The Forces Driving Small & Sole Practitioner Firms to Sell

I recall a report that was published within the profession some three, four, or even perhaps five years ago, suggesting that something like 51% of equity holders within firms at that time, would be heading for the door over the coming five or so years. Fast forward to today, and whilst that event may not have eventuated in the predicted magnitude, strongly due to the impact of COVID, post pandemic life is certainly finding our small firms and practitioners strongly considering their futures, with an expected increase in the number of principals taking the opportunity to realise there is more to life than running a practice.

So, what does this look like for those considering a sale; what are we hearing? Firstly, it’s also about exhaustion. The last couple of years has absolutely battered and bruised practitioners, and their firms, with many now coming up for air, still perhaps slightly behind in their lodgements, to refine the continuing world. I don’t think I have met one practitioner in the past couple of months that hasn’t described themselves as absolutely exhausted. Thus, the point of reconsidering their future.

The second thorn in the practitioner’s side is staffing. We saw some stupid things start to happen in terms of recruitment around October last year, and now, as it is in virtually all other industries, the accounting profession is screaming for suitably qualified and experienced personnel in just about all areas of the country. Not only is the concept of recruiting staff a concern for firms, but it’s also the need to retain the staff that they currently have, hoping to avoid significant staff loss or turnover as other firms and recruitment agency make brash approaches to their personnel through social media, head hunters and even their direct work e-mails.

Another area of angst for firms is the demands of their client base. During COVID, it was simply manic as clients needed more and more assistance with each and every government, both federal and state, assistance package, which initially seemed to keep moving the goal posts on the rules in the early days, along with perhaps helping clients with refinancing or communications with their banks, and so on and so on. Many a time, much of this advice and guidance ended up going unbilled or only partially billed, and perhaps unvalued. However, coming out the other side, some firms are reporting the continuation of excessive demands being made by their client base, and the practitioners have had enough.

A further factor quite prevalent in discussions with practitioners is the fun and games, not, of dealing with the ATO. We are hearing more and more about the difficulties firms are experiencing in communicating the with ATO and the increased expectations which are being placed upon them. Many are completely over managing their lodgement lists whilst trying to ensure clients are returning the necessary information within the required timeframe to enable the firm to meet the ATO’s lodgement requirements. Practitioners want to hand ball this off to someone else.

However, the broader comment being reported by those considering a sale is the wholistic broad sweeping issue of practice management, which really covers these previously noted individual aspects of running a practice, as well as just about everything else that relates to being a practice owner. The administration and management tasks required to keep a well functioning practice moving forward and growing is the absolutely bane of a practitioner’s existence, and whilst these tasks have not really changed over the years in a big picture sense, for whatever reason they have now simply become too much for some to continue. Some just feel there is more to life, and they’re probably not wrong.

Interestingly, and very pleasingly, this feeling does not necessarily equate to a desire to leave the profession altogether, but rather to simply not have to be responsible for the day to day operation and management of a practice. Many of these principals still love servicing their clients and would love to continue to do so for at least the short term, which would be hugely beneficial to not only the transition, but also in light of the shortage of professional personnel available within the marketplace. We know purchasers are not only wanting to make acquisitions to get clients, but also to retain the firm’s personnel, which could extend to the principal in an ongoing servicing or consultative type role, where so desired. A win win for both sides of the transaction.