Newly qualified accountants setting up in practice face a number of challenges
Times are tough and you may be considering setting up on your own. So if you are thinking of starting your own practice, take heed of the challenges you may find yourself facing:
- If you wish to trade as a CCAB-qualified accountant (full member of any of the six UK accountancy bodies which were formed by royal charter, are themselves members of the Consultative Committee of Accountancy Bodies) you must have a practising certificate. Half of all firms of accountants are non-CCAB and do not need the certificate to practise, however.
- In the current climate, with no previous experience of running your own practice, it is notoriously difficult to raise external funding to buy goodwill (either a practice or just a block of fees) unless you have already identified a specific opportunity, which is also notoriously difficult.
- Even if you had access to the funds, it is unlikely that many Vendors would elect to sell to you as a newly qualified accountant unless you can demonstrate to them how you would retain their clients. The Vendor could envisage a hefty claim under the claw back clause in the Sale Agreement (the shortfall would come out of his pocket), since the claw back protects the Purchaser from paying for clients who have not transferred across successfully. This is why it is so important to the Vendor that they choose the Purchaser most likely to retain their clients.
- Were you to start from scratch with no clients you could face a very difficult period, say, five years before you could hope to match your ‘recently qualified’ earnings in industry/commerce. In all probability, you would have to ‘low ball’ to attract clients from other practices initially. Then you could find yourself with clients who are only after a cheap service, meaning you would have to work incredibly long hours to earn an acceptable income. You might then not have the profits to invest in lower level staff who could service those clients for you‚ a Catch 22 situation.
- APMA’s advice is to join a carefully chosen practice where the Principal(s) are seeking a successor(s) in a few years time. Visit our website for more detailed information at www.apma.co.uk (serving the profession since 1973).