How Do I Build My Accounting Firm?
A CPA's Guide To Starting and Growing a Quality Tax Practice
By Frank E. Salman, CPA
Avoid unnecessary costs and expenses.
The most common question among CPAs is "How do I grow my accounting practice?" It starts by avoiding unnecessary costs and expenses, which can be done by remembering that the simple principles to a successful accounting practice are quality clients along with the basic equipping of tools to service the clients. Most accountants that seek to develop their own practice usually burden themselves with an abundance of unnecessary overhead, which undermines the opportunity to grow and succeed. Unnecessary costs can be put on the back burner until they are absolutely necessary. You should obtain only the basic necessities in order to service your initial clients. Keeping your initial overhead at a minimum is very important. This is a crucial element in order to create a fast and efficient positive cash flow if you want to finance the development of the practice.
When you start a CPA Firm, you can work from your home to lower additional costs. In today’s high-tech world, clients accept accountants that work from their homes. In some respect, clients are provided with a perception that they are receiving more value if they feel that their accountant has less overhead. erhaps part of the savings is being passed on to the clients. By saving the cost of rent and other office expenses, accountants will accelerate their positive cash flow, which may be used for financing the expansion of the practice without going into debt. Once the cash flow is sufficient to support an office, then the accountant can decide if expansion into an office is warranted. Accountants who do work from home may also find they enjoy it so much that they may choose to forgo moving to an outside office.
Another way accountants can maintain a low overhead is by avoiding unnecessary costly accounting software. Numerous accountants procure very expensive accounting software to support clients they have yet to develop. There are extremely good software companies that provide an excellent product at a low to medium price range. Drake Tax Software is a very cost-efficient software program that has an excellent reputation. In the September 2011 edition of The Journal of Accountancy, the results of a software survey were published, and Drake Tax Software received an excellent score. Accountants who are starting their own accounting firm are encouraged to pursue good software at affordable prices giving them the basic tools to service clients.
There are many other simple ways accountants starting their own accounting practice can reduce startup costs. Simply the name that accountants decide on for their firms will reduce their initial costs. If accountants would use their first name, middle initial, and last name followed by CPA and/or Certified Public Accountant, they may 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 costs associated with fictitious names. Many times, Certified Public Accountants can choose fictitious names, which would diminish potential clients’ perceptions of them, which in turn would impede a startup business. For example, a licensed Certified Public Accountant doing business as “Bay City Tax Service” or “Accounting & Tax Service” loses credibility. Prospective clients may perceive this company as uncertified and unlicensed. A good understanding of this should answer your question, and is the first step in the direction of how to grow my CPA firm.
Build your accounting practice alongside any current employment.
Accountants who are considering developing an accounting practice and who are currently employed are encouraged not to terminate their employment in pursuit of starting their own accounting firm. Instead, they should develop a CPA practice concurrently while still employed. This can be a time-demanding decision when compared to terminating their employment and devoting full time to their practice; however, the sacrifice is well worth the reward. As the practice grows, accountants can grow with it and transition themselves full-time into their own practice without placing unnecessary financial pressure on themselves or on their families.
With the relief of financial pressure while operating the new practice concurrently with employment, there will be a substantial boost in income without incurring large expenses. Cash reserves will substantially increase as employment income is maintained, and new income will begin to flow in from the new practice as well. This increase in cash reserves will be of great assistance in financing a full-time transition, and this will make the move go more smoothly when the time comes
When starting an accounting practice and making that move to a full-time practice, accountants will find it easiest to transition full-time into their own practice in the month of January. January is the beginning of tax season, and along with it comes the beginning of revenue from income tax preparation. The increase in revenue will come right at the time the accountants need it the very most. It is important that accountants position themselves to begin marketing at the start of tax season to aggressively develop individual tax clients taking full advantage of their first tax season. In addition, January encompasses yearend work for many businesses, such as payroll and financial reporting. This will also add additional revenue to the accountants’ practices in the month of their transition.
January is also the best month of the year to transition full-time into the practice because it may be the best month of the year for developing new businesses as clients. Most business owners resist changing accountants. It takes a very solid reason for a client to leave a predecessor accountant. Once a client makes the decision to change, usually he or she will not invoke the change until the end of the business year not desiring to have two accountants split a fiscal year. Accordingly, yearend is the most opportune time for approaching business owners, and it will make the transition into the full-time practice easier.
Avoid marketing accounting services as a commodity or product.
Finally, when starting an accounting firm, it is important to avoid marketing services as a commodity or product. This often leads to very low response and low quality of clientele. It also can be extremely expensive. There are volumes of accountants who pursue very expensive marketing programs offered by various companies and who are lured by difficult-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 must be driven by truth, honesty, and professionalism, which will enable a client to be more comfortable knowing that he or she is hiring an accountant who can be trusted.
Opportunity starts with action- No action, no opportunity!
Accountants who take action provide themselves with the opportunity to succeed. They should start their own accounting / tax preparation firms from home while employed. Their successful experience without jeopardizing their future will provide them the confidence and cash flow they need to enjoy the freedoms in ownership of an accounting firm. I hope this answers your question of "How do I grow my accounting firm?"
For more information on starting a practice or on Frank E. Salman, CPA, visit www.accountantsmarketing.com.