Viewpoint: Should firms band together into Virtual Partnerships?

In April 2010 Julian Hamilton in the ACCA magazine proposed a new type of partnership.  This artlice from the  asked if the time was right to adapt the small practitioners' traditional format so as to gain the benefit of size (offering a wider range of services) whilst avoiding the costs (overheads of a central office). Julian Hamilton, director of Jobtel, the accountancy practice merger broker, certainly believes so.

'Jobtel was involved with introducing firms for the Vantis floatation. But that format is only suitable for firms of more than around £2m minimum to £10m fees, so can something be learned from that consolidation for adaptation to a smaller format? Is it time to look at a structural change for smaller practices too? Can such changes improve the sustainability, efficiency and profitability of smaller practices?

Such firms handle around 80 per cent of businesses in the UK. Improving the services to these businesses would be hugely important in establishing new enterprises and improving their profitability.

But the average sole practitioner struggles to supply wide-ranging services to an  increasingly sophisticated client base -

• complex tax questions,
• forensic tax ,
• new accounts format,
• IT software advice and training
• company formation,
• company secretarial,
• payroll & P11D returns,
• VAT and NI, 
•  book-keeping service, 
• cash flows for business loans,
• tax saving opportunities,
• business advice, and
• those money laundering rules!A
• Audit work
• Pensions Advice
• Corporate Finance
• Foreign Tax

All while juggling with the demands of  200 to 300 clients. 

But right now the stress that some practitioners feel is having a dramatic effect....25 per cent of Jobtel's clients are ill when they come to sell, a further 25 per cent sell before their time.

Some time ago Jobtel set up a working party using local firms to consider a group practice. The independent profit centre/firms would group together so that each used the skills of the others, one carrying out the audit work, another staff training role, others doing marketing, one having Sage staff and doing IT installations and training, another concentrating on payroll work, some expertise was expected to emerge in business sectors like medical and legal to be leveraged across all firms. It would allow partners in firms to sell out and newcomers to buy in, provide holiday and illness cover, using a  brand name, grouped on a regional basis but then linked together with other regions with shares quoted on the junior market "Plus" to allow of outside investors - but essentially owned by its members. 

Modern technology now allows us to extend this format.  Provided there is an agreement in place between a sole practitioner who has a specific need (say Corporate Finance Advice on selling his key star client's business) and a matching supplier of that need - a larger foirm with a dedicated Corporate Finance Department - then distance really may not matter that much.  What the sole practitioner needs is a reliable supplier who will not steal the client and who will give perhaps a small intro fee for the introduction?

Jobtel believes such a structure would work to the benefit of all.'

Julian Hamilton, FCA, MBA, BA

the key elements of this was published in the acca magazine for april 2010