A CHANCE MEETING in the trenches during the First World War ultimately led to the creation of Bishop Fleming, the £17.5m-turnover West Country practice headed up by managing partner, Matthew Lee.
As the firm prepares to mark its centenary in 2019, Lee is on the cusp of celebrating his own major company milestone – amassing a solid quarter century of continuous service on 01 August.
The 51-year-old, who recently clocked up a decade as chairman of Kreston UK, a global network of independent accounting firms, which collectively amasses “north off £100m” in turnover, is proud of the firm’s heritage, its go-getting culture and strong moral compass. This compass saw it refuse to promote any of the more “aggressive” tax-planning schemes that seduced and ultimately embroiled some in the profession.
Currently 38th in the Accountancy Age Top 50 +50, the practice currently has around 170 academies on its books across the south-west and the Midlands, earning it the number two spot in the UK hierarchy, just below market leader Baker Tilly, suggests Lee. Such penetration contributes some £2m a year to its growing revenue stream. Another £1m comes in from its Torquay-based payroll services.
Other key sectors for the firm are not-for-profit and care homes – a natural fit, given the demographics in the south-west, a popular retirement destination.
(Non) insolvency woes
While still a significant regional player in business recovery, the market has declined markedly in the last few years, as Lee explains: “Ten years ago we generated almost £2m from business recovery whereas last year it was £1.2m.”
He puts this change of fortune down to a reluctance from banks to “put the boot in and wind people up”, and the current low interest environment that has empowered borrowers to easily service debt.
“There’s enormous political pressure for banks to continue to support their customers and they’re more prepared to work through those problems,” adds Lee.
“What you need for an insolvency business to do well is a lot of, frankly, irresponsible lending to go and there hasn’t been that. But if you look at the statistics, people starting businesses have been going bust for hundreds of years – it’s just one of those things.”
Lee describes the “typical” Bishop Fleming client as an SME turning over between £1m to £10m, its “sweet spot”.
Perhaps surprisingly for a firm of its size and regional reach it conducts no listed company audits. Lee is quick to explain why: “Strategically, we look to serve SMEs as more than just their accountants, and by offering specialist services into larger businesses such as tax and VAT advice or finance, for listed entities.
“Here in the SW there are only five AIM-listed businesses and the institute (ICAEW) wants such a large increase in fees that you have to pay to do it, that when you factor in what they take off you plus what the public indemnity insurers take off you, it simply not worth it.
“It’s based on a very unfair matrix of the number of partners and the number of offices. It favours the very large and the very small. The mid-tier gets disproportionally penalised. So if we were to step up from none to some, it will cost us between £15,000 to 20,000 – so you’d have to do quite a few audits make it cost effective.”
He says the Big Four will always monopolise the upper end of the market “because of the sheer logistics” needed to service it adequately.
With 300 staff, the firm’s biggest office is Bristol with a £3.3m turnover, closely followed by Exeter at £2.9m, Bath at £2.6m and Plymouth at £2.2m.
The business has come a long way since it was conceived almost a century ago. “Oddly enough there never was a Mr Fleming,” says Lee.
“Bishop and Fleming met in the trenches in WW1 and vowed that on getting demobbed, they’d set up an accountancy practice in Torquay together.”
While Frank Bishop went off and got the office, Fleming had a change of heart, so Frank Bishop -being a typical gripey accountant, said: ‘I’m not going to throw away the letterhead…and kept the name plates'”.
The rest, as they oft used phrase goes, is history. But the firm’s expansion took a while to gear up.
Torquay remained its only office until the 1950’s, when it set up a new outpost in Exeter and Plymouth. Some 30 years later, in the late 1980’s, further expansion out of its Devon heartland into the historic port of Bristol and the Cornish city of Truro ensued, prompted by a failed merger with Coopers and Lybrand after the firm’s then partners decided it could be a case of “turkeys voting for Christmas”.
The next key moment in the firm’s evolution happened around four years ago, when Bishop Fleming was turning over some £10m. Since then volume has grown by 70% and the company was fastest growing firm in the Top 50 for two years running, until last year.
Pace of growth picks up
That pace of growth occurred through a winning combination of organic gains and the acquisitions of Worcester outfit Rabjohns in late 2011 – then just over a week later Bishop Fleming bought the Bath office of Target Chartered Accountants from receivers PwC after the firm went into administration.
This, plus several million pounds from their academies business and a cool million from payroll services, have helped to offset some of the downturn in insolvency.
And over the last decade, Bishop Fleming’s payroll services have been consciously centralised, become more professional and priced in line with how payroll bureaus work, and all actively managed by dedicated manager. A growing slice of the payroll business is derived from government initiatives such as RTI and auto enrolment.
Much of their bread and butter work is derived from “mum and dad family shareholder-controlled businesses where we have been advising them for a couple of generations”.
Indeed, the results of the firm’s customer satisfaction survey reveals many of its clients – the bulk of them corporates – have been with them for several generations, often for 60 or 70 years. “We get the culture right, we look after our clients and we become their trusted adviser,” enthuses Lee.
He joined the practice in 1990 from Coopers and Lybrand’s management consulting arm, where he worked at both their Bristol and Nottingham offices.
Prior to that he trained with Bristol-based Gordon Wood Scott Partners, and moved on qualification to Deloitte Haskins and Sells as audit manager, which then through a merger became Coopers Lybrand Deloitte.
Looking forward to the next developmentally-critical stages in the firm’s ongoing evolution, Lee has a clutch of “simple messages”.
Breaking the Top 30
“We’re looking to be a Top 30 practice, to maintain the existing culture of firm, which is important to both staff and clients. It’s about being open, friendly, approachable, honest and fair and putting the interest of client and staff ahead of our own particular interests.
And it is the maintenance of this unique cultural DNA that Lee is especially keen to nurture and retain.
“We’re one of few firms in the Top 50 that does not engage in selling tax products – much of which is now coming back to bite people. We felt that morally and ethically many of the schemes being marketed to us in the past were akin to being morally blackmailed by some of the providers.
“They effectively said ‘if you don’t let us sell these to your clients we’ll help your competitors market to them’. It didn’t feel right. If we wouldn’t sell it to my mother I wouldn’t sell it to a client.
“For those firms that did, it’s come wrong for them. When it comes to our professional indemnity, now it’s top of the list. ‘Have you ever sold this?’.”
“We’ve been here for almost 100 years and we want to be around for another 100 years. We want long-standing relations with our clients and be able to look them in the eye in ten years’ time and be able to say our advice was in your best interests and not mine because I’m going to get a cut off it.”
And in a bid to secure the next 100 years, the firm has ramped up its rewards and benefits packages for staff and partners with a cycle to work scheme, the ability to buy and sell holiday, flexible working, and wider tweaks to improve and enhance the general employment experience.
Lighter-touch local model
Part of this change to way staff are rewarded was by introducing a “lighter touch local model”, whereby more centralised teams mean that everyone works on one system so all the audit and tax files are in the same central information pool, ensuring that a tax manager in Exeter can work on a job in Bristol as easily as if their local one.
Lee sees potential threats and/or opportunities as being represented by Xero’s cloud accounting and KPMG’s SME offering, “which on the face it looking to stray into our market place” will actually benefit firms like his.
“I think we’ll be better at it than they will, because we’re more familiar with dealing with those sorts of clients – we are Xero re-seller and put a lot of time and effort into developing our offering to what our clients want us to do – we keep agile and keep changing.
“They (KPMG) have deep pockets. I have little doubt they could provide that service if financially they decide that they wanted to, because they have a lot of very clever and very good people.
“But what they will not be able to do is get the premium rates they are used to getting from that client base. There is a difference between our clients in that they pay with their own money where probably in [the corporate sector] it is somebody else’s money. And you spend your own penny more wisely than you do your employers.”
As chairman of Kreston for the past ten years he’s now thinking it’s “probably time someone else did it”. And having been Bishop Fleming’s managing partner 15 years, he has ensured that, instead of the somewhat outdated system whereby partners would look after different departments such as HR and marketing, a team of professionals now run them, dispensing with the committees of old and liberating the partners to run the practice.
Despite clocking up a cool quarter century at the firm, Lee is still hungry for more success and is keen to get it into top 30. To get there numerically, he’d “only need another £5-6m turnover”.
“Now you could go and buy but I don’t advocate that. There are a number of models out there where that has failed because they overpaid for goodwill and can’t service the debt.”
Instead, Lee believes that there are “good practices around where it’ll make sense to join us because of the culture we’ve got and they can see it’ll be a nice place for them to go – particularly in an environment where practices are suffering with succession issues.”
Having recently taken on Christine Tuckerman, the former head of private client business for Baker Tilly, to run their Bath office and a record number of 25 trainees this year, the Jaguar X12-fan and owner of two fox red Labradors, plus a couple of horses for his equestrian-loving wife and daughter, the next chapter in his firm’s evolution looks decidedly rosy.
“My passion is to see the firm continue to prosper and grow, whether that’s new offices or new M&A service lines or whatever. Who knows? Stuff always changes every year and I’m perpetually fascinated by the market and how it develops,” says Lee.
Matthew Lee CV:
2006: Appointed chairman of Kreston UK
1990: Joined Bishops Fleming
1986: Joined Deloitte Haskins and Sells
Bishop Fleming in numbers:
Staff: 296, including 28 partners
Fee income: £17.5m up to end May 2015
Service lines: Audit assurance; business recovery and insolvency; personal tax services and payroll
Bluffer’s Guide to Bishop Fleming: Possibly the only firm forged through a chance meeting in the mustard gas-ravaged trenches of the First World War. Both Bishop and Fleming vowed that on getting de-mobbed – they would set up an accountancy practice in Torquay. Fleming had a change of heart, but as Bishop had already had the letterheads and name plates made – he kept the moniker.
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