Let’s say we have a business which is good at what it does. New technology means lower costs, so more profits are re-invested in still better technology, staff training, promotion, lower prices and a generally better deal for the customer. The business is expanding steadily. This is called organic growth and it is something for businesses to think about.
When the business reaches a certain size it will have two choices if its owners continue to have ambitions. The first is to try to duplicate itself directly in other areas of the country, accepting all the costs of starting from scratch. The other way is to take over similar businesses and convert them to its way of doing things.
The problem comes when one business takes over another business when actually, it has nothing to contribute in the way of improvements to the business processes of the second business. This is likely to end in tears, because the business being taken over is likely to be overpriced, and the acquiring business then has to finance the takeover through a reduction in profits. Such activity is derided as empire-building. It often happens because it is easy to pretend that empire-building equates to some sort of organic growth.
A firm of accountants is in one sense just another business, and we often see pointless empire-building among accountants. A former employer of mine, whom we will call Hacksaw, went round the country buying up accountancy practices. For those working at the coal face, there was no advantage whatsoever from this activity. We were told that another branch of the firm was more efficient than us, but we were never told how to emulate them.
The European Union is another prime example of mindless empire-building which is now coming unstuck. It may make sense for Germanic and Frankish nations to get together, but adding other countries merely on the grounds of their geographical location is just silly.
David Porthouse & Co is a firm of accountants based in Carlisle in North West England. We have a keen interest in new technology with the aim of speeding up accounts production and making accountancy more affordable for our clients. We are pioneers in the introduction of automated processing and optical character recognition. We are biassed towards organic growth.