It is no secret that people like making money. However, few people actually enjoy managing and handling finances. That is why so many people opt to hire a Certified Public Accountant (CPA) to keep track of their finances, taxes, and other related things.
In today’s heavily financialized world, accountants are practically a necessity to keep track of the thousands of transactions a business or individual might make every single day. So, if you are looking for a lucrative job that is in high demand, then a career as a CPA might be a good choice.
Many CPAs decide to open their own firms. These business owners appreciate the autonomy and flexibility that accounting allows. However, it is tricky to start your own CPA firm but not impossible. You can open a successful CPA firm with no prior experience in the field. Here is how.
Starting a CPA Firm Without Experience
1.Work for a Small Practice
Despite what you might think, CPAs that work for huge firms do not necessarily fall into working at a small business easily. Even someone who has a lot of experience at a big firm might falter a bit in a small firm as they are not used to working so closely with clients.
The best way to start off starting your own CPA firm is to first work for a small firm. Working with a small firm will help you learn the ins and outs of the profession and what it is like to work in a small business setting. Working for a small firm will also help you learn how to deal with clients on a personal basis; a skill you will need when growing your own CPA firm.
While working at a small practice, you should try to sell at least 1,000 hours of services before you leave to start your own firm.
You need to be able to sell your services to private clients to find work as a CPA. 1,000 hours of billable services will probably not be enough to sustain you, a partner, and a secretary so if you cannot even hit that benchmark, then you will have a very rough time on your own.
2.Decide Your Accounting Niche
Once you have a suitable lay of the land, the next step is to find your specific accounting niche. Most accountants have a particular area of focus, whether it is auditing, consulting, accountant information tech, or something else. The kind of niche you want to fill is one of the most important decisions to make when starting with an accounting firm.
Generally, startup accounting firms are small and have enough staff for the basics: themselves, a partner, and 1-2 administrative staff. If you have any prior experience in the industry at all, here is where that experience will help.
Deciding on Accounting Niche is Important When Starting Out
If you do not have any experience, then you will need to find one that matches your skillset. This can be difficult if you have no professional experience as you may not know what the job fully entails. That is why it helps to work for a small practice first and put in your dues.
If you are a bit stuck, then there is nothing stopping you from asking other accountants about their work. The internet is essentially a limitless source of information so you could ask actual accountants and CPAs what their specialties are and what a day of their work looks like.
The goal here is to find a niche that is not too broad but also not too narrow. If it is too broad, then there is nothing to distinguish yourself from one of the thousands of other CPA firms out there. If your niche is too narrow, then it might be difficult to find a steady stream of clients that need your unique services.
Some potential accounting niches you can look at include:
- Estate or Trust Accounting
- Accounting Information Technology Systems
- International Accounting and Taxation
- Mergers and Acquisitions Accounting
3.Give Clients More Attention Than a Large Firm
One of the advantages of being a small firm is that you can provide a level of service that large firms cannot. Large firms typically juggle several clients so there is much less opportunity to sit down one-on-one and build an actual relationship.
Clients will greatly appreciate it if you give them an extra amount of attention, and it will increase your professional reputation. Clients will reward your attention with repeat business. The most successful firms are ones that manage to build close relationships with their clients.
4.Hire Earlier Rather than Later
Many people think that they should wait until you already have some momentum going before hiring extra help. After all, you might think that you can handle everything by yourself when things are just starting. That is far from the truth, however.
Strictly speaking, you can handle everything yourself, but it’s not recommended. You will likely stretch yourself too thin trying to handle all the minutiae by yourself. Try to find help to hire sooner rather than later. If you try to handle everything on your own, you will quickly burn yourself out.
Try to have a reserve of 1-2 administrative assistants so they can handle all the paperwork and daily details of running an office, and you can focus on selling your firm’s services to clients. Trust us, you will be much less effective at sourcing clients if you also have to handle all administrative and office work.
5.Get an LLP Business License
If you want to work as a legitimate business, then you will need to nail down the legal structure. There are several ways that you can structure a business venture, each with pros and cons.
In general, businesses fall into 3 kinds in the US: Sole proprietorship, general partnership, and corporation. Sole proprietors are the simplest form and consist just of a single person. General partnerships may involve an agreement between two or more individuals, and a corporation contains multiple entities and hierarchical legal structures.
There are also variations of these general business types. For example, S corporations and LLCs have become popular. When it comes to CPA firms, though, the best option is probably a Limited Liability Partnership (LLP). An LLP is the best option because it gives you
- Liability protection: The structure of an LLP protects individual partners so that they are not financially responsible for any negligent or illegal acts committed by another partner. In other words, an LLP ensures that if your business partner does something bad, then you won’t be held responsible for any debts or obligations that arise from it.
- Flexibility. LLPs are a very flexible business arrangement and ownership. Partners can decide how they wish to contribute to the business and duties can be divided between each partner. Also, partners can maintain ownership but cede all business decisions and management decisions.
- Taxes. LLPs also get a lot of nice tax breaks and benefits. Individuals in an LLP are responsible for paying their own income taxes, self-employment taxes, and other taxes. The partnership itself is not responsible for paying taxes.
6.Pick Your Accountant Software
Technically, you do not need to use software for accounting practice, but things will be much more efficient if you do. Accounting software will greatly streamline the process so you can get more done and focus on running your business.
Some of the more popular accounting software nowadays include:
- Freshbooks
- SageOne
- BillQuick
- Xero
- Accounting Power
- QuickBooks Online
- CYMA
- Intacct
- Microsoft Dynamics NAV
- Open Systems
For the most part, these are all Software as a Service (SaaS) products so you will most likely have to pay a license fee to use them to their full capacity. The benefit of accounting software is it scales. You can use it for small organizations but you can also use it for large businesses and clients.
Additionally, you will probably need to get add-ons to your accounting software to have the full suite of reporting and documentation features you will need to run a CPA firm. Some examples of these add-ons include:
- Avalara – Sales and Tax software
- Biznet Software – Excel-based tool for reporting
- Microstrategy – Data and mobile analytics
- Prophix – Reporting and budgeting
- SalesForce – CRM module for SaaS applications
- Tallie – Reporting, budgeting, and form generation
Depending on your accounting niche, you might need to buy some software add-ons.
7.Find a Location
The last thing you need to do before starting work is to find a location for your business. As an accountant, you have a lot of choices of where to set up shop.
You can rent an office space, rent a co-op working space, or you can even be an accountant out of your home. The key thing is to pick a location that is conducive to your niche.
For example, if you want to serve high net-worth clients, then you may consider finding a location in a wealthier part of the city. Alternatively, if your services are aimed at a specific demographic, then you should find a place that is near that demographic.
You can also rent a virtual office if you do not want to drop the money for a physical space. Virtual offices have many of the same amenities as physical offices without the overhead and cost.
8.Growth and Expansion
Once you have an office set up, it’s time to grow and expand your operation. One of the biggest problems new CPA firms have is finding clients. After all, it can be hard to land clients if you don’t have a prior track record.
One way you can search for clients and network is through a joint venture. A joint venture will allow you to work with a larger, established accounting firm to get some exposure and experience.
For example, if your firm does not handle auditing, you can outsource that portion to a CPA firm that does. Joint ventures and other business partnerships with established firms can greatly help you find return clients and cement your professional reputation when just starting.
Another way that you can try to expand is by offering special services for clients. For example, you could offer free tax preparation services for individuals that come to you for consulting, or you could provide a discount rate for return clients. There are several ways to position yourself to grow your clientele.
Growing too quickly can cause a firm to collapse on itself. The goal is to find a handful of reliable, return clients that require your special skill set. Finding a core clientele will help you cement your reputation and expand.
How Much Does It Cost to Start a CPA Firm?
Startup costs for your accountant firm depend on the size of your operation. Location and your accountant focus determine a lot of these costs. Start-up costs can vary anywhere between $2,500-$25,000 and can include things such as:
- Physical space
- Information technologies (e.g. computers, phones, servers, etc.)
- Accounting software
- Insurance
- Licensing and registration fees
One great thing about the modern age is that you can open a virtual office for your CPA firm and save greatly on the costs of renting or buying a traditional brick-and-mortar location. Virtual offices provide your business with a physical address and other services like phones, meeting rooms, and videoconferencing abilities. However, some clients will prefer a physical branch
Conclusions
Being a CPA is an important and rewarding career that is very lucrative. As a CPA, you will be the go-to person for businesses and individual’s finances. Starting your own CPA firm from scratch is very difficult, but it is possible with a bit of planning, hard work, and some luck.
If you play your cards right, you can have a thriving CPA firm in just a few years. CPA work is always in high demand, so it is a viable long-term career with plenty of room for upward advancement.
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.