According to the 14th edition of The Good, The Bad & The Ugly (GBU), an accounting research report issued by Business Fitness, mid-tier firms are currently “being squeezed from both sides”, leading to a “first-ever drop” in revenue and profits for the sector.
Brad Geelan, GBU report publisher and head of business development at Business Fitness, stated that one in four firms makes a loss if a notional partner’s salary of $200,000 is applied.
Mr Geelan added that client fees have also suffered as a result of recent trends.
“At one end of the spectrum, there’s been an influx of breakaway firms providing cheaper services; at the other, the big four have introduced attractive retainer options for small business,” he said.
According to Mr Geelan, a shift to a business advisory model and a reliance on technology should only be adopted when suitable for the business and the clients, “not just because it’s trendy”.
“The GBU research shows a 133 per cent increase in firms’ expenditure on online services over the past four years. Yet, we’re also seeing a first-ever drop in revenue," he said.
“The smaller, cheaper breakaways are not yet making a profit, but they’re targeting key clients of the mid-tiers.”
The survey also revealed that over the past three years, firms are spending less on marketing, despite it remaining a significant challenge to find new clients.
“We’ve been taking the pulse of the industry for 15 years – a long time when you consider Facebook went global only nine years ago,” Mr Geelan concluded.