Simon says reform the partnership model
Simon Dolan, founder of SJD Accountancy, tells Accountancy Age why accountants do not make good entrepreneurs
Simon Dolan, founder of SJD Accountancy, tells Accountancy Age why accountants do not make good entrepreneurs
ACCOUNTANTS should be involved in more aspects of their clients’ businesses, current thinking dictates. The likes of the 2020 Group state that this is the way to maximise profits, with accountants developing weird and wonderful ways to help their clients. There is only one problem with this, says Simon Dolan, founder of SJD Accountancy, and that is accountants aren’t particularly good businessmen.
“Accountants need to move away from the ‘grow your business by hiring another partner’ model,” he says. The partnership model is flawed. “If you look at the Top 50, with the exception of four or five, essentially all they are is 50 individual small firms bolted together. The problem with that is you don’t make much money and it is impossible to make a decision. They should look at accountancy being a business and not as accountancy being something they do.”
Dolan, author of How to Make Millions Without a Degree, points out that this is not a crusade against his profession. “It might appear that I am being disparaging towards accountants, but I’m not,” he says. “In my experience, I haven’t found accountants to be especially good businessmen – but I find that of people in general.” The crucial point is that there is “no reason to believe they are better or worse than anyone else” at business.
An example of this is the rigid billing of clients, he says. By sticking to this, firms limit their profits to the amount of hours there are in the day. “It is the leap away from saying ‘I am an accountant’ to ‘I am running a business that happens to be providing accountancy services’,” he says.
Falling into the profession
Dolan’s entry into the profession helps to explain his outlook. An entrepreneur at heart, he says he fell into the profession. “It chose me when I left school, but I only worked in a practice for 18 months because it happened to come along. My dad was an accountant. I wasn’t going to be a rock star. So I wrote one hastily scribbled note and got a job. I found I had an aptitude for numbers, never much for the legislation.”
Following a sales job, which he gave up after losing his driving licence, he put a standard advert in a local paper. “The only thing I could do was accounts.” After the advert, he got a client and the business grew from there.
Perhaps this beginning has allowed Dolan to shun the partnership model in practice. SJD Accountancy is the only non-partnership in the Accountancy Age Top 50+50, with Dolan maintaining full ownership. And it seems to be working well for him. Fee income was £14m last year, up 16.6% on the previous year. It does not take an accountant to work out that this equates to £14m per partner – beating KPMG’s £2.78m per partner into a distant second place.
SJD’s strategy is simple, he says. “Our particular niche is one- or two-man limited companies, mainly white collar workers. The reason we have been successful is that most accountants want to do something that is complicated. What we do is not especially complicated or varied.” There is a bit of snobbery involved in this attitude from practitioners, but not against the businesses involved – rather, it is “intellectual snobbery”.
This simplistic approach brings in the business, he says. As well conferring a greater business sense upon accountants than they warrant, the holistic service espoused by the 2020 Group fails in another way – “there aren’t many clients that can take advantage of the value-added services,” Dolan claims. “Firms are fighting over a relatively small market. But there is always going to be a need for compliance work.”
As the sole owner of the firm, he is able make quick decisions – a distinct advantage over other firms. “If I wanted to do something, I could do it,” he says, “where it could take partners forever and a day to get the meeting together and come to a majority vote.”
Degree of uncertainty
Not surprisingly, this entrepreneurial outlook comes through when talking about qualifications. “From an entrepreneurial point of view, qualifications are the last thing you’ll ever need.”
There is “nothing wrong” with trying to educate a society and it is a moral aim. “But we must ask, in what shall we educate them and what is the best way of doing so? This is the point where I think universities fall down. They are educating people in the wrong things.”
Indeed, according to Dolan there are very few jobs that require a degree. “For an accountant, it depends on what work you are doing. If you are doing complicated work, it is better to have training,” he says. “Whether that training is in the form of a qualification or on-the-job-training. I would argue it is always better to learn on the job… I would always look at someone’s ability to do the job rather than whether they got a 2:1 in history from Durham.
“University should be for the intellectual elite who want to become doctors or lawyers or teachers.”
Also not surprisingly, his opinions on qualifications extend to the accountancy institutes. “As far as I can see, they do not provide much of value. You get a magazine, so what?”
The institutes themselves “do a very poor job in promoting their members’ interests,” he adds. “Every year, you pay your subscription, but you never see anything off the back of it to obtain more clients, which is what every firm should want. The institutes should be promoting the fact that a qualified accountant is a member of their body and people should not be looking anywhere else. But they don’t.”
He is a member of the CIoT because it “was considered to be the hardest qualification, so I thought that would be a challenge. It didn’t make any difference. I didn’t get one single client as a result of being a member of the CIoT,” he says. In fact, he believes membership could even be a negative.
“If you are not qualified, you can do whatever you like and if you mess up, you do not have to have professional indemnity.”
If institute qualifications are not a great attraction for clients, Dolan is more convinced of the value of search engines. “There is a bit of a lag, but as more people search for services on the internet, finding an accountant online will become more prevalent. And they will find us – that is our whole strategy,” he admits.
However, this does not extend to social media. “You don’t need to be a genius to see that Twitter and Facebook are not making any money,” Dolan says. “Most people who go on Facebook are 14-year-old girls with no money to spend. They want to see what their friends did last weekend.”
If these modern phenomena websites are not making money, “it’s likely their clients are not making money from them either,” he says. And accountants, along with solicitors, are the least likely to make money from social media, Dolan claims. While we are in the transitional phase before search engines become the method of choice for attracting clients, people will still rely on the classic word of mouth.
These views are not particularly controversial. If debates on accountancyage.com are anything to go by, the amount of people enthusing and disparaging the benefits of social media is split down the middle. Not only this, but their positions are entrenched with almost religious vigour.
What makes Dolan’s views interesting is that, in another way, he embraced Twitter to the extent that it made national headlines. Nicknamed the “Twitter Dragon”, Dolan offered investment to potential entrepreneurs based on their 140-character pitches.
“I had the same pressures that other people had – hearing that social media is the next big thing, so I felt I had to get on the bandwagon,” he admits. “So I set up an account. Then you think, what do I do with it? Then it occurred to me that I see a lot of business plans for people who want investment, which can get boring after a while. So I thought I could get plans without having to read too much. I put the message out and it took on a life of its own.”
This does not change his views on social media. “It will be like the Dutch tulip craze,” he suggests. But, more importantly, did it work? “I invested in two businesses,” he adds.
The dragon moniker was perhaps inevitable. But the television programme from which it was derived, Dragon’s Den, and reality show The Apprentice have done nothing to further entrepreneurial spirit, according to Dolan.
“They make entertaining television but I’m fairly sure Alan Sugar is not like that in real life. And I know for a fact that Peter Jones, Douglas Bannatyne and Deborah Meaden are not like that in real life,” he says. What’s more, this fictional portrayal of business can be damaging. “If someone wants to go into business and their only point of reference is Dragon’s Den, they will think they have to put on this fantastic pitch in front of scary people who are going to grill you to within an inch of your life and you will need £50,000 to £75,000 just to get started. Well that isn’t true and it doesn’t do anyone any favours. Similarly with Alan Sugar. It’s all barrow boy stuff and he isn’t like that.”
But whereas Lord Sugar’s signature show might not have done much for encouraging entrepreneurs, his life story is inspirational. Unfortunately, successive governments’ attempts to encourage new business people have been “lame, poor, non-existent – or any other adjective that describes doing nothing”.
“There’s entrepreneurs’ relief, of course, which is great. But it’s a nice relief for when you have finally made it. But that is not going to drive someone to go and start a business.”
Instead, there should be “huge tax breaks to people who set up their own businesses – no tax or PAYE for the first few years, no PAYE for the first five months, etc,” he suggests.
Like the National Insurance holiday, which allows new businesses to get reliefs on NICs for new employees in its first six months. But this was only taken up by 3,000 businesses in a year, despite an initial target of 132,000. “Maybe they did a particularly poor job of advertising NIC holidays,” he says. “And why would they advertise it? They could say they have done it, and it makes great headlines, but if no-one knows about it, it has little benefit – and it does not go far enough.”
The way to boost the economy is a change in culture to encourage entrepreneurs. “If you are encouraging entrepreneurs, then you are building businesses and making jobs. That is the sole purpose of encouraging an entrepreneurial culture… That is the only way jobs can be created,” says Dolan
“You cannot have a situation where everyone is employed by the government. Government creating jobs means people pushing one piece of paper to the next. We have mass walkouts in the civil service, but who would be able to tell?”
Le Mans for all seasons
This single-minded individualism is evident in Dolan’s life outside work. This year, he raced in the Le Mans 24-hour race and although he only managed six hours before the car’s pistons cracked and the engine blew up, it was a “special time” for him and he hopes to take part next year.
Motor racing seems an obvious choice for an entrepreneur, with its risks and its focus on the individual. But that wasn’t necessarily the attraction, he admits. “It’s not a conscious thing to participate in individual sports. But it is something I prefer. There is something really quite relaxing about racing because you put your earplugs in, your balaclava on, you get in the car and can’t think of anything else. You’re just in that moment. And you don’t get that very often in life.”
There might be a more mundane explanation though. “Maybe it is the fact that team sports at the highest level have kids that have done it since the age of four. In racing, it’s possible to do well in five or so years.”
All of which does not fit into the Monty Python boring accountant stereotype. Which brings us to the undoubted star of this year’s Apprentice and former PwC graduate, Edward Hunter.
Hunter was scolded by Lord Sugar for not using his accountancy skills, which are a great plus for any business, the part-time businessman, full-time show-businessman said.
But, as Dolan points out, being useful in business is not the same as being an entrepreneur. “I don’t think very many people left to their own devices have a very entrepreneurial spirit anyway. There isn’t a larger proportion of entrepreneurs from an accountancy background, a law background, or a scientific background – they come from all walks of life.”
So maybe Hunter was right to so forcefully reject his accountancy shackles? Probably not, says Dolan. He’s probably suffering from that Monty Python stereotype more than anything else. And he got out in the first week – there you go, not very entrepreneurial.