Tax season is a busy time for an accountant and an exciting opportunity to take on multiple new clients and make a difference for their business. Maybe you’ve been an accountant for a while and have a case of entrepreneurial spirit to start up your own accounting practice. While tax season is definitely the busiest time to attract clients, it isn’t always ideal to start your practice during the rush. As tempting as tax season seems, it can actually be beneficial to start during the off-season. That way, you’ll have everything in place before you’re in high demand. Here’s a quick guide to how you can launch your own accounting practice during the off-season and set yourself up for success.
Work In A Small Practice First
Having experience in the market and industry can teach you some key lessons you’ll carry into your own practice. While you’re working for another small practice, keep an eye out for common pitfalls to avoid and big wins to emulate. Focus on learning both what you should and shouldn’t do to succeed. You’ll be surprised how a year or two of experience pays off when it’s time to break out on your own.
Determine Startup Costs
You probably have a great idea for your own practice. While it can all sound exciting theoretically, put your accounting skills to good use and write up an actual business plan before you get carried away. Starting your own practice can be expensive. Determine all the business startup costs to start your accounting firm and the estimated running cost of the first year of operations. You should then think about how to acquire the money to start your business. Consider personal loans, small business loans, and other options to best fit your needs.
Figure Out Your Market
It’s better to do a single thing really well than to do a lot of things poorly. Keep this in mind during your first year of business. Take time to scope out the market and determine where your practice can earn the best returns. Start by deciding the regions you would like to pursue and determine if a market exists in those areas. If there isn’t a market in your region, it’s not a good idea to continue with your plan. On the flip side, be cautious of oversaturation in a region. If there are already multiple accounting practices that specialize in your field, find out whether there is a large enough market for you to establish a stable customer base.
Develop A Pricing Structure For Services
A temptation for many people is to undercut the market and offer very low costs for their services. While this strategy can increase your customer base, it might not always be financially feasible for you in the long run. Your pricing structure needs to cover not only the salary of your staff but also your business license, insurance, software, office space, and office supplies. Don’t set your price structure so low that your schedule is always full. This will only set you up for failure and employee burnout.
Determine if you want to charge per hour or if there will be a fixed fee. Generally, customers prefer a fixed fee as it provides the most value. However, each practice has its own needs, so there could be times where charging per hour might be a better choice for your new business. Some practices make a habit of “writing down” certain services, like preparing and filing taxes, when their normal rates would be too high for a customer. When an accounting practice is able to provide quality annual tax support for their clients, their clients are likely to return to the practice. In this way, the lost profit margin is seen as an advertising and marketing cost for later services rather than a loss in revenue.
Obtain An Employer Identification Number (EIN) And Tax ID Number
To legally function as a new company, you need to obtain a business EIN and PTIN. This will allow you to file state and federal taxes for your business and employees. It doesn’t take long to do and is an easy process you can start online.
Get The Right Software
The practice management software your practice uses can make a huge difference in the success of your firm. The right software can help you go paperless, transition to the cloud, manage billing and invoicing, and improve your customers’ experience.
Start Small And Aim For Manageable Growth
As a new business owner, rapid growth can be a kiss of death for a new practice. It might feel great to have an ever-growing list of clients, but unsustainable and unmanageable growth will only end in disaster. A common error is when accountants take on new clients without taking the time to research them. Just because a client is willing to pay you money does not necessarily make them a good fit for your services. Choose clients who need your special services, skills, or knowledge. Make sure your mix of skills and style add value to your clients’ businesses so they will continue to rely on you for their accounting needs. Above all, be in control of your practice. Set limits and boundaries to your practice. It’s better to be selective with your clients and work a 40-hour week for a higher rate than to approve all clients at a lower rate and spend 80 hours a week to earn the same profit.
It’s a significant feat once you’ve gotten this far, but the work isn’t over yet. You need to sell yourself in order to give prospective clients a reason to hire a CPA. When you sell yourself, clients will believe in the value of your services and advice. Make sure they know what you bring to the table and get comfortable advertising yourself. Customers want to make a professional relationship with you, so always be honest and genuine. Trying to make your firm something it’s not can ruin your reputation and marketing efforts.
Hire Support Staff
While you might not be hiring additional accountants or CPAs, you do need to hire support staff early on in the life of your new accounting practice. Investing early in additional staff can give you more time to focus on earning more clients and being an accountant, rather than filling your calendar with time-consuming administrative duties. This way, you can elevate admin performance and direct your focus to more pertinent things.
Throughout the first year of your practice, be willing to be flexible. What might work out great on paper might not be a reality when you’re in the office. You need to be able to make changes to find success. Don’t limit yourself to a single plan, and be willing to learn from your mistakes and your wins.
Overall, starting your accounting practice during the off-season is actually your best choice as it gives you time to establish your company and grow a customer base for tax season. It can sometimes feel like a bit of a gamble, but if done correctly, it can lead to significant returns.