Accountants, like all business owners, can become complacent and run down and destroy their practices profitability and eventual sale value.
The four most common ways to destroy accounting practices are:
- Failing to reinvest in the business. There can be the temptation in business to run it excessively lean and draw all the cash out and limit reinvestment. As Woolworths Ltd is currently demonstrating, this is fine for a few years but eventually the under investment takes its toll and profits fall.
- The practice principals under investing in their personal professional development and training. Too many practice principals do not take the advice of Stephen Covey (Seven Habits of Highly Successful People) and spend the time to sharpen the saw.
- Failing to change. As the business environment changes, practice owners must change. The ‘old’ ways of doing things must be changed when technology makes the new ways quicker, cheaper or more convenient. To not do so is to get left behind.
- Operating the practice like a hobby or vocation, not a business. Without the discipline and focus on managing the business for maximum profit, standards and performance falls.
Many practice principals are relying on using the eventual sale proceeds of their practice to fund their retirement. To ensure they have a happy retirement they need to ensure they don’t run down their practice value before they sell it.
By Lana Woollard from Success Tax Professionals Wagin