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Lower barriers to entry sparks start up boom

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28th Oct 2016
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The deluge of new firm Practice Excellence Award entries suggests there’s been a formation boom. And it’s clear why: Accessible technology has lowered barriers to entry.

The career route an accountant takes used to be clearly mapped. You’d join a big firm and scale their partnership structure, but ambitious accountants often now choose a different route.

Rhys Bateman, Sage’s senior product marketing manager, has seen accountants diverge from the big firm partnership model.

Bateman was the only one from his university group to avoid the traditional route. Yet, only one or two of his university friends remains in a big firm environment; the rest have welcomed other opportunities.

“It's not as attractive to do that long-term, work your way through the partnership model right to the top, when you can go out on your own and have that freedom and flexibility,” said Bateman.

Many catalysts can lure practitioners into branching out: Maybe they feel shackled by their current practices’ focus on compliance work and they want to explore advisory or niche services or they’re working within a model where partners are reluctant to change, said Bateman.

It's not as attractive to do that long-term, work your way through the partnership model right to the top

Bobby Chadha, Intuit’s product manager, attributes reduced software costs as the key factor for this boom: “Traditionally, if you wanted to start off as an accountant, you would have had to buy some accounting software which would have cost you anywhere from £500 and beyond,” he said.

The affordable software mitigates the cost-risk and overheads previously associated with starting your own practice. “A modern day accountant or bookkeeper can adopt cloud accounting software and because you are on the cloud, you don't have to buy a shop front or have physical premises,” said Chadha.

“As long as you've got a really nice website which is engaging... write blogs, and get tips from marketers on how you can rank higher on Google, that's all you really need to do as an accountant to get started in 2016.”

Bateman echoed this: “People are not as impressed by a huge office like they may have been before. As long as you are coming across professionally, you can create a pretty good brand from your own home.”

He identifies social media and digital marketing as one the reasons why client acquisition has become “a whole new exercise compared to what it was like 10 or 20 years ago”.

People are not as impressed by a huge office like they may have been before. As long as you are coming across professionally, you can create a pretty good brand from your own home

But Chadha distrusts the theory that the younger generation born in an environment where phones and tablets are readily available are solely responsible for the boom. “It doesn't matter what generation you are in, technology has been made simpler,” he said. “I don't think it's related to your age, anyone can pick up that software and play with it.”

For those considering the leap, Bateman offered some sage advice: “Make sure you are doing it for the right reason. It's not all about money. It could be the ability to work from home or more time with the family, flexibility with holidays or face-to-face with clients.

“So you’ve got to have confidence in your own ability and have a plan in place before you take that leap. Be mindful that it can be a scary proposition on your own. But ultimately it's rewarding to run your own business and do things your way."

Intuit's startup mentor Bobby Chadha goes more in-depth on those starting their own practice when AccountingWEB caught up with him at the Bookkeepers Summit.  

 

Have you recently branched out and started your own practice? What were some of the deciding factors which prompted you to make your own leap of faith? How did it go?

Replies (8)

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Paul Layte
By Paul Layte FCA
28th Oct 2016 11:20

Not sure £500 ever really put anyone off starting a practice. Also try anywhere not anyhow in your quote.

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Replying to Paul Layte FCA:
Richard Hattersley
By Richard Hattersley
28th Oct 2016 11:52

Hi NH,

Agreed - £500 isn't going to deter anyone. But do you think smaller overheads have lessened the risk in starting a practice?

Also, thanks for pointing out that error. I've amended it.

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By ireallyshouldknowthisbut
28th Oct 2016 17:30

i dont think the overheads are any smaller now than 15 years ago.

You need: Prof cert subs, PI insurance etc which dwarf any software costs.

If anything they are higher now as you cant get away with using HMRC software for things like CT, nor can you get away with paper filing.

The only cheap thing you can do now is get TaxFiler at £12 a month, vs coughing up £500 for an old fashioned licence

Do remember we are talking here about (hopfully) people who are earing £30-50k in practice or in industry learning how to be an accountant before they start up.

We are not talking about someone who has woken up one morning on the dole and decided to be an accountant without knowing the first thing about it, albeit "any answers" might suggest otherwise.

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By Accounts12
29th Oct 2016 08:51

Agree with other posters, £500 is far to low to start a practice, even one working from home and it's important any start up realises that to.

I think it's good and important that the article has raised it's not just about the money point, in fact with more clients caring less about whether you are qualified or not, and with more choice out there for them, it's not an easy industry to make large sums of money in especially in the early years if you are starting out on your own.

It's Saturday and despite working full time, I am working on the weekend - again. Yes working from home may be easier and cheaper but it's hard to switch off from work to when it's based at home, this can create tensions with partners very easily, I regularly go back to work in the evenings to and some clients will be put off by being a home based accountant, especially if you are targeting bigger businesses and if you've got family living with you to, I have had to regularly ask my husband if he wouldn't mind taking the kids out so I can meet a new client or sign accounts off with one over a weekend and used to have evening appointments to which are no longer possible now kids are older and noisier! Needless to say an office is on my Christmas list!

#justmytwocents

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Man of Kent
By Kent accountant
29th Oct 2016 12:36

Unfortunately the barriers to entry were already extremely low.
Judging by the appalling lack of knowledge displayed in some of the questions in the 'Any Answers' section they have gone even lower.
It worries me that some clients are paying good fees to so called 'accountants' who are then providing a shoddy and inept level of service.
I can only see this getting worse when MTD is publicised to the general working public, and small businesses/sole traders clamour for a cheap accountancy service to help them out.

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Man of Kent
By Kent accountant
29th Oct 2016 12:39

@Richard - perhaps the increased number of entrants is less to do with an increase in the number of start up practices, but rather AWebs constant marketing on the subject of the Awards?

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Richard Sergeant
By Richard Sergeant
02nd Nov 2016 12:12

£500 does seem very low, and I agree with many of the comments. However, we should also welcome newer firms into the market. There is still an issue with the average age of partners and succession - all new practices are welcome to keep ideas and a reasonable supply of the right experience available for businesses to call on.

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By elpedro1977
03rd Nov 2016 12:21

Surely barriers to entry are clients and income. Surely thought would need to be placed on how am I going to live in the next year rather than can I acquire software cheaply? If you don't have a significant cash pot in place prior to start-up or another guaranteed means of income, would start-up not be a very risky decision? This would be a more practical thinking approach in my opinion. Agree with Kent accountant as to the shocking questions and answer forum.

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