Talenom as an investment
Market
Market
A growing and defensive market
The Finnish market for accounting and financial reporting services was around EUR 1.3 billion in 2022. Based on the size class of accounting firm customers, the market is mainly composed of micro, small and medium-sized companies. In large enterprises, financial management is still largely an internal activity, but the outsourcing trend is progressing gradually.
According to Statistics Finland, net sales in accounting and financial reporting services has grown by an average of some 5% in Finland in 2001-2021.
The market is rather independent of macroeconomic cycles. In addition, a strong trust is typically formed between accountants and their customers, which makes customer retention in the industry quite high.
Size of the market (€, mil.)
The fragmented industry is gradually consolidating
The structure of the accounting firm industry is fragmented because being close by your accountant has been a major competitive factor and thus the sector's character has been local.
The accounting service market in Finland is fragmented. Statistics Finland's structural business and financial statement statistics indicate that in 2022 the number of companies in the sector was 6,195 (2021: 6,212) and the average company size was 2.1 (1.9) employees.
The accounting service market has a lot of one-person offices and part-time entrepreneurs. Market fragmentation offers the opportunity for growth and creates economies of scale. Economies of scale are significant, for example, in information systems, sales and marketing, and in organising operations. Key players in the industry are Accountor, Talenom, Rantalainen, Administer, Azets, and Aallon Group, as well as Monetra and Provincia that concentrate on the public sector.
The accounting industry is experiencing changes that are driven by digitalisation, outsourcing, expanding service offering, and increasing importance of consulting, as well as the rise of different forms of entrepreneurship and legislative changes. We believe that the changes in the industry dynamics will gradually consolidate the market. Smaller companies may not have sufficient resources to implement necessary software and develop their business to meet the demands of digitalisation, which, we believe, is a prerequisite for maintaining competitiveness in the future accounting market.
Number of companies
*The restrictions on operating time and company size have been removed from the delimitation of the statistical units of the market-specific statistics provided by Statistics Finland. Due to the statistical change, the number of companies has increased significantly since 2017.
Market trends and growth drivers
1. Importance of digitalisation and advisory services is growing
The accounting services market is already undergoing digitalisation that changes the services, processes, skill requirements and work allocation in customer relationships. This development is also characterised by a shift in the role of traditional accountants toward more consultative and a growing demand for different financial advisory services. However, the pace of digitalisation is slow in the fragmented accounting market, and there is no sign of a general price level drop caused by the progression of automation.
Feedback from our customers shows that proactive consulting is an increasingly important part of a positive customer experience. Our advisory services include legal, taxation and financial consultancy. Our customers need advice, for example, when planning and implementing company structure changes, generational change, and ownership arrangements, in tax planning and corporate restructuring, when assessing financial management processes and internal accounting as well as in related development projects, in change management, and outsourced financial management services.
2. Outsourcing trend progresses gradually
The market for accounting firm customers is mainly composed of SMEs. In larger companies, financial management is largely an internal function, but they are also increasingly willing to outsource key support functions. Outsourcing financial management would be a natural step in this development, which would not only increase demand for accounting services but also for accounts payable and receivable and payroll services.
3. The rise of entrepreneurship
Entrepreneurship is becoming a way to employ oneself for an increasing number of people. Moreover, the ongoing work revolution leads more people to work another job or to part-time entrepreneurship. At the same time, the mode of work is increasingly becoming platform economy work taking place through entrepreneurship.
As paid work turns into entrepreneurship, the need for financial management services also grows. By developing comprehensive services for small and light entrepreneurs, we want to ensure our involvement in this global mega trend.
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4. Legislation
Increasing regulatory pressures, e.g., related to money laundering and GDPR, create new needs for financial management and accounting services:
With the new e-invoicing directive, which came into force in April 2020, an entrepreneur is entitled to receive an electronic invoice from another company.
The PSD2 directive imposes an obligation to open bank interfaces across the EU, allowing banking services to be integrated into the accounting firm’s service offering.
The Basel provisions have tightened, e.g., the solvency requirements of banks, which has created the need for new SME financing channels.
Talenom's observations from Europe
Legislation has developed into its current rather complex form over hundreds of years and therefore the need for expertise is permanent
Weak economic growth is the driving force in efficiency projects
The share of SMEs of GDP is significant (over 50%)
The accounting services market is fragmented and investment capacity is limited
Working methods are quite traditional and the need for investment is therefore high
There is a shortage of skilled experts, which has led to the optimisation of the workload by networking and subcontracting
The European accounting sector is clearly lagging Finland in digitalization
In 2018, we started investigating expansion of accounting services outside Finland. In 2019, we expanded to Sweden with the Wakers acquisition. The size of the Swedish accounting services market (2019: around EUR 2 billion) is roughly double that of Finland. In general, Sweden lags Finland in the development of the accounting industry, e.g., in terms of digitalisation, but the level is very good in a European comparison.
We have grown our business in Sweden both organically and through acquisitions and entered a growth phase where localisation of our own technology is also important. In summer 2021, we managed to successfully launch a similar small customer concept to TiliJaska (Kontokalle.se) into a pilot phase. With our own software implementation, we aim to automate our business operations in Sweden in the future. Thanks to the experience gained from Sweden, we are more prepared to utilise our expertise combining software production and the accounting service industry in the rest of Europe.
In summer 2021, we expanded to continental Europe when we bought the Avail Services SL accounting firm in Barcelona, Spain. The size of the Spanish accounting service market is around EUR 10 billion and the number of accounting firms in Spain is over 65,000. Like the rest of Central Europe, the digitalisation in Spain is lagging far behind the Nordic countries.
At the end of 2022, we expanded to Italy by acquiring the business of accounting firm Studio Gavazzi. According to our estimate, the size of the Italian accounting firm market is about 12 billion euros, and there are more than 64,000 accounting firms in Italy. There are about six million companies in Italy, of which more than 99 percent are small and medium-sized companies.
In general, the dynamics of the European market seem to be favorable to us. There are many micro and small sized companies in Europe that are served by a myriad of individual consultants and small accounting firms. The fragmented market is dominated by small accounting firms, whose operations are paper based. Our goal is to continue growth and expansion in Sweden and other European countries, with significant potential to lead the digitalisation of the accounting services industry.
