Partner at McLean Delmo Bentleys, Jamie Bishop, says succession has become the “primary challenge facing the profession in the SME sector” because people are not willing to pay for a client base anymore.
“Historically, partners would sell a fee base and typically valuation was based around dollar for dollar, so the incoming partner or the existing partners would buy them out and then pay dollar for dollar ... so a million- dollar fee base they’d pay a million dollars for,” Mr Bishop said.
“Over the last probably ten, 15 years, the valuation of fee base has gone down significantly, but also increasingly the younger generation, such as [myself]..., are no longer willing to actually pay for a fee base.”
Mr Bishop said the “fundamental issue” with buying a client base is that “no one actually owns a client” and as such you cannot guarantee the client will stick with the firm.
“A client only remains with an accountant or a firm because they want to and they value the relationship, but you don’t actually own the clients,” he said.
“Certainly, we find that clients probably are losing, changing accountants more regularly these days. Certainly, it’s easier because of technology if [the clients want] to move.”
Adding to problems with succession, Mr Bishop said the younger generation is already burdened with debt and is therefore less inclined to buy firms.
“Partners typically my age also often have huge mortgages, particularly in Melbourne and Sydney, so they’re already burdened with this huge mortgage debt [and] they don’t really want to then go and get another debt on an upfront service or a fee base,” he said.
“Often, what that means is the partners are staying in the profession and working a lot longer than they’d intended because they can’t get the payout which they historically would have done.
“So there’s a huge issue around succession in the profession at the moment.”