Is size everything when it comes to accountancy practices? Nicola Draper finds one man who thinks not.
Is size everything when it comes to accountancy practices? Nicola Draper finds one man who thinks not.
While everyone is talking about the importance of growth, is it always the right thing for your business? Downsizing tends to refer to people selling large houses for smaller ones, and it’s not something often discussed in business terms.
If you wake up one day and decide to take on more staff and office space and to aggressively market yourself to get more clients, well, fine but it does have its downside and it’s not for everyone.
I recently came across an accountant who has a successful practice with no partners. He has big offices in the centre of a city. He has 11 staff and a lot of stress, juggling everything from clients to staff issues. Being in the office on yet another Saturday, he worked out that he had some clients he really likes and whose businesses are big enough to bring him in GRF of around £100,000 a year. He looks after them himself, with straightforward audits and company accounts. His staff, meanwhile, look after what he calls ‘his little guys’ – individuals and very small firms. He overseas this, checking work and signing off, and it takes up, he reckons, over half his time.
His salary bill for staff is almost £300,000 a year, rent and rates come to £16,000 a year and other expenses such as utilities, stationery, computers, maintenance, travel, marketing etc. come in at an extra £20,000 a year. That’s around £336,000 a year. What do these staff earn for the company from his diverse range of ‘little guy’ clients? Last year it was just shy of £340,000
Yes, he is giving people jobs. Yes, he is helping small firms, but all that hassle for a clear profit for the business of only £4,000? He was wondering if it is worth it. As his lease is coming to an end, he has made a life changing decision, for him, his staff and possibly for his clients. He is going to keep his big clients, buy a bigger house and create a home office, employing just one person and ditching everything else. Less stress, no commuting, low overheads, clients he likes, and more or less the same income.
He was about to just let his small clients go when luckily, a colleague recommended he talk to us first. I pointed out that a GRF of £340,000 was certainly worth selling as a block or even in several blocks. Even though he is an astute accountant, he didn’t realise these clients had value as an asset. Some of these small clients have the potential to become big clients, thereby making them more valuable; some who are older individuals less so. I am in the process of assessing the profile of these clients and their contribution to his GRF, to enable me to advice whether to sell them as one block or perhaps divided them into several. Either way, it’s about ensuring they are the most attractive they can be to potential buyers.
The moral of this tale (if there is one) is that big isn’t always beautiful and size, as they say, is not everything. Don’t discard a single client if you decide to downsize; whatever their profile, however small their contribution to your GRF, they have a value and you’d be foolish not to capitalise on it.
Nicola Draper runs Draper Hinks, a broker firm that specialises in buying and selling accountancy practices or blocks of fees
Article written by Nicola Draper from Draper Hinks.
To contact Nicola Draper please email her on n.draper@draperhinks.co.uk