My journey: Part one

Almost 15 years ago, I bought Landers, a small accountancy practice in Toddington with a good client base, but a whole host of issues to sort out. After ten years of running the practice, it achieved a 250% profit growth, negative WIP and partners enjoyed a four day working week. There were times when this level of change seemed impossible, but we did it and you can too. In these articles, I’m going to share with you the techniques we used to achieve this, but first I want to tell you about my personal journey which I hope will inspire all those practitioners who are feeling less than positive.

My story
In 2007 I was unexpectedly diagnosed with cancer and had to leave the office at short notice to start my treatment. On 16 October 2007 I sat at my desk for three hours, talked to the team and effectively made myself redundant. My illness allowed me to re-assess my goals and priorities in life and I decided to pursue a different line of work helping other accountancy firms and spending more time with my family. I never returned and Landers continues to grow without me.

When I talk to practitioners and share my story they ask, ‘but how did you actually do that? We can barely leave the office for a week without returning to chaos!’ There are two parts to the answer to that particular question. Firstly, I had a remarkable business partner. Secondly, we worked to build a business that wasn’t overly dependent on a partner and could readily continue without my involvement. I felt so proud that I had achieved this and my work was done. Given that the practice was heavily systematised it also meant Landers was valued at a premium on my departure.

Even in this hard economic climate, positive change is possible. There are still many opportunities for the small practice. There are still successful strategies to ensure you keep one step ahead of the competition, build a team of people that will grow the business with you and provide you with a valuable business asset into the future and your own retirement or exit date. It is also possible to achieve that four day week and longer holidays with some simple business planning.

Big changes
I originally bought Landers from a retiring sole practitioner around 15 years ago and with the practice, I also inherited some of its problems, including:

• No budgetary control on jobs.
• No systematic billing of clients.
• Bad debts.
• Huge levels of work in progress.
• Uncertainty over whether work in progress was actually recoverable, since no one had dared to look too closely and tried to bill it out for fear of the unknown.
• An overdraft facility that was permanently at its limit.
• Profit per partner running at only £40,000 a year.
• No available working capital.
• Partners working in excess of 60 hours a week.
• Significant balances on partners’ capital accounts as there was never the available cash to draw it down.
• No real job satisfaction and a feeling of continual ‘fire fighting’.
• Work was not fun.
• Failing to deliver the level of service clients deserved.
• De-motivated and disillusioned staff and a real recruitment problem – after all, who would want to come and work for a firm like this one?

After ten years of running the practice, we achieved the following:

• Positive cash flow and no overdraft.
• Turnover had increased by 150%.
• The number of partners had doubled and profit per partner had increased by 250% compared with what the original partner was making when the firm was bought out.
• There were no debtor issues or bad debts.
• The practice had available working capital to grow the business and invest in its future.
• Partners were able to draw profits.
• There were only 140 clients with an average annual fee of £6,500.
• There was negative work in progress as clients were paying in advance.
• Partners were working a four day week and enjoying 10 weeks holiday a year.
• We had a team of staff who were happy – and we knew this because we measured their happiness weekly.
• The number of clients had remained constant despite some leavers and joiners.
• Work was enjoyable and there was a clear vision for the future which everyone shared and was part of.
• Clients were delighted at the level of service they received and would say so in writing.
• The practice won lots of awards, including Accountancy Age Firm of the Year, AVN Regional Firm of the Year and Regional Rising Star Award Finalists.

How we did it
It wasn’t all plain sailing, that’s for sure. There were plenty of challenges along the way and days when both I and my fellow business partner, Robert Brown, wanted to throw the towel in and run for the hills. After buying Landers we spent five years sorting out our own housekeeping issues and had achieved a moderate degree of success. However, progress was slow and we felt we needed some extra resources and support to help us as a small firm punch above our weight.

Next time, I'll explain how joining an accountants’ network added to my professional toolkit and reveals my top ten checklist for successfully developing a practice.

Finola McManus is a chartered accountant and a former senior partner of Landers Accountants in Bedfordshire. She is now a professional accountants’ coach and founder of Practice Perfect, a consultancy service which offers targeted solutions to help practices grow.

Finola McManus FCA
Email: Finola@practice-perfect.net
www.practice-perfect.net