Do you think about opening your own CPA practice and working for yourself instead of working for others? If so, you’re not alone. While women represent 50% of all new CPAs employed in the accounting profession, the percentage of women who reach partner or principal in CPA firms nationwide is just 24%. What happens to the rest of the women in the firm’s career pipeline? Many achieve senior manager status, while others move to corporate positions, and still others make the life-altering decision to start their own firms.
Work-life balance is often the motivation for a woman to start her own solo CPA practice, as well as more flexibility or devoting more time to caring for young children or aging parents. Regardless of the reason, CPAs who are driven to develop their own practices need the right blend of ambition, skills, creativity, and self-motivation.
Starting your own practice can be one of the most exciting and rewarding steps in one’s career. When beginning to plan for such a step, remember that you’ll undoubtedly have to make some initial sacrifices as far as your time and personal cash flow are concerned.
Do a Self-Assessment
Before announcing your plans to open a firm, ask yourself a few key questions:
- Why do I want to start my own practice?
- Do I have the drive and personality to start and manage a business?
- Do my spouse and family support my decision?
- Do I have the financial means to weather a startup period?
- Does my present employer know my intentions? Do I have a noncompete clause?
If the answers to all these questions are affirmative, start thinking about how you want to establish your practice. There are several ways to go, each with its own advantages and drawbacks.
Decide How to Establish Your Practice
There are several options available when starting a CPA practice, including the following:
- Buy an existing practice. An established CPA may be ready to retire or move onto other opportunities. Buying an established practice brings with it an established client list and assets, but can be prohibitively expensive.
- Open a practice with a partner. Partnering with another CPA means you can share start-up costs; of course, you’ll share the revenue too. All decisions will require agreement or compromise between you and your partner; will this work for you?
- Start from scratch. Perhaps the most demanding and risky option, but potentially the most rewarding. You’ll build your practice from the ground up, controlling your pace of growth. You’ll call the shots. You’ll handle the expenses. And of course, you’ll reap the profits.
Beyond actually providing accounting services, you’ll have many other considerations, among them financial, legal, and insurance-related. While you may be an expert on all things financial, you’ll want to establish a few close, trusted relationships with legal and insurance professionals with specialized expertise. If you’ll be a sole practitioner for a period of time, you should also establish a good relationship with another CPA firm to provide support when you are away from the office.
Develop Your Business Plan
One of your first steps is to develop an effective and compelling business plan that outlines all aspects of your practice. Your business plan should capture all of your thoughts about your firm, in a logical, detailed presentation.
A well-conceived business plan will help you develop your pitch to prospective clients, and is critical should you seek outside funding for your firm.
Your business plan should—
- outline the goals of your business;
- identify the structure of your business (e.g., sole proprietor, partnership, C corporation, S corporation, limited liability company);
- describe your experience and skills;
- describe the services you’ll provide and the competitive advantages you foresee;
- identify your market and client potential;
- outline pricing for services;
- explain management and staffing;
- outline equipment and office requirements;
- estimate startup costs;
- estimate monthly operating costs;
- estimate projected revenue; and
- define the source of startup and operating capital.
Making a list of all the physical things needed to establish your practice is a good first step. In addition, think of ways to minimize risk from a financial perspective and from an internal controls perspective. Errors and omissions (E&O) coverage, for example, is almost always required when firms are bidding on contracts. It is therefore prudent business practice to have E&O coverage in place from day one.
It’s best to have your engagement letters and other internal controls in place before you even start your practice. Your firm’s clients and your billable hours are key to growth. You don’t want to be knee-deep in work and all of a sudden realize you have to shift your focus to processes, procedures, and obtaining different types of insurance coverage.
Marketing Your Firm and Yourself
Once you’ve established the services you’ll provide, you need to develop a dependable and loyal external client base. This is where your personality, skills, and networking and marketing abilities can shine. Positive word of mouth is one of the fastest, most reliable, and most cost-effective ways to grow a business. Newly independent professionals should be proactive in asking satisfied customers for referrals and for approval to use them as references.
In marketing your services, there are several aspects to consider during business planning:
- Defining your service and determining what sets you and your business apart
- Reaching prospective clients through a variety of channels.
Your marketing plan needs to define the kind of accounting services you will provide. Do you have sufficient experience to provide many services, or do you have a niche focus? Will you serve private individuals, businesses, or both? Can your local area support your business, or is it already crowded with other firms? Is there a niche you can fill that your competitors are not serving? Knowing the needs of your prospective marketplace will be critical to your success.
Once you’ve determined your services, you’ll need to cultivate your prospects. A combination of face-to-face networking, plus online and traditional tactics, should serve you well. You’ll also want to have a robust social media presence in order to attract and engage prospective clients. Consider the following ideas as you launch your business:
- Make meet-and-greets a priority.
- Join your local small business association or Chamber of Commerce.
- Become active in a civic group or professional organization.
- Volunteer at an organization of your choosing and provide pro bono services; this may help you make some valuable business contacts.
- Spread the word to family, friends, and business associates and ask that they tell others.
Be prepared to clearly and concisely describe your services to promising contacts, as well as your expertise and what sets your business apart. Having a list of references will be helpful so that potential customers can easily check your background and credentials. You’ll also want to establish mutual referral relationships with complementary businesses. One example would be a law firm specializing in business law; you could provide accounting and tax services to their clients while referring your clients to them for legal services.
In addition to in-person networking, you can also market your firm in the following ways:
- Firm website
- Facebook and Twitter
- E-mail campaign
- Business cards
- Announcement ad in local newspaper (print and online)
- Direct mailing to a compiled prospect list.
You will also need to develop a pricing schedule. Your price must be competitive with other CPAs and low enough to attract new clients, yet not so low as to undercut your revenue requirements. One final note on online marketing: Encourage satisfied customers to write a recommendation for your LinkedIn pro-file page, to share reviews online, and to like your Facebook page.
There are other considerations when starting a new CPA practice. The following are some recommended best practices.
If you plan to run your business out of your home, make sure that local zoning laws allow it. Engage an attorney to ensure you’re in compliance with local requirements and to handle the formal establishment of the business as a legal entity.
Client acceptance procedures.
Establish a plan for taking on new clients. Maintain certain standards of integrity and do your due diligence before accepting each client. At a minimum, have them fill out a new client information form and review it.
Have you established a billing process that sets the right fees, bills promptly, and handles collections professionally? Failure to set up effective procedures will hurt your firm’s revenue, cash flow, and morale.
Engagement letters are one of the best risk controls available. The AICPA and your professional liability insurance carrier will have templates you can use as a starting point for your practice (http://bit.ly/2PFzNJH).
Make sure you do background checks on prospective employees, since employee theft is one of the most pervasive and costly exposures faced by businesses. If your staff pays bills and does payroll, make sure you put a fidelity bond in place.
Are you calendaring and structuring your continuing professional education (CPE)? It’s not uncommon for firms to have their licenses suspended for 60 or 90 days because they missed the CPE requirement. Stay current on rules and regulations as you build your practice.
Before you open your doors, make sure you’ve secured the proper insurance coverage. A good advisor can help you fulfill your insurance needs and help with setting up internal risk controls that help mitigate losses. The AICPA offers complimentary risk solution consultations by phone [(800) 221-3023], as well as online insurance portfolio and risk mitigation resources (http://www.cpai.com/).
Weathering the Startup Phase
Good planning, hard work, discipline, self-motivation, and creativity will all help start, build, and grow your practice. Those who weather the startup phase say it’s one of the most challenging and incredibly rewarding opportunities of their lives.
Link to The CPA Journal for the original article.
Alvin Fennell is the vice president of business development at Aon PLC, Philadelphia, PA. Cathy Whitley is an AICPA risk advisor for Aon in Dallas, TX. They are authors of the free e-book, On Your Own: A Guide to Starting Your Own CPA Practice (http://www.cpai.com/onyourown).
To learn more about the AICPA Member Discount Program, visit www.aicpa.org/membership/discounts/aicpa-insurance.html.