Have you ever considered starting your own accounting firm? If you’re a young CPA, it may have crossed your mind at some point, but just because you know how to do the work, doesn’t mean that you have the skills to run an accounting firm. In fact, from an operational perspective, you don’t even have to be a CPA to operate a firm – you just need to be a skilled businessperson.
Ultimately, starting a firm demands strong entrepreneurial skills, and while an intimate understanding of accounting can be helpful, there are a number of other factors you’ll need to consider. These 5 tips can help you determine whether starting an accounting firm is a good choice for you and allow you to get off on the right foot if you decide to proceed with starting your own firm.
Define Your Professional Niche
If you’re considering opening an accounting firm, one of the first things you’ll want to do is determine what kind of services you want to offer. You can think of this as the purpose of your future firm. This will help you decide how large the firm should be, who your ideal clients are, and how you promote your services.
As you think about what your firm will do, you also need to consider what your role in accomplishing that goal will be. If you want to continue doing accounting work, you may as well go work for someone else. As the founder and owner, your role will be primarily managerial. You can be passionate about accounting, but you can’t expect that it will be your primary job anymore if you choose to go this route.
Further reading: 5 Time Management Tips For Accounting Firms
Evaluate Your Skills
Once you’ve considered what your broader plan for your firm is and determined that you’re willing to part ways with your career as an accountant, it’s time to ensure you have the necessary skills to actually run a business. Modern accounting firms not only need to have skilled staff who can execute the technical tasks at hand, but they need marketing savvy and strategic insight that fuels differentiation. Most importantly, though, you need motivation, support, and managerial skills.
In many cases, unless you’ve run a business in the past or served in a high-level management role in a prior job, you may not have the skills necessary to run your own firm – but that doesn’t mean it’s completely out of the question. If you feel strongly about your business concept, you could consider seeking out a business partner whose skills complement your own. However, you’ll want to be careful about placing your trust, and your financial future, in someone else’s hands. A strategic partnership between a knowledgeable CPA and an experienced entrepreneur is ideal, but finding the right match for your skills may take time. Be sure to account for that as you make career decisions and build your professional timeline.
Consider Your Basic Business Needs
If you’ve concluded that you have the skills necessary to launch your own public accounting business, then you’re ready for the boring details – licensing, office equipment and office space – all the elements that go into daily operations. You’ll also likely need to take out a loan in order to finance your initial setup. Experts recommend having enough funding on hand to sustain your business through the first year, so how much money you’ll need will depend on what types of accounting services you plan to offer as well as where your business is located.
Running an accounting business also requires specific licenses, beyond just a certificate of incorporation. Typically, the owner of an accounting firm is expected to have a CPA license, even if you won’t be handling accounts yourself; it’s part of ensuring you have the necessary skills to hire staff and manage day-to-day operations. In addition to a CPA license, you’ll also need insurance, and any licensing related to additional services you plan to offer. For example, if you plan to provide investment advising as part of your broader financial services stable, you’ll need an appropriate license from the Securities & Exchange Commission.
Further reading: Best Strategies For Managing Accounting Firms
Study The Industry
Accounting may be an old business, but that doesn’t mean it hasn’t also changed. Today’s firms rely on a variety of new technologies, serve a more diverse set of client businesses, and need to be more creative about everything from marketing to customer service. And in order to accomplish this, great owners need to invest in talent development. This is vital to your firm’s longevity, particularly at a time when the majority of firms fizzle out when their founder retires.
In addition to studying the broader elements of the accounting world, it’s also worth taking a deep dive into what makes the most successful accounting businesses tick. Most discussions about accounting focus on the “Big 4” – Deloitte, KPMG, PricewaterhouseCoopers, or Ernst & Young – but there are many smaller, successful firms, and their strategies will teach you far more. This is particularly true when it comes to client acquisitions, sales and acquisitions, and even marketing.
Develop A Profit Plan
Having considered all these factors, there’s still one major element remaining: developing a profit plan. If you’ve never actually run an accounting business, the major ways in which firms make their money can be a bit inscrutable. Obviously you’re selling a service, but how do you drive profit in an old, yet evolving industry? There’s been a modest downward trend in industry revenue growth over the last three years, along with increased mergers – but it’s common for new businesses to lose money for the first several years, so your firm needs to start strong out of the gate.
That being said, there are a few major ways that accounting firms make money, with key services like tax preparation and payroll at the top of the list. However, more firms are expanding their offerings to include non-profit services and wealth management, among other financial services. They’re also strategically adopting new technologies to become more efficient and better serve their clients. This includes adopting Taxfyle’s outsourcing platform, which enables firms to match accounts with pre-vetted CPAs and allows them to focus their in-house services on higher skilled, more profitable activities.
As you develop your business plan, you’ll gain a clearer sense of where most of your firm’s money is likely to go, but staffing costs typically comprise as much as 50% of a firm’s revenue, so figuring out what staff are critical and what tasks can be outsourced or automated is vital. Overall, unemployment rates in accounting are very low, so hiring the best can be expensive – but it’s also the only way to compete.
Get Started – And Grow – With Taxfyle
As with any business, starting an accounting firm is a huge undertaking, but you don’t have to go it alone. Even the newest firm can take advantage of Taxfyle’s services, helping you to build your client base while keeping initial hiring to a minimum. It’s an ideal way to get a sense of demand, build your marketing skills, and start recovering your starting costs, and our services are designed to grow with you. Contact Taxfyle today for a free demo and to learn more about our services. We know how hard it is to succeed in the accounting world, but Taxfyle can make things a little easier.
