Grant Thornton has closed its Geniac business, a start-up providing outsourced services to small companies, which it acquired in 2015, illustrating the difficulties larger practices can have in servicing the smaller clients.
A spokesperson for Grant Thornton UK said: “I can confirm that Grant Thornton has taken the decision to cease its Geniac business and will no longer be offering Geniac’s services to clients from 5 April 2018, as the offering was not making the progress we’d intended in the marketplace.”
In 2015, Grant Thornton injected £ 22m ($ 30.5m) in Geniac, which was founded by two ex-Accenture consultants to offer accounting, tax, legal, HR and corporate administration in one services to small companies.
This move was in line with a market trend which saw the larger firms trying to conquer the smaller end of the market, including the Big Four. Indeed in 2016 Deloitte UK launched a cloud-based services, Propel, targeting the SME market.
Deloitte UK followed in the footstep of KMPG and PwC who have already set up similar services. With KPMG advertising their services at a starting price of £125, which seems a good catch for SMEs' squeezed budgets.
Speaking to International Accounting Bulletin in June 2016, Kreston CEO Jon Lisby said: "With everyone able to crunch numbers at low prices – the winner will not be based on price. The winner will be who is really able to provide the SME/Entrepreneurial business with what they really need – and what they need is a trusted advisor."
And he predicted that the Big Four would struggle in that market. Fast forward to 2018 and the closure of Geniac suggests that even the larger mid-tier firms would struggle to service the smaller end of the market.
Someone with knowledge of the situation told International Accounting Bulletin that it seemed to be a sensitive issue within Grant Thornton with some very senior members of staff unaware of the situation.
“All the big firms want to find the next Bill Gates, or at least a start-up / early stage that’s going to have rounds of raising and get to IPO, with the lucrative fees involved. But their business profit models struggle with it; you have to kiss a lot of frogs to find the prince or princess,” the person who didn’t wish to be named said. “They try to leverage technology to give a cookie-cutter service, but in reality the competitive edge remains with the smaller players. They can increasingly leverage similar technology, but also offer meaningful relationships (not just “access”) with senior experienced professionals, which the bigger firms cannot afford to do and also earn the profits they want.”
According to its latest available filing with the UK Companies House for FY16 Geniac UK limited reported a shareholder deficit of £ 2.5m.