People are always going to need assistance with taxes as well as starting expanding new businesses. Many people make the mistake of thinking that an accountant simply does taxes on an annualized basis, and while that is a significant part of their job, a vast majority of the work that a certified public accountant does is specific for managing tax matters, providing consulting to small and medium-size businesses, and assisting people with obtaining financing for new business opportunities.
It should be noted that many accounting firms do not always have a staff certified public accountant, but rather operate in a more bookkeeping focused capacity. Both of these are considered accounting firms, and what makes the difference for these businesses is whether or not audits can be completed on behalf of a client. Many people enter this field in developing their own accounting firm have usually had substantial experience as an accountant. One of the benefits to owning and operating an accounting firm, especially among people and hold a CPA designation, is at the barriers to entry are moderately high for this type of business. It takes several years of school coupled with substantial work experience in order to become a certified public accountant. As such, these businesses do enjoy a strong degree of barriers to entry once they’re established. One of the other nice things about owning these types of businesses is that they produce highly predictable streams of revenue on a yearly basis not only from tax-preparation return but a host of consulting and financial services that are typically provided by these professionals.
As it relates the type of capital that is used for the development of an accounting firm, many of these individuals typically will use their own funds in order to acquire a small office and begin providing accounting services. However, most banks are happy to provide a working capital line of credit specifically to an individual to hold a CPA designation. One of the ongoing reasons why banks are receptive to this type of business is the high-margin and high predictable revenues that allow accounts to easily satisfy any underlying debt obligation.
In many cases, friends and family may also provide the necessary capital to start up a accounting firm given the low startup cost. Typically, these businesses can be started for as little as $10,000 or as much as $100,000 depending on whether or not the company is going to have a number of staff preparers or staff accountants at the onset of operations. Either way, the capital structure of a new accounting firm is pretty straightforward.
One of the things that is commonly done when starting a new accounting firm is the fact that a full-scale demographic analysis is usually produced in conjunction with a business plan and marketing plan. For any new CPA or general accounting firm, it is imperative that these organizations understand how many people are within the target market, their annual household income, median net worth, and the complexity of the tax returns needed by the market as a whole. In areas where there are a number of businesses, especially small businesses, certified public accountants and accounting firms tend to thrive given the complexity of the paperwork necessary to operate these businesses. This is why it is very important that a demographic analysis, which should also include a competitive analysis,when discussing and planning to start an accounting firm.
As it relates to corporate structure, this can vary state-by-state given that some states require that a CPA operate as a professional corporation rather than as a regular corporation or limited liability company. Of course, this is only a determination that an attorney should make for any individual account or certified public accountant that is going to be starting their own firm. Most attorneys can do to make this determination very quickly and at minimal expense.
All accounting firms also need a number of employees especially as they expand. Although many of these firms start with simply the owner-operator conducting all operations, the there is a quick need to have an assistant, staff tax preparers, staff certified public accountants, and related professionals that can assist the owner on a day-to-day basis. It should be noted that some accounting firms have also taken the hiring certified financial planners and registered investment advisors in order to provide an integrated number of financial services for people that have their tax returns completed by the firm.
As it relates to the expense of these individuals, administrative assistants can range anywhere from $25,000 to $50,000 a year. Staff accountants typically have starting salaries ranging from $65,000 to $85,000 a year depending on the location. An accounting practice in a more rural or suburban setting will typically have lower employee costs versus a major metropolitan area where expenses are very high and higher salaries are required. As with any type of business that is being started, and account should have an attorney develop a large-scale employee handbook that showcases to each employee what their roles responsibilities are and what to do if any type of specific business issue occurs. In many cases, most workmen compensation insurance policies as well as related liability policies pertaining to employment require that the account have a employee handbook and that each employee sign it giving their understanding of the rules and regulations that guide the practice’s operations.
The outlook of this industry is tremendous given the continued complexity as it relates to taxes. There are more than 1 million accountants within the United States, this is primarily due to the fact that most individuals do not know how to properly file tax returns or know what is required of them when they start a new business. This trend is expected to continue especially as more and more people turn entrepreneurship rather than having a standard 9 to 5 job. The expected industry growth will remain in locks that with step with the general economy. It should be noted that one of the ways that many accounting firms are able to expand at a higher than average rate is by operating within a specific niche. There are many accounting firms that focus specifically on financing businesses, healthcare related companies, and related specific industries in order to differentiate themselves from that of other accounting and bookkeeping firms.
Marketing is one of most important aspects when developing a new accounting firm given the fact that most areas do have a certain level of saturation as it relates the number of practitioners. As such, most accounting firms engage in a broad-based marketing strategy that includes these of online as well as print media. At the onset of operations, many accountants – including the lows that hold the CPA designation – will frequently develop ongoing relationships with third-party financial planners as well as attorneys that can provide referrals. One of the key things when developing a professional practice to know is that referrals are worth a huge amount to these businesses given the fact that someone has vouched for the quality of the work offered.
Beyond just thriving off of referrals, many accountants will maintain expansive online presence via a proprietary website. This website should feature information regarding the firm, its staff accountants, hours operation, and may or may not have pricing information as it relates to standard services like tax preparation services. A presence on social media is sometimes warranted for a new accounting firm especially as people do seek referrals from friends and family when they are looking to retain the services of a new account. In some cases, especially for established firms, a marketing firm can be retained to manage all aspects of the marketing and advertising that is required by these businesses. Although this can be somewhat expensive, given the fact that most marketing firms do have a minimum retainer of usually $1000 the $2000 per month in order to provide services. However, in rural markets and in suburban markets these fees may be substantially less given that many marketing firms are looking to expand their client base and may offer substantial discounts at the onset of an engagement contract.
Accounting firms are to continue to be one of those important industries within the United States given the fact that they provide a service that is not typically a be able to rendered by other companies. One of the major threats it is faced by these businesses is the fact that there is a number of accounting software suites that allows individuals to complete the taxes on their own. However, for individuals that generate income besides as a paycheck – these pieces of software do not really provide the same level of professional support that is needed by a licensed professional or small business owner. The complexities regarding tax reporting for small businesses and any other corporation is substantial, and qualified advice from a certified public accountant is always going to be valued and in demand. It is not uncommon for a highly experienced and well marketed accountant to earn incomes ranging anywhere from $200,000 to $400,000 per year once they have established a strong brand name for their firm.