EBITDA; Blah, Blah, Blah…

By Wellness Capital Management

I would love to meet a CPA that provides sound business advice to business owners that is usable, and understandable.

Business owners own and operate businesses. It may shock your CPA to know that reading a financial statement was not the first thing you learned when you opened their business or practice. Surprise, the majority of business owners are not financial MBA’s! Business owners have the courage to make commitments: to sign loans, leases and hire employees. They know (or seek to know) how to control cash and costs. They seek good competent guidance, not high-brow academic theories.

Sweating payroll on Friday, is one of those little joys we experience as business operators. I can’t say it is fun, but as we grow our businesses, it is sadly a right of passage. As we’ve learned the hard way, money doesn’t arrive on a magic carpet in neat little bundles; it is earned. It is our responsibility as financial professionals is to help you understand, plan and improve profitability.

Your financial professional should provide checks and balances (pun intended) on you growth, profitability and equity during the year. They should not buzz in at year end and tell you to acquire new equipment to lower your taxes. As a business owner, you go to your financial adviser for tax advice and to help organize your Balance Sheet. You want someone to guide you through that confusing and bureaucratic tax code; not by making you read it, but by telling you how to organize your finances so you don’t get reamed.

This is what you should tell your CPA if they are acting as your financial adviser or bookkeeper:

  1. Show me financial statements that illustrate what is going on in my business.
  2. Demonstrate to me what it costs me to operate.
  3. Give me a Chart of Accounts and tools that help determine breakeven and manage profitability.
  4. Don’t pretend to understand my business if I only see you once a year at tax time.
  5. Help me form a plan that minimizes the taxes I am going to have to pay.
  6. Take the time to listen to me and don’t be preachy.
  7. Help me form an exit strategy which includes understanding how to value my business.
  8. Look at me and my business holistically. You know that how I am paid from my business and how profitable my business is will affect my personal tax situation. View them as a whole and give me comprehensive advice.
  9. Be honest with me as to what your strengths are. If you can’t give me timely financial information that is accurate and useful, don’t tell me you can do my bookkeeping. If there are more cost-effective and efficient services available, tell me.
  10. Please know the tax advantages of setting up my business entities correctly. (For example, that my real estate and my business should be in separate corporations).
  11. Don’t give me rhetoric or fancy language that means nothing to my daily business operation. EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) has a nice poetic ring to it, but since I’m not the MBA, CPA or CFA that you may be, can’t you just call it something that I am familiar with; like “Net Profit”?

Wellness Capital Management wants to help maximize your business potential and guide your overall financial vision. If you’d like to talk about it, call. The first call is free.