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Practice growth

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Morning all.

I'd be interested in hearing from practitioners who started out as one man bands and then took the plunge to take on staff and grow. How did you approach it, how did you deal with the initial drop in income and the loss of (some) control - we are all control freaks aren't we, can't just be me?

I'm not interested in hearing from marketeers and consultants (who think) they can tell me how to do it, but rather practitioners who have done it, are in the process of doing it or are thinking about doing it.

I'm at a crossroads where I'm considering it.

PM me if you'd rather communicate that way.

Replies (25)

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By wilcoskip
16th Sep 2016 11:28

I'm reasonably small still, having just in the past year taken steps to move past a strictly one-man-band existence.

My first step has been to more fully utilise a local sub-contractor for VAT returns, bookkeeping and payroll. The relationship was already in existence, so trust wasn't an issue. It's still sometimes a headache needing things urgently when they're off working for one of their own clients though.

I tried very recently to get a full-time (more or less) staff member on board. Even with a laid-back office environment and flexible working options (I'm quite cloud-based and also work via hosted desktops) I still couldn't find who I was after. My new thinking is to get an apprentice in and grow my own staff member.

As far as control freakery goes, I think effective delegation is essential, but I went for it too soon and should have kept a tighter rein on things for the first few months.

By far the best aid to growth that we have is technology. Makes life so much easier than it was when I was training...(20 years ago next Feb. Good grief.)

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Routemaster image
By tom123
16th Sep 2016 13:02

Good to see you back, haven't noticed you around a while..

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By Glenn Martin
16th Sep 2016 13:34

Hi Kent

Good to see you back.

I am at similar stage where I will be at capacity pretty much soon, with some part time bookkeeping and admin support.

For me the way to grow is through acquisition at the stage. I looked at buying a practice similar size to mine. He had 2 staff who were doing most of the work and the retiring guy was only doing 2 days per week. The deal would have doubled my practice and given me a good platform to grow as he had been trading for 30 years.

It fell through but others are coming up as some of the older lads don't fancy MTD and more fees will come up soon.

Taking on a full timer is a big step your income will drop and you will be under pressure to get extra fees in quickly to get back to you where you were. It might take you back a year or so before you see the benefit. If I cannot get some fees soon I will have to consider some more permanent staff as I really want to push on now and build beyond being a sole trader.

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By [email protected]
16th Sep 2016 14:25

Kent Accountant,

It is an interesting dilemma, I have been through it in the last 12 months. Whilst the ACCA tells me I am in practice, it is not really an accounting practice, as I specialise in R&D Tax Relief. I don't do anything else.

The first thing I did before even considering an employee was subcontracting out all the things that I could just like Wilcoskip. I started with Payroll, then my own bookkeeping, then I subcontracted out things like Social Media, that I use quite a lot and then Blogs that I publish, which are now generally subcontracted out, this may not all be appropriate for you, but getting rid of things to other experts will mean the opportunity cost should be of benefit to you as they will do the work in a much shorter period of time.

I found this freed up quite a lot of my time for another 6 months. But then around the turn of the year after an incredibly busy December 2015 I took the plunge and started the hiring process.

Look for someone who can do something better than you, this means that your new employee will be able to complement your existing talents, meaning that you can offer a better service to your existing and future clients. If they have a specialty make a song and dance about it.

Whilst I am a qualified Accountant, I worked in industries where R&D is prevalent for 7 years after leaving practice and had been running my business for 30 months before recruiting. The industries I worked in were Clinical Research and Motorsport Engineering, so I had a tendency for being very good at identifying R&D in these sort of projects, I knew that my specialist knowledge of IT was my weakest area, so I looked for someone who had extensive knowledge of the IT industry. It took 3 months to find him but he has made an impact in my business already and has improved the service I can offer to my clients.

I hope that helps and good luck with your growth prospects.

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Man of Kent
By Kent accountant
16th Sep 2016 17:49

Thanks for all the comments

@wilcoskip – I suppose use of subcontractors is just an extension of doing it all yourself – you spoon feed them and still have to review everything.

My view would be you (and me to an extent) would need an admin member of staff for the…admin… and a qualified able to do work from start to finish which you could then review before finalising.

Would you be comfortable seeing your income drop for 1-2 years?

@tom123 – have been lurking very occasionally but things on here just aren’t the same…

@Glennzy – I’m not keen on buying fees. I like to know clients well and with organic growth you take on clients gradually and familiarise yourself with their businesses over a period of time.

With buying fees you suddenly have a group of clients you know little about. Unless you have a member of staff you can rely on, you need to spend a huge amount of time with familiarisation (even after the due diligence and initial meet and greet).

@Simon – sound like you recruited someone on a similar level to yourself in which case they could just hit the ground running?
However with this it brings the likely drop in income for yourself, unless you’ve built up a cash fund - and it looks like you have ;o) – until they become fee and profit generating.

For me it’s a cultural thing – I do as I please at the moment (work fits around family life) and my feeling is going for growth would require a change i.e. proper staffed office, manage staff, delegate and review work etc which may take some of the ‘fun’ out of being a sole (just me) practitioner.

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Man of Kent
By Kent accountant
16th Sep 2016 17:55

I suppose I'm really looking to hear from someone who was in my current position and made the move to running a 'proper' business.

It may be its just not what I want.

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By The Doctor
16th Sep 2016 18:34

It's not what you want, it's pretty obvious from your reply you're putting up objections to all the suggestions.

For what it's worth I started my practice about the same time as you. I now employ 8 staff and work 4 days a week. So you can have a better work life balance, which does sound important to you.

The first member of staff is the hardest financially and emotionally.

You have to learn to let go, most clients don't care and won't notice the little errors that inevitably slip through.

My advise would be to take on a cheap AAT or QBE and give them as much of your easy work as possible (bk, paye, bank recs, admin, pertax) - you'll be amazed how much time you save. Don't bother with admin staff to start off, it's a waste of time as they'll be too much that is beyond them.

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Man of Kent
By Kent accountant
16th Sep 2016 20:07

@The Doctor - thanks.

Did you grow organically or did you take on blocks of fees?

Did you always plan to grow and how far do you plan to take it?

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By marks
16th Sep 2016 20:54

Been on my own for nearly 4 years.

When i started out I always said to new clients that would always be just me. But as things grew that wasnt going to be possible.

So this is what I did

1. Build up on my own until about 100 clients after 2 years using cheap and cheerful software VT for accounts and taxcalc for tax returns.

2. Then moved to taxcalc for accounts and tax returns.

3. Then took on first full time employee after being in business 2 years.

4. Then moved onto IRIS after about 2.5 years as was proving more and more difficult to keep job tracking on spreadsheets. Now use IRIS accounts, personal tax, business tax, fixed asset register, time and fees (have fixed fees so time is really just to see what the time is as opposed to billing time incurred), automail, fixed asset register, practice management, openspace, openlearning. Also in the process of moving to myworkpapers. IRIS is expensive but we have made up in the cost in efficiencies.

5. Also took on 2nd member of staff after 3 years.

6. Earlier this year took on my 3rd member of staff. Admin assistant doing all my admin work that I used to do. She does 2 1/2 days a week and does all scanning, shredding, IRIS time write off, ensuring IRIS data is up to date, marketing resourcing that I used to do.

7. I now have my next member of staff lined up. Someone from school who will be joining under 5 years training programme in Apr/May next year. She has already been in a few weeks during holidays and has picked up things really quick and is really fast at processing. Plus is bright. Has 7 As in her exams this year.

8. I now also outsource all things like social media postings, blog posting, email marketing, website updates that used to do myself to someone who can do it better and quicker than I can.

Key I have found is to take time and just move to take on staff when you have reached capacity.

We are at the stage where we could do with the new staff member now as have about 230 clients but we will just muddle on through until they start next year when we should be up about 260 clients.

Long term aim is to get to 300 clients, earning +£300k GRF with probably 4-5 members of staff. Staff salaries £100k, overheads £70k which leaves £100k after tax each year. Will probably be at this level end of 2017/start of 2018.

Then wont actively market and will just take on someone new if space becomes available or if we can use them to replace a few lower earning clients. eg someone with annual fee of £3k we would then work out the practice £3k worth of low earning clients. So eventually over time can reduce client numbers but maintain GRF about £300k.

Once reach that level then my business is done.

Few other things to do

1. Hope that you find the right staff. Luckily I worked with my first employee so knew what he was like then got lucky with 2nd staff member who is also hard working.

2. Systemise everything so you staff can do everything that you can. I used to finalise all the accounts, tax returns, VAT returns etc. My staff now do all this after i have reviewed and sent drafts to client and client approves.

3. Outsource what someone can do better and quicker than you. We now outsource all payroll and as said above social media etc.

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By The Doctor
17th Sep 2016 07:53

I always planned to get big enough to make £100k pa. The growth is all organic, I've found taking on clients fairly easy, and have had to have the brakes on the marketing most of the time as we get swamped easily being a small practice.

We are still growing and all through referrals, which is great. Although I'm much more picky!

One idea might be to put your fees up a chunk and see what happens, worst case you'll lose a couple of clients, make the same money and have less to do. Best case would be keep everyone and pay for your new member of staff.

(Top tips - first member of staff could be part time. And when putting up fees choose your least favourite first!)

@marks - awesome post. :)

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Replying to The Doctor:
19th Sep 2016 22:01

The Doctor wrote:

One idea might be to put your fees up

I first read this as "One idea might be to put your feet up". I sometimes wonder what would happen if I did :-)
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By Red Leader
19th Sep 2016 11:38

I defer to other posters here, as I haven't "been there, done that". Kent has probably heard all this from me already anyway.

However, when I was faced with this decision, for me it came down to a choice between:

a) maximising profit and enjoyment as a lifestyle business, with no staff or premises;
b) really going for growth (to boost fees 5x) and being prepared to take on senior people who would dent my short-term profits but enable my limited time to stretch much further.

For me there was a nightmare scenario which would be:
c) take on premises, junior staff, clients and end up stressed with having to review (and correct) everything closely, working silly hours.

I settled for a) and as a one man band make £100k profit. If I'd gone for b), maybe now that would be £200k.

If you choose growth, think about at what age you want to do that. Earlier rather than later, I suspect.

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Man of Kent
By Kent accountant
19th Sep 2016 11:53

@marks – good growth, well done.

Was it the desire not to say no to prospective new clients which led you to take on more clients and ultimately, take on staff?

@The Doctor – did you think £100k earnings as a one man band wasn’t achievable – hence the go the staff route or did you always intend to take on staff?

And, if you have 8 staff you must have passed that level of earnings a while back, so now is it just to continue steady growth?

As I see it there is a difference between the one man bands and small sole practitioner practices which is not the desired level of earnings but rather the type of business they want to have.

Either they want to manage the business or they want to do the work. This works to a certain level of earnings.

I have been at the £100k earnings level for a while (based in the South East it is readily achievable for a one man band).

I could bumble along and see this steadily increase, however if I wanted to earn £200k I would need to change my business structure - take on staff and/or subcontract a lot of accounts prep and bookkeeping work, or look to do more specialist work (such as R&D tax credit claims).

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Man of Kent
By Kent accountant
19th Sep 2016 12:04

@RL - yes I've heard that all before... ;o)

Mind you its an important point you touch on, if you've been in practice a while and are earning well and relatively comfortable, why would you want to take on staff and earn less (for a while) to earn hopefully more in the future.

My feeling is I've left it too late as I've got use to my level of earnings (necessary to a large extent - children, big mortgage etc).

If I'd been single, in my late 20's or early 30's then my outlook would probably have been different. So your point (and touched on by The Doctor and marks) about timing is key.

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By cheekychappy
19th Sep 2016 12:17

What do you want professionally and personally, Kent?

Last year I worked an average of 46 hours per week over 42 weeks.

Post tax profits were ~£120k.

I had considered growing (and I did post about it), but what is the point? I can already live very comfortably on what I earn and it is still more than my last employment income of ~£90k.

My children are still young, and the practice as it is enables flexible working. If I took on staff, my flexibility would be reduced.

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By Glenn Martin
19th Sep 2016 13:14

For me the need to scale up is partly to deal with MTD as I think it will be difficult as a sole trader to cope with the increased filing requirements and I could see some easily swamped with work.

No matter how good your systems are, how automated your processes I can see MTD adding 30% (at least) to work loads from existing clients base. Yes this 30% will be paid for ultimately but will be hard fought for in early years, and I could see margins being squeezed for a period. The earnings figures/ hours worked above quoted above will be more difficult going forward. I feel I will definately need some staff to deal with the logistics of it all.

I am looking to buy fees with longish term admin/accounts staff in post as in theory if they have been doing it for a few years they should be competent and no what that they are doing.

Other than that, at the stage I am now I think I would add a lot to my practice with some staff as I still spend too much time on more basic tasks and need to outsource out more things like social media etc.

Well done Cheeky on your 10 weeks holiday.

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Man of Kent
By Kent accountant
20th Sep 2016 17:55

@Cheeky - there's a similarity between your post and the post I made when you asked a similar question a year or so ago!

My children are a little older and will probably start going to Uni in 2/3 years time at which point I will not need to be so flexible. As a result I'm thinking of whether/how I may change the way I work.

If I were to change and look to grow my practice (get it ready for sale?) I'd want to plan it properly to minimise disruption and drops in income.

@Glennzy - if you can find a small practice which is already ticking over nicely and is/will work the way you want to then it sounds like the thing for you. i know you've been looking for quite a while.

BTW - I've been getting bombarded with emails from an outfit called Bains Watts asking if I want to sell my practice...

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Replying to Kent accountant:
By Red Leader
23rd Sep 2016 11:43

I get the Bains Watt emails as well. It doesn't do them any favours as it goes into the spam folder along with the more dodgy ones.

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Replying to Kent accountant:
Hallerud at Easter
23rd Sep 2016 12:22

Kent accountant wrote:

My children are a little older and will probably start going to Uni in 2/3 years time at which point I will not need to be so flexible.

Possibly (though I spent a vast amount of time driving back and forwards to St Andrews with mine) but you certainly will need to be flexible with your wallet/purse.

I finished renting the last place in St Andrews in June this year and am slowly starting to see the positive cashflow benefit of same, but suspect I will need to slave away for about five years to repair the hole in our bank accounts caused by seven years of kids away at university.

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By pauljohnston
23rd Sep 2016 11:31

I have tried most things taht have already been suggested. The problem is that you are trying to fucus on your business and growing it. That works a bit. In the end I got and still have a mentor who works with accounting practices we have set the growth goal at 30% per annum, which much to my suprise is working.

Another option for you to consider

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Man of Kent
By Kent accountant
23rd Sep 2016 12:46

@DJKL - yes I've been doing the cash flow projections. Assuming all 3 want to go its an 8 year 'project' and a major outlay (bang goes early retirement...)
I'm looking forward to being able to start work in the morning without having to do a school run.
Have been thinking about buying a property (HMO) depending on where they may study...

@pauljohnston - is it just you or do you have staff/subbies?

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By RFSummers
23rd Sep 2016 13:00

As an aside, what's the headboard on your loco, please?

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By RFSummers
23rd Sep 2016 13:00

As an aside, what's the headboard on your loco, please?

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By Tom 7000
23rd Sep 2016 16:08

One step back 2 forwards
if you want to earn big bucks you need to be bigger
Weigh up the risk

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By pauljohnston
25th Sep 2016 10:08

In response to the earlier post I have two staff but expect to increase this next year as the growth starts. The menton has provided a basic growth v profit graph. THe profit in year two only grows modestly because of extra staff and maybe bigger accomodation. If you are brave enough or really wanting to grow you business then imho this is one way. I am sure it will not be plain saling but I wish I had done this years ago.

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