Getting into the marketplace and focusing “at a high level” on growing client books and seeking new business prospects has not typically been a top priority for Australian accounting firms, said Hayes Knight director Greg Hayes.
This is being reflected in the growth prospects of smaller firms in particular, he said.
“A lot of accounting firms have lost the art of organic growth. They’ve been in an environment where growth has been force-fed on them for probably the last three decades. So their ability to go out and grow business and grow clients hasn’t been something that has been a high focus level,” Mr Hayes told AccountantsDaily.
“We probably have a generation of accountants out there at the present time who have never had to do it and don’t really have the skillset for it,” he said.
Mergers and acquisitions have been used, in many cases, as growth tools and methods to provide more holistic advice services – a model for which demand is currently escalating.
However, Mr Hayes believes this is not a sustainable option for accounting firms beyond 2016, as it addresses only short-term imperatives.
“The profession by and large has tried to address this issue through merger and acquisition and that’s not sustainable. There’s only so many mergers that are going to take place and ultimately the firms who will win will be the firms who are good at organic growth. Unfortunately most firms aren’t good at organic growth,” he said.
“There’s nothing wrong with [joint ventures] and there’s nothing wrong with mergers and acquisitions, but why would you pay a serious price for something that you can probably generate at relatively low cost? Every one of these mergers is either diluting equity or [affecting] the balance sheet,” he said.
Small firms in particular need to actively pursue new client bases and understand what today's clients want, and what will make them especially sticky for at least the mid term, Mr Hayes said.
“Accountants in small firms in particular are very busy. The danger is you don’t get around to [seeking growth], and that might be OK from a short-term point of view, but you’ll seriously miss out in the long run.”