05.11.07 VALUE OFFERING

When I was asked to write on the topic "middle-sized firms - valued or valueless?, I thought it was a poison pill. However, reflection suggested that an examination of the role of the constituent parts of the profession might blow away a few cobwebs.

What is a medium sized firm? In my terminology a firm with over £2m of turnover with 3/6 Partners is probably medium sized. Small would be under £2m turnover and large would cover the Big 4 and National/International Groups. So are medium sized firms neither fish nor fowl or do they have a special place in the market?

My own firm, Campbell Dallas, have grown from small beginnings in the 1990’s to moving towards £12m of turnover in the current year, including Financial Services. Our goal is to be the best independent medium sized firm in Scotland. Currently we are third largest in Scotland and 48th in the UK. So why do we consider that we should be valued? Is it just about price? We are of course, billing rate for billing rate, cheaper than the Big 4 and the Nationals.

But cheaper is not the real issue. The real issue is value for money. By retaining independence and keeping overheads sensibly low for their market place and with Partners’ remuneration at realistic levels, medium sized firms can and do deliver the breadth of service the SME market place is seeking in Scotland.

With a reasonable degree of size the medium sized firms can create the specialisms in tax, corporate finance, corporate recovery and general business services the Scottish market requires. This allows them to compete head to head in the SME market place with a real value for money offering.

In my opinion, the Big 4, the Nationals and International Practices are to a large degree directed and controlled from London where there is a distinct misunderstanding as to the requirements of the Scottish market. This leaves acres of space in large areas of the market for medium sized firms.

In my terminology SME companies can encompass businesses with turnover in excess of £100m with trading throughout the UK and also overseas.

There is no requirement for the medium sized Practice to be part of an International firm. This aspect can be easily covered by membership of a UK/International network where total independence is retained but the client has an assurance about the quality of service provided by their Advisers. Campbell Dallas obtains this through UHY International with representation in over 50 countries.

The final and possibly the biggest advantage that flows from the medium sized Practice, is that the service delivery is usually Partner led.

The Big International firms find it difficult to move out of their work silos and in the SME sector this can lead to a disjointed service. Being Partner led does not prejudice audit independence so long as there is sufficient Partner resource and safeguards within the firm.

Many small and medium firms bill themselves as Chartered Accountants and Business Advisers. In this sector it can be said that they do what it says on the tin.

Do not be mistaken I firmly believe that there is a place for Big International Practices. I do, however, believe that it is horses for courses and generally speaking the SME market place is not their course.

One dark cloud on the horizon – I am becoming very concerned at the division in CA Training between the Big and Medium firms. Medium sized firms who train CA’s frequently find they lose their newly qualified (fully and broadly trained) staff to the Big 4. Staff coming back the way are well trained in auditing and of limited value in the medium sector. This means more training.

The three-year training contract is far too short for the small and medium firms. Unless this is altered I fear that there will be a stampede away from the CA Contract in the small/medium sector of the profession.

In conclusion there is still a vibrant opportunity throughout the market place for quality Practices.

Jim Campbell, Senior Parnter

Publication: CA Magazine

Date: 05/11/2007