Last updated by
June 10, 2022
Every accountant at one time or another has considered starting their own accounting business but very few actually take the step.
Every accountant at one time or another has considered starting their own accounting business but very few actually take the step. The reason is accountants are very analytical and generally risk averse. Those two factors really influence a decision to start a business when you put pencil to paper and analyze the opportunity. The analysis never seems to work out on paper.
However, that doesn’t mean you shouldn’t move forward. Paper is paper and results are results; and with work, results can blow away paper.
Building a successful accounting business is more about diligence in the process than numbers on a piece of paper. Anyone willing to put in the effort and follow the process is likely to find success. Knowing “what is needed” is the first step.
So, how do you start a small accounting business? Here is what is needed.
Table of contents
Starting a business is easy, growing a successful business is the hard part. Some estimate it takes 2 to 3 years to be profitable and 7 to 10 years to truly become successful. This is only an estimate. Service oriented businesses are more likely to be profitable in their first year because of low overhead.
What is important is to distinguish the difference between starting a small accounting business and succeeding at growing a small accounting business. The steps are much different.
There are 4 aspects to growing a successful accounting business.
This article will cover each of these aspects in full detail.
The first question you should ask yourself is do I have the experience to go out on my own? No one has all the answers and you shouldn’t expect to either. However, experience exposes you to situations, circumstances, and challenges. You’ve heard the saying, “you don’t know what you don’t know”. Experience helps bridge the gap of what you don’t know so you can ultimately serve your clients better.
Accounting is simple and complex at the same time, so spending a few years working in an accounting environment will teach you valuable skills that will translate into your own practice.
How much experience is needed? That really depends on the experience you are getting. If you work in public accounting auditing various companies you will be exposed to a variety of accounting issues in 2-3 years. If you work as an accounts receivable accountant your experiences will be less broad.
Only you can answer the question of experience, but getting some experience is preferable to starting right out of school.
Most accountants choose accounting because they enjoy working with numbers. Owning your own accounting business will allow you to still work with numbers, but most of your time will be networking, selling, and finding new customers. You will be a salesman first and foremost.
Before you take the leap into your own business, it might be a good idea to practice what you will be spending most of your time doing. Attend networking events and practice networking, practice selling your current company’s services or products, take some sales training courses, talk to friends and family about your business ideas and build stronger relationships with current clients by going to lunch or golf. You might even start connecting with individuals who work with complementary services such as attorneys, insurance agents, other accountants.
Each of these experiences will make you a more effective salesman and make the transition into your own business much easier.
Accounting is a broad field with lots of competition. Learning more about the market place you will be serving will give you ideas on how to reach them, serve them, and help them.
Creating the perfect plan is great, but it generally gets changed the minute it goes to market. The market knows what it wants so the more you know about the marketplace the more likely you are to find success.
Most successful businesses find a niche and become expert at serving that niche. By being involved in the marketplace you may potentially discover underserved niche areas. These may be the foundation for starting your successful practice.
Congratulations you made it this far which means you have the confidence to start. Half the battle is deciding to start. Business ownership begins for various reasons: frustration in the current position, opportunity presents itself, loss of a job or just an internal drive to do your own thing. Whatever the motivation you still have to take action. You have to start.
This section focuses on the legal and financial steps necessary for starting a business. To me, this is the fun part because it makes your business REAL. Enjoy the process, but remember this is not what makes your business successful, it is just what makes it legal.
Easy peasy – right? You’ve been dreaming up this name for years. Here are a few questions to consider that might have you rethinking your choice.
The point is, that naming a business is important and you want to make sure you get right from the get go. In our internet age, you might be surprised at what names are already taken. A little work upfront goes a long way. A business name becomes the face of all branding and marketing efforts so choose wisely.
You thought choosing a business name was hard. Well, it just got a little harder with choosing a business type.
Professional accounting business owners often choose one of the following structures due to the liability risk.
The LLC has become popular because it offers liability protection like a corporation, but has less compliance requirements than a corporation. In other words, if you are sued or can’t pay debts, personal assets are protected assuming the LLC has been operating in good standing. The compliance advantage is no corporate tax return is required as all profits flow through your personal return.
However, because there is less compliance and it is harder to monitor an LLC some states do not allow accountants to register as an LLC. They feel professionals should be liable for malpractice and they want to be able to monitor licensing.
So, it is best to first check with your state to see if they have any limitations on registering as an LLC.
PLLC is an alternative to the LLC. However, like the LLC it may or may not be allowed in your state.
A PLLC is a professional services designation and requires all members to be licensed. Again, check with the Secretary of State for specific rules in your state.
A PLLC has more requirements, more paperwork, and must be approved by the state licensing board prior to formation.
A C Corp provides the safest liability protection as it limits a person’s exposure to the amount they have individually invested in the company. It operates as a completely independent entity. The negative is it requires more administrative costs such as tax returns, board of directions, shareholder meetings and strict compliance with state requirements.
Once again, make sure to check with your state for any specific requirements about a professional accountant forming a C Corp.
Not all states allow a PC but if they do, it is considered a corporation with a licensed professional designation. A PC must be approved by the state licensing board, it protects against personal liability but not malpractice, and it requires a specific structure and many of the same administrative things as a C Corp.
Businesses are essentially controlled by the state and as such must be registered with the state. You can contact the Secretary of State to find out the process and registration requirements to properly register. Because certain states limit or restrict the type of business structure this step naturally can be addressed at the same time you are deciding on your particular structure.
This is the Federal Government's Employer Identification Number or (EIN). It is required for all corporations and partnerships for tax filing and reporting purposes. It is also typically required by a bank to set up a corporate bank account. You can apply for your own Federal Tax ID number at irs.gov.
These licenses and permits will vary from state to state. To practice as a CPA, you must be licensed and in compliance with continuing education and other state requirements.
There may also be other general business licenses required for local city or towns, sign permits, and even home business permits.
Finally, we are getting serious, a bank account. This might seem a simple step, but it is critical to keep business and personal expenses separate. A business bank account provides this separation. A test of a legit corporation is the separation of funds so don’t skip this step.
With most business operations there is an exposure of liability. Having liability insurance will help protect your personal assets from those risks. As has been discussed above, most business structures protect or limit liability for business debt or lawsuits. However, personal assets are not protected due to an individual’s own actions.
Securing an insurance policy to provide additional protection of personal assets can provide peace of mind. There are many different types of policies such as an umbrella policy, business ownership policy or professional liability policy. It is best to find a good insurance agent that can guide you through this process and help find the best policy for your situation.
Congratulations, you’ve set up your accounting business, it has a name, it's legal, and it makes you feel proud. But now comes the work. Marketing and growing an accounting business are an entirely different prospect than setting up a business.
The old saying, “if you build it, they will come”, can blindside many new business owners. Don’t get blindsided.
I like the analogy of building a beautiful niche store right behind Wal-Mart. You build it, you stock it with product, you hang the sign out, you unlock the door and no one shows up.
Walmart represents the many other businesses that block the view of what you offer. Without advertising, marketing or selling no one will know about your beautiful new business except maybe your wife.
This section provides tips for getting your services out there and known. Visibility and top of mind are essential in order to retain clients and secure new ones.
Don’t feel the need to build the machine before you have the sales to support it. This means don’t spend a lot of money renting office space, hiring a staff, phone system, hanging up a sign or even building a website.
Fixed costs can add up quickly and are hard to eliminate. While sales are limited, minimize expenses to increase the odds of success. Amazingly a small business can sustain itself on very little. Get a computer, get a cell phone and go to work.
An effective website may not be the first thing you establish as it requires resources you may not have. However, in our digital age, a website is essential as you begin to grow. A website offers several benefits.
***TIP: The best way to improve traffic to your website is to create lots and lots of content via blog posts. Answering common accounting questions in your specific industry by writing 700 – 3500-word articles will increase website exposure exponentially and bring new leads. It typically takes 3-6 months for a blog post to be ranked and gain traction so start early and be consistent.
Don’t underestimate the power of social media. Social media is a great networking tool. People by people and social media offers a way to connect and get to know people in a much larger geographical area.
Business sites like LinkedIn, are perfect places to build a following. Many people consider LinkedIn’s only purpose to find a job. While it is useful for finding a job, it is more useful in finding clients. But it does take work. You can’t just establish a profile; you need to actively engage with others. Write frequent posts about your accounting niche, like and comment on others posts, direct message potential clients and get to know them personally. All of this helps broaden your pool of potential clients and network in an effective way.
In a specialized industry such as accounting trust is a big deal. Clients are hiring you and your expertise not your business. They want to trust you and have confidence in you so make sure to give them evidence to support that trust.
You are selling your expertise so let them know what expertise you have:
The more you offer to people the more they begin to trust your expertise. Don’t be afraid to offer tips. Accounting is second nature to you, but to your client it is complicated. Tips and education help clients see the need for your services.
It is hard to be all things to all people. The early stages of business may include accepting any and all engagement; however, specializing is the best approach. A niche focus helps develop expertise, keeps you ahead of constantly changing trends, improves efficiencies, helps you better understand your clients, and establishes proof or real-life examples of how you are the best at what you do.
Specializing leads to increased referrals as companies within similar industries talk more and refer more within their specific industries.
Specializing may be in the form of a specific accounting technique, like tax accounting, cost accounting or mergers and acquisitions. Or, specializing may be in the form of a specific industry like construction, medical, or fitness. Either way, you begin to see how your expertise would certainly grow as you spent your days focused on a specific area.
Another consideration in specialization is always refining and narrowing your niche. You may discover that one aspect is more profitable than others, one industry may refer more frequently, or geography may play a part in narrowing.
Begin early in your business capturing email addresses for current customers and potential customers. Email is a great way to stay top of mind. You will have to determine the right frequency for your industry, but staying in touch with customers and contacts at least monthly will help to keep you and your business top of mind.
A frequent email allows you to highlight law changes, introduce new techniques, or offer new services. Your best customers are always exiting customers and staying in frequent contact and offer value helps them retain customers.
The best way to win more business is to get your good customers working for you. When customers have a good experience, they are more than happy to refer their friends. I like the saying: if you ask you might get, if you don’t ask you for sure won’t get. Ask for referrals and then follow-up.
An underutilized resource is peers and complimentary services. The best business you can get is referral business. Referrals are like having an independent salesman selling your services for you.
Build strong relationships with other accounting firms big or small, connect with attorney’s, insurance agents, and financial planners. You will be surprised how much business will come from these types of connections.
In the early startup phase of your business you may not have the resources to hire staff; however, as you start to grow, adding staff is essential. The timing is always a hard decision.
When you begin to get mired down in detail work or administrative work is the right time to hire. You will often fret about keeping them busy and affording their wages. Don’t let this overwhelm you. If you build it, they will come as a true principle. By freeing up your time you are able to focus on the big picture of bringing in new clients. Marketing never ends, but if you get mired down in the details the sales pipeline will dry up and so too will your business.
So, hire sooner than the numbers tell you, it will be your best move.
Inevitably as you grow, you will have good clients and bad clients. Bad clients are those that don’t pay, don’t appreciate your efforts, and try to nickel and dime everything. While it is hard to walk away from any revenue, bad clients actually drain your resources and bring your company down. Freeing up one bad client increases your likelihood of bringing in newer good clients.
The 80-20 rule definitely works and you don’t want to be caught spending 80% of your time on 20% of the problems. You can easily see how disastrous this could be.
Clients often become great clients when they see the value you offer. Don’t just be an accountant, become a trusted advisor. Give your best customers the TLC they need and they will provide you more opportunities. Here are 3 things to consider in your client relationship
In other words, be engaged with your clients. Treat it as if it is your business and they will feel that and more importantly pay for it.
Retaining customers is a lot less expensive than finding new customers.
Every industry has its unpleasantries. Compliance is one of those issues. As you try to manage growth and the day to day operations of your business compliance often can slip through the cracks. Don’t allow that to happen as it puts you and your client in jeopardy.