Once they’ve worked for someone else in the accounting world for a few years, many people feel ready to branch out and form of a company of their own. This is a noble ambition no matter what type of accountant you want to be, but there are several things to bear in mind as you get started on this exciting new venture.
One thing to keep in mind is the risk vs. reward equation. There are many potential benefits to running your own accounting firm but starting any type of business entails a certain level of risk as well. But while some of these risks are inevitable, there are others you can sidestep once you’re equipped with a little knowledge. That’s the purpose of the following list. It draws on the experience of others who have started an accounting business to help you avoid making a few very common mistakes.
Stay away from the following six pitfalls to maximize your new business’s chance for success.
1. Thinking You’re Too Good to Work Cheap
Far too many CPAs start their own firms under the illusion that they can build up an impressive client base in advance. Unfortunately, the business world just doesn’t work like this. To succeed in the accounting business, you must be willing to do whatever it takes to secure your first few clients.
One way to start snagging clients is to bid low on public projects. Bidding low on these types of jobs will accomplish two things at once. First, you’re more likely to be hired when you bid low. Second, it will give you a great chance to dazzle your first clients by exceeding their expectations. These projects might not lead to big paydays all by themselves, but they will help you start building a great reputation.
2. Cutting Corners on Your Work
A commitment to high ethical standards is an absolute requirement for accountants. This is especially true when it comes to preparing a client’s taxes, a task that offers a great deal of room for cutting corners. But no matter how much pressure you feel to satisfy your clients, don’t give in to this risky temptation.
Take the high road by advising your clients against shady practices like unreported cash sales. This isn’t just a matter of living up to the ethical standards you’ve established either. Helping your clients take shortcuts may end up damaging your firm’s long-term prospects as well. Stray from your principles and you’ll find yourself saddled with a reputation for shady practices yourself.
Helping clients cheat on their taxes will make them think they can also take advantage of you. Hold your firm to the highest possible ethical standards and you’ll develop a client base that treats you like the professional you are.
3. Launching Your Business with Misguided Priorities
Starting your own business often gives you access to some very attractive perks. You get to set your own schedule, for instance. You also get to establish your own goals and work toward them at whatever pace that you choose. And there’s always the temptation of pocketing the profits your company brings in.
But no matter how attractive these benefits are, you’ll end up disappointed if you prize them too highly. Don’t fool yourself into thinking that running a successful accounting business will ever be easy. Starting and running your own firm requires a great deal of hard work and a deep commitment at all times.
According to Dun and Bradstreet’s 19th Annual Small Business Survey, ‘being your own boss’ continues to be one of the biggest reasons that professionals go into business for themselves. But although it’s perfectly reasonable to look forward to being in charge, don’t let these shiny perks distract you from your primary purpose or prevent you from putting in the necessary work.
4. Starting Your Firm Without a Target Market
One thing that many failed accounting firms have in common is not having a strong idea of the kind of clients they want to attract. Far too often, an accountant will try to be all things to all people. But while it’s not a bad idea to offer a broad range of services, you should also identify your areas of strength. Pursue the clients who need the services you’re good at and are prepared to pay for them.
For instance, if speedy, accurate tax preparation is one of your strengths, maybe you should target young adults who are seeking professional help with their taxes for the first time. You can still offer a wide range of other services– your website is the perfect place for this– but you don’t need to offer the entire list to every client you meet.
5. Going Without Expert Advice
Most accountants are great when it comes to giving expert financial advice to others. But far too many are under the impression that this means they know everything there is to know about running their business. But as many of these people learn, this simply isn’t the case.
When you start your business, make sure to surround yourself with a group of experienced advisers that can provide you with smart guidance you know you can trust. You can learn a great deal from other professionals, so be realistic about your strengths and accept whatever help you can get with your weaknesses.
6. Underestimating the Importance of Your Employees
No matter how good of an accountant you are, you’ll need a great deal of help if your firm is going to succeed. This means you’ll need to assemble a team of hard-working people who are as invested in your company’s success as you are. You’ll need the very best you can find, from your fellow accountants to your interns and everything in between.
Advertise any openings you have across a wide variety of platforms and consider each candidate carefully. And don’t forget how important interpersonal factors can be in the workplace. The ability to work well with others is often just as important as a candidate’s skill set.
To review, here are six practices that will turn our six potential pitfalls into productive recommendations:
- Be prepared to work cheap to start building up your reputation.
- Adhere to the highest ethical stands with all your clients.
- Focus on what your business needs to succeed, not on the shiny perks running it might offer.
- Target specific types of clients right from the start.
- Identify your areas of weaknesses and seek wise counsel to help turn them into strengths.
- Put in the necessary effort to assemble a strong team.
About Brandon Pfaff
Helping clients ford their financial future by powering through the currents of complexity. River City CPAs, LLC specializes in assisting individuals and small businesses with tax preparation, bookkeeping, payroll and successful business planning.