Accounting firms are always going to be required given that there is a substantial amount of complexity as it relates to completing taxes, undergoing audits, and dealing with ongoing tax matters that affect both individuals and businesses on an ongoing basis. As it relates of the strengths of an accounting firm, the high gross margin services ensure that they are always able to remain profitable and cash flow positive in any economic climate. Even during times of economic recession, individuals and businesses are still going to need to file regular tax returns to state and federal revenue authorities. As such, demand may only waiting very slightly as it relates to the need for a highly competent accountant or certified public accountant. Additionally, one of the other strengths is that these businesses are able to generate highly recurring streams of revenue by being able to provide bookkeeping services to the general public as well. The startup costs are considered to be moderately low, and an accounting firm can be started for as little as $10,000 as simply an office is needed along with a website and a simple marketing plan. For accounting firms that offer certified public accounting services, they enjoy very high barriers to entry is the individual must be properly licensed by the state in order to render the services to the general public.
For weaknesses, in any small-town, suburban area, or major metropolitan market – there are always a number of accounting firms, auditing firms, and bookkeeping practices they’re going to create a very competitive market space. However, once a client base is established – most people stay with that account for a substantial period of time. As such, the competitive risks related to operating a.m. accounting firm are somewhat limited. One of the other weaknesses it is faced by these businesses is that there are now a number of online services and software services that can allow an individual to file their taxes without having to visit an accountant. However, these types of services are really limited only to people I have a very straightforward way in which they make income. Small businesses and corporations almost always require the services of an accounting firm in order to properly fill out all the documentation that needs to be seen by taxing authorities.
For opportunities, accounting firms can rapidly expand by hiring additional accountants, certified public accountants, and bookkeepers that will boost the ongoing billable hours of the business on a yearly basis. Additionally, many accountants will become certified financial planners or receive similar credentials and allows them to provide investment services and advice as part of their overall service menu. This can be a substantial opportunity for an account given that they can receive a fee equal to 50 basis points to 1% of all capital raised and assets under management. Some accounting firms will also undergo an acquisition., In which they acquire similar companies in order to boost their client base.
For threats, there is a risk that automation in technology will take the job of bookkeepers. However, the advice of a competent and qualified certified public accountant will always be in demand. Additionally, when an individual or business is audited – they will almost always be the services of a certified public accountant or a similarly licensed professional in order to ensure that the audit go smoothly and that the taxing authorities have an understanding of all receipts, revenues, and expenses that were incurred by these third parties. Overall, the landscape for the continued development and expansion of accounting firms is very positive. Minor pieces in legislation may change the way an accounting firm works in regards to fiduciary obligations, but that risk is somewhat limited and if it were to occur it would simply only modestly change the way in which an accounting firm operates. The demand for specialized services is going to continue to expand as specialization in the economy continues to change. As such, the threat risk faced by an accounting firm is very limited.