Accounting Firm Business Plan

1.0 Executive Summary

The purpose of this business plan is to a require a $100,000 working capital line of credit in order to develop the operations of a accounting, auditing, and bookkeeping firm. Accounting firm, LLC (“the Company:) is a Philadelphia based business will provide a host of professional accounting services to individuals as well as businesses. The company was founded by Mr. Peter Smith. Revenue-generating operations are expected to commence this year. Mr. Smith is a certified public accountant.

The Services

The primary focus of the accounting firm’s operations will be to provide ongoing tax and accounting services to the general public. This includes filing tax returns, preparing financial statements, managing matters with tax authorities, and representing clients when needed.

The firm will also provide business valuation and consulting services regarding the purchase and sale of businesses as well as other income producing assets.

The company will generate substantial and ongoing streams of high-margin revenue from all services rendered. At the onset of operations, the firm will have one staff CPA in addition to Mr. Smith.

The next section of the business plan will further document the services offered by the business.

The Financing

As stated above, the company is currently seeking to acquire a $100,000 line of credit in order to commence operations. The terms of this line are to be determined during negotiation. This document assumes that the business will Street receive a 10 year revolving credit line carrying a 6% interest rate on the drawn down balance.

These funds will primarily be used for office development, initial expenses, as well as the company’s initial marketing campaign.

As time progresses, the business would continue to be an excellent candidate for larger lines of credit or a business loan given the high-margin revenues of the business and the economic security of produced revenues.

Sales Forecast

Profit and Loss Statement
Profit and Loss Statement

The Future

As time progresses, the accounting firm will continue to hire enrolled agents, certified public accountants, and bookkeepers that will allow the firm to rapidly expand its billable revenues. The company may also acquire existing accounting practices that are in operation in order to expand through nonorganic means.

2.0 Accounting Services

As discussed in the executive summary the accounting firm will provide a large breath of services to the general public. It is estimated that about 30% of revenues will come from matters pertaining to tax returns and other filings on behalf of individual clients. The remaining 70% of revenues will be generated among business clients by not only providing tax filing services and tax preparation services, but also advisory services regarding the ongoing operations of these businesses.

The business will have a number of bookkeepers on staff in order to ensure that when a client needs the services they can be rendered directly by the firm. The company will charge $30-$40 per hour for providing on-site bookkeeping. At the onset of operations, the business expects to have two bookkeepers on staff that will render the services.

Additionally, the accounting firm will also provide business valuation services. These services are not often provided by an accounting firm, and they will create a strong differentiating factor for the business. The business will be actively engaged in assisting business owners with selling their companies to third parties, and with entrepreneurs that are seeking to acquire businesses and other income producing assets as part of their overall portfolio.

3.0 The Financing

3.1 Usage of Funds

The funds are to be used as follows

Use of Funds

3.2 Owner Equity

Peter Smith retains a 100% ownership interest in the business.

3.3 Exit Strategies

In the event that management wishes to sell the business to a third-party, he will actively advertise the business for sale among other certified a public accounting firms within the greater Philadelphia area market. Based on historical standards regarding similar businesses, this company could sell for as much as 2 to 3 times total revenues depending on the strength and regularity of the earnings produced by the business. Mr. Smith would likely have to stay on for about one year as a consulting partner in order to properly transition the clients to a new owners operation.

4.0 Market Analysis

4.1 Industry Analysis

The demand for services relating to accounting and business consulting taking typically remain relatively strong even during times of economic recession. Currently, the economic climate within the United States a strong. Asset prices have risen substantially over the past seven years since the end of the economic recession. There have been recent major changes to the tax code within the United States, and many individuals as well as business owners are going to continue to need the services despite any negative change in the economy.

Nationwide, there are approximately 300,000 accountants that provide the services the general public. Each year, these entities produce approximately $90 billion in revenue, and provide jobs to a total number of people in the around 600,000. This includes support staff. The industry Outlook is very strong given the ongoing and substantial complexity of the United States tax code.

4.2 Customer Profile

The average customer of the accounting firm as it relates to individuals will have an annual household income of approximately $75,000 or higher, a net worth of $250,000 or higher, and they will be willing to spend $1000-$2000 per year on accounting services rendered by a certified public accountant.

As it relates to business clients, the accounting firm expects that the average client will have revenues exceeding $500,000 per year, EBITDA exceeding $100,000 per year, and will require ongoing bookkeeping in addition to any tax returns that must be prepared by a certified public accountant. These businesses will be located within 15 miles of the accounting firms location.

4.3 Economic Analysis

As discussed earlier, the US climate is strong. Interest rates have remained stable despite substantial increases in economic productivity. Unemployment rates are at all-time lows. It is expected that a light recession may occur within the next five years given the substantial amount of growth that has occurred during this time. However, most economic indicators point to continued and moderate growth during this period. Only substantial change in the interest rate climate would have a major negative impact on the firm’s ability to generate revenues.

4.4 Competition

In any market there are always going to be several independent certified public accountants as well as accounting firms that are in operation. One of the key differentiating factors that the company will have over its competition is that the business will be actively involved in providing advisory services as it relates to mergers and acquisitions. This includes providing business valuation services, which are not often provided by certified public accountants given the liabilities that can be associated with this type of practice. The company will only hire certified public accountants and enrolled agents to manage tax matters on behalf of clients. All bookkeepers that provide services to clients will be considered full charge. As such, once the business develops a strong brand name for its operations – the ongoing competitive issues at the business will face will be relatively low.

5.0 Personnel Plan

The company will have the following expected payroll costs over the first three years of operation:

6.0 Marketing Plan

6.1 Marketing Objectives

Develop strong relationships with area chambers of commerce and small business associations within the Philadelphia metropolitan area.

Maintain strong connections with area attorneys that specialize in doing business transactions so that people requiring business valuation services will be referred to the accounting firm.

Maintain an expansive online presence including use of social media in order to create awareness of the accounting firm’s operations and services offered.

6.2 Pricing

On average, an individual tax return will cost $500. Business tax returns will generate $700-$2000 for the business. Per our advice rendered by a certified public accountant or enrolled agent will be billed at $175 per hour.

5.3 Marketing Strategies

For most, the accounting firm intends to maintain an expansive online presence that will ensure that when people do searches for area accounts in the Philadelphia area, the website will appear on the first page of the search. The company will hire a professional web development firm that has specific expertise in search engine optimization in order to ensure that the website is listed quickly and is easy to use. The website will be mobile friendly so the people using tablets were cell phones can cleanly see the website.

The business will also maintain an expansive presence on social media platforms including FaceBook and twitter. The business will have a FaceBook page it showcases Mr. Smith’s biography, images of the firm, and all relevant contact information. Over time, the business will continue to make posts regarding specific tax matter issues as well as general accounting advice. His will allow for greater following on the social media platform, and will most likely convert several people that are looking for Philadelphia area accounts into clients for the business. The company’s administrative personnel will manage social media marketing on a day-to-day basis.

Beyond online marketing, Mr. Smith will enroll in several area chambers of commerce in order to create interest among existing businesses and people that are doing startups. These entities often provide a number of referrals for accounting firms. Additionally, Mr. Smith will distribute literature to area attorneys in order to ensure that people that are buying real estate, businesses, or engaging in large-scale sales transactions will be referred to the firm as it relates to preparing financial statements that are going to be shown to third parties. Mr. Smith, as a CPA, has the ability to certify any financial statement.

The company expects at approximately 2% of its aggregate revenues will be allocated on a yearly basis towards ongoing marketing and advertising costs.

7.0 Financial Plan

7.1 Financial Assumptions

  • The company will have a growth rate of 10% per year.
  • Mr. Smith will acquire a $100,000 working capital one credit carrying a 6% interest rate in order to launch operations.
  • Gross profits from revenues will be approximately 95%.

7.2 Sensitivity Analysis

Accounting firms and related professional practices are some of the most stable businesses to own and operate. The high barriers to entry due to licensing requirements allows these businesses to remain in demand at all times. Many people as well as small businesses lack the ability to properly prepare tax filings and other financial statements. The complexity of the tax code also requires that a professional is hired to manage these aspects on behalf of their clients. This coupled with the high gross margins generated from revenues will ensure that the business is able to remain profitable and cash flow positive at all times, while concurrently servicing any underlying financial or debt obligation undertaken by the accounting firm.

7.3 Source of Funds

7.4 Profit and Loss Statement

7.5 Cash Flow Analysis

7.6 Balance Sheet

7.7 Business Ratios and Breakeven Analysis

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