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Leader: KPMG’s SME move part of a worrying change to small practice landscape

IS your practice scared that KPMG is looking to widen its nest and provide a cheap (for them) service to smaller businesses? Probably not.

And you’re probably right to think that way. It’s unlikely that vast swathes of your clients are going to up sticks for a Big Four firm fluttering its eyelashes at them. And the range of commentary from the small practice community has veered between indignation and incredulity.

KPMG’s move, however, is indicative of a number of interesting issues.

For the firm itself, it is suggestive that its core markets are becoming increasingly tough in which to grow. Audit and related services are being strangled, while driving value in tax is a tricky area – and that’s putting it lightly.

So the firm is spreading its wings. But will it succeed? It’s hard to imagine it not, despite the clear hurdles it faces: building a brand i.e. convincing clients that they will ‘care’ in the same way a ‘local’ practice would; and achieving a margin.

How success will be defined by the firm will no doubt be finessed before it reaches our eyes, but the game is definitely a long-term one. As such, initial client numbers and profits will be only of limited importance.

They will look within the new client base to pick up some that are high growth, then manage them – and their clients owner-managers – from cradle to grave. The real money is made in picking up lots of businesses that accelerate.

So, who should be looking over their shoulder, after KPMG’s pronouncement? Well, it’ll be the other large-scale, online or commoditised accounting providers. They won’t be too happy with a big dog stepping onto their lawn.

So, ‘as you were’ for other practices? Well, not really.

Mid-market clients, where a lot of growth and value is created, could end up having been caught in KPMG’s net earlier on in the process. Will mid-market practices find its supply of clients start to dry up?

The bigger picture for smaller practices is generally worrying, with or without KPMG. Clients, still struggling to turn a good profit, find further regulation tying them up. The extra burden of helping clients through auto-enrolment, or real-time PAYE, can be difficult for firms to bill against.

Meanwhile practices, having done some navel-gazing about their own structures, realise instead that they need a telescope to find people to take over the running of the firm. While many traditional practices stagnate, other accounting services providers have entered the fray, with fresher ideas and new business models.

So will KPMG take your clients and kill your practice? No, but the firm’s move is part of a bigger, worrying change to the landscape in which smaller practices operate.

Kevin Reed is editor at Accountancy Age 

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