Starting your own accounting firm can be an exciting and rewarding career, but it also requires that you do your research and plan carefully before leaping into the business world. After all, if you don’t succeed, you won’t have anything to show for your hard work—and if you go in unprepared, you could lose money, time, and credibility that you can never get back. This guide will walk you through the most important steps you should take when planning to start your own accounting firm and give you everything you need to know to ensure the success of your new business venture.
What will you name your business?
Naming a business is one of those things that should be left for last. Why? As you’re trying to get off the ground, you’ll have many more important questions on your mind—like how are you going to market and sell your services, or what kind of clients do you want? Once you know who will be buying what it is that you’re selling, then naming becomes much easier. A simple trick is to name your business after yourself.
What are the things you need?
The first step in opening an accounting firm is having a plan and knowing what you need. Some of these requirements may be easy for you to fulfill, but others might take some time to acquire.
Registered business name: To open an LLC or C-Corp business entity, you will have to register with your state’s Secretary of State office (you can usually do so online).
Then, reserve a business name that isn’t already taken. You don’t have to use it as soon as you register it—but be prepared because once a name is registered, other businesses cannot use it! If you plan on registering a DBA, check with your city’s local government offices to see if they require permits or special licensing. Professional licenses:
These vary by state and are needed if you want to provide services such as preparing tax returns or acting as an accountant on behalf of another company. A professional license requires specific training, passing exams and being certified by an organization such as ACFE (Association of Certified Fraud Examiners) or CPA (Certified Public Accountant).
What are other people doing?
Look around at other small businesses that are similar to yours and see what they’re doing. See if you can offer more services or products than they do, but still have a core competency that puts you in good stead. The key is to look at other successful businesses and see how they operate – then create a plan based on their strategies. If necessary, outsource some tasks like payroll processing or invoicing software so you can concentrate on making money!
Where do you find customers?
The best customers are typically referred to you by people you know and trust. Word of mouth is always a great way to drum up business. But don’t think that just because your aunt Mary Lou knows everyone, it will be easy for you. Just ask her one day what she charges for her services, how long she’s been in business, how many clients she has and if any of them would recommend her. You may find out that even though she’s an awesome accountant, she isn’t worth working with. So be sure to do your homework on anyone who recommends a service provider.
What is it going to cost?
Before you start, you need to have a good idea of what it’s going to cost. If you have never owned a business before, look at similar businesses in your area. What is their overhead like? Get familiar with banking, payroll, and tax information. Use websites like QuickBooks Self-Employed and other resources that help new small business owners become more familiar with all these things they will be responsible for every month.
How do you raise capital?
Raising capital can be a daunting process for any business owner. But if you want to keep it in-house, you don’t have many options. You can try family and friends, but that’s likely to limit you from what kind of growth you see as a business owner. There are also bank loans and credit lines; these usually require collateral and an already established track record of revenue. The last option is an angel investor or venture capitalist someone who invests money in businesses they believe will make them money and then some. Angel investors like investing in earlier-stage companies that have plenty of room for growth and big rewards on their end if it all works out.
What are the costs involved in opening an accounting firm?
Opening an accounting business is significantly more expensive than starting a traditional business. For example, you’ll need multiple office leases, insurance policies and employee benefits packages. To offset those costs and earn a profit, you’ll need to have years of experience and attract at least $1 million in clients or better yet, much more.
Accounting professionals can make as much as $250 per hour billing out at full speed and assuming you charge by the hour and don’t pay your employees or rent for space it will likely take you four years to hit that threshold if you bill 25 hours per week. When it comes time to hit clients up for payment, keep in mind that services-based businesses tend not to get paid until months after providing their service.
Starting your own business is a great way to make money and run your life as you see fit. Starting an accounting firm requires little startup capital and offers plenty of opportunities for growth, so it’s well worth a look. A small business like an accounting service can be started with very little overhead, making it affordable for most people who are interested in launching their own venture into entrepreneurship.