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James Caan
James Caan

James Caan: Accountants can be entrepreneurs

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Former Dragon’s Den star James Caan sits down with AccountingWEB to discuss how accountants can and should be more entrepreneurial, why private equity is moving into the accounting sector, and why it’s an exciting time to join the profession.

16th May 2024
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Speaking at offshoring and outsourcing firm AdvanceTrack’s gbX 2024 conference in London, former Dragon’s Den investor and judge James Caan talked attendees through his career, from starting recruitment company Alexander Mann from a broom cupboard in Pall Mall, growing it into a multinational employing more than 1,000 staff and selling it for millions, to his work with government, private equity and the charity sector.

He also shared stories of his successes and failures, his core business values, and how his first Dragon’s Den investment landed him with a garage full of dog treadmills.

Following his keynote, Caan sat down with AccountingWEB technology editor Tom Herbert to talk about bringing a more entrepreneurial approach to accounting firms, the value that private equity sees locked in the profession, and the impact technology will have on accountancy. The interview has been edited for length and clarity.

Tom Herbert (TH): Can accountancy, a profession that’s traditionally risk-averse in its outlook and training, ever be entrepreneurial?

James Caan (JC): Yes, absolutely. Many accountants run their own firms, so by default they're running a business – they’re entrepreneurs. They also have one of the core skills of being an entrepreneur, which is understanding business numbers, metrics and finances. This is a critical part of doing business: if you can't manage the funds, the business goes bust pretty quickly.

There's no question that to be successful in business, you also have to take risks. By default or through their training accountants are risk-averse, so they are slightly hampered in terms of their ability to move forward because they're overly cautious and that could stifle their ability to grow and scale.

TH: Is there a way for accountants to become more entrepreneurial in their approach?

JC: What they can do is bring in people with different backgrounds or skill sets. It could be a general manager or a mentor, depending on the business. If you want to grow your firm but are naturally insular, you need somebody who's a bit more outgoing and together you make a good partnership. 

In my particular case at Alexander Mann, I was the opposite. I was that front-facing person but I lacked the rigour of an accountant. I didn't have the corporate governance, the management controls and processes or the discipline with numbers, so I brought in a general manager who represented the bit that I didn't have. I recognised my own weakness and addressed that by bringing somebody in who had the skill set I didn't have. 

I think for accounting firms, it's about surrounding yourself with people who complement your skill set. Ultimately, it's never about one individual. No one individual can ever grow a business past a certain point. It's about having the right people in the right positions and making sure collectively, you have a very strong proposition to the market.

TH: There’s a lot of interest from private equity in accounting firms and a lot of consolidation in the market at the moment. Why do you think this is?

JC: The market has been consolidating because private equity realises there are thousands of boutique accounting firms in the UK. These firms have good customers, good relationships, but haven't scaled. They [private equity] believe they will bring in rigour, governance, better technology, and the ability to attract talent, and that will create a larger platform to enable the business to grow. 

If the founders had done all that before, their business would be way bigger and way more valuable. But the firms that are being acquired, to be blunt, are not being acquired at a premium. So there is an arbitrage opportunity, where scale has value, which is what the private equity industry recognises. 

Most of those boutique firms are still owner-manager-led and haven't built a management team. That’s part of what’s preventing them from scaling, often the limitation is the founder themselves. I think a lot of founders should take a step back and say, 'What are they [private equity firms] going to do that I've never done? Why don't I implement some of those things myself? Rather than being a 15-person practice why not get to a 30-person? Then I’m going to be worth twice as much.'

But many don’t and that's how private equity makes money from the industry.

TH: With your old recruitment hat on, is it an exciting time for young people to go into accountancy or should they be running the other way? 

JC: I honestly believe this is probably the most exciting time to join. I think the industry is becoming more interesting because a lot of the menial, mundane side of accountancy is being replaced with technology. I don't think it's as bland as it used to be because today, the human aspect of accounting is about value-add. 

I think it's not about the mechanics anymore, because over the next three to five years machine learning will take this industry to another level. But that level will reinforce the importance of value-add. Having customer engagement skills, and understanding how to add value to clients, will be vital because they can buy accounting anywhere and it will become highly commoditised.

Replies (4)

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By FactChecker
16th May 2024 22:07

Interesting and puzzling .. in equal measures.

I've never met James but have met a lot of people like him - in his own words "I was that front-facing person but I lacked the rigour of an accountant. I didn't have the corporate governance, the management controls and processes or the discipline with numbers."
So basically, the Sales Director not the FD (or even CFO).
Which is fine ... but that doesn't really give him an obvious foundation from which to lecture readers here on our self-imposed limitations of being a derisory 'boutique' accounting firm.

Obviously it depends on the motivation that drives a particular individual to set up in practice, but all of the final paragraph (starting from "I think the industry is becoming more interesting ..") is a financier's perspective that could describe almost *any* 'industry sector' - there's nothing specific to accounting & taxation there.

Hence the puzzling bit ... where are the insights relevant to *our* 'industry' (although I hate that word being applied to professions)?

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By johnthegood
17th May 2024 05:58

Where to begin?

There seems to be a misconception here that its somehow accepted that practice owning accountants are by nature not entrepreneurial, very odd and couldn't be further from the truth - why else would we have setup our own businesses, not to mention that day in day out we are advising other business owners on how to grow their businesses.

I can guarantee that almost every practice owner has taken some risk in going it alone.

That said I am sure that the majority of us are quite happy with not "scaling" the business massively as we are quite happy with the lifestyle we have, not everything has to be about squeezing the maximum amount out by selling out and giving away control.

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Rob Swan
By Rob Swan
20th May 2024 10:35

Hmmm....

Private Equity? Those smooth talkers who espouse 'realising latent value', suck a business dry, put management under extreme pressure, inflate the Balance Sheet, and then sell to some unwitting buyer just before the business flounders. I thought PE had already earned the bad name it deserves. As for 'Arbitrage'....

As comments above suggest, I think Caan's comments ring rather hollow and possibly emit an unpleasant odour. 'Boutique Accountants' are - in my experience - highly valued by their clients. The moment they 'scale up' they'll likely lose the clients they value and most of their practice's 'value'. A point Caan is apparently ignorant of.

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By Yossarian
21st May 2024 08:35

I'm a 'boutique accountant' and many of my clients came to me after getting utterly sick and tired of the sort of firms that Mr Caan presumably thinks I should scale up to. I've seen decent businesses ruined by that type of approach.

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