Summer 2013
Sweet Success An informal advisory board was a key ingredient for Main Street Gourmet
breaking down Audits vs. reviews
focus on Turbulent times
get to know Bob Littman
going for gold How transparent are you? The economic recession that began in 2008 resulted from corrupt business dealings that withheld vital information from people involved in the mortgage process. These opaque activities occurred from management that lacked integrity, and they had a catastrophic effect on the global economy. How can we, as business owners, do our part to prevent a recurrence? The answer may be to become transparent. Transparency in business is easily implemented given today’s technological age. Developing an open communication structure within your organization can build trust and empower your employees with a new sense of belonging and purpose. The June issue of Entrepreneur had an interesting statistic from an annual survey conducted by Boston-based Interaction Associates. According to the study, trust levels have declined every year since the financial collapse began, except 2013, with the largest drop coming immediately after the crisis hit. By swiftly, and sometimes secretively, executing layoffs and cutbacks, many bosses hid their companies problems from their staffs, leading to a significant loss of faith in management. Companies that better weathered the storm operated more transparently, allowing staff to provide solutions and participate in brainstorming sessions. Our clients and employees have made a decision to place part of their lives in the hands of their business leaders. It’s the job of these leaders to make sure their clients and staff know what’s happening — that means the good, the bad and the ugly. Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, recently stated in a speech in Washington, D.C., that, “In the last decade, the trend towards greater transparency accelerated.” Utilizing techniques to communicate what is happening to all levels of staff creates a team atmosphere that fosters free-flowing idea sharing across organizations. Alan Webber, co-founding editor of Fast Company magazine, was quoted as saying, “The other very different leadership model involves adopting specific trust-building practices with regard to investors, employees and customers. This approach means that people know what you’re doing, why you’re doing it. You’re appealing to their values — and practicing more transparency, utilizing more clarity in communications.” What is our best avenue to instill and implement transparency? Communication simplifies how we keep information flowing to clients and employees. Full disclosure across all levels builds trust inside and outside of organizations. Give your employees the tools they need to create more trust in your business by becoming transparent.
www.SSandG.com 800-869-1834 info@SSandG.com AKRON 301 Springside Drive Akron, OH 44333
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SS&G HEALTHCARE SERVICES 275 Springside Drive Akron, OH 44333 800-288-2818
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PAYTIME INTEGRATED PAYROLL SOLUTIONS 31105 Bainbridge Road Cleveland, OH 44139 800-579-9529 Send letters to the editor and story ideas to Solutions@SSandG.com.
Mark Goldfarb, CPA Senior Managing Director
IRS Treasury Regulations require us to inform you that any tax advice contained in the body of this communication was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.
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SS&G is a founding member of LEA Global, an international professional association of independently owned accounting and consulting firms.
first person Bob Littman Title: CEO Degree(s)/College(s): Bachelor of Science in accounting, University of Arizona; master’s degree in tax, University of Akron Hometowns: Cleveland and Akron Year I joined SS&G: 1985
When I was growing up, I wanted to be: An airline pilot My first job: Tennis instructor. I built good communication skills and I started my career of giving advice. The word that best describes me: Ambitious My first day at SS&G, I remember thinking: I needed to find some clients so that I had something to do. The best part about my job: No day is ever the same. My business philosophy: Lead by example. Influence people to do things because they want to, not because you have the authority to make them.
At least once in their life, I think everyone should: Pursue their passion. You don’t want to look back on life and say, “Why didn’t I try that?”
Becoming CEO at SS&G means: Being able to impact a great organization that can continue to grow and provide opportunities to our employees. The person I admire most: My father. He gave me the chance to make my own decisions and to become independent. My greatest achievement so far: The four women in my life — my daughters, Jamie, Tara and Allison, and my wife, Leslie. At least once in their life, I think everyone should: Pursue their passion. You don’t want to look back on life and say, “Why didn’t I try that?“ If I weren’t doing this, I would: Be building another business.
On weekends, I look forward to: A run in the park, a round of golf and a lot less email. My favorite place in the world is: The top of Camelback Mountain. When I get discouraged, I: Never look back. I am always looking forward. My attitude toward change is: You can’t stop change, you can only embrace it. Success is: Looking forward to each new day. j
My favorite movie: Shawshank Redemption My next personal goal is: To relearn how to play the piano.
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industry Audits vs. reviews
How to determine which level of assurance services is right for your business
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ssurance services are not one size fits all, and it’s up to you to determine what level of assurance your business needs with respect to its financial statements. Two of the most widely used assurance services are reviews and audits. To figure out which will best serve your company’s needs, you have to understand the differences. “Essentially, different levels of service give the user different levels of assurance and comfort with respect to their financial statements,” says Carol McNerney, director in charge of the assurance practice for SS&G. “Each requires different types of procedures by the independent public accounting firm.” In a review, the accounting firm analyzes financial numbers that have been provided by the client organization and makes pertinent inquiries regarding how data have been processed and numbers calculated. The firm also inquires as to why financial results differ from expected results if that is the case. In an audit, the accounting firm performs detailed tests of the account balances underlying the financial statements. “In an audit situation, the auditor obtains a much deeper understanding of the company’s internal controls and performs an assessment to determine where there is more risk that certain account balances may be misstated,” McNerney says. “The firm designs auditing procedures in response to the company’s identified risk
“We’re handling a lot of cash, so we’re going to need somebody to provide a much more thorough assessment of our procedures and internal controls as we continue to grow.” — Tim Corman, CFO of Weltman, Weinberg & Reis Co. LPA
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“Lenders who have made significant loans to clients may require annual audits as a condition for maintaining that credit.” — Carol McNerney, Director, assurance services, SS&G
factors. In a review, the accountant focuses the inquiries and analytical procedures based on his or her awareness of areas where there may be misstatements in the financial statements developed from an understanding of the client and the industry in which it operates.” Companies that have offsite ownership are among the entities that may find it more prudent to undergo an audit. “If you have offsite ownership and you want to have more comfort in the numbers that your on-site leaders are reporting to you, you might choose to have an audit,” McNerney says. “Lenders who have made significant loans to clients may require annual audits as a condition for maintaining that credit.” Tim Corman, CFO of Weltman, Weinberg & Reis Co. LPA, manages the financial numbers for the growing law firm. Presently, SS&G conducts reviews for the firm, but Corman anticipates that it will require the more in-depth auditing services in the near future. “SS&G has performed a review of our financial statements for a number of years,” Corman says. “But as we have grown and become more complex operationally,
we are considering elevating that service to an audit, as it is a much more comprehensive assessment. We’re in the process of doing a lot of things to prepare ourselves for transitioning to that level of CPA activity.” Weltman, Weinberg & Reis is in the debt-collection business, so as the firm grows, it will deal with a much larger flow of money, necessitating a much more detailed look at its yearly financial performance. Corman hopes to have his firm positioned for auditing services within the next two fiscal years. “Because we collect debts owed to businesses, we put the money in a trust and then flip it over to the client,” Corman says. “In short, we’re handling a lot of cash, so we’re going to need somebody to provide a much more thorough assessment of our procedures and internal controls as we continue to grow. That is one major way an audit differs from a review, and that’s why we’re considering the move to audits.” j HOW TO REACH: Weltman, Weinberg & Reis Co., 216-685-1000 or weltman.com
Audit
Review
Highest level of assurance
Limited level of assurance
Auditor performs detailed tests of the account balances underlying the financial statements
Accounting firm analyzes financial numbers provided by client
Auditor obtains an understanding of the company’s internal controls and performs assessment to determine where material errors could occur in the financial statements
Accounting firm inquiries how data has been processed and numbers calculated, and why financial results differ from expected results, if that is the case
Designs auditing procedures in response to the company’s identified risk factors.
Focuses inquiries and analytical procedures based on awareness of areas where there may be misstatements in the financial statements.
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case study
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Sweet Success An informal advisory board was a key ingredient for Main Street Gourmet
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ain Street Gourmet may operate behind the scenes of the food-service space, but its presence is as obvious as the muffin on your plate at breakfast. The custom bakery, founded and still located in Summit County, Ohio, provides muffins, cookies, brownies, cakes, scones, biscotti and other baked goods to major restaurants and grocery store chains throughout the U.S. Although the company produces some lines of retail products, it operates primarily as a wholesale outfit, meaning that consumers seldom see its company logo. But just as Main Street Gourmet is a major behind-the-scenes player in the food service industry, there are major players working behind the scenes at Main Street itself. From 1993 to 1996, and again from 2004 to 2011, Main Street co-founders Steve Marks and Harvey Nelson maintained an advisory board consisting of influential Akron-area business figures. For those critical years, Marks and Nelson drew on the expertise of the advisory board to guide company decisions and help build Main Street into the $25 million food manufacturer it is today.
Photos: Kevin Kopanski
Seeking assistance Main Street started in 1986 as a single muffin shop located in a downtown Akron building purchased by Marks and Nelson. Six months after the business opened, a restaurant owner asked to buy a batch of raw muffin batter. The pair agreed, and the next day — and the next — the restaurant owner came back for different flavors. Before long, momentum was building, and the business took off in a new direction.
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“That’s the short story of how we got into wholesale,” Marks says. “From there, we started to branch into cookies, brownies and cakes, making them in different customized forms, depending on the needs of the individual customer.” As more restaurants and store owners became interested in their muffins, the pair ramped up production even further. By the early 1990s, the company had transitioned to a full-service wholesale bakery, offering products such as granola. “We found we needed different kinds of equipment and new processes that we had to learn from the start,” Marks says. “As with many of our new offerings, we started making it by hand in smaller batches until we saw if it would make sense to invest in new equipment. You have to do the research and gauge when you can expect a return on the investment and whether the customer is going to be pleased with the product.” As demand grew and sales continued to increase, Marks and Nelson, who were still in their 20s, wanted more direction. So in 1993, seeking the advice of experienced area businesspeople, they formed Main Street Gourmet’s first advisory board. Marks and Nelson used their connections to reach out to experienced businesspeople, seeing their input on the path the company should take for growth. The board was strictly on a volunteer basis. “We were in both retail and wholesale, and we were
“We didn’t pay (the board members) in terms of monetary compensation, but we were always willing to pay them back however we could.” — Steve Marks, Co-founder, Main Street Gourmet
honestly in a quandary at the time,” Marks says. “We were in a certain stage of growth and we knew we could go through many more stages. We were young businessmen in our 20s, and we wanted the advice of people who had been there before.” The board of advisers never existed as a legal entity, and the advisers — five or six at any given time — did not cast votes on corporate decisions. Instead, they simply provided a vast reservoir of knowledge and experience for Marks and Nelson to draw on as they considered the decisions that would affect the future of the company. “We didn’t pay them in terms of monetary compensation, but we were always willing to pay them back however we could,” Marks says. “We hosted dinners, we did favors for them when they needed it. We tried to express our gratitude for their guidance in any way possible.”
In the running How Steve Marks brought the Akron Marathon to life Steve Marks, co-founder of Main Street Gourmet, is also a runner. And it was his love of running that served as a springboard for the biggest philanthropic endeavor of his career. “I had run in several marathons, and in the 1999 to 2000 time frame, I started to wonder why Akron never had a marathon,” Marks says. “It really is a big event for a city. You have a festive atmosphere, bands playing along the course, and I started to ask why Akron didn’t have a race of its own.” Marks quickly became interested in having Akron host a marathon and began rallying support from key political and business figures. That effort led to the formation of a nonprofit foundation tasked with generating interest and financial support for an Akron race.
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The next generation The first incarnation of the advisory board existed until Marks and Nelson sold the business in 1996. Then when they bought the business back in 2004, they revived the concept and kept the board intact until 2011, when they joined forces with Clover Capital Partners LLC. This provided for the creation of a formal board of directors. Marks says members of the informal advisory board — which, over the years, included Akron business pillars such as GOJO Industries CEO Joe Kanfer and Akron Children’s Hospital Foundation Chairman Phil Maynard — were drawn to serve on Main Street’s advisory board because of the company’s potential and the passion he and Nelson exuded. “I think they saw a little of themselves in us,” Marks says. “They saw what we were doing, and they knew that everyone has someone who helps them along the way. It wasn’t like we were asking them to help out with the hard labor of running the business. They got to advise us and impart their wisdom and share their expertise. That was really the best way they could have helped us.
“We were at it for three or four years,” Marks says. “We really treated it like a business. We did benchmarking, and we went to other races and studied what was working for them. We moved quickly toward putting the race on, but we were very thorough in our research.” The research and promotion efforts began to pay off. Marks and his team were able to secure sponsorship deals with major companies, including Summa Health System and Time Warner Cable. A field of 3,775 runners took to the streets for the inaugural Akron Marathon in 2003. By 2006, the race was named one of the fastest-growing marathons in the country by MarathonGuide.com. In 2007, with the addition of a half
Main Street Gourmet has grown from a single muffin shop into a $25 million company. “We were like sponges, absorbing everything they were telling us. We were enthusiastic, we wanted this company to realize its potential and we wanted to always get better. The people we connected with who ended up on our advisory board, they want to help people like that, and we are very appreciative. They’ve helped make us what we are today.” j HOW TO REACH: Main Street Gourmet 330-929-0000 or www.mainstreetgourmet.com
marathon event, the field had grown to 8,000 participants. Participation surpassed 10,000 in 2009, and in 2011 the race generated an economic impact of $5.2 million for the Akron area. By 2012, the marathon’s 10th anniversary, more than 15,000 runners took part in the event. “The experience of founding this race taught me a lot about putting on a community event like this,” Marks says. “Get the right people behind you and do your legwork many months in advance. We’ve had great sponsors on board with us from the very beginning, and we’ve been able to put tremendous people on our committees, people who have played a big role in making the race a success for over a decade.”
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focus on Tips for
turbulent times
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lthough the recession is over, we are still reeling from the impact. SS&G Wealth Management director Carina Diamond tells us some of the major problems facing Americans today and some steps you can take to lessen their sting. • Income tax rates are on the rise. To combat the deficit, the American Taxpayer Relief Act of 2012 returned payroll tax rates to 2010 levels and increased income tax rates for some taxpayers. These rates will most likely continue to rise because of the size of both the deficit and changes facing Social Security. • America is saddled with debt. About 30 percent of all student loan debt is owed by people ages 60 and older, and many people are burdened with payments for credit cards, auto and home loans. • Baby boomers are struggling to finance their own retirements while helping their parents and children. Sometimes called the sandwich generation, boomers are dealing both with parents who can’t afford retirement and children who have student loan debt and are unemployed or underemployed. • Unemployment remains high, due in part to a shortage of skilled applicants. Students who attend expensive colleges and earn unmarketable degrees have no actual skills to enter the workforce. While these problems aren’t going away any time in the near future, here are five tips to help navigate their aftershock. • Manage your future income tax burden. Although there is no way to know what tax rates will be when you retire, it may be a better option to pay some of those taxes now while you’re still working. Consider the Roth option in your 401(k) and look at the potential of a Roth conversion for your IRAs. This way, you will pay taxes on the money now, while the money grows tax deferred. You can then withdraw this money tax free at your retirement, as opposed to paying your highest ordinary income tax rate at the
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time of withdrawal. In addition, invest your after-tax dollars in a taxable (nonqualified) account, such as a brokerage or mutual funds account. When you withdraw the money, you may owe taxes on capital gains, but it may be less than what you would pay on traditional IRA or 401(k) withdrawals. • Aggressively pay down debt. This will help you enter retirement without large fixed obligations. Many clients find they can live a relatively rich, fulfilling life on less income if they have previously paid off their debt. • Prioritize your own retirement over helping family members. Avoid being a co-borrower on your children’s student loans or other family loans, and start paying off your credit cards. Educate your children about financial planning basics so you don’t end up carrying their burden. Even wealthy families should educate their children on financial planning, as they may have to handle the responsibilities that go along with eventual inheritances. • Insist that your children pursue education and training geared toward developing employable skills. This leads to actual careers. Also encourage them to find summer/part-time work in these fields. Graduating with $100,000 or more in student loan debt with a liberal arts degree and no employable skills is a luxury most families can no longer afford. • Talk to your parents about their financial situation. Do they have current wills, financial powers of attorney and health care documents? What kind of health care do they want, and if they require assistance, how do they anticipate paying for it? It is better to have these conversations early, when everyone is healthy and of sound mind, than to have to deal with it later when there is no longer an opportunity to plan proactively. j HOW TO REACH: Contact Carina S. Diamond at CDiamond@SSandG.com
the last word
with Bob Littman
Past, present and future
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s I step into the role of CEO for SS&G, I know I have big shoes to fill. One of the many reasons SS&G is a leader in providing the highestquality tax, accounting and consulting services is because we have had such remarkably talented leaders at our helm. The dedication that Gary Shamis has shown to the advancement and growth of the firm for the past 27 years is remarkable. I have to thank him for being such a wonderful inspiration, colleague and friend. I also want to extend my thanks to Mark Goldfarb, who has, throughout my career, provided guidance and mentoring that has helped me to grow as a leader. Mark has taught me about the importance of relationships and has been my companion navigating many tough roads — literally and figuratively. I am fortunate to have been a part of the leadership that has helped build and shape a strong history of success at SS&G. As I begin my new role as CEO, I will continue to embrace what we have achieved under their leadership. The vision for the firm will not change — we still seek to be the pre-eminent provider of accounting, tax and consulting services. We will still offer professional services of the highest quality and value that enable our clients to thrive. We will still look for the best and most dedicated professionals, and present them with opportunities for personal growth. You don’t fix what isn’t broken.
“I am fortunate to have been a part of the leadership that has helped build and shape a strong history of success at SS&G.”
I do look forward to changing my focus as a professional. I will still dedicate myself to my clients and continue to advise them; however, in taking on the role of CEO, I’ve taken on perhaps the biggest, most important client in my professional career — SS&G. My concentration and efforts will now be on making sure this firm continues to achieve its lofty goals, with the consistent message of improving the organization each year. While our leaders have helped guide us, the success and accomplishments of this firm can really be attributed to the joint effort of all of our 525 employees. I hope that, as their new CEO, I can continue to demonstrate the same commitment to our clients and staff as those before me. j
SS&G has created an easy reference guide that outlines the many areas where our team of professionals can provide assistance. Visit www.SSandG.com/resources/tax-booklet to receive this complimentary tax booklet.
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We haven’t peaked yet. It takes a lot to be the best. At SS&G we strive to consistently provide not only high-quality services for our clients, but also the ideal work environment for our employees. SS&G professionals are some of the most dedicated in the industry, and we are proud that they have voted the firm one of Ohio’s Best Employers for eight consecutive years. We couldn’t provide superior service and solutions without the finest people. Discover what makes us different at SSandG.com/words.