If you really want to know why CBIZ's stock hasn't ever gone anywhere and (IMO) never will, you really have to think about their business model. The premise of their business model is that you go out and buy a mid-size tax/accounting/services firm, harness their employees and reputation, and then try to sell into their customer base. That sounds good and logical from their point of view. Now rethink their approach from the seller's point of view......

1. I (maybe with a handful of other partners) have built a successful practice.

2. We have built a good stable of employees. One of our problems has always been that our best employees, those that can actually build a profitable client base, typically leave our firm to start their own practice.

3. We are making $400k+ (or more) per year but are now getting up there in age and want to cash out. Unfortunately, none of our employees have enough money to buy us out of the business. We also don't want to take the chance of doing an earn-out with the employees because we don't trust that our employees can keep the practice going strong enough to pay us out over time.

4. Enter CBIZ. These guys will give us cash and stock worth a couple million bucks for our practice. Nice money but the stock is below $10. I'll live with the stock risk though because it's been at least relatively stable lately. All it has to do is hold it's current level for 2 years and then I can sell my shares. This is probably my best chance to cash out.

Now.........after the deal...............

5. I just got a couple million bucks in CBIZ stock and now they want me to work my butt off for a reduced salary of about $200k per year? I don't think so! My idea was that I would just transition this puppy over to them and bow out gracefully. My only goal is to wait long enough to sell my CBIZ stock and then I'm totally free.

6. What about the strong employees? My employees are doing fine. They are doing a good job servicing the clients I had, but they will never build a practice and get new clients. That was my problem before, remember? The good client development people all left to start their own practices. Why in world would a strong seller stay on with CBIZ? There is no way a public company could pay this type of person the kind of money they could make on their own.

7. What about hiring good people from the outside? Think about this for a minute. If you had a track record of being a strong manager, building a successful practice, and creating a large strong book of business, why would you join CBIZ? I would think that you would either build something that you own or, if you are into the ego thing of being with a big company, you would join a company with a bigger, better-established reputation. So, the people that are left for CBIZ to hire are mid-level managers jumping from bigger firms. Some of these guys might be ok, but they have never really built anything - they have just ridden on the coat tails of the reputation of the big firm they were with. After they jump ship they find it was a whole lot easier to sell a project when it was on the letterhead of a Big-4 firm than when it's on CBIZ letterhead.


I know that this is a long post but I just don't see how a company like this can ever succeed. I think that the basic business premise is fatally flawed. CBIZ might very well stay around for a number of years, but there will never be growth other than through acquisition (and there never has been - check the numbers).