Who will replace the baby-boomer retiring accountants?

Crunch time looms for a cohort of older accountants

28
Jun
Image

The baby-boom end is generally defined as being 1964 - if you're a baby boomer retiring accountant, discover what lies in store when selling an accountancy practice and how your actions can impact the market.

 

Contents

Who are the baby boomers?

How has their career been defined?

What does this mean for the market?

Does it make a difference?

 

Who are the baby boomers?

 

The baby-boom end is generally defined as being 1964.

To me the appeal of such a definition is its simplicity compared to the monikers that followed, be it Gen Y, Y1, Y2, Z , Millennial, Snowflake and whatever will come next.

It would appear that I am a post baby-boom by 3 years but many of my clients are baby-boomers, usually those at the beginning of the era.

 

How has their career been defined?

 

What I have noticed is that so many of the early “boomers” acknowledge that they were raised as the developed world prospered and that they themselves launched their professional careers during an era of rapid consumer growth and an increase in wealth all round.

Perhaps this explains why so many of them seem to think that they will go “on and on” in practice, somewhat reminiscent of Margaret Thatcher in her 1987 interview. Everybody knows they are but mere mortals and the end is, like tax, inevitable, but what is it about so many accountants of that generation that stops them retiring and enjoying life a bit more?

Most sellers at the moment are in their 70s, but maybe 70 is the new 60?

Meantime accountancy remains a very popular career choice, something that perplexes me to this day, but that’s for another blog.

 

What does this mean for the market?

 

This feeds through into people keen to set up in practice themselves. When I was training all those years ago that was seen, to me at least, as the gold standard to aim for – your own practice with a shiny brass plate at the front door, which in theory meant you had a licence to print money. The good old days of rose tinted spectacles! How times have changed.

In some ways it has never been easier to set up in practice on one’s own, given the marvels of technology and post-Covid the ability to ply for business and build client relationships remotely. But in others, especially the rapid pace of change and the complexity of compliance, it has never been more frustrating.

What a lot of the young guns these days want is to be able to purchase a block of fees or an entire practice, everything readymade and turnkey. Nice if you can actually get it.

So, what we see is the supply being constrained by boomers clinging on and demand building up without nowhere to go, so to speak.

Maybe they are no different to any other profession or vocation but for those who leave it too late, apart from doing a dis-service to their clients, staff and families, it begs the question as to what happens next? Ultimately their clients will still require an accountant but instead of the whole practice ending up with a single buyer, clients will drift away and end up in the hands of dozens of different firms.

 

Does it make a difference?

 

On the macro level the profession still retains the same number of clients and if it were a country its output would remain the same. But, and here’s the rub, – it means that up and coming aspiring buyers looking to set themselves up via purchase will be denied the opportunity, which is a shame.

Although prices have finally started creeping up after years of stasis that has defied the traditional supply and demand curve, it seems that the temptation of higher multiples is still insufficient to motivate practitioners to close their ledgers for good.

Covid saw many who were ripe for retiring push off the big decision for yet another year, and who could blame them, with all their clients needing extra help to navigate the myriad support schemes, and often getting free money to pay them without haggling!

How refreshing.

So much so that they are still at it, but ultimately MTD is likely to be the final straw for many so they are making hay while the sun shines, but that sun will eventually set. A poll by AccountingWeb in June 21 showed that 31% of accountants cited MTD as a reason for quitting practice, but I reckon it is actually higher, from my own conversations in recent months. And if it isn’t MTD it’s the stress of always being at the beck and call of ever-demanding clients.

But the end is nigh.

 

Conclusion

 

It looks like those buyers will finally find accountancy practices for sale that meet their requirements but will prices drop back to pre-Covid levels?

That’s the $64,000 question.

I reckon it's a step-change and will stay firmly in place, maybe even rising further.

If you are one of those boomers I hope that this post will get you thinking, as there’s nothing like an accountancy practice sale at leisure and setting your own timetable, as opposed to waiting too long and having to sell on terms that are less favourable.

For buyers reading this piece, it’s time to get your ducks lined up because markets can move quickly, even within our own august and traditional profession.

Want to discuss your retirement requirements further, free of charge without obligation? Get in touch today or visit our resources page.