By Amanda Phelps, CPA
How many times have you dreamed of being more “work”-based than “time”-based? Do you dream of being your own boss? Do you want to create your own schedule and set your own vacation parameters? I had these same thoughts and my entrepreneurial spirit was yearning for something more. Something bigger. If you feel the same, it’s time to turn your vision into reality.
Although it is scary to take the plunge, there’s no better time than the present. In fact, accounting is one of the easiest skill sets to go off and start your own business and there are few barriers of entry. This is my guide on how to get off the corporate treadmill and become your own boss.
Step 1: Work for several different companies or firms first.
If you work at a large CPA firm, you may want to consider spending a few years at a smaller operation, which will give you a chance to acquire a well-rounded approach to handling clients. Also, take note on how many hands touch each client. Pay close attention to areas like who talks to the clients, who bills the clients, and how the firm secures more clients. Notice on which services smaller firms focus. Notice what items they outsource, if any.
Pricing is something you should definitely research before starting your own accounting business. When you are first starting out, pricing can be one of your most difficult discussions. You do not want to price yourself out of the market. You also do not want to undervalue yourself. Come up with a strategy that works for you. Make sure to discuss pricing with clients and put it in writing before your start an engagement. There is no right or wrong way to determine pricing. You must figure out what works best for you and your clients. All the tools you learn at someone’s else firm will lend well to starting your own business.
Step 2: Plan your departure.
Planning, planning, planning is the first step to starting your own accounting business. You may feel like a double agent, but the reality is: You must start planning for your own financial safety before you leave your current position. Benefits are a huge factor to consider. What benefits are you currently taking advantage of at your company? What benefits are subsidized? Can you afford to pay for health insurance that is not subsidized by your current employer? Also, consider your cash flow safety net. How much capital do you need to start your business? Because you will no longer be receiving regular paychecks, what do your savings look like? What about retirement? What vehicle will you use to save for retirement once you have said bon voyage? These are very real factors to consider and can halt many people in their tracks. That’s why it is so important to plan. You may to even start planning years in advance.
Step 3: Select a name and an entity type.
Once you’re ready to set your business up, you need a name. CPAs often like to use their names as their business. This is a great way for people to remember your company. However, consider if a name change could be on the horizon through marriage before attaching yourself to a specific business name. Or, not using your name could work well if you plan on expanding in the future. Whatever you decide, make sure your business name is easy to pronounce, has a positive connotation, and is memorable. Before spending too much time on this, make sure your name is available for use. It is of the utmost importance to make sure your name is not misleading. If it just you in the business, make sure your business name does not imply multiple people. Your business name will be on all your invoices, marketing materials and legal documents, so make sure it represents your company well.
When you start your own business, you will have to decide on an entity type, which affects tax and legal aspects. Typically, when you start out, you can start out as a sole proprietorship (an unincorporated business with a single owner). With a sole proprietorship, there is no legal protection. You could also consider forming a Limited Liability Corporation (LLC), which you would need to file with the State Corporation Commission. The LLC is governed by its operating agreement.
And if you are starting a business with more than one person, considering forming a Limited Liability Partnership (LLP). Check out your state website for more guidance. For example, some states don’t allow LLCs. You also need to make sure you have all applicable city and/or county licenses. Acquiring business insurance is a good idea. You will want omissions and error insurance at the least. Cybersecurity insurance may also be something to consider.
Finally, the IRS may require you to register for an Employer Identification Number (EIN). Your EIN will come in handy when you go to set up a bank account and cash your first check.
Step 4: Start small and use your network.
Pick your place.
This is where planning is crucial. You want to have a safety net of cash planned so you can start small. The great thing about an accounting start-up is the few barriers of entry. You do not need to pay to rent office space in a busy city center. Your clients will be happy that you don’t have huge overhead expenses to cover. You can now run your entire operation from the comfort of your home. Worried about clients coming over and seeing your piles of laundry? No worries. There are many alternatives to meeting when you do not have an office space. Starbucks, video conferencing, and collaborative places you can rent are available in several cities. Better yet: Tell the client you will come to them for their convenience. And of course, with the pandemic, so many clients are becoming used to virtual meetings.
Pick your clients.
Is a client is weighing you down with stress? You can fire them (in a professional way). Not every client and accountant match is a good fit. Some clients may not be stressful, but may be money pits. These clients need to be fired as well. You have to learn how to professionally end relationships with clients who are not adding value to your firm and bringing in a profit.
Embrace social media.
You must take advantage of social media in today’s digital age. FaceTime, Instagram, LinkedIn and podcasts can be critical to marketing your business. Use Squarespace, GoDaddy, Wix or another platform to quickly and easily launch a website. Go to as many networking events as possible. Use LinkedIn to join groups that include your target clientele. Consider starting a blog so people can follow along on your journey. A blog is a great way to showcase your skills. When people think accounting, they will begin to think of you if you are leveraging social medica correctly.
Embrace the sell.
A lot of accountants are in fact great accountants, but lousy salespeople. Selling yourself is just as important and performing your services. The first place to go to sell your services is your own personal network. Tap into the network you have around you. Remember every individual files taxes, and every business needs bookkeeping and tax work. There are no shortages of needs in the marketplace for accountants. Ask for referrals! If you are focusing on real estate tax preparation, considering joining a group where you could showcase your skillset. Join any national, state and local society for CPAs. CPAs know other CPAs and refer them all the time. Do not be afraid to ask for referrals. Consider establishing a niche market. If you did specialize in something at a firm, consider carrying those skills into your business. Establish a digital and physical brand. Come up with a logo and colors that represent your business. Use complimentary colors and stay away from trends. When in doubt, keep it simple. Create and order business cards. Get your name out there in as many ways as possible.
Step 5: Create a business plan and value proposition.
Establish a one-sentence value proposition about the services you offer. How you are different from your competitors? As a sole proprietor, I have less overhead because I work from home and can offer competitive prices. You will also want to outline a clear business plan to create your goals. Most people just keep a vague business plan in their heads; it is crucial to write it out. When you have a business plan in writing, you are more likely to succeed. Business are cyclical and you will have ups and downs; the important thing is to just keep going and stick to the plan.
Step 6: Go and do it!
The right mindset is the most important factor in success. Start small and grow your business. Eventually, you may be able to add on employees to help you with the work. It is time to spread your entrepreneurial wings.
When I first started my business, I thought it would allow me more free time, flexibility and vacation. I am finding out that is the exact opposite. Servicing my clients is my primary objective and that can be more time-consuming than busy season in public accounting. Deciding to start your own accounting business should not be taken lightly. You will make mistakes and you will struggle — that is part of the process. Research, planning and mindset are the most crucial factors to success. Just get started.
Amanda Phelps, CPA, owns Optimal Accounting, LLC, serving the Hampton Roads area. A previous VSCPA Top 5 Under 35 Award winner, she serves on the VSCPA Young Professionals Advisory Council. Find her on LinkedIn.