Accounting and advice firm Hayes Knight is well known in SME circles, and has not only been helping businesses grow but going through a similar process itself. Senior partner Greg Hayes talks to AMANDA GOME about the essentials.
Greg Hayes is well known for giving fast-growing businesses advice. He started Hayes Knight in 1979 and for the first 10 years, or really until the 1990s, was a sole practitioner before he fired up the firm.
Group revenue is now around $35 million. Greg (right) talks to Amanda Gome about how he grew his firm, how he overcame his challenges and also wades into the bookkeeper/accountant debate. He also tells us what to tell our accountants…
Amanda Gome: You’re probably number 20 in the accountancy company pecking order. Can you tell us why you decided in the early 1990s to boost growth and move from being a sole practitioner?
Greg Hayes: I commenced the firm as a sole practitioner and spent about 10 to 12 years in that sort of structure. But I could see where the marketplace in the 1990s was heading, particularly the small medium business marketplace and decided that’s the area that we’d always specialised in and wanted to continue to specialise in. We also realised it was going to be increasingly difficult for a sole practitioner to operate in that space and to be able to deliver all the range of services that we perceived that clients would be looking for.
What challenges were there?
First, at a professional level, life was getting more complex. Tax was getting more complex. Clients were increasingly wanting financial planning advice and that was becoming more regulated and more complex.
And that’s really just dealing with regulatory issues whereas for a lot of small businesses the interesting part of working with them in fact is helping those businesses to grow and develop their business. I took the decision at the time that I could either be a generalist and have some general coverage of a lot of those areas, but the moment that it really got into anything complex we would need to go and see some specialists. The other challenge of course as a sole practitioner is you just don’t have enough hours and enough time to do all the things you want to do with those clients. The alternative was to grow the practice.
What were your first steps in growing the practice?
Growing the business for me meant starting to introduce partners into the firm and that meant being prepared to not only relinquish levels of ownership but relinquish levels of control and to accept that there was going to be more than one way of doing something, and that in a partnership structure or a larger structure that you were going to have to accommodate the views of other people.
How did you grow from then?
Between 1992 through until about 1995/96, growth for us was about growing the practice in New South Wales, and that meant bringing on a couple of partners – then opening a second office in New South Wales and establishing a stronger presence and a stronger structure for what we were doing.
What was the hardest barrier; finding staff or marketing to clients?
It was more about, in a sense, the change of structure, the change of vision. As a sole practitioner it is very much about practising your profession as an accountant. I think the moment you start to grow a professional services firm you have to take on the view that you’re running a business, not just practising your profession. You move from that focus of practising your profession to also understanding that you’re running a business.
It meant changing parts of the culture of the firm and getting the firm operating at more of a business level, and then looking out and saying, in terms of our forward plans, what do we need to be doing in terms of those next steps? What type of infrastructure resources do we need to be putting in place to manage that growth?
And what did you need to put in place?
Having a slightly larger firm in New South Wales still wasn’t an answer. If you are growing, with clients who perhaps had needs in more than one state of Australia, then you needed broader coverage and for us that really was where the second part of the stage came in.
We said ‘let’s put the Hayes Knight name, the Hayes Knight footprint, across Australia’, and our model then was to develop a business where there was a Hayes Knight office in each state of Australia. And we saw that New Zealand was important to that as well, because of the amount of business that was done trans-Tasman, so the next stage really was to say ‘let’s start to put in place Hayes Knight offices across Australia and New Zealand’.
You give lots of advice to fast-growing firms. What did you find hard that you knew you had to do but you find personally hard to do?
Probably two things. One, recognising that to grow a business at a reasonable level and to a reasonable size you actually have to let go of some of the things that you may have done in the past, and for me, as an accountant, that actually meant recognising that I couldn’t look after all the clients who I’d looked after in the past. I needed to have them working with, and looked after by, other people – so I mean in the early 1990s I went from a stage of managing several hundreds of clients to narrowing that down and managing a much smaller group of clients on a personal level. They were still clients of the firm. The other part was to recognise that not everybody did it exactly the same as I did it. And that that was OK. Again it’s this control issue.
So what’s been the latest plank in your growth strategy? What have you just done recently?
In the early 2000s we launched the Hayes Knight professional network and this was actually a support service for other small medium accounting firms where we provide them on a subscription basis with resources to help them working with their clients.
Today it is the largest service of its type that exists in Australia for the accounting profession and there’s over 5000 accountants who use it every week. The next step was to embark into the financial planning space. Last month we launched a new company called Merit Wealth and that company is a company dedicated to providing a financial services arm that accounting firms can work through in the provision of financial services advice for their clients.
And what do you see next?
Certainly the financial services space – I mean there’s a big challenge there. We’re very fortunate that we’re working with some great business partners, but there’s a lot of work to be done to bring that together. But we’re also at the same time looking at taking some of our business strategies… and because of the fact that we have this specialist SME focus and SME consulting approach, we know that that translates into other parts of the world. As one of our forward steps we’re looking at launching that into the Asian market in the coming months.
So going global?
Yes. I mean we have a lot of clients already who are dealing on a cross-border basis, and one of the things that has been a great opportunity that’s come with our growth is the opportunity to talk to the accounting profession in probably most parts of the world.
There’s very few places where there’s an established profession that I haven’t had the chance to speak to them, and one of the things that’s interesting is everybody has the same sorts of issues and the same sorts of problems. Perhaps at slightly different stages, but the accounting profession and the small medium business market I think is very consistent on a global basis, and if you have things that work well there’s no reason why they can’t work equally as well in other parts of the world.
That would be true for any of the professional firms wouldn’t it?
Yes. We simply have this focus that our natural market is the small medium business market and the advisers to small medium business. So we see the accounting profession in the small medium business space is exactly the same as small medium business clients themselves. We’re probably one of the few firms who would say that that is our specialist market space.
There are a lot of firms out there who operate in that space but as they get larger their appetite for clients tends to be larger, where they’re saying ‘we want to go and look for the listed companies’ and that type of thing. Our focus is very much around that SME space, and we think we can take a lot of the skills and a lot of the approaches we have with the SME market, and advisers for the SME market, and deliver those in other parts of the world.
You’re number 20 in the pecking order in an industry that is consolidating. What’s happening and what are the biggest challenges?
I think the accounting profession is going through a fascinating stage at the present time. First of all it’s dominated by small medium practitioners. There’s about 9500 firms out there in Australia today, and of those 9500 firms 83% are made up of sole practitioners and two partner firms, so like most of the people they advise, they’re small medium businesses themselves.
They’re faced with the same succession issues and probably in a stronger way. What we’re seeing is that probably about 40% of firms believe that they will have a succession issue at some stage over the next five years. My prediction would be that within five years we’ll see the number of accounting firms in Australia will in fact shrink from the present 9500 to about 7500.
It doesn’t mean there’ll be less accountants around, but it just means that what we’re seeing, as a lot of those firms come up to deal with their succession issues (either retirement or retirement of a key partner or that type of thing) a lot of them are making that choice and saying ‘I probably need to be in a slightly larger firm’. There’s a huge amount of consolidation and merger activity going on within the accounting profession, so we’re going to see fewer firms around. But those fewer firms will be slightly larger and hopefully be able to deliver a bigger and better range of services to their clients.
There’s big issues going on with bookkeepers at the moment in the accounting professions, because the bookkeepers are going to have to be better qualified. What’s happening with the bookkeepers versus accounting battle, and also what advice have you got for people who are starting out who are doing their own books? Should they go straight to an accountant or should they go the bookkeeper route?
I’m probably biased in this, but I think there’s certainly a role for bookkeepers in the marketplace and there’s work that good quality bookkeepers do which is probably more efficient and more cost effective than what would be delivered through an accounting firm. The message I normally give to clients is look first and foremost at your relationship in terms of making sure your accounts are right and making sure your taxes are right and those sorts of things. That relationship first and foremost is with your accountant.
Sit down with your accountant and understand what he or she can and can’t do. Some accounting firms do offer bookkeeping services and charge them out at bookkeeping services rates. Other accounting firms say they are not really geared up for that.
The best approach – rather than engage a bookkeeper and then go and find an accountant and hope they’ll all work together – is to get your accountant first. Get them organised. Find out what they do or don’t do and then they’ll be able to not only give you right suggestions in terms of what your needs are with a bookkeeper, they may be able to introduce you to one.
But it’s really important at the beginning that the bookkeeper and accountant understand what each one’s doing and are working collectively together, because otherwise you can get into the stage where one is doing something differently to what the other needs, and that can actually add to the cost and the complication of everything.
How do you get your accountant to spend more time helping you grow your business?
A lot of the surveys indicate that a lot of business owners want more from their accountants but they haven’t necessarily asked for it. And in some cases they haven’t asked for it because they’re not absolutely sure what to ask for. Sit down with your accountant at the beginning and say ‘this is the sort of stuff that I need done. Can you help me with it?’
Make sure the accountant that you’re working with does work in that area and has time to work in that area. There’s a lot of great small firms out there, but if you’re dealing with a very small firm that has a large client base with a lot of compliance issues, the typical tax stuff and that type of thing, with the best of intentions the practitioner may have some challenges to deliver all those services.
So make sure that you communicate with your accountant and say ‘this is what I need’ and then equally ask him or her ‘are you able to do this?’. Ask have they got the time to do it, because if they don’t then you need to know up front so that you can talk to somebody who can. And it may not necessarily mean that you’ve got to change your relationship with that accountant, but it might just be that you need somebody else who’s working for you in that space.
This is an edited transcript