AI Issue 4 2018 - John Harrison & Company

8 Acquisition International - Issue 4 2018 clients had to have an audit and they were beneficial to most business owners as a check on their accounts department. This was a major part of our practice and constituted 30% of our turnover, but gradually the audit threshold was increased to the point where it is today at £10 million and none of our clients need an audit. I want to work in the owner managed business sector, in which people want to grow and I am not particularly interested in companies who are bigger than £10 million turnover already, so that is a huge amount of fees that we lost.” Boasting a sterling reputation throughout the industry, John has been recognised by many of his peers in the education sector. He tells us about some of the sectors and industries that the team moved into, and about his own passions, particularly in children development and education. “Initially, we replaced most of the work in auditing through the Grant Maintained Schools movement. I am passionately interested in children’s education and I thought and still do think the grant maintained schools with local ‘ownership’ by boards of governors working with the teachers, parents and children together is the best recipe for success in children’s education. “There wasn’t the support in those days for schools wanting to go down the GM route as there is now with Academy schools, so I read everything there was available about the subject and lectured across the East Midlands to headteachers who were considering GM status. We designed and implemented an accounting system for them to use and helped in the budgeting process as well. We had clients from London to Cumbria and I was even invited to a reception at 10 Downing Street by the Prime Minister in recognition of the work I had done in the education sector.” John discusses the importance of technology, and how he and the firm have had to adapt to the constant developments which are arising on a constant basis. “When computers first became commercially available they gave us an exceptional technological advantage. Principally, the cost of them was so great that in the small business sector only professional practices could afford to buy them. The performance was nothing like what we have now but it allowed us to keep our margins up.” Having built up an extensive amount of experience and knowledge, John talks about listening and learning to others, and explained how he is keen to learn from others and how this has helped him develop his company. “Around the end of 2013, I was at a conference where Chris Fredrikson was speaking. He’s a British Chartered accountant who has spent nearly all of his professional work in America and is now one of the most expert consultants there are to the accounting profession. He was extolling the virtues of a book that had been written by Jim Collins, and he said it was the most read book on business management. “Subsequently, I thought I’ve got that book in my library, and I’ve never read it. So, when I got home I got it out. It was called ‘Built to Last’. Collins had carried out a study of businesses that had started out over 100 years ago and were still with us today. What differentiated them from similar companies that set up at the same time but failed?” “He discovered that each of the long-lasting companies had a mission. He didn’t mean one those woolly Mission Statements thought up by marketing gurus that Ric Payne succinctly describes as ‘motherhood statements’, he meant they had a real mission.” Inspired by the success of previous companies, John wondered what he could do in order to provide an exceptional service which would be well suited to the evolving digital age. He explains some of the software that the team developed and took on, and how this has enabled the team to establish itself as a leader within the financial industry. “Essentially, I wondered what services we can provide that would fit into that definition in this digital age and I came to the conclusion that it would be financial support services, helping business owners set their long-term strategic goals and achieve them. At its heart would be a Financial Management System, and I was inspired by the 2020 Innovation Annual Conference in 2013 to start researching the creation of an electronic system using the cutting-edge technology that was becoming available at the time. “As such, we took on some American software that was used to carry out a financial performance review over five years, benchmarking and forward forecasting. The financial performance review showed a graphical analysis of the main key performance indicators including; for example, turnover growth, gross profit margin, labour to sales, debtor days and so on. This enables us to show business owners which performance areas had done well in the good years and what didn’t in the harder years.” “The financial forecasting part of the software shows what the financial results of the company will be like in five years’ time if the key performance areas vary in the next five years, as they did in the previous five years. This is always an eye-opening experience, whether the result is good or bad. It either opens up eyes about what can be achieved if the business is financially controlled properly, or indeed what will happen if changes are not made to the way the company operates.” Contributing to John and the team’s success has been its striking ability to pay great attention to detail. Clients and staff have to produce models which show turnover will be achieved, rather than just state what they expect to achieve. “Vital to our success is the fact that we do not allow owners to just put a percentage increase in the figures for turnover. The model has to show how the turnover will be achieved. So, for a jobbing business it might be the number of hours available multiplied by an efficiency rate; the charge rate and recovery rate; materials sold per hour and the mark up on materials used.