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Death of the sole practitioner

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4th Mar 2008
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Figures from the ICAEW's membership database show that the number of UK sole practitioners has been in severe decline for a decade. Between 1998 and 2008 numbers have more than halved.



For many the information only confirms long held suspicions that the sole pracititoner is becoming an endangered animal.

"This isn't a surprise," said Steve Pipe of AVN, "It's becoming increasingly hard to keep abreast of legislation, and way more importanly, most of them work far too hard and just don't make enough money."

Meanwhile, the Institue was careful to point out the news wasn't all bad.

"Whilst there is no doubt that the number of sole practitioners has declined," said an ICAEW spokesperson, "the presence of five partner firms on the high street is alive and well, increasing from 2,967 in 1998 to 3,068 in 2008. In many cases sole practitioners have joined together to form a larger firm to maintain their local service."

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By User deleted
10th Mar 2008 16:19

SPA
where do you find details of SPA?

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By User deleted
10th Mar 2008 16:46

Not my experience
This is not my experience in the area I practice in. In the last three years the number of people offering accountancy services appears to have mushroomed. Running alongside this are online accountancy services and customer focused HMRC. I can only base this on how competitive the market has become especially in the last twelve months. I've no way of knowing if the accountants that are setting up are ICEAW or not. When I first set out clients very often only consulted on accountant now they shop around for the best price without any reference to the service they are getting.

I have noticed an increase in people working part time from home in the evenings or whilst children are at nursey or school both from full time mums and people working full time and topping up their earnings.

I've also lost quite a few of my building workers both through the changes in CIS or simply because they are not getting the work any more. I had two builders last year who were in the 40% tax bracket who have lost so much work to overseas workers they've given up.

I've not increased my prices in the last two years despite price increases in all my costs but I'm regularly undercut. I plan to continue for the next twelve months and then decide whether to continue because the profit I make is less than the minimum wage.

I have to agree that the volumes of new legislation, regulation etc is difficult to keep abreast of and of course this is all overheads to the sole practitioner. The way forward seems to be several sole practices joining together it makes sense economy of scale, specialisms etc.

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By Neville Ford
07th Mar 2008 07:44

Demographic Timebomb
Whilst I think that resignations, consolidations, increased legislation, etc are factors in making people give it up, there is also the demographic timebomb. I attended a meeting some years ago, it must be around 10 years ago now, where it was stated that about half the accountants practicing at that time would retire in the next 10 years.

I believe the effects of this demographic timebomb will have a disproportionate affect on the numbers of sole practitioners and that its effect on firms will be masked.

If the retiring accountant works in a firm, whether partnership or incorporated, it won't show up in the statistics. The number of firms will broadly remain constant because the firm either shrinks in size, they recruit an ICAEW member by paying more, recruit a member of a different institute or use "unqualified" staff to do the work previously done by the ICAEW retiree. I don't think the 3% increase between 1998 and 2008 is a lot to shout about and is probably explained by consolidations in the face of increased legislation - ML, PA, etc.

If the retiring accountant works in industry then the business recruits a new accountant (possibly not ICAEW) and/or increases the salary to a level that attracts someone - market forces, they have to have one.

If the retiring accountant works in sole practice there are two options - sell the business or close it down. If the number of accountants is shrinking through demographics then on average there will be less accountants interested in buying the practice as a sole practitioner, so the numbers will reduce.

If this analysis is correct, the implications are serious for sole practitioners. It will mean declining values for practices and that pot of gold you were expecting on retirement may well evaporate. Which for those of us with, say, 10 years to go need to make more out of the fees now instead of expecting a big gain on retirement.

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By Nick Graves
06th Mar 2008 18:58

Me too.
David Hollister's practice sounds almost exactly like my own!

I'd like to cut down further on the work load, so there needs to more of us.

I know some of my ACCA associates have also considered handing in the badge, because apart from the mortgage reference thing, there really seems to be little advantage to them.

It will be interesting whether the MLR extension levels the field further, or not.

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By stevec.cooperparry.com
06th Mar 2008 18:08

Couldn't agree more..
David H, you have described my situation very accurately! Although I am currently still a paid up member of ICAEW I am struggling to see the benefits of membership (mortgage references are about the only one that springs to mind).

I am desparate not to have employees, but am finding it hard to turn away the good potential clients that come my way. Do many SPs use subcontractors as a solution?

Steve Coates

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By User deleted
06th Mar 2008 15:06

Not exactly a representative sample
Most sole practitioners are not members of ICAEW. There are some 25k in tax agents, plus an unknown quantity of non-tax related practitioners and accountants in business on their own.

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By User deleted
06th Mar 2008 13:57

Reports Greatly Exaggerated
From the autumn of 2005 to the summer of 2006 it is known that there was a sharp decline in the number of ICEW Sole practitioners.

Other factors such as the merging of sole traders with other practices; and; those sole practitioners just resigning from the ICEW; is possibly what is all really reflected in the above results.

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By User deleted
06th Mar 2008 11:02

Not so! Alive and kicking.
The ICAEW is completely out of touch with sole practioners and does not appear to understand their work. This because the ICAEW is dominated by the big six who in reality have never run a whelk stall!

I recieved my ICAEW membership card this week, some two months into the membership year having paid my fees in December.

It is for this reason many have joined SPA..

When I retired the ICAEW still wanted a membership Fee.

What did SPA do ? Grant me free life membership.

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By dhollister
06th Mar 2008 09:24

Sole Practice - you should try it sometime
Although we ‘unqualified’ sole practitioners’ are oft regarded by members of the ICEAW as unwanted flies buzzing around their particular honeypot, I for one have for the past 20 years enjoyed not only being a ‘sole practitioner’ but also one without even a secretary for company.

A few years with the Inland Revenue and a few more working for an FCA taught me the basics. One and one will usually - if not always - equal two. Necessity has taught me to type as fast as I could dictate, check and sign a letter. With no staff, I am not only unburdened by ‘holiday pay’, ‘maternity leave’ and ‘employers liability insurance’ but also the onerous Money Laundering Regulatory process; I am by default my own ‘MLRO’.

Having a practice limited in size by the time I’m prepared to put in, means that I do not have to keep 100% abreast of every new regulation that comes in; I challenge anyone who says that they can. An ability to ‘scan read’ technical publications and government websites means that I only need to fully study those parts relevant to my 125 clients, who have been carefully selected from the many who over the years have asked me to act. A selection which specifically excludes farmers, licensees, heavy smokers, people with foreign income, people I don’t like, and businesses which have expanded to the point where they become ‘labour intensive’ at which point they are recommended to seek alternative professional advice from my neighbouring ACCA with whom I have an excellent working relationship.

It enables me to know each client, his spouse and often his family, too. Many have sat around my dinner-table. Each client knows that when he calls, he’ll see me rather than a receptionist or a junior. The buck stops on my desk. Faced with a question I can’t answer, I’ll seek professional advice from someone who can, and pass the costs on to the client without profit.

It enables me to run a successful practice using the Inland Revenue’s very own and very user-friendly self-assessment, CIS and PAYE systems; this policy has been criticised by Rebecca Benneyworth in the past but I see little point in paying hundreds or thousands of pounds for something which does exactly the same as the free product.

And of course the main benefit of being a ‘sole practitioner’ - apart from being able to play loud rock music or Talking Books whilst working - or even have a cigarette if I still smoked - is that if the sun shines, I can go outside and sit on my patio, laze in the Jacuzzi, or even take my wife out to lunch.

Sole practice does, indeed, have its benefits ……………….

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By User deleted
06th Mar 2008 10:03

Keep it simple
Richard Breare makes a very valid comment, I have often thought of resigning from the ICAEW saving myself their regulation and fees whilst carrying on practice looking after my hand picked bunch of clients, most of whom are personal friends.

Keeping up to date is not that hard if you stick to your niche and don't try to be all things to all people.

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David Ross
By davidross
06th Mar 2008 08:56

Richard, you raise an interesting point
Though nobody will agree with me, I think it is scandalous that every Self Assessment client was not converted to 31 March when Self Assessment came in. I slaved away to average the 35 months from 1 May 1994 to 31 March 1997, with the result that my clients faced no future fears from inadequate Transitional Overlap Relief, and I can sleep at night.

Now I have always supposed that others merely averaged two years together in the transition because, with say 30 April as the Accounting Date, there are another 11 months for the firm to get the figures ready for the Return - in that example 21 months between ARD and Filing Date as opposed to 10.

Richard, you raise the suggestion that it was pressure of work that may have been the cause. Can you or others shed further light?

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By User deleted
05th Mar 2008 20:11

An interesting statistic
I wonder if what has really been happening over the last 10 years is that a large number of "sole practitioners", who were not really in practice, have given up. With universal CPD, PI insurance costs, practice assurance and layers of regulation , a lot of semi-retired members who just did "a few tax returns" have realised that you have to be fully-committed to practice or get out.

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By Pompier
05th Mar 2008 18:38

No they just went in to hiding
Could it simply be that a number have merely resigned from the ICEW simply to get away from their buraucracy and concentration on large firms issues. I did?

Their attitude on introduction of self assessment was a disgrace, advertising

"Find a Chartered Accountant to solve SA problems"

when Chartered Accountants couldn't cope with the excess work already in their offices resulting from transitional rules for Schedule D1.

Why didn't they lobby goverment for a transitional year with extra time instead.

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By ShaunSpalding
05th Mar 2008 18:36

Missing line on the graph
The graph is missing the line of the number of unqualified accountants acting as "sole practitioner" bookkeepers.

Their numbers have probably increased by at least 7,000 between 1998 and 2008

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By Paul Shrimpling
05th Mar 2008 14:53

lies, damn lies and statistics!
The graph clearly shows a decline in sole practioners but does not tell the whole story.

Even as a big big fan of measurement i believe the facts are buried beneath the graph...

They are buried in the fact that, perhaps, the reducing number of sole-practioners are getting better at what they do and are mopping up those sole-practioners that just can't cut the mustard. Thank goodness.

They are buried in the fact that lots and lots of multi-partner firms operate as sole-practioners with a shared overhead, rather than as an effective organisation.

Not surprisingly their results will generally reflect this and be no better than the failing sole practioners but with more grief (from having to debate with other partners before making deciions and taking action). What a shame, it could and should be so different.

This won't surprise anyone - getting partners to challenge their 'silos' of clients is a tough one. Getting partners to behave as an effective leadership team is a real challenge. Getting their teams to work as one sometimes seems impossible. But tackling such issues can generate substantial results - ie better service to clients and as a consequence better results for the firm.

Lies, damn lies and statsitics is a good reflection for any single measurement of industry performance. What matters is the story behind the number don't you think?

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