Having gained considerable experience developing five of my own accounting practices and spending the next two decades individually helping more than 2,000 accountants develop their own practices, there are some basic principles accountants can observe to give themselves the best chance for success.
The best way for accountants to succeed when starting their own Accounting and Tax CPA practice is to give themselves the greatest opportunity for that success. This can be done by remembering that the basic principles for a successful practice are good clients along with the basic tools to serve them. Many accountants looking to develop their own practice are positioned with large amounts of unnecessary overhead that undermine their chance for success. Unnecessary costs can be deferred until they become necessary. Get only the items needed to serve initial customers. It is important to keep the initial overhead as low as possible in order to quickly create a positive cash flow to fund the development of the practice.
When starting a public accounting and tax accounting firm, it is recommended that accountants start from home. In today’s technological world, customers are very accepting of accountants who work out of their homes. In a way, it provides customers with the perception that they are receiving greater value. They feel that if the accountant incurs less overhead, perhaps some of the savings will be passed on to clients. By saving the cost of rent and other office expenses, accountants will accelerate their positive cash flow, which can be used to finance practice expansion without going into debt. Once cash flow is sufficient to maintain an office, the accountant can decide if expansion to an office is warranted. Accountants who work from home may also find that they enjoy it so much that they may choose to forego moving to an outside office.
Another way accountants can keep overhead costs low is by avoiding unnecessary expensive software. Many accountants buy expensive unnecessary software to help clients who have yet to develop. There are extremely good software companies that offer an excellent product at a low to medium price. Drake Tax Software is a very profitable software program that has an excellent reputation. In the September 2011 issue of The Journal of Accountancy, the results of a software survey were published and Drake Tax Software received an excellent rating. Accountants who are starting their own Accounting and Tax CPA firm are encouraged to look for good software at affordable prices that will give them the basic tools to serve clients.
There are many other simple ways that accountants starting their own accounting and tax firm can reduce startup costs. Simply the name that accountants decide on for their businesses will reduce their start-up costs. If accountants use their first name, middle initial, and last name followed by CPA and/or Certified Public Accountant, they can avoid DBA registration costs, bank charges, and filing fees. In addition, active licensed Certified Public Accountants have legal rights to practice public accounting under their own names, saving them the costs associated with fictitious names. Often times, Certified Public Accountants may choose fictitious names, which would diminish potential clients’ perception of them, which in turn would prevent them from starting a business. For example, a licensed Certified Public Accountant doing business as “City of the Bay Revenue Service” or “Accounting and Tax Service” loses credibility. Potential customers may perceive this company as uncertified and unlicensed.
Accountants who are considering developing an Accounting/CPA practice and who are currently employed are encouraged not to terminate their employment in pursuit of starting their own Accounting and Tax CPA firm. Instead, they must develop their practice simultaneously while still employed. This can be a time consuming decision compared to terminating your employment and devoting yourself full time to your practice; however, the sacrifice is well worth the reward. As the practice grows, accountants can grow with it and transition full-time into their own practice without putting unnecessary financial pressure on themselves or their families.
With the relief of financial pressure while operating the new practice concurrently with employment, there will be a substantial increase in income without incurring large expenses. Cash reserves will increase substantially as employment income is maintained, and new income will also begin to flow from the new practice. This increase in cash reserves will go a long way in financing a transition to full time, and this will make the move go more smoothly when the time comes.
By making that move to a full-time practice, accountants will find it easier to transition from full-time to their own practice in the month of January. January is the start of tax season, and along with it comes the start of income from income tax preparation. The increase in revenue will come just at the time when accountants need it most. It is important that accountants position themselves to start trading at the start of tax season to aggressively develop individual tax clients who will get the most out of their first tax season. Also, January encompasses year-end work for many businesses, such as payroll and financial reports. This will also add additional income to the bookkeeping practices in the month of your transition.
January is also the best month of the year to transition from full time to practice because it can be the best month of the year to develop new client business. Most business owners are reluctant to switch accounts. It takes a very strong reason for a client to leave a predecessor accountant. Once a client makes the decision to change, they typically won’t invoke the change until the end of the business year, since they don’t want to have two split accountants in a fiscal year. Consequently, the end of the year is the most opportune time to approach business owners and will ease the transition to full-time practice.
Finally, when starting a public accounting and tax firm, it is important to avoid marketing services as a commodity or product. This often leads to very low response and low quality clientele. It can also be extremely expensive. There are plenty of accountants who chase very expensive marketing programs offered by various companies and are lured in by hard-to-enforce guarantees. Many of these programs are commodity driven. The accounting industry is not commodity driven; it is driven by trust and loyalty. An accountant’s marketing campaign should be driven by truth, honesty and professionalism, which will allow the client to feel more comfortable knowing that they are hiring an accountant they can trust.
Accountants or CPAs who are currently employed and looking to start their own accounting and tax CPA firms will find it beneficial to pursue the practice by following a few very simple steps:
1) Avoid unnecessary costs and expenses.
2) Consider starting your CPA accounting practice from home.
3) Develop the practice along with current employment.
4) Avoid marketing the company as merchandise or product.
Remember, opportunity begins with action. No action, no opportunity. Accountants who take action give themselves the opportunity to succeed. They should start their own CPA and accounting firms from home while they are employed. Their successful experience without jeopardizing their future will give them the confidence and cash flow they need to enjoy the freedoms of ownership in a CPA accounting and tax firm.