Did you know the accounting services industry in the U.S. is worth over $113 billion?
It’s easy to see why this industry is massive and growing year over year. Of the small businesses that fail, a whopping 82 percent can attribute their failure to cash flow issues. To prevent financial mistakes, many businesses are turning to accounting firms.
So, if you’re planning to start an accounting firm, you’re making a savvy business decision. The demand for accounting services is there.
This, though, is not to say there’s no competition in the industry. With over 95,000 accounting firms across the U.S., only the well-built firms survive the competition.
In this article, we’re sharing 5 essential tips for starting an accounting firm that’ll thrive.
1. Get Enough Skin in the (Accounting) Game
To start a medical practice, you have to be a licensed medical doctor.
To start a law firm, you have to be a licensed lawyer.
To start an accounting firm, you don’t necessarily have to be an accountant. That’s right!
Whether you need to be an accountant or not depends on the type of accounting services you want to offer. You see, in the world of accounting, we have regular accountants and certified public accountants (CPA). There are certain services only a CPA can offer.
As such, it’s possible to start a regular accounting firm even if you’re not a CPA, or even if you’re not an accountant at all. You can just set up a firm and hire accountants to lead and manage it.
However, this doesn’t mean you should start the firm regardless of your professional background. To enhance your chances of starting a firm that will succeed, it’s important that you have a professional background in the accountancy field. This way, you’ll have a superior understanding of how the industry works, something that is invaluable when running an accounting consultancy.
Therefore, be sure to develop enough skin in the game before starting an accounting firm. Go to college and study accounting. Become a CPA if you want. Find employment as an accountant and gain professional experience.
2. Draw a Business Plan
At this point, you’re an accountant looking to open their own firm. Perhaps you’ve been working for another accounting company, and now you want to become your own boss.
The first step to starting any business, regardless of the industry, is to draw a business plan. Don’t skip this step because you think that, as an accountant, you know how running a business goes. You don’t!
A business plan fleshes out crucial details about your upcoming business, including the name, address, mission, and vision. It also details the following:
- Types of accounting services offered
- Sales and marketing strategy
- Startup capital requirements
- Financial (income and loss) projections
- Ownership structure.
3. Ensure You Have Adequate Startup Capital
The vast majority of businesses that fail do so because of one or a combination of several financial mistakes. One of these is poor cash flow.
When your business is spending more money that’s it’s making, it will inevitably run into cash flow problems unless you’re sitting on an unlimited stash of cash. This, as you know, is rarely the case. Most small businesses are running on shoestring budgets.
The good news is you can prevent cash flow problems by ensuring you have adequate startup capital. From your business plan, you can tell the amount of money you need to set up the business.
Do you have it at hand? If yes, thumbs up!
If not, take steps to raise it. You could go in for a business loan, for instance.
Whatever fundraising method you choose, don’t make the mistake of starting up the business without the required capital. Don’t assume that your firm will start generating an income soon after opening up. In fact, it’s commonplace for new businesses to take several months, sometimes years, before they become cash-flow positive.
4. Set Up Your Office
An accounting firm isn’t one of those businesses you can run from home. Image matters a lot in this industry. No established company is going to seek your accounting services when you’re working from your couch at home.
As such, an important step when starting an accounting firm is to set up your office. Find a suitable building and buy or lease your space.
Next, install office furniture, equipment, and other essential an accounting office needs to be up and running. As you do this, you should also be securing the permits and licenses you need to run the business in your state.
Don’t fail to embrace the power of technology as you build your office. Purchase and install software that can give you a competitive advantage.
5. Build a Team of Accountants
At the start, your business can be a one-man show.
However, as you grow it and get more clients, you’ll need to build a team of accounts and bookkeepers. An accounting firm is only as good as its team of accountants.
Besides accountants, there are other professionals you’ll bring on board. For example, you’ll need an IT specialist to take care of your firm’s technical infrastructure, a human resources manager, front-office personnel, and more.
Starting an Accounting Firm Made Easier
Starting and running a successful business in the United States is a challenge, more so when that business is an accounting firm. This kind of business requires you to not only have a good grasp of business management, but also a superior understanding of the accounting profession and industry.
But having read this guide to starting an accounting firm, you’re now in a good position to launch a firm that will succeed. Keep reading our blog for more tips on accounting, taxes, and running a successful business.
