Start an Accounting Business

Accounting is a more diverse profession than it is often given credit for, and it can offer both the stability of a long-term employer and the autonomy of self-employment. Starting your own business is no easy task, but the route to self-employment in accounting has been thoroughly mapped. Identify what type of accounting services you want to provide and draft a business plan. After forming your business, obtain required permits and tax ID numbers. Marketing will be critical to your success, so analyze all available marketing methods.

Steps

Planning Your First Steps

1. Identify your niche. Before you open, you need to know what kinds of services you will provide. This process is called finding your niche. It’s unlikely that you’ll be a “Jack of All Trades,” so identify the services you want to specialize in.
   • If you are an experienced accountant, then think about the type of work you have enjoyed most. Do you want to work with businesses, individuals, non-profits, etc.? Do you know what type of work you don’t want to do?
   • If you have no experience, then it might take you a while to find your niche. However, you can talk with accountants who are currently practicing to get a feel for what they do.
2. Decide whether to go full-time. You might be excited to jump into your new accounting business with both feet. However, you need to realistically assess whether you can afford to start a full-time accounting business.
   • Instead, you might choose to continue to work your day job but build your accounting business at night or on the weekends.
   • If you are currently an accountant, then proceed cautiously. Your employer won’t like that you are setting up a new business as a competitor.
3. Consider partnering with someone. Partnering with an established accounting professional can help you get a business off the ground. Working with a partner means more industry connections and more capital.
   • Reach out to people who have recently started their own accounting businesses and schedule a lunch. Tell them you want to start a business and ask if they are open to bringing on a partner.
   • Choose your partners wisely. An ideal partner should complement your skills. You should also agree on where you want to take your accounting business. If you don’t see eye to eye, then forming a partnership could create problems down the road.
4. Decide whether to buy an existing business. In some ways, buying an existing accounting practice is the easiest option. You already have a built-in client list and visibility in the community. On the downside, this is usually an expensive option. Make sure that you can spread out the purchase price over several years.
   • If you decide to go down this route, then you should thoroughly investigate the business. You want to make sure their niche aligns with your interests.
5. Draft a business plan. Writing a business plan is a necessity if you need funding. Lenders will only extend a loan after looking at your business plan. However, writing a business plan is also a great exercise on its own because it forces you to focus on the nuts and bolts of your business. Your plan should have the following parts:
   • Executive summary. Write this last but put it first. It’s a one- or two-page summary of your entire business plan.
   • Company description. Explain your business structure and how it fits into the accounting industry. Also identify your goals or objectives.
   • Products and services. Describe your accounting services and anything that makes you unique.
   • Marketing and sales analysis. You need to identify your competitors and then analyze their business, pointing out their strengths and weaknesses. Also create a profile of your ideal client. Consider age, income, education, location, etc.
   • Organization details. If your business is large, you can provide an organization chart of departments and key employees. Also provide background information about your management team.
   • Financial plan. You should project your finances for the next several years. Financial projections are particularly important if you need funding.
6. Purchase necessary technology. Fortunately, accountants don’t need a lot of equipment to run their business. At a minimum, you’ll need the following, so budget for them:
   • computer
   • printer
   • telephone
   • fax machine
   • copier
   • account software (e.g., QuickBooks Pro)
7. Find a business mentor. A mentor can answer your questions and be a sympathetic ear to bounce ideas off of. Finding a more experienced accountant to act as your mentor will benefit you, especially if you don’t want to go into partnership with one.
   • Remember that your mentor will be primarily a business mentor. They can help on the business side of things. If you also have accounting questions, you might want to get a second mentor.

Forming Your Business

1. Decide on your business structure. Every business has a certain structure, which will determine how it is formed as well as your legal liability. Consider the following common options in the U.S.:
   • Sole proprietor. This is the easiest type of business to form. You don’t have to file anything with the state to form a sole proprietorship. Instead, you use your name and Social Security Number.
   • Corporation. Some states have special professional corporations for accountants. You’ll have to fill out articles of incorporation and file them with your state. Corporations shield you from personal liability for any debts incurred by your business.
   • Partnership. A partnership is a business run jointly by two people. You don’t have to file anything with the state to form a partnership, but you will be personally responsible for any debts incurred by another partner or the partnership. However, some states allow you to form a limited liability partnership (LLP), which shields you from business liabilities. You should draft a partnership agreement before forming.
   • Limited liability company. Like a corporation, an LLC shields its owners form personal liability. You’ll file articles of organization with your state.
2. Obtain other licenses or permits. In many states, you must be a CPA in order to start an accounting business. However, there are other licenses or permits you may need. Contact a Small Business Development Center to check.
   • Generally, you also need to register your business with your state and/or county. Call and check.
3. Obtain an Employer Identification Number (EIN). You’ll need this number if you hire employees or collect sales tax from clients. It’s also a requirement to open a business account at most banks. You can get the number online by visiting here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
4. Hire employees. Your staffing needs will vary, depending on how large you are. For example, if you’re going solo, you might only need a part-time receptionist. Alternately, you might want to hire other accountants to work at your firm.
   • You need to follow many laws when hiring employees. For example, you’ll have to register to pay unemployment tax at the federal and state level. You’ll also need to register to collect withholding tax.
   • You also must purchase workers’ compensation insurance.
5. Buy liability insurance. Accountants might need several different kinds of insurance. For example, you will need professional liability insurance for any errors you make. You may also need disability insurance and an umbrella liability policy to cover things like personal injuries incurred at your office. You can shop for insurance by looking online or working with an insurance broker who has experience helping accountants.
   • Don’t assume your homeowner’s insurance policy will cover injuries at a home office. Some policies have business exclusions.
6. Find appropriate commercial space. Your office needs to be accessible to the public and large enough for your needs. Some people are intimidated by searching for commercial space, so use a real estate agent if necessary. Generally, your rent will be based on the square footage of the office. Find office space that has good foot traffic.
   • If you want a home office, then check whether your home is zoned to allow for a home business. Stop into the zoning office and check.
7. Fund your start-up costs. A small accounting business should not be expensive to start up, especially if you are working out of a home office. However, you may need some money to get off the ground. Consider the following sources of financing:
   • Your savings. Tap your own savings and save on costs. You won’t have to pay anyone interest. Also, if your business goes belly up, you can’t be sued.
   • Business credit card. For small purchases (such as office equipment), you might be able to use a business credit card. Shop online and compare offers. Make sure to use your business credit card only for business purchases.
   • Small business loan. Contact banks and credit unions first. If they won’t lend to you, then you can seek an online lender, but do proper research because there are many online scammers. Generally, a bank will look at your personal credit history before extending a business loan. Often, you must sign a personal guaranty on the loan, which means you’ll be personally responsible if your business can’t make payment.
   • Home equity loan. You can use your home as a piggy-bank, though it comes with risks. For example, you can get a home equity line of credit or a home equity loan. If you do this, then your home is collateral for the loan, and you might lose it if you default.

Marketing to Clients

1. Create a website. A website is a “must have.” People surfing the Internet can find you. Also, if someone hears about you by word of mouth, they can go online and learn more about your firm. You should spend considerable time planning your website.
   • Look at the website of your competitors. What information is included? For example, do they list pricing information?
   • Identify what content they provide on the site. For example, they probably provide bios of each employee. But does the website include a blog that explains accounting concepts? This is a good way to showcase your expertise to the public.
   • Hire a professional. Though you can create your own using templates, you’ll benefit from having a stylish and neat website.
2. Distribute flyers for basic services. If you provide basic tax preparation services, then you can distribute flyers around your neighborhood. This is an inexpensive way to get your name out.
   • Post flyers at libraries, grocery stores, gyms, and community centers. Make sure to get permission from management before posting your flyers.
   • Your flyer should have multiple ways to contact you: phone, email, and physical address.
3. Network with other professionals. As an accountant, your services are in demand from other professionals. Accordingly, you should raise your profile at the local Chamber of Commerce and with networking groups such as Business Network International. You can also join various accounting societies.
   • You can also do direct mail to businesses in your area. Identify your target businesses, such as small businesses with revenues below $5 million. Then buy a list from Dun & Bradstreet or Info USA. You can then reach out to them by sending a professional flyer.
4. Showcase your expertise. You’ll draw clients if you reach them through public presentations and articles. Remember to identify your target audience, since this will influence where you give presentations.
   • For example, if you want to reach ordinary workers, then you can give presentations at a local community center and publish short articles in your local newspaper.
   • However, if you want to reach businesses, you can present at your local Rotary Club, Chamber of Commerce, or Elks Club. You should also publish articles in business journals and provide a link on your website.
5. Remember social media. You can create Facebook, Twitter, and LinkedIn pages cheaply. They are a good way to interact with your clients. In fact, you can encourage clients to leave reviews at your Facebook or Twitter feed.
   • Of course, maintaining social media accounts can be time consuming, and you need to balance the benefits with the costs. As you get more established, you can hire someone to manage your social media presence, including your website.

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Sources and Citations

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