The Loneliness of the Long Distance Runner

Sole practitioners face a lonely task. Running your own public accounting practice often leaves you with no one to talk to about how your business is going (or where) but your significant other, assuming you have one.

And if they’re not from an accounting background, maybe it’s tough for them to truly appreciate the challenges you face. That makes it tough on you.

The many challenges faced by sole practitioners and smaller practices often leads many to seek out another firm with which to merge, in order to have the critical mass needed to compete in today’s marketplace.

Some of the benefits of merging are obvious, such as:

• Economies of scale achieved by combining two business units
• Increased profitability as a direct result of the first point
• Camaraderie between newly formed partners
• Second opinions on technical issues
• Peer review & quality assurance issues resolved
• Vacations suddenly seem a little easier to take
• Someone to talk to about direction, strategy and such like
• Recruiting better people become possible as the best candidates are – in all honesty – very hard to attract and retain if you’re a sole practitioner
• Retaining your biggest clients (and finding more like them) becomes a little easier

But some other benefits may not be immediately obvious, and I will discuss some of these with you shortly.
With tax season now upon us, many baby-boomers might decide to make this year their last, and seek to sell their firm after this season. Whether selling or merging, there are many stages you will need to get through before any type of deal will be struck.

Typically, these will fall into four categories, in the following chronological order:

• Initial research & active search for a buyer/merger partner
• Discussions with specific suitors
• Crafting an agreement
• Closing the deal

For the practitioner, these are usually once-in-a-lifetime events, and mistakes can be costly.

Fortunately, help is available from either myself, or my fellow columnist, Mort Shapiro, whose excellent articles often appear on the same page as the one you’re reading right now.

For those who choose to negotiate these hurdles without professional help, there’s a very steep learning curve ahead of you. The process can be long, arduous, with many a potential trap laying in waiting for you on the journey. It’s not a quick fix type of situation by any stretch of the imagination, and it sure ain’t easy!

That said, despite how the economy may go in 2009, many deals will still be done this year.

There is still a shortage of quality public accounting firms for sale, and in my own merger & acquisitions practice, I could find a buyer for 10 or 12 new firms for sale within a couple of weeks.

Indeed, as the economy slides further into recession, many larger firms, instead of laying off staff, might want to consider buying more business in order to be able to hang on to their skill base (the staff) and avoid layoffs by looking for bargains in the marketplace.

In order to achieve some of the benefits listed earlier, a merger might have been the only way to get access to them, but not any more.

I am pleased to announce that, together with my long-term, award-winning client, Steven Walker, CA, in Calgary, ‘The Business Mentors Network’ will be launched across Canada later this year.

What is this? Simple – it’s a national network of independent accounting firms who commit to go that little bit further in how they service their clients. They’ll use ‘what-if’ business planning software to help their clients build a better business, they’ll offer fixed-fee pricing as an option, they’ll be approachable, and, most importantly, they’ll think like entrepreneurs and offer value-added advice and services.

So, instead of merging in order to achieve some additional benefits, maybe joining up before the limited number of memberships are all taken is an option worth considering.

For those who decide to go down the path towards a merger, some of the ‘softer’ benefits I said earlier that I’d mention in this article might include:

• Additional skill sets (such as a CBV, for example) in the other (formerly separate) party that your own clients might benefit from buying
• Additional skill sets that you bring to the table that the other (formerly separate) firm’s clients might benefit from
• More marketing power of a joined unit could create more opportunities with better quality potential new clients
• Bigger buying power might make an employee healthcare benefit scheme suddenly viable
• Lower professional indemnity insurance costs per client, possibly
• Potentially better career prospects for your staff – making it a little easier to retain good people
• Potential to grow your own successors a s a direct result of the above point
• One less competitor to worry about!

It’s by far a comprehensive list, but a pretty good start.

Whichever route you decide to go, stay solo, join up with a larger firm, or investigate the Business Mentors Network, I wish you every success during tax season, and please, try to avoid the loneliness of the long distance runner, by talking to someone, be it your significant other, Mort Shapiro or myself!