The Australian accounting services industry is growing 1.5% pa and currently generates $20bn revenue (IBIS World Industry Report M6932). The industry is comprised of 33,870 businesses employing over 114,000 people.
Over sixty percent of Australia’s accounting practices operate as sole practitioners. Some trade as sole traders and others operate through a practice company or trust structure. Whilst fifty percent of sole practitioners employ staff, the rest just do 100% of practice work, administration and management themselves.
It’s well known that two heads (or more) are better than one for problem-solving, coming up with ideas, and management in general. As such, it’s no surprise really that when managing an accounting practice, two heads are better than one. The reasons for this include:
- Broadens the practice’s experience, services and skill sets.
- The larger practice size provides benefits from scale.
- It’s easier to recruit higher quality accountants to a larger firm.
- One practice owner is always on hand to manage the practice staff when the other owner is away on holidays or sick.
- With two principals the practice can gain synergy benefits so 1 + 1 = 3.
- Enables principal specialisation.
- Easier access to bank finance to fund expansion. Banks are reluctant to lend to sole practitioners as there is more risk.
Digital disruption in the accounting industry is now accelerating so even long established and highly profitable practices need to adapt and change. Australia’s 20,000 sole practitioner practices are the most vulnerable to digital disruption and need to make some changes now to ensure they survive. In this regard, a good first step would be to merge their practice with a likeminded sole practitioner.