17,000 consultancies launched in the UK in 2020
…the second highest start up category after online retail sales.
Firstly why?
Consulting has always been one of UK's most popular industry for starters, with the majority being sole proprietors – experienced professionals that enter the consulting world to work independently.
More than 10,000 consulting start-ups were launched by individuals above the age of 30.
Transitioning into consulting is a common career move for managers looking go solo with life as an independent consultant is appreciated most for the flexibility it offers, potentially high fees and autonomy in work.
More than 6,500 consultancies were started by individuals under 30, signalling the entrepreneurial spirit of young, talented people, but also reflecting the chaotic year amid the Covid-19 pandemic.
Around 23% of new businesses in 2020 were started by people who had been made redundant or furloughed, and the consulting industry saw a huge influx of young, independently minded entrepreneurs.
Latest ONS data found total business creations in the UK stands at between 370,000 and 390,000, a creation rate of 13.0% on the total number of entities. The number of businesses which have expired is estimated to be slightly lower, suggesting that when one firm collapses, it prompts a number of former employees to go into business for themselves rather than seek new employment from existing companies.
Since 2017, there has been a 206% increase in the registration of sole traders between 16 and 20 years old, alongside a 72% increase in those aged between 21 and 30.
Thanks to the toolkit of digitally native younger workers, many with social media at their fingertips they can reach customer audiences not otherwise accessible without being part of something bigger.
Lee Murphy, Managing Director at The Accountancy Partnership, said, “The barriers to starting a business are lower than ever, with the ease of selling services online with little to no initial costs. It is clear to see how each age group has been affected by the pandemic, turning to enterprise because their other options are so limited.”
London is a long way from being the easiest city to establish a new online business from. However, in spite of this, the capital’s size, clout, and logistical links mean it remains the biggest hub for the launch of new businesses hosting more than 100,000 more start-ups than its nearest rivals of Birmingham and Manchester in 2020.
Secondly, what does this mean for accountants, experiencing these contradictory forces?
A decline in compliance work as old businesses close and new ones turn to online apps instead.
A post COVID boom in small businesses needing help with ‘across the board’ business advice.
More spending on business advice than accountancy work
A boom in consultancy start ups looking to get their business
Loss of clients to consultants with ‘whole business’ solutions
An avalanche of accountancy software providers claiming to empower accountants to offer (limited) business advice
So how can accountants make the right decisions now to secure their futures?
Diversifying into business advisory work is a given, as every accountant I know plans to do so. But what isn’t given is how it’s done, which is a cause of great anguish.
The journey to enlightenment can only begin by differentiating between:
‘Business Advisory’ which mostly amounts to financial forecasting services followed by helpful suggestions which are hard to charge for and don’t fundamentally change the client’s business unless s/he is a serious self-starter, with time and energy.
And…
‘Business Consultancy’ which typically involves a major change programme taking months and costing £thousands, so far beyond the reach of every small business.
The answer must lie between the two…
Bringing about lasting operational changes across a whole business over a sustained period whilst doing so affordably for the client, yet profitably for the accountant.
Which is why Runagood® developed the ‘AI Business Advisor® System
By Duncan Collins
Founder of Runagood.com Ltd