So the recession is over, the economy on the upturn and the usual casualties that provide such an important source of fee income for IPs is on the way. Or is it? Talking to a number of IPs suggests that there aren't the usual signs of IPs getting busier as they usually do when businesses run out of cash as they try to meet growing orders. Indeed I am still hearing about redundancies within our profession, the most recent at quite a high level.
But as I look around I see more insolvency firms than ever with a number of the casualties of redundancy plus some sizable mergers, setting up their own insolvency practices. I have expressed my views before that these are brave souls in the market as it is and has been for some years. More firms and less work overall. Plus some finder firms are now trying to take appointments in house rather than referring cases to independent IPs. How are we going to feed all these mouths?
Running in the background is all the uncertainty about fees. I have voiced my opinion on the question of fees in previous blogs but suffice to say that if fees revert to the old basis of being success based rather than extremely inequitable time costs, a number of IPs will find it tough to make a living. The worst affected will be those IPs who take smaller jobs rather than those who take a mix of size and type of jobs.
So where does that take us? To my mind, there is only one sensible way forward and that involves mergers and acquisitions. What firms need is a mix of work so that the swings and roundabouts that worked very successfully up until 1986 can operate again. That system, in that type of structure, earned the IPs at that time an extremely healthy income, far more than many today. Oh if only I was born 10 years earlier I might have been an appointment taker back then to reap the benefits!
If you rely on small cases and volume to earn a living you should be seriously be thinking of selling out to or joining with a larger firm so that together you can service both the smaller and larger cases profitably. And don't just think that it is just a question of ditching the smaller cases as the accountant who refers the big cases usually likes you to look after his smaller clients too. If you are too choosy he may find an IP who will look after all his clients not cherry pick the best!
If you are a medium or larger sized firm then you should be on the lookout for smaller practices to absorb the business for minimal additional cost and talk to firms of a similar size to provide a balance of profitable cases.
The big firms have long since abandoned the small work and more and more ditch the reasonable quality work too. Quite whether they want to be seen as insolvency firms at all must be in doubt, most preferring to be thought of as business advisors. That's fine for the rest if that is the large firms strategy but the more they drift away from the core insolvency product, the harder it is for them to get back into it when other sources of work dry up. It ain't so easy to switch horses when one has foundanother jockey!
I strongly suggest that now is the time to think about rationalising the profession. Act now seeking firms to integrate with rather than leaving it until the best ones have been snapped up by your smart competitors. Pick the best whilst you can and don't be the practice left "on the shelf"!
The profession is unsustainable as it is so it must change. The world is changing around us, not always for the better but you ignore it at your peril.
Our own GGT IP Select can help you with this process. Contact us in the strictest of confidence to discuss your options. We have a number of IP firms already looking to merge and we aim to match them with their ideal match!