6 Key Components for Starting a New Accounting Practice| |
Starting an accounting practice can be one of the most rewarding things you do in your life if you plan your entry properly, have a healthy DIY mentality, willingness to learn on the job, and enjoy working with people.
The accounting industry is more diverse than most people realize. There are so many unique opportunities to create a practice, that it boggles the mind. And for the right individuals, the rewards of self-employment, economic enrichment, and gratification from helping clients are the reason why they do it.
Relative to other industries, starting an accounting firm is relatively low risk (if you've adequately prepared yourself), and requires little up-front investment. In the long run, the business model is ideal, as selling an accounting practice when you want to exit the industry is very easy. Quite frankly, the business model is phenomenal, and the need for accountants grows stronger every year with emerging new industries and ever-changing legislation.
To get you started out on the right foot, we put together this list of 6 key components for starting your own accounting practice or CPA firm:
1. Prepare Yourself Adequately
Before starting your own accounting practice, obtain at least 1-3 years of public accounting firm experience. The typical accountant has 5-15 years of accounting and tax experience before hanging out their own shingle. This is usually a combination of private and public experience. You may also opt to start with just a couple of years experience and make up for your lack of experience with a healthier drive to learn on your own by running your own practice. As a rule of thumb, acquire 80-90% of what you need to know while working at someone else's practice (aka - working as an apprentice) and then jump in. Don't expect to know over 90% of everything there is to know. Even accountants who have owned a practice for many years learn new things on the job.
2. Plan Your Entry Strategy
Most aspiring entrepreneurs are afraid of failure. Accountants are no different. The majority of accountants are thrifty and risk-averse, so a typical entry strategy is buying someone else's practice because it appears to be less risky. Unfortunately, this notion is a fallacy - in fact, acquiring a practice is the most expensive way of entering the accounting industry. The accounting firms that are listed for sale are the seller's retirement nest egg, so they want to sell to the most "qualified" buyer, both financially and experience-wise. If the accounting practice they build is highly desirable, a larger CPA firm will quickly gobble it up for cash. It is far cheaper to acquire new clients organically, using a proven marketing system.
3. Determine Type of Accounting Practice
Just like any new business, your goal is to develop a venture that is unique and sustainable. By creating a unique twist on a need in the market, you can compete on something other than price and location. The accounting industry is ripe with niche opportunities and emerging needs that are currently underserved, or often ignored. Keep the following goas in mind when choosing the type of accounting practice you will operate:
- Identify what is unique within your experience
- Evaluate what parts of your local market are underserved
- Determine if you can command a premium price for services
The ultimate goal is to obtain higher pricing for superior "perceived" value.
4. Don't Underestimate Location
By all means, you don't need expensive retail office space for your new practice, but securing space in a location which is in close proximity to many small businesses is imperative to attracting the right type of clients. Many practitioners today choose to work virtually. Although this helps with productivity, it is not optimal to grow your practice. More often than not, many new practitioners will select an office location near their residential home for a shorter commute, or choose to work from home. This is typically the wrong decision. The reasons for selecting a residential home (i.e. good school system, low crime, etc.) are vastly different from reasons for selecting an accounting firm location. Additionally, your physical address is essential for local search optimization.
5. Market Yourself First
All new business owners need to learn how to use marketing for the purpose of lead generation. The accounting industry is no different. If prospective clients believe in you, they will buy into the value of your service and the wisdom you offer. This makes is less likely that a competitor will come courting and steal them away. Clients will not believe in your capabilities unless you present yourself in a genuine manner. They are seeking a professional relationship with a real professional. Don't try to be someone you are not, or oversell your firm. This will ultimately undermine your efforts. Being true to yourself and developing a unique practice will bring about long-term success.
6. Properly Price Your Services
Even though this sounds basic, you'd be surprised how many new accounting practitioners struggle with this concept. By establishing prices for your accounting services, you're not only setting a plan to build your business, but you're sending out a message about the types of clients you want to work with. For example, a high pricing model infers top notch service and quality. A low price may indicate the client will receive sub-par service. Learn how to identify good and bad prospects, types of services that are more desirable, then properly price your services.
For more tips on starting a new accounting practice, download our complete guide, Starting a New Accounting Practice. This guide delivers more essential tips and let's you in on the most common mistakes to avoid when setting up your new firm.
Find more articles on accounting practice management in our blog library. If you would like more information on Build Your Firm, check out our marketing programs for accountants, or contact us at 888-999-9800, ext. 1, or email us at [email protected].