Bob the CPA: This is Abacus, I'm Bob the CPA. My guests today are Mario and Joe and they operate in an industry you probably don't know much about.
Joe Bailey: Let me tell you working in cannabis is not the easiest way to make a buck as a CPA.
Bob the CPA: They'll tell you about the good, the bad, and the ugly of leaving The Big Four to work as CPAs in the growing US marijuana industry. All in this episode of Abacus, let's go.
Learn everything you need to know to have a successful and fulfilling accounting career. Whether you're on the partner track or you're making your own path, this is Abacus.
What's up everybody? Hope you're having a great day. As you know this is the Abacus Show and this season is my excuse to talk to as many interesting accountants as I can, to tell their stories and maybe inspire you to go out and find a new career path of your own. Today I'm talking to Mario and Joe, they're partners at New Era CPA's, a small firm on the west coast specializing in helping clients in the US cannabis industry. They'll share the story of how they got started, how they evaluate risk verse reward in an industry where all of your clients are technically breaking federal laws, and we'll get their different views on the age old question when is the best time to leave The Big Four?
As always, you can learn more about everything we talk about today and even ask me to email you the most popular episodes ever of the show by visiting Abacusshow.com/305. Now on to the interview.
All right, let's start at the beginning. Before moving into the cannabis industry, both Mario and Joe started their careers at The Big Four. After the 2008, 2009 financial crisis Mario started to worry whether working in a corporate environment was right for him.
Mario Ceretto: That crash in 2007 and 2008 really made the corporate world very unattractive. Waking up and not really doing what you want to do versus being able to empower yourself in an emerging industry that's the fastest growing industry in the United States.
Bob the CPA: Joe switched firms once and ended up staying about a decade in The Big Four before joining New Era. I was really curious to hear his thoughts on making the switch to this new industry.
Joe Bailey: After being in The Big Four environment you're either going to stay and try to run it all the way to the top or you've got to get out at some point. I probably waited around too long. I was there for just shy of a decade working in that atmosphere, and so I actually reached out and reached out to Mario and we started a little conversation early in 2015 about hey, this is coming, can I come online? Let's open this Portland office. This has been a crazy whirlwind kind of year for me, for Mario, for the firm and I think our background being in that Big Four accounting atmosphere just means that we're able to absorb a lot of change and stress and deadlines and issues that may come up. Let me tell you working in cannabis is not the easiest way to make a buck as a CPA.
If people are only interested in making money then by all means they should stay doing corporate work, the money's great, if that's all you care about. If you care about helping people who otherwise aren't going to get as good of health, maybe doing something that you actually care about, that's why we came over into this industry.
Bob the CPA: While we were talking Joe mentioned that being in The Big Four taught him how to effectively deal with stress and tight deadlines. But I wanted to dig a little big deeper and find out exactly which skills they both learned along the way that have been most beneficial in starting in this new firm.
Joe Bailey: I definitely learned over at The Big Four. When you get to a certain level you're really managing a small pocket of business. When you're a manager and up you're managing client relationships, people below you, people above you, the economics of the engagements that you're working on, and for obvious reasons those are really great skillsets to have if you're going to move into a really entrepreneurial space. Being able to effectively manage your own economics, as well as business development, clients relationship management, all those kinds of skills are huge in what we do.
Bob the CPA: It's already March 2017, but you may not know that I hopped on the phone with Joe and Mario to record this interview at the end of 2016. If you weren't paying close attention to the November 2016 elections you may have missed the fact that four states legalized marijuana for recreational use during that time. I had to get their take on what the results mean for their firm and the industry as a whole going forward.
Joe Bailey: Yes, some things have changed, I mean I guess everything has changed. California obviously kind of does the big thing on the horizon now where everybody's getting geared up for the recreational cannabis legalization there. Jess Sessions coming in as the Attorney General has definitely put some people on their heels, maybe where they were really, really excited to take off, they're a little bit more cautious now. I'd say that's definitely something that I've been seeing from especially new clients that we're bringing in, that's one of the first things they asked about.
Bob Berchtold: Hey guys, Bob here.
I'd like you to take a moment to think about your career. Over the years, I've noticed that people tend to fall into one of three categories.
On one extreme, there's people who love their job, they can't imagine a world where they would ever leave, they're staying for life.
Then, there's the people on the other end of the spectrum. People who really, really hate their jobs with a passion and desperately want out ASAP.
Most of you probably fall somewhere in the middle.
- Your job is fine but you worry there's something better out there.
- You don't hate what you do but you wish you could get paid a little bit more and get what you're worth.
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All right, let's get back into the interview!
One question I'm fascinated by is the amount of risk involved in serving clients in cannabis industry. You see while some states have legalized the industry, it's still very much illegal under federal law. As an outsider I would be most worried about getting into possible legal trouble or even losing my CPA license. I asked Mario and Joe how they take these risks into account.
Mario Ceretto: Entrepreneurialism is based on risk, that's exactly the things that we fight through every day. Our clients are committing federal crimes on a daily basis. Every single one of our employees are being paid with money that's traced to a federally illegal crime. I mean that's just a unique way to do it, but our number one service that we're providing is compliance. If it wasn't for us the government would be shorted millions of dollars.
Joe Bailey: I was just going to say if you stand back and think about it, what is somebody going to report on their tax return if they don't have a competent professional helping them do it? It's either going to be they're reporting a crazy amount of income or they're not reporting enough, and either way it's best us coming in and helping these people. Not only provides them with a good service, which they desperately need but really we're insuring that the government is actually receiving the proper amount of tax revenue. We're not viewed that way I don't think by many folks, but that's the truth because in the wild west of cannabis if they can't figure out how they're supposed to do it they might just not file a tax return. Now everybody's at risk and the government doesn't get paid their tax dollars.
Bob the CPA: Starting any new business isn't easy, and I imagine hanging your shingle in a new industry where there's so much uncertainty doesn't make things any easier. Before talking to Mario and Joe I assumed that the hard part would be government regulations or getting financing from a bank, but it turns out that what they consider the toughest thing so far is not what I expected.
Mario Ceretto: Well I'll tell you to get people that are traditional accountants excited and interested in the cannabis industry, I've struggled with this for seven years. The typical accountant is not entrepreneurial, very conservative, and doesn't really want to steer away from that cubicle life. It's been an extreme challenge to try to attract experienced accountants like, for instance, Joe and myself that are down for the industry. I mean the turnover of other partners in the firm it's been a challenge and it's just not for everybody. It's not for everybody because of the use of the industry. It's not corporatized yet, it's exciting, it's creative and you have to be creative which isn't typical accounting brain. Kind of a left brain versus right brain mentality where the corporate environment is very left brain, very structured. This structure it has to be malleable because the industry is changing literally on a daily basis.
Bob the CPA: When is the best time to leave The Big Four? That's the million dollar question for a lot of you. Everybody seems to have an opinion on this topic. It's a really personal question and the answer always depends on your personal goals, ambitions, and experience. You may have noticed me asking other guests this question throughout the past seasons of the Abacus Show, and since I have two Big Four alumni with very different experiences on the show today, there's no way I wasn't going to ask their thoughts. Here's what Mario and Joe had to say on the best time to leave The Big Four.
Mario Ceretto: That's such an interesting question because first of all, everybody's experience in The Big Four is uniquely different. It's a very cliquey environment. If you're not attractive or if you got moved from offices because bad hiring and they hired too many people and then you just had to move to Portland randomly. I got stuck on the worst gigs you can ever do. I had a terrible experience. I had colleagues working on the Nike job just chilling, loving it, getting free Nike gear left and right, and I'm getting shift to go count RVs in places like Indiana and Eugene, Oregon on New Year's Eve when I could be rather doing other things. My experience at The Big Four was terrible for a lot of other reasons beyond just the actual grind and that's just the way The Big Four is. It's a political and social environment that transcends the actual work. The work is not extremely challenging at times, it's the hours and that corporate environment that is brutal.
The ability to interact with CEOs and CFOs of publicly traded companies on a regular basis, to have that contact, I think for branching out of The Big Four. To be able to communicate and learn the communication skills to deal with those high level executives, it allows you to really understand hey if you're going to branch out on your own you kind of have a good footprint on what to expect in the world and how to interact with them in a positive way. Joe let's hear about yours.
Joe Bailey: Yes, I mean I totally agree that a lot of the pains with working in The Big Four arena doesn't really have anything to do with the work itself. It's really just going to be a function of what silo's do you end up getting put into, who do you work for? Kind of like Mario was saying, you luck into this client or that client and your experience will be 180 degrees from the next guy. What it does teach you how to do and one of the things I learned the most from being in The Big Four is just how to deal with fire. How do you put out fires? How do you manage expectations and relationships?
I think that The Big Four is a great jumping off point, and those first two, three, four years I mean the learning curve is enormous. You're really going to take on so much more knowledge being in a Big Four firm rather than being at a small firm just because the sheer volume that you're going to see. Mario eluded to it as well, you're right away talking to CEOs, CFOs, controllers, real decision makers. You get to see and hear how they think. That's pretty valuable information to have for when you want to leave and go do something else.
If you're looking for a time frame of when I'd say it's good to start looking elsewhere I'd say you probably want to get a solid three, four years. Get to that senior level, really understand what's going on, and also get your CPA license. That'd be probably the biggest one. Study for that as soon as possible, right when you start your new job or before if you can, and stay until you start thinking about that question. Do I want to be a partner or not? If it's not after your second, third, fourth year you're probably not thinking about that all that much.
Bob the CPA: A big thanks again to Mario and Joe for coming on the show today, and thank you for listening. If you enjoy this episode do me a quick favor and tell a friend. More listeners means I can release more episodes, cover more topics you want to hear about, and help you build your own successful career. I really appreciate it and I'll see you next time right here on the Abacus Show.
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