We’re halfway through the year and the accountancy sector is fizzing with activity – we’re talking to people founding their own firms every week.
This might seem a bit odd to some given the impact the COVID-19 pandemic has had on the UK economy over the last 15 months.
So what does the data actually tell us about the future of new accounting firms looking for a 2021 grand opening? And what can they do to stand out in this day and age?
The trends in new accountancy firms
Over the past decade, accountancy practices taken as a whole – firms that conduct accountancy, auditing, bookkeeping and tax consultancy activities – have seen steady growth in terms of their numbers.
For instance, in 2010 there were 35,270 accounting firms operating in the UK. This number had grown to 43,235 by March 2020 –an increase of just under 20%.
The only significant irregularity was between 2018 and 2019, when numbers dipped for the first time since 2011 by 4% from 45,570 to 43,720. Other than that: steady growth.
However, there’s more to it than that when we look at the performance of each activity over the past decade.
When we do this, we can see that bookkeeping services increased every single year between 2011 and 2020 from 3,290 to 6,735. The same is true for tax consultancies, which numbered 875 in 2011 and 1,560 in 2020.
Accounting and auditing firms, on the other hand, have been on a downwards trend since 2017 when they numbered 36,005 firms, compared to the 34,950 recorded by the Office for National Statistics (ONS) in March 2020.
Smaller firms, especially those with less than four employees were the main casualties, while firms with 20 to 49 and 50 to 249 employees fared better, even increasing in number over the three-year period.
How many new firms will open in 2021?
The question, then, is have accounting and auditing firms reached a peak in terms of new startups? Are entrepreneurs confident about their prospects, despite the economic toll of the pandemic, restrictions and lockdowns?
Unfortunately, there is no data available to assess how many new firms formed in 2020 or the first half of 2021 yet. But we can look to the past to gather an understanding of what might have happened by observing data from when the UK was in a similar tough situation – over the course of the global financial crisis between mid-2007 and early 2009.
Here, we see something very interesting: in 2006, all accountancy firms totalled 24,510 in 2006 and 25,030 in 2007. Then, the sector exploded by 39% to reach 34,815 firms in 2008, which started the upwards trend that we previously touched on.
John Stokdyk, editor-in-chief at AccountingWEB, suggested that immediately after the financial crisis, firm formations during this time were driven by experienced accountants who had left larger organisations, either out of choice or after they were let go.
Furthermore, there is arguably greater demand for accountants during times of economic hardship as businesses look for all the help they can get, especially from financial advisers.
If history repeats itself, then, we might see the next ONS report on accounting enterprises indicating there was a positively large increase in accountancy firms between April 2020 and March 2021 around this time next year.
Standing out in 2021
New firms will be facing their fair amount of challenges, of course, but there are steps they can take to ensure they succeed in the first year of their lives.
One of the best things a startup can do in this day and age is opt for modern branding to stand out from the huge number of competitors who are often still using the same overused language, outdated websites and bland logos.
Getting your digital marketing strategy right will help better communicate who you and your team are, what makes you stand out from the crowd and why you’re the best choice for a prospective client.
Content marketing for accountants is equally as important, which you can always outsource for a great return on investment if your team is too busy to be writing blogs and similar content themselves.
Combine all of that with a strong SEO strategy to ensure your content can be easily found, and you’re on your way to getting a steady wave of traffic, potentially new clients, and profits.
You also need to attract not just new clients, but the right clients. If the economic downturn in 2021 has taught us anything we now know to attract those recession-proof, crisis-proof clients, accountants need not only to assert their modern, tech-savvy credentials but prove them.
Talk the same language as your ideal clients and walk the walk. Don’t make software an add-on – put automation and efficiency at the heart of your proposition.
That’s why we highly recommend that you read through our recession proof clients guide for some tips, while Capium is always open to chat with you.
Talk to us about setting up your own accounting firm here.