Changing hats.

How a retired CPA became an entrepreneur in one difficult, giant step.

When Fred Gage announced his plans to retire, at age 61, from the CPA firm he helped found, little did he know that he was about to launch a new career as an entrepreneur. And little did he know that much of his CPA training and experience did little to prepare him for his new role as a boss.

The conversion, from a partner in an accounting firm to the manager of a small manufacturing business, was not as easy as he had imagined when he decided to plunk a sizable portion of his retirement nest egg into a business that was experiencing financial difficulty.

"As a CPA with years of experience advising clients on how to run their businesses, I was sure I knew what to do. I was equally sure I could turn this business around and watch my retirement funds grow handsomely," Gage says. "As it turned out, I was wrong. I lacked some critical entrepreneurial skills. As much as I thought otherwise, I still had my professional head buried somewhat in historical data."

CASH FLOW IS KING

When you're in a manufacturing business, Gage explains, cash flow is king. "You must have the money to pay for the raw materials--which means you need accurate, timely cash projections. And while financial history is important as a reference point, in my case it doesn't necessarily tell me whether I can write a check in September for the stainless steel I need to fill orders in October."

The business that Gage bought, Brindle Products, Inc., in Fort Wayne, Indiana, manufactures truck trailers and bodies primarily for propane gas dealers, who use the equipment to deliver portable propane tanks. The company recently launched a new product line--stainless steel accessories for Navistar International trucks.

Brindle Products was a client of Gage's former CPA firm, Baden, Gage & Schroeder, also of Fort Wayne. Gage helped start the accounting firm in 1980 and over the years he became mostly involved in personal financial planning and administration, overseeing the firm's three branch offices. "But after 11 years, I felt ready to retire. As soon as I announced my plans, I realized that retirement for me did not mean being put out to pasture."

So Gage searched for an investment that would not only engage his accounting skills but also sweeten his retirement-- both with interesting work and a good return on the investment. The Brindle enterprise was an obvious target. "The price was right--and so was the challenge," Gage adds. "But I must admit, I did tremble a bit when I finally decided to take the plunge."

Although the company had not been doing very well, Gage decided to keep the former owner on to assist with day-to-day operations. "I figured I needed someone who really knew- the nuts and bolts of this business. What I didn't realize was that he was used to doing things a certain way, and I came in with new and different ideas. In short, our goals did not always mesh."

The company continued to lose money, and Gage realized that some difficult decisions needed to be made-- and soon.

"Aside from the painful financial consequences," he added, "I was embarrassed. Here I was coming in as a smart, experienced CPA and the business wasn't going as smoothly as I had anticipated. It troubled me a lot."

He said he considered selling what was left of the business. "But my pride stopped me, and I knuckled down and asked myself, 'If I were a business consultant, what would I tell this failing client?' After all, I've been dishing out management advice for 34 years, so I should know."

And he did know. But acting on what he knew--that there was one too many executives making critical business decisions--required a difficult personal decision, because it meant the former owner would have to go. It took six months for that to happen. That delay, he concedes now, demonstrates, in part, the different mind set of a CPA and an entrepreneur: A CPA is trained to assemble and analyze the data; an entrepreneur acts on it.

When Gage bought the business, he hired another person who was experienced in both manufacturing and sales. But that person lacked the personal drive necessary for success. Once again he had to make the hard decision to let the man go.

Eventually, Gage hired his son, Joseph, who had no experience in manufacturing. But what the young Gage lacked in experience he made up for with his energy and drive for success. And these, the senior Gage had come to realize, were the key ingredients for a winning executive.

THE RIGHT MOVE

This move was instrumental in turning the business around quickly. Now, four years later, Brindle has recouped that first-year loss several times over, and revenues and profits have risen about fivefold. We asked Gage to share with us some of the other things he learned from this experience. His responses:

* Manager's experience. "Good managers don't necessarily have to be highly experienced in the technical area they're managing. But they must know what the final product-- the outcome--should be. I had to learn that my real job was to assess the final product--not necessarily the process to achieve that outcome. It takes trust to do that. You have to hire capable people and then let them do their jobs."

* Delegation. "I came from a profession in which you took on the tough problems and you handed the easy ones to subordinates. But when I became a boss in this business, everything was new to me and everything was tough. So I felt I had to invest all my time learning the new things so I could handle the tough problems. That was a mistake. Eventually I learned to delegate the tough problems so others could learn."

* Managing time. "Working as a CPA, I strove for billable hours. They were the measure of productivity. But as a manager, I learned I needed time to manage--not to perform some specific, goal-oriented function. That meant I had to give up many day-to-day, busy-work activities, to give myself the freedom to manage and to think."

Now that Gage has worn both hats, we asked what advice he would give to accountants.

* Focus. "In my early years as a CPA I collected, among other things, historical data for clients. That's what we were trained to do. Over time, my firm realized that it would have to shift its approach to meet the changing needs of clients, who were growing increasingly interested in looking ahead--with projections and forecasts. As more CPAs go into industry,, they realize the need for such a shift. Therefore, I would advise CPA educators to put more emphasis on teaching students how to look ahead and develop business strategies."

* Client role. "Now that I'm a client, I look at my former public accounting firm quite differently. The firm is trying to build more billable hours and I'm trying to cut them back. As a result, while my business is doing much more work in-house, using the powerful accounting and bookkeeping software tools that are available, I'm asking my CPAs to take on more of a true advisory role."

For example, when Gage was the outside accountant for Brindle Products, his firm prepared quarterly payroll tax returns and interim financial statements. Today, because of computers, he says he is quite capable of preparing or supervising their preparation in-house. What he says he needs from his accounting firm is assistance in the selection and installation of computer hardware and software to accomplish these tasks.

Also, when Navistar informed Brindle that, in order to continue as a supplier, it must become part of Navistar's electronic data exchange system, Gage knew he needed outside technical help in setting up the system. His first choice for that help was his accounting firm. And that's as it should be, he adds.

* Profession's future. "The accounting profession," Gage says, "is in a state of change--from chroniclers of yesterday's information to that of forward-thinking business partners. If we fail to recognize and act on it, we're going to be in serious trouble. To make the change, we will have to give up a little bit of our past work and take on new, more exciting projects. That probably means we will have to bring in non-CPAs--computer experts, marketing professionals, for example--to do some of these jobs. That used to bother me, but now that I'm wearing a different hat, I recognize how important it is."

When asked how- this entrepreneurial experience has changed him, Gage responded: "I'm told by my friends that if I worked as a public CPA practitioner today, I would do a much better job."

EXECUTIVE SUMMARY

* WHEN AN INDIANA CPA announced his plans to retire from the CPA firm he helped found, he didn't know that he was about to launch a new career--as an entrepreneur. He discovered that much of his CPA training and experience did little to prepare him for his new role as a boss. Some of the things he learned:

* "As a CPA, I was sure I knew what to do. As it turned out, I was wrong. I lacked some critical entrepreneurial skills. I still had my professional head buried somewhat in historical data.

* "I had to learn that my real job was to assess the final product--not necessarily the process to achieve that outcome. It takes trust to do that.

* "Working as a CPA, I strove for billable hours. But as a manager, I learned I needed time to manage--not to perform some specific, goal-oriented function.

* "I would advise CPA educators to put more emphasis on teaching students how to look ahead and develop business strategies.

* "Now- that I'm a client, I look at my former public accounting firm quite differently. The firm is trying to build more billable hours and I'm trying to cut them back. As a result, while my business is doing much more work in-house, using powerful accounting software tools, I'm asking my CPAs to take on more of a true advisory role."

STANLEY ZAROWIN is a Journal senior editor. Mr. Zarowin is an employee of the American Institute of CPAs, and his views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain special committee procedures, due process and deliberation.