International networks can be a boost for smaller firms competing hard for business in a mature market, writes Rachael Singh
IN MARCH, THE International Group of Accountancy Firms, IGAF, joined forces with Fidunion International to form IGAF Polaris. It features in the Accountancy Age Top-35 International networks, associations and alliances, and boasts members such as Hurst, Cooper Parry and Buzzacott as its representatives in the UK.
For Hurst’s managing partner Tim Potter, the notion of joining a global set of accountancy firms and the network’s expansion has offered more than just extra services to clients. It has given it the tools to compete against the Big Four and opened doors to gathering and sharing ideas with other UK firms.
Since the recent merger between IGAF and Fidunion, and now Polaris, Potter believes the union will increase the pool of services available to Hurst clients.
“That is going to mean that, in overall terms, we will become an even more credible deliverer and an even more credible competitor,” he says.
Potter claims that the IGAF Polaris merger has created a “massive opportunity” for firms to compete against the Big Four.
Currently, the firm has 13 partners, 79 staff and turnover of £4.2m. It focuses primarily on the tax, audit, corporate finance, payroll and recently created human resources service lines. On the face of it, the firm looks as though it would not have a chance of competing against mid-tier firms, let alone the Big Four.
However, the London, Stockport and Manchester-based firm has made a rapid rise to fame in its 29-year history.
The firm launched itself onto The Sunday Times’ Best Companies league table in 2009. Although it did not make it into the top-100 on its first attempt, they were given first-class accreditation, showing they were on the right track.
A year later, Hurst entered the Crain’s Manchester Business Best Places To Work For Award 2010; it narrowly missed out but was the only accountancy firm to make the shortlist.
Now, the firm is back entering The Sunday Times’ Best Companies league table 2011, with entries currently underway and the report to be published later this year.
Improving brand awareness
Although the firm has not yet managed to break into the league table, it has gained enough brand recognition to compete against the likes of PKF, Baker Tilly, and RSM Tenon.
Hurst’s then-chairman Malcolm Hurst had grand visions for the firm and in 1998 opted to join IGAF for several reasons. One of the most important was to ensure that Hurst could take on any and all entrepreneurial businesses.
By Potter’s admission, companies are becoming increasingly internationally focused; he claims that Hurst needed to establish the right branding so entrepreneurs could trust that the firm would be able to deliver on global services such as auditing for subsidiaries overseas.
He highlights: “In particular we have been successful at working with a number of the larger IGAF firms in the US and positioning ourselves as outsourced project managers for those clients with European interests.”
It was not just the perfect marriage for Hurst. IGAF had previously been losing or not even bothering to pitch for work outside the US because it had not been able to prove its strength in the international arena.
Potter remarks: “Since about 2004-05, we created our own delivery mechanism. We positioned ourselves as their men in Europe.”
This is bolstered by recent changes in the US to instill more independence into the financial reporting framework. There are plans to force companies to have separate accounting firms complete their compliance, audit and tax work.
Potter believes that, because of this drive, it will help Hurst compete against the larger accountancy firms. Hurst has been successful in picking up European subsidiary work from US counterparts that previously would have been handed to the Big Four.
He considers Hurst as IGAF’s supply line in Europe: “The Big Four in particular have created an almost monopolistic position. They have proven themselves on international deliveries and they do it pretty well, let’s face it.
“But they also charge an absolute fortune for it. So it is the strategic idea to work with IGAF to tap into this market.”
The association generates, along with other international work, about 6-7% of Hurst’s revenue stream. The firm’s revenue increased by about 7% in the last year and Potter expects it to grow by at least a further 10% for the year 2011-12.
Potter hopes that over 10% of the fee income will come from international sources over the next three to five years.
More impressively, he hopes the firm will make a 10-15% increase in organic growth each year for the next three to five years, doubling revenues by 2016.Capital ventures
Although tax had a quieter year, corporate transactional seemed to be blazing through, so much so that the firm was confident enough to open a London office to serve private equity clients and field recommendations for its corporate transactional division.
By his own admission, Potter can see himself spending a substantial amount of time in the London office. However, he is quick to point out that he has not left his roots behind: “It comes back to the point which is that our people are the key to everything.
“I want to be leading them. I want to be working with them. I want to be close to the coalface and our core business. Clearly, the sexy world of corporate finance and the wine bars of London are all very tempting but, actually, we have an enormous client base that is growing.
“The team are the people who deserve the attention and the care, though and I won’t be looking to leave them behind.”
Although quick to point out that what was then Price Waterhouse offered him a great professional education, Potter left because it was unlikely in his view that his ambition to become partner could be achieved. He comments: “In the seven years I was there, nobody made partner in Manchester, so a lot of great people came and went.”
He believes that if someone has the potential to be a partner then they will do their best to ensure they become one. However, Hurst found itself caught out as it lost, in a single year, two such key people to the Big Four, something that Potter claimed hurt the firm.
Potter says: “We initially thought defensively, what can we do to make sure that people don’t leave?”
Through alliance links with other firms, he found himself discussing retainment policy with Cooper Parry’s chief executive, Jeremy Bowler, who suggested Potter enter the firm into the Sunday Times’ Best Companies to work for league table, which boasts just a handful of accountancy firms.
Although some claim that the list is little more than public relations at best, the exercise of digging into employee “happiness” at the firm was a real eye-opener for Potter. He believes it was a “fabulous” learning curve, giving the partners a real insight into what was working for its employees and what needed improvement.
Open to the truth
The firm now undertakes an annual anonymous survey for all its employees. One of Potter’s personal goals in running the firm is to ensure that any staff member who has the desire, drive and commitment to rise to the top will be given the opportunity to do so.
He says: “So I’ve got to grow the firm at a swift enough rate to make sure that Joe Bloggs senior can make his managerial promotion. If they are worthy and prepared to work enough to become a partner, there will be a partner place open to them.”
Through IGAF Polaris, Potter has recently introduced secondments to destinations such as the US, Switzerland, Belgium, Spain and Germany for his employees – something previously only available to larger international firms.
He highlights: “We get some pretty bright people but we have to put up a pretty good fight to get them. This is what we say as part of our attract-and-retain strategy.”
Concerning himself, Potter claims no aspirations to be chairman; instead he would like to continue in the same role but for a firm twice Hurst’s size. He is quick, though, to point out that Hurst is on a rapid growth path over the next few years and that ambition could be realised where he is now.