The Debate: Are small firms stuck in a rut?

Firms fail to build up business

By Keith Seeley

Call me a pessimist, but I believe most small and medium-sized accountancy firms have no future.

They are doomed to become no more than sweat shops turning out tax returns and accounts for small businesses where the key driver is cost.

Why do I say this?

Because the major issue for most quality growing businesses is business planning and strategy, and what they desperately need is advice to help them build their businesses.

Unfortunately, most accountancy firms are failing to meet this need, although they delude themselves that they are doing so.

Regrettably clients do not value their accountant for their audit or tax compliance abilities.

Eventually the better businesses will migrate to those few firms who are geared to help them to go forward rather than focussing on the past.

The main reason why most firms are stuck in this rut is that they are structured in the wrong way.

They organise themselves so that all the partners are general practitioners.

The result is that they are far too ‘hands-on’ and are carrying out tasks that would be better done by more junior staff.

This is evidenced by the number of partners who are unavailable during January because they are too busy doing tax returns.

The worst offenders are those firms where clients are ‘owned’ by individual partners who treat the size of their portfolio as their power base within the firm in this situation. No other partner has access to these clients.

This means that it is very difficult to build up specialisms, with the result that the quality and range of services offered then becomes dependent on the quality of the general practitioner.

And unfortunately most general practitioners simply cannot cope with complex tax issues, corporate finance work or other areas that constitute ‘added value’ services.

Accountants must learn to maximise the potential from their client base so that they can give their clients what they really want – help with growing their business.

• Keith Seeley is managing director of Target Consulting Group

The future looks bright
By Phil Shohet and Andrew Jenner

A great many owner-managed businesses (OMB) and SME clients still prefer to have a smaller or medium-sized practice as their advisers – provided that they can offer a comprehensive range of services.

Therefore, whilst there is still support from this vital sector or their market place, and provided that they can institute and maintain effective practice management and development strategies, they will (probably to the great disappointment of the major firms and consolidators) continue to enjoy a profitable existence.

Essentially there are two types of firms: those that have clients managed by all the partners working together; and those where individual partners have their own clients in isolation from other partners. Firms that fall into the first category are more likely to be able to plan and implement effective strategies to survive and prosper. Likewise, identifying and anticipating client needs in a pro-active manner is essential if a practice is to prosper. Some partners may be more proficient than others in this role – but only if they have a good knowledge of the firm’s client base.

Taking the time to get to know your clients and their requirements can help to grow the practice more effectively than the most expensive and sophisticated marketing techniques, but it requires commitment from all the partners if it is to be successful.

Typically, the needs of an OMB business are often reflected in both running out of money and a reduction in efficiency as the company grows. Often management is not working to a clear plan and those involved are not properly trained and conversant to take the business forward. You need to be able to harness the skills and talents needed to help them manage their business growth effectively.

Restructuring the practice, creating added value services, improving efficiencies and introducing a culture that encourages everyone to achieve their true potential will all contribute towards the creation of a business of true value and profitability with future growth potential.

• Phil Shohet and Andrew Jenner are directors of practice development consultancy KATO.