‘Adding value” is de rigueur in accountancy these days, but Chris Horne sees a seismic shift on the horizon that will not only super-charge the growing push into advisory services, but should also sort the firms with a genuine client focus from those without.
At some point in the not too distant future, he believes that HMRC or Companies House – or perhaps both – will begin accepting business banking statements in lieu of statutory accounts from smaller UK firms, scything away a hefty swath of the market. In the same way that legal firms were left scrambling for business after the banking crisis, accountants will have to re-think their entire business model and raison d’être.
“I am certainly preparing us for that day,” says Horne, the managing partner of Campbell Dallas, which ranks among Scotland’s largest independent accountancy firms. “On a bad day, I think it could come in as few as five years, and on a good day I don’t think it will be any more than 15 years.”
With offices in Aberdeen, Glasgow, Perth and Stirling, Campbell Dallas employs more than 180 people, including 21 partners. A relatively young firm, it was formed in 1999 by the merger of Campbell & Co of Bearsden and Paisley with another Paisley practice, Dallas Nicol & Co.
Horne was one of a quartet of young partners from major accountancy firms persuaded by Jim Campbell and Bob Dallas to join them in 2002 with the aim of expanding their business by doing “what’s right for the client”. For Horne – who began his training in 1992 with Glasgow-based Walkers Chartered, which through a series of acquisitions eventually became Baker Tilly – the switch to Campbell Dallas was a natural decision.
“With each name change and each slightly larger organisation, the ability to give advice was becoming slowly eroded, so there was an appeal in coming back to a firm giving business advice to people who needed it,” he explains. “It felt like going back to 1992 at Walkers.”
Since Horne joined, Campbell Dallas has nearly trebled its revenues, which reached £12 million during the year to the end of May. The firm remains on course to hit its target of £15m by 2018, with turnover in the first quarter of the current financial year up 9 per cent on the same period in 2015.
About 60 per cent of this business is generated from the compliance side of operations covering things such as auditing and statutory accounts. These “traditional” activities are already being eroded by the growing spread of cloud-based accounting, which Horne says the profession must embrace on its journey to higher-value services such as real-time advice on tax and business planning.
His comments echo those of most within the accountancy sector, but Horne reckons quite a few are failing to walk the walk.
“A lot of people are talking about providing professional advice, but to be quite honest, I don’t think a lot of them are actually doing it very well,” he says.
“They provide these services from various specialist divisions – for example, a small business division – and I don’t think the market in Scotland wants to work with lots of different divisions in a single accountancy firm. The issues are much the same in large and small firms – whether you have got a seedling or an oak tree, it still needs water and food.”
The dilemma, Horne adds, lies in the prevailing approach.
“Lots of accountancy firms struggle with cross-selling, but that is because they put their own agenda at the heart of the discussion,” he explains. “They say ‘How can we get our audit team selling more VAT services?’ or ‘How can we get our VAT team selling more audit services?’ rather than looking at what it is that the client needs.”
Campbell Dallas has traditionally been a champion of family and smaller companies, and the majority of its clients still have annual revenues of £10m or less. But during the past two years the firm has added a number of large corporates to its customer rolls in a sign that its hands-on approach is achieving broader appeal.
For Horne, it “all starts with happy staff” who then in turn provide quality advice and service to clients with whom they work on a regular basis.
The average employee age of about 35 makes Campbell Dallas fairly youthful among its peers, and reflects the emphasis placed on bringing new talent through the pipeline. Horne says the profession is losing too many young people to competing sectors such as financial services, and to combat that his firm has evolved into one of the largest providers of accountancy apprenticeships in Scotland.
It was one of the first to begin taking school-leavers through AAT accounting qualifications five years ago in what has been a “very successful” initiative. In all, the firm has in the region of 65 staff under training contracts, having spent £250,000 earlier this year on the recruitment of an additional 15 apprentices.
Keeping these young people requires a clear path for progression. Horne proudly points to the fact that of the current cohort of 21 partners, “three-quarters or more” were promoted from within the existing ranks at Campbell Dallas. Achieving this requires growth and expansion.
“At the end of the day, we are talking about what happens when a firm gets to middle age,” he says. “A lot of accountants work to get themselves to a certain level that gives them a certain bottom line, and then they settle there.
“But if you are the same size as you were last year, then it is really hard to bring more people through. It is all about creating a culture where good people can flourish, and that is what takes care of succession planning.”
Horne observes that a significant proportion of merger and acquisition activity among accountants is driven by a lack of succession planning, which is rather ironic given that this is one of the areas where many firms offer to advise clients. But it remains a fact that when it comes time for principals to retire, they often have no one to hand over to, and therefore must look externally.
The strategy for Campbell Dallas to reach its goal of £15m in annual revenues is for half of this growth to come from acquisitions, but this has yet to really come into play. The last deal it did was in 2006 for Aberdeen-based MacPherson & Co, where it now employs 15 people riding out the downturn in the oil and gas sector.
“Our Aberdeen office has done OK in that space,” Horne says. “The predominance of the work in Aberdeen was in the compliance space, rather than the advisory space, so they have probably felt the pinch less than some others.”
He adds that the lack of deals during the past decade has simply been a failure to find the right fit for Campbell Dallas. The firm remains alert to opportunities, and has also attracted interest in its own right. Horne says he would “never say never” to the possibility of hooking up with a larger operation, but he clearly prefers the role of hunter to that of the hunted.
“We have had offers in the past that we have turned down because the fit wasn’t right,” he says. “To work, it has to be fantastic for everyone involved, but these offers would not have been fantastic for our staff, and would not have been fantastic for our clients.”
The question of compatibility is equally crucial for clients in the hands-on ethos of Campbell Dallas: “If you want an accountant who is going to leave you alone and just turn up once a year, we are probably not it.”