I used the expression ‘Halfway house’ firms of accountants for the first time today when commenting on an internet forum. It seems sensible to explain my thinking in a short blog post.

I had in mind those mid tier firms that are largely all but indistinguishable – in the eyes of prospective clients. It’s a harsh truth that is perhaps best evidenced  by the promotional flyer about which I have written in recent blog posts. I also made a similar point when reviewing an innovative online video produced by another mid-tier firm.

It’s partly the difficulty in distinguishing themselves that will be the downfall of many mid-sized (half way house) firms. They struggle to win competitive pitches, to attract new clients, to secure new partners with a following and to retain qualified staff. They are constantly fighting to become more efficient so as to reduce costs and maintain, let alone, improve profit per partner.  The recession has reinforced all of these challenges.

The only mid tier firms that will survive and thrive are those with clearly defined niches. By this I mean those that are known for having an area of expertise that makes them really stand out from the pack. They recruit staff and partners specifically to bolster this expertise and they don’t waste time and money trying to be all things to all people. And these firms will only survive as regards those specialist areas. The more generic areas of their practices will shrink as partners retire or leave to go to smaller firms with lower overheads and potentially higher profits per partner. The smaller firms will often be less pressurised environments too – especially if they stick to clearly defined, promoted and valued niches.

Those mid-tier firms that have no such recognised niche expertise will face increased pressure from the egg-timer squeeze of both the largest firms and of the smaller more focused and cost-effective firms. The larger ones are perceived as having more credibility for the provision of a wider range of services – when these are needed and valued. The smaller ones are able to provide compliance, advisory and special services more cost effectively.

How many businesses really need to be served by halfway house firms of accountants?

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