires.
Maisler was later recruited to work at Pacific Telesis, which was continuing to build an infrastructure after the AT&T spinoff, another situation in which the company needed high-level experience for a finite period. He later worked as a consultant, finally meeting up in 1990 with two of his CPA colleagues from Wells Fargo, who were also consulting. All three had worked independently or through short-term placement agencies, and found that many of the people sent by temporary agencies were not of the same caliber as a CPA with high-level industry experience. Having stumbled onto this gap in the marketplace, we decided to do something about it, Maisler says.
The founders first planning sessions were in restaurants in the San Francisco area, but they later had to meet at their own dining room tables when they noticed other diners eavesdropping on details of the new venture. They set out to offer experienced accounting and finance help to a range of companiesfinancial services, manufacturing, distribution, retail, not-for-profit, hospitality, legal, real estate, health care and public utilitieson a temporary basis. They initially expected to serve midmarket companies, but these businesses werent spending any extra income in the lean early 1990s. Larger corporations, however, had cut back substantially on employees in the downsizing binge and were happy to shore up their knowledge gaps with high-level temporary help. We got very large clients very quickly, says Maisler, including Itel, Wells Fargo and the Bank of America.
In one 60-day assignment, a bank used a temporary accounting manager to conduct due diligence on loan portfolios when it acquired several mortgage companies. Another associate from Accountants 4 Contract later integrated the mortgage companies accounting systems with the banks systems in a four-month job. When the bank standardized all its mortgage accounting systems, four associates spent 1 years completing the assignment.
In another case, a large biotechnology company employed a construction specialist with 20 years experience to oversee accounting, cost allocation and estimating when it built a new research facility. In a project that may take three years, a food manufacturer brought in a team of associates at different experience levels to help a division reconcile receivables during a relocation.
A LOT OF TALENT
Industry cost-cutting early in this decade also made it fairly easy to find the kind of temporary help the company was promising to clients. Businesses were cutting staff like mad, recalls Maisler, who has since become president of the company. A tremendous number of talented people were on the market. A lot of them were uncomfortable starting their own businesses and many companies were shying away from hiring individual consultants because of worries about IRS independent contractor rules. The company was able to find all the qualified people it needed simply by asking friends and former colleagues.
All of the staff who are farmed out to corporations are technically employees of Accountants 4 Contract. As such, these people, known as associates, receive 100% medical and long-term disability coverage, plus a 25% pension plan bonus. The company founders chose to offer generous benefits because they wanted to attract top-notch talent, targeting those with 10 to 25 years accounting and finance experience. All associates have corporate backgrounds and many have worked for the Big 6. Clients are charged for services based on an hourly rate between $60 and $125. Rates are determined based on the work assignments complexity and exposure. Maislers company must price each engagement to cover the costs of the associate, benefits and a contribution to overhead and profit.
If the client ultimately decides to hire the associate permanently, the company does not charge a placement fee. We view job offers to our associates as an indicator that we have a good match, Maisler says. Last year, we lost two associates to client offersalthough one recently returned to Accountants 4 Contract. It does not happen a lot because the kind of people we attract dont want all the hassles that go along with a staff job, such as office politics, limited advancement, starting over in terms of seniority and reduced benefits.
Despite the attractive benefits package, the founders still had to reassure highly skilled personnel about what they were getting into. We did a lot of selling not only to clients but also to recruits, Maisler says. Most potential associates thought of it as temp work, but it has turned out to be anything but. This is a long-term-relationship business. We have associates who have been with a client for three years. Someone will do a great job in one area, and when he or she is finished, a person in another area will recognize that the associate knows the client systems and has a proven track record, so the client reassigns the associate to another high-priority job. As the company proves itself with clients, it receives longer-term assignments, such as a general ledger conversion or working on the accounting for a construction project that has an 18- to 24-month time commitment.
If we know that an assignment has long-term potential, we build in fee escalation clauses targeting fixed dates, such as six months or a year, Maisler says. On assignments that are time indeterminate, we periodically review and watch for changes in responsibility or scope. We try to peg rate changes to value added. If an assignment lasts for a year, we approach the client for an annual increase.
Name: Accountants 4 Contract.
Although the potential was strong, the founders proceeded with caution at first, choosing not to borrow for a lavish start-up but, instead, paying for the minimal initial expenses themselves. We had zero overhead, Maisler reports. We didnt rent or buy anything. The founders, who ultimately numbered four, worked out of their homes in the beginning and used their personal office equipment and computers. Our first office was a mail drop box so we had a professional-sounding address. We also had voice mail. During the summer of 1990, the company tested the waters by offering a few initial clients some very short-term help and found the concept workable. In September, the business was launched as a full-time partnership. The founders paid themselves half the company income and rolled the rest back into the business.
High-quality laptops were one early, unexpectedly successful purchase. That got us several assignments because companies were so resource-constrained early in the 1990s that they didnt have spare computers. We could tell them we brought our own. This policy no longer is followed because businesses now use a larger variety of spreadsheet and word processing software than they did in the early 1990s and because they have greater concerns about the spread of computer viruses. However, the generous benefits policies and the investment in laptops demonstrate why it makes sense to pay more for certain strategically important items, even while scrimping on things such as office rental costs.
Another smart move that Maisler would recommend to other CPAs interested in launching businesses was the pocket veto given to each of the founders at the outset. All decisions had to be made without dissent. That was wonderful in the early days because it built team work and camaraderie. It forced us to seek more collaborative answers. We had to consider and address each others concerns and clear up misunderstandings. That helped us build trust and get to know each other and our different philosophies. Although the company has since expanded to three locations and moved from a partnership to a C corporation, we retained that sense of trust even as we have moved into a more hierarchical organization. All four founders remain with the company.
Although other companies offered short-term accounting help, none had yet staked out the high end of the market and offered associates with hands-on industry experience. At the outset, according to Maisler, we didnt find a lot of direct competition; we had marketplace confusion instead. We had to explain about the higher caliber of our services and our people. The founders planned on doing this using a brochure but found it was much more effective to meet with prospective clients and talk them through possible scenarios. They also discovered that their associates were a powerful marketing tool.
A lot of people called us because they were unhappy with their current service from temps. They would come across one of our people in a meeting and be impressed. They would call us and say, Id like someone like that. Thats the way we grew. We could add six people at a new client because the client had seen one good person on the job. The company stuck to networking and avoided advertising. We were concerned we would get swamped by demand and not be able to deliver. That would have been as bad for the business as having no business at all, says Maisler.
The company did not have to run an employment ad until last year. With the uptake in the economy and the big growth in Silicon Valley, our recruiting job has been much more difficult. At one time, Maisler says, high-tech companies were reluctant to hire staff, even in accounting and finance, who hadnt already worked for a technology business, but that has changed. They are more open to people from other industries. The field has a tremendous allure, so it takes away a huge pool of talent. That has hurt our recruiting, but it has helped our business, because other employers are having trouble competing with Silicon Valley for recruits, too.
Maisler dismisses concerns about the insecurity of the jobs that associates take. Does anyone have a secure position in Corporate America? he asks. Our associates can get a wider variety of experience, plus we pay great benefits. He points out that the trend toward job-hopping leaves many people without much in the way of retirement benefits. You can be into your 30s and have no retirement savings. If you work two years for us, youll have more retirement savings than if you worked three to four years in a corporation.
A PEOPLE BUSINESS
For other CPAs interested in this developing niche, Maisler advises that they stick to familiar turf. Our first clients were financial services giants because we came from banking and financial services organizations. We built a solid reputation before we went into other business segments. We stay away from the smallest businesses because they need more and broader support. Before launching a new business, he says, if you cannot think of 10 people you could approach directly who have authority to engage you, think about entering a different business or wait until you have built more contacts.
Keep in mind, as well, the unusual nature of the business relationship. We are running a people business. Essentially, we have no product, no opinions to render, no document to offer, no engagement letters. We concentrate our attention on serving our clients and supporting our associates. That makes us part bartender and part hairdresser. Our egos have to be checked at the door. We seek to make clients look their best.
A BRIGHT FUTURE
Since its beginnings, the company has expanded from San Francisco, adding an office each in Los Angeles and Boston. The largest single assignment it has handled was sending six people to help out in an acquisition, but many companies ask for multiple associates for different departments. In some corporate meetings, 6 of 10 people in the meeting might be our associates. They might have employees, contractors or lower-level temps reporting to them.
Maisler sees a bright future for his industry. Our business is limited only by the number of quality people we can hire. And once prospective associates know about us, the sell is easy. The company has started a visibility program to attract more recruits, participating in a local job fair. We investigate the demographics of job fairs and attend only those that have a strong correlation to our target recruits. We also understand the cost-benefit analysis. I know what I earn in contribution to profit and overhead from an associate, so I know what I can spend to recruit one, Maisler says.
He believes the aging of the baby boom generation will have a profound effect on the employment market, causing potential labor shortages in the coming years. In 20 to 25 years, companies may have to downsize if they cant find the people they needor find an alternative means to handle their business. There will be pressure on people not to retire and staff may jump from one company to another more readily because corporations will lure them away. In this environment, companies like ours can provide stability. We allow people to maintain continuity of employment and to get a market rate for their work.