Ervin & Co. Accounts for Growth

Termites nearly ate John Ervin’s first CPA practice in 1978. Now he gobbles up other accounting firms.

Ervin & Co. CPAs PA of Fayetteville has grown significantly from its days as a three-member operation in a rundown pillbox of an office on College Avenue.

With 27 employees and 16 professionals (certified public accountants and CPA candidates), Ervin & Co. is easily the largest single practitioner CPA firm in Northwest Arkansas.

Marsha Moffitt, peer review and membership manager for the Arkansas Society of CPAs, said Ervin & Co. was probably also the largest firm of its kind in the state.

The ASCPA is unaware of any single-owner practice larger than Ervin’s. But because some firms are not registered with the ASCPA, it’s hard to tell for sure.

What is certain is that three acquisitions and 22 years of revenue growth mean that Ervin no longer has to pack pesticides in his briefcase.

Ervin & Co. expects its net billing this year to exceed $1.5 million, and its 28,000-SF Colonial-style office building on Gable Drive is nothing short of elegant. The firm boasts about 2,500 clients, including Washington County and the city of Siloam Springs.

“We really started in a dump,” Ervin said. “It was on the backside of the old Evelyn Hills development. I was always spraying Raid, and there were piles of sawdust in the corners where the termites were working. Me, Joyce Mortensen and Laura Bland were all that there was of John B. Ervin CPA then.”

The practice is now one of a few single-owner firms in the state with its own in-house legal counsel, a perk gained through the September acquisition of Miller & Schroeder CPAs Ltd. of Fayetteville. That buyout helped the practice’s billing jump 15 percent, from $1.3 million in 1999 to this year’s total.

Barbara Angel, ASCPA’s executive director, said Ervin’s growth over the last decade had been unique to the industry in two respects — it happened through acquisitions and expanded services.

“Practices are not buying up one another anymore,” Angel said. “They’re specializing. Even when most firms have hired personnel in the last decade, it’s typically workers who aren’t CPAs but can fill supporting roles.”

John Ervin bucked the trend and diversified. In addition to traditional tax accounting, his office offers a wide range of consulting and estate planning services.

Ervin & Co. handles outsourcing services, such as administering payroll, for more than 30 small companies and has even become an outsource provider of labor-intensive operations like audits for other CPA firms.

Ervin is also working on a Web-based software initiative with Skylight Systems Inc. of Wyncote, Pa., which will add advanced online services to his arsenal.

Luck and Leverage

Two big breaks came in the early 1990s.

In 1992, Ervin was able to acquire John Michael Hudson CPA in his hometown of Harrison. With that followed what is still one of Ervin’s largest accounts, the Area Agency on Aging Inc., and a 90 percent increase in billing, from $290,000 in 1991 to $550,000 by December 1993.

Then, in 1994, the American Institute of CPAs mandated peer reviews for firms conducting audits, and the Arkansas State Board of Public Accountancy began requiring quality reviews. Both made audits more accurate but turned an already time-consuming discipline into a nightmarish chore for small firms.

Most CPAs opted to downsize and specialize, focusing on their most profitable tax work and outsourcing their clients’ audits. Fortunately for Ervin & Co., in 1991 it had hired Robert Ferguson, a CPA with a knack for knocking out audits. Word spread that Ervin was still auditing, and pretty soon, that service went from being 10 percent to 38 percent of the business. Tax accounting still makes up 32 percent of billing.

“It was almost like a whole new revenue source,” Ervin said. “Most of those firms would still do their clients’ taxes, but they would send the audits to us.”

In 1994, Ervin & Co. happened into a onetime $50,000 fee when it was called to audit the huge bankruptcy of Eudy Oil Co. of Siloam Springs. In October 1996, it acquired Marsha Spivey CPA of Fayetteville and grew an additional 13 percent.

By the time Miller & Schroeder was absorbed this fall, Ervin’s firm had become far more than he imagined while working for Leon Bland CPA after graduating from the University of Arkansas in 1975.

“In 1977, Leon wanted to retire and talked me into buying his business,” Ervin said. “I went to what was First National Bank of Fayetteville to borrow $10,000. They wanted to lend me $5,000 in two installments, but I wound up only needing the first one. I owe a lot of thanks to my wife, Nancy, for keeping me going.”

The early years were lean. In 1979, Ervin’s fledgling firm grossed $40,000 and his personal net was about $7,500. It took until the mid-1980s to really get rolling.

Service Comes First

A former president of the Northwest Arkansas chapter of the ASCPA and a member of the professional advisory committee for tax law publisher Commerce Clearing House Co. of Chicago, John Ervin is now a fixture in his industry. That is because of the talents of his employees, Ervin said, not his skills or academic prowess while at the UA.

“I was not a good college student at all,” Ervin said. “My grade- point average was probably a 2.3 or so. But I always joked that if I needed a 4.0, I would hire one. Fortunately, I’ve been able to do that. It’s like Don Tyson said, ‘Hire smart people.'”

Ervin has actually gone after both bright and committed professionals. He said the company defines CPAs as “creative proactive advisers,” and their duties as answering questions before they’re even asked. Walter Miller, who along with Susan Schroeder, sold out to Ervin, said the company’s commitment to proactive service was one of its biggest attractions.

“Selling to Ervin made sense because we had reached the point where there were services we couldn’t offer,” Miller said. “[Ervin] had things he needed help with, and we both wanted to go in the direction of offering clients more. His vision project is promoting a very proactive atmosphere that we’re glad to be a part of.”

Jim Kennedy, treasurer for Siloam Springs, said he thought enough of Ervin & Co.’s service to recommend the company to The Richardson Center in Fayetteville, where he also serves as a director.

“Audits are very time-consuming, and the biggest problem is you rarely get them back on a timely basis,” Kennedy said. “A lot of firms tell you they’ll have them in June, and you get them in November. Not Ervin. They’re delivered when promised. Because of that, we extended Ervin’s contract last year, and now The Richardson Center uses them, too.”