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Episode 81: Building A Business By Following Your Passion (Jerry Catalano)

In this SeizeYourBusiness.com entrepreneur video, Jerry Catalano discusses how he built his accounting firm to a staff of 24 by becoming an industry expert in his niche, earning referrals and acquiring other books of business, and being a thought leader and creative marketing mediums.

Jerry Catalano

Catalano, Caboor & Co.

630-261-0550

http://www.catboor.com

In this SeizeYourBusiness.com entrepreneur video, Jerry Catalano discusses how he built his accounting firm to a staff of 24 by becoming an industry expert in his niche, earning referrals and acquiring other books of business, and being a thought leader and creative marketing mediums.

KEVIN O’FLAHERTY: I’m really excited about our guest today. It’s Jerry Catalano from Catalano and Caboor.  He owns an accounting business that’s really thriving.  And we’re going to talk today about combining your passion with your business and hear a little bit about his story how he built it up from the ground. Now, how many accountants do you have working with you?

JERRY CATALANO: We have a total of 24 staff, and it’s in that 5 administrative staff, and the rest are all professionals and paraprofessionals. 

KEVIN O’FLAHERTY: Thanks for taking the time for being with us, Jerry. Why don’t you tell us a little about your backstory and the firm’s backstory. 

JERRY CATALANO: Okay. Well, Catalano and Caboor & Co. Ltd., we’re certified public accountants and consultants.  I’ve been a CPA for 46 years, and one of our niches is entertainment. We have a niche called the music CPA, and we have a website called the music CPA. The way I got involved with that. I was in a rock band in the 60s. And in 1970 I actually did A&R work. What A&R work is -- You go out and look for acts and sign them. I was working for a company called Zark Attraction, which was a management company for these bands. I believed in Chicago talent.  I was 21 years old, so as naïve as I was, went out and signed acts.  One of the acts that everybody told me about at that time was a group called TW4. They said you got to go see these guys. So I said okay. They used to rehearse in a basement of an apartment building, and they were really good. But they were playing covers, and I said I want only original material. I’m signing actual material.  They said we got some; we’re not done with it.  I said when you get some original material, I’d like to sign you. You know who that band turned out to be?  STYX. For God sakes.  They were called TW4 because they were twins and four other guys.  That’s what their original name was.

KEVIN O’FLAHERTY: So you signed STYX?

JERRY CATALANO: I didn’t.  That was the thing.  That’s when I realized that that was not for me.  But in that time period I learned at the time in Chicago at that time Columbia records was here; Chess Records was here; Ampex Records was here; ASCAP had an office here.  They’re all gone.  But I got to meet people in the back end of the business.  And I must say, in that era in the 70s, these people were not nice people. I actually was so disgusted with the business side of the business that I put my guitar in the closet, didn’t play it for 15 years. I was really afraid I would write something good.  Because at the time with the Zark Attraction I was not only signing acts, but I was the resident songwriter. So if they didn’t have original material, I would offer them mine. I had five different acts at that era that were playing my material in clubs.

KEVIN O’FLAHERTY: Anyone that we might have heard of?  

JERRY CATALANO: No. None of them went anywhere.  And that was the problem. It was sort of a message from God. “Hey, this is not the right business for you.”  But later what I was able to turn it into is I built my accounting practice.  I said I know enough about the industry and the back end of the industry that I could help musicians.So I started getting involved with NARAS, National Academy of Recording Arts and Sciences, the Grammy people. I vote on the Grammys. One of the 9,300 people that are voting members of NARAS.  I started going through meetings, starting meeting the entertainment attorneys in the industry. And they were like, “You’re what? A CPA and you’re – what are you doing here?” “That’s why I write music.” They said, “Yeah, well --” But in the year 2000 I wrote a song for Son Seals, the blues guy, if you’ve ever heard of Son Seals. He had seven albums on Alligator, and he recorded the song live at Buddy Guy’s Legends for his Spontaneous Combustion album. And Bruce Iglauer from Alligator didn’t like the recording, didn’t like the song. He didn’t understand it even though the song’s called “Let It Go” and the basic chorus is “Sometimes you just got to let it go.”  I don’t know what’s to understand, but it’s a blues song. It wasn’t written as a blues song, but Son Seals liked it at that.  So Bruce wouldn’t allow it to be on the album.  Son was so mad. He says, “You keep that song for me. I want the song.”  So he went to Telarc to record the song.  Telarc Records liked it so much that they put it out as the promotional single for the album to all the blues stations, which was interesting that here’s one guy that hates it and one guy that loves it.  And Telarc liked it so much that they also put it on their sampler album. So I had the song on two albums.  And the album was called Letting Go. It’s still out there. Son Seals Letting Go on Telarc. It went on that year to win the W.C. Handy Award for the best traditional blues album of the year 2000.  And he ended up doing it live on the Conan O’Brien show.  And that’s when I learned that’s why if you watch late night television, why the music is always on last: because the royalty rate goes down.

JIM WASZAK: Interesting.

JERRY CATALANO: They played my song on the Conan show, and it was after midnight New York time. My royalty for that one performance of my song on network television was $1,500 as the composer.  If he had played the song before midnight, the royalty’s $2,700.  Okay. So you could see that the talk shows are saving 1,000 bucks a night; they’re saving 5,000 a week just having all the music artists on last. 

KEVIN O’FLAHERTY: Did you get any royalties from the Frozen movie that came out that sounds like your song? 

JERRY CATALANO: I wish. I made a mistake.  Wrong “Let It Go.”  It was the wrong one. But from that perspective I went on to -- I started getting work, and I did litigation support for an artist named Max-A-Million that came to me in the 90s. He had brought me his royalty statements in. He recorded an album in Brookfield, Illinois, caught SOS records.  And his song is called “Fat Boy.”  It was number one on the radio in the 90s, and I had never heard of the guy. He called me during tax season.  I brought it home. My kids were young at the time, and they all ran to their rooms, and they had all bought his music.  Just like, “You got to take care of this guy, Dad. He’s great.”I started building the case. We ended up finding an attorney to take them to court.  And I testified for five hours on the stand as the expert witness, and they ended up giving him a check for 600,000 bucks. That’s how badly they ripped him off.  As I was leaving the courtroom, the judge called me up to the stand and said like this:“What do you want, your Honor?”“Come here,” he says. He leans down and says, “Are you someone famous?” I said, “No, your Honor. You would have never heard of me.”

KEVIN O’FLAHERTY: That’s a complicated question. Relative to me you’re pretty famous.

JERRY CATALANO: So since that time I work now a lot with Lawyers for the Creative Arts, which is a pro bono organization. Because often times I’ll get a musician in that’s been hurt, or damaged, or signed a bad contract, and they don’t have any money to go to a lawyer. They can’t afford it.  So Lawyers for the Creative Arts is a pro bono organization that will sign pro bono work to attorneys that will help people like that.  That’s a really neat organization because so many guys sign such bad contracts. I got a call just last week from a guy in Montana. It was a recording studio in Montana, and he said he called an attorney in Los Angeles to write -- Because he wants to start a recording label, he bought the studio, and asked this attorney in LA to write a contract that he could use for the artist. And he wanted my opinion on it.  Have you heard of a 360 contract?  Do you know what a 360 contract is?

KEVIN O’FLAHERTY: No.

JERRY CATALANO: In the music industry a 360 contract covers everything the artist does. So if the artist writes, if the artist performs, if the artist records, the record label owns everything.  They own a piece of everything.  This contract went further than that. It basically said if this guy went to work at Subway.  It didn’t say Subway, but it said all earnings, all income by the artist belong to the label.  I said to this guy. I said, “You really don’t want to put this guy. This is horrible.”  I said, “But I can tell you why they did it.  They make it horrible in the anticipation that the artist is going to get a lawyer, and they put negotiation points.  That’s what it is.  You’re going to negotiate a lot of that away.  But you’re also going to have a really strong contract when they’re done.  And if someone is foolish enough to sign this without getting an attorney, then you own them.”  And the contract was in perpetuity.  I said that’s crazy.

KEVIN O’FLAHERTY: That borders on unconscionable.   

JERRY CATALANO: That’s what I said.  I didn’t use that word. I used a word that started with A.  I said you do want to be an A. You don’t want to do that.

JIM WASZAK: So, Jerry. How has this music experience and background -- How has that helped you in your accounting practice? Do you do a lot of music-related clients?

JERRY CATALANO: We do a lot more.  We also branched out into a lot of other entertainment fields because of that.  We work with Lawyers for the Creative Arts.  We also branched out into film, so now we do film accounting.  We’re one of the eight firms in Illinois that’s authorized to do the Illinois film credit.  And the Illinois film credit is if you shoot a commercial, TV show, or a movie in Illinois, you get 30% of the Illinois spend as a tax credit that you can sell. For example, we did the accounting for a TV show that ran two seasons on A&E called First 48: Missing Persons. They’re off the air now.  And their spend was $4,000,000 a year.  Well, their tax credit would be a 1,200,000 bucks, and they would sell it to Kohl’s department store for $0.92 on the dollar.  So Kohl would save on their taxes, and they would get cash to fund their show.

KEVIN O’FLAHERTY: That’s interesting.  I never heard of a tax credit that you could sell before. So I went to your firm, and I met probably like 15 accountants with different areas of expertise.  I’m dying to know how you went from being a musician to saying I’m going to pick up being an accountant now to now you’ve got a staff of 24.  It seems like you can handle everything.  What was your process like?

JERRY CATALANO: Well, you know what. It takes a long time.  It takes a while to build a firm.  I started out in ’71. I was in a firm of two partners.  Me and one of the partner’s sons -- And they were all of the Jewish religion, and I wasn’t, which was interesting. That was the whole firm.  From that I started there. I built the firm up to 10 because I became a partner when I was 30.  Left them at 32, joined another guy. Left there at 32. Bought in with a guy that was retiring because my attorney’s father’s partner had passed, and they wanted someone to join them.  So at that firm it was me a 63-year-old guy, and a 72-year-old secretary, who was on Valium every day, and a 78-year-old that used to --

KEVIN O’FLAHERTY: And you were 32 at this point? 

JERRY CATALANO:  Yeah. At that point I was 32 years old.  And from there I built my firm from that.  This guy had a great base of clients, and they were at the end of their careers. And the clients that he had wanted more service.  They just weren’t interested.  They were, at the end, giving them what they needed but not what they wanted.  So I gave them what they wanted, and I was able to build from that base. And then as time went on, I’m sure that most of my partners thought that the music side was going to be a joke.  But I persisted.  And said I’m going to keep doing it.  I’m going to start keep bringing in -- Because some of the musicians we’ve gone through, they don’t have any money, or they’re just starting their careers.  And a lot of times it’s not a lot. It’s not a big thing, maybe a small -- But from that now, just this week I just put the offer out now. I just put the proposal out for a band. I won’t say their name, but a band that tours regularly that does four-and-a-half million in tour revenue.  From that they have to file a tax return in every state in the Union.  Forty states because all the states attack --

KEVIN O’FLAHERTY: Everybody wants their cut. 

JIM WASZAK: If they earned it in that state --

JERRY CATALANO: If you perform in a state -- You’re an athlete now.  These guys are getting -- Like they said in the Superbowl how much Cam Newton owed in taxes for playing in California. It’s like $159,000 in California tax.  So this is a big job for us, and the tax return alone is $50,000.Little at a time taking the grief from my partners that are like “You really want to do this stuff?”  I said yeah. Because I think what really launched it -- When I was successful in the Maximilian case in getting him his money and doing the expert witness, I got some notoriety. A lot of entertainment attorneys paid notice to that.  And I started getting more business from more entertainment attorneys. 

KEVIN O’FLAHERTY: Okay, so you actually built up a public reputation.  It wasn’t just -- I assume you don’t get up to that many accountants without doing some marketing and networking and stuff, but you kind of made some hay in a famous case that gave you a reputation you could build around. 

​JERRY CATALANO: Yeah. The 90s started that case that was famous for me. It’s all on a referral basis, and we get a lot of business from attorneys, people like yourself.  And entertainment attorneys -- There aren’t a lot of entertainment CPAs in Chicagoland.  You can go to LA and New York and a lot of people do. A lot of artists make it big here. They start getting to dictate their reputation out of LA or New York.  Even the attorneys: They’ll go seek somebody outside of Chicagoland and especially accountants. There aren’t many here, so it gave me -- I saw it as a unique opportunity not only to help people in a passion that I have for the music. Because I’m still in a band; I still have albums on iTunes; my band’s name is The Fource.  F-o-u-r-c-e.  Check us out of Spotify.  And I’m still playing.  I just did –

KEVIN O’FLAHERTY: What style do you play? 

JERRY CATALANO: We call it acoustic rock. It’s sort of like in the genre of Traveling Wilburys or Tom Petty. Like that. That kind of style.  Harmonies and we use harmonica.  I play 12 string and sing. We write original material. We just did a Christmas album last year.  Last December we opened for Ronnie Spector in the Arcada.  We were the opening act. 

KEVIN O’FLAHERTY: So the force with a U in it. 

JERRY CATALANO:  Force with a U.  It’s actually Four-Ce, I guess.  F-o-u – Four with C because there’s four of us.  It’s kind of a joke on words. 

JIM WASZAK: Beautiful. 

KEVIN O’FLAHERTY: So what were some of the challenges in growing from three people to -- Actually you had four, but three of them were on the brink of retirement -- to now having this thriving workforce. 

JERRY CATALANO: It’s the same issue we have now.  We’re getting some excellent opportunities now, and I can’t find staff.  I’m having a hard time finding new staff.  We have some nice young staff, which I’m really proud of.  They’re fresh grads, and I have some great interns; but I need some middle people I need the middle; and it’s hard to find those people three, four years out there because they changed the rules on when you can sit for the CPA. They require five years of college now. So that put a short fall in our staff.  And I’ve grown it to -- We’re a family business. My daughter’s with me for 17 years. She’s a CPA.  My son now does our marketing and social media stuff.

KEVIN O’FLAHERTY: He’s doing a great job.  He’s all over the place. 

JERRY CATALANO: He is all over the place, and I was shocked at how much business he was directly responsible for last year through the Internet.  It’s amazing how much business last year we got off of Yelp, and LinkedIn, and Google, and we don’t run Google Ads.  Jim just is on it all the time, and the leads groups he gets. It’s incredible. It’s a source of business we would have never had before without him.  And he’s just at the cusp the beginning of this thing. It’s just taken off.  Now we’re getting more and more stuff off Yelp.  Which, a CPA firm getting business off of Yelp? Who would think that?  But that’s today’s society. 

KEVIN O’FLAHERTY: It seems you’ve done a couple of things in your career that have been a little different from your competitors.  You chose the music route, which gave you a niche and having Jim out there really being aggressive with business development.  Most accountants they’ll just work off of pure referrals, and if the business comes in great, and if it doesn’t, they’ll take a vacation; and that’s given you a real competitive advantage I think. 

JERRY CATALANO: And it’s fun. It’s got to be. We’re a serious CPA firm. We’re peer-reviewed, which means we still do certified audits.  We have to hire -- Every three years we have to hire another CPA firm to audit our accounting methods that we’re keeping up with all our accounting rules. It allows us to do--

KEVIN O’FLAHERTY: So, I know you’re busy. We’ll let you go pretty soon.  The last thing I want to hear is just some advice for someone who’s just starting out.  You said staffing now is a challenge. Everyone would like to have that problem.  We’re too busy to handle our growing business, but over the past several years, what are the top one or two tips that you can give to someone who’s trying to grow from basically a sole practice in accounting or another service industry to becoming a bigger firm?

JERRY CATALANO: We grew two ways: organically and acquisition.  Over the years we’ve acquired two small firms. 

KEVIN O’FLAHERTY: And that worked out well for you?

JERRY CATALANO: It worked out extremely well.  One of them was a small firm in Glen Ellyn, which was an all-female firm. And we actually through that got -- Country Sampler Magazine was our client for a while before they sold out. So always looking towards if you want to grow, you want to look into two methods.  There’s always a retiring sole proprietor somewhere that’s looking to get out.

KEVIN O’FLAHERTY: How did you go about finding them?

JERRY CATALANO: In my case it was all word of mouth -- attorney referrals actually.  It was an attorney that called that knew me, and said I know this other accountant wants to sell out; are you interested?  The other case was the CPA firm was a tenant in one of my client’s buildings and was telling them they wanted to sell out. So my client called me –

KEVIN O’FLAHERTY: So seize the opportunity. 

JERRY CATALANO: It was organic.  Yeah.  The other method.  It is great if you have a passion for something, whatever it is. And there’s an industry for everything. So if you have a hobby or you like a certain –I went college with a guy named David Stein, who we went through all our classes together. And today he’s in California, and he has a practice where he only does minor league baseball teams.  He used his passion for baseball, and he got a couple of them as clients. Word spread on him, and now his tax season’s all summer because he’s running around the country managing the dealing with all of these minor league baseball teams that are accounting issues, how they deal with the major clubs, how they deal with their concession revenue, and all that stuff. That’s all he does.  So it’s another example.Sometimes you have a passion for something: Use it.  Everybody needs accounting.  Accounting’s never going away. There might be different ways we do it now because of technology, but you still have to know where debit and credit is.  No matter what the technology is, no matter how many software packages they’re going to give us, they’re not going to that figure that out without us.  So there’s always a need. There’s always going to be a need for auditing; there’s always going to be a need for consulting in terms of business and those things finance.  It’s always out there.  You know what I mean? If you know something you really love to do, you have to get out there and do it and be involved.  You have to have your face there.  You go to the meetings. Or whatever associations and groups like that and get known. 

JIM WASZAK: I have a question for you, Jerry, because I have all this entertainment industry experience. Kevin and I get a lot of comments about our little show.  And somebody sent me an email the other day, and they were coming into the show, and they said you have a face for radio.  What do they mean by that? Is that an entertainment industry term or what? 

JERRY CATALANO: I actually did that for a while.  I did a radio show Joe Gentile had a station in Berkeley. It was an AM. I think we went five miles or something.  The studio was in his apartment building on Saint Charles Road. He had his antenna up there, and we used to do a morning show called Money Talks. It was from 10 to 11 on Saturday mornings.  And it was fun, and we were paying 75 bucks an hour for radio time. And then we started getting real sponsors because I was doing it with a financial planner named Paul Garret, and Paul actually got some of the mutual funds, municipal bond funds, stuff to sponsor us. So we were covering our costs.  Well Joe Gentile heard that, and he raised our rate to $125.  And says, “You guys are making money now.” “No.” So we quit, but it was fun.  What we used to do is -- that was another thing from a marketing standpoint -- It was really a marketing thing for us.  We used to tape the show, and this was back in the 90s as well, we used to tape the show; and two of us used to go on client referrals together. And we used to do a topic. Say, “Okay. This week we’re going to talk about municipal bonds,” or, “We’re going to talk about mutual funds,” and we do a whole topic on it. And then we would bring -- We’d make copies of the show.  And then we’d go out to clients and say here’s the radio show we did.  And it was like --

JIM WASZAK: We encourage people to use this.

JERRY CATALANO: Same kind of thing.  That’s a great idea. 

JIM WASZAK: So, let me ask you this.  You’ve had a really interesting career -- You’ve done the music; you’ve done the accounting; you’ve built a firm.  What’s next for you?  What do you see in the next three, four years?  What’s your next thing you want to accomplish?  Or just kind of stay the course or --

JERRY CATALANO: Well, I’m having a good time now. I might want to stay the course.  It’s taken a long time to get here.  It doesn’t happen overnight, and I’m having a ball working with my kids.  My sister’s a paraprofessional, and it’s fun.  If you do what you enjoy, it’s not work.  For me, that’s the way I feel about it.  I do what I enjoy, and it’s not work.  There’s always days where you have somebody who’s angry or gets a tax notice or something doesn’t work out. But that’s in anything.  That’s in anything you do.  You roll with that.  I like it.  I wish I could find more people.  I really feel strongly in where we’re going right now.  Because we’re well-positioned to grow.  We’re right in the right spot.  I mean, we’re not to big; we’re not too small.The last two clients we got were taken from much larger firms.  Some of the larger firms what they do is they price away. They go to the next level, and they say we don’t want you guys.  So if I get a company with $38 million sales, that’s big for me.  For Bank Fidelity, it’s nothing. Or it’s a small. To me, I’d tell the client, “Do you want to be a big fish in a small pond or a small fish in a big pond?  Where do you want to be?  Where are you going to feel better?”The other thing I always tell clients too is one of my other niches is planning.  I always tell a client, “Look, you can either make me a historian, or you can make me a futurist.  It’s your choice.  You want me to be a historian, I can do your compliance work.  That’s what you’ll get.  It’s not -- I don’t think it’s worth as much to you as me being a futurist where I can sit down with you, and I can help you get there.  Let me help you get to your next level.  Let me help you see where your costs are, what you can do better.  Let me see if we can structure your business in a way that’s going to make more sense.”  Those are the kind of items. ​Just like this rock band.  They’re getting compliance work, but no music industry help at all in terms of how their royalties are being paid.  They have a record label and a publishing company. The structure’s all wrong.  I know how to fix it.  And I know how to fix it that will work with the music industry.