Starting up in practice - safety net

Starting up in practice - safety net

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Hello,

Further to my last post on starting up in practice, I'm going to go it alone and not enter into a partnership with others that I know.

Now I've decided to do this, the idea of not having a salary has focused my mind. I was wondering what advice the community might have on the level of savings I should have to see me through to stability. I have enough to cover mortgage, car, necessities and light family spending for about three months. I got into (and out of) credit card trouble once, so don't want to rely on them (my wife doesn't either!).

I'm fairly social and imagine I'll be going to a lot of networking events hoping to find clients!

Thanks.

Replies (14)

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By Sherman Holter
20th Apr 2014 20:49

The length of pieces of string come to mind,

With more information this would be a difficult question to answer.

With NO information it's just impossible.

You could find a couple of one-day-a-week sub-contract things to lighten the financial load.

 

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By zebaa
20th Apr 2014 21:56

3 months is not enough...

...in my opinion. I think you need x2 or x3 this amount if you are starting from zero. Do not forget even after this time things can get tough and if all your savings have gone you can get very hungry. I think it also depends on who is dependent on you. When I first went self employed it was just me and so when things got hard there was only me with a problem. It sounds like you have a wife & perhaps children. Clearly, you must think of them too.

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By ming_the_reasonable
20th Apr 2014 22:09

Thanks

Wow. I didn't think I would have responses on the bank holiday weekend! Thanks for these.

it's funny how you can think you have a lot saved but in reality, it doesn't go very far when there's nothing come in! Think I'm going to have to tough it out and save a bit more. My wife has a part time job, which eases things and we have one little one but she doesn't cost us an awful lot at the moment.

I like the idea of finding some subcontract work when I start up. That should ease things from when starting from scratch.

Again, thanks!

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By occca
21st Apr 2014 07:18

Another thing to bear in mind

When you take on a client, most have at least a year lead time, in my experience - esp if they set up a company

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By User deleted
21st Apr 2014 07:43

Two things

1, You need more savings than that if you have a mortgage to pay. I'd got enough saved to pay off my mortgage when I went self-employed (years of making higher repayments than necessary as I knew I wanted to go it alone eventually) so although I only had c£2k of savings left and nil clients (and no 4-pawed dependents at that stage) I knew that would see me through for ages. Having a wife and a kid and a mortgage is a whole different ball game and clients don't fall into your lap.

2, When you take on clients get them onto monthly standing orders immediately regardless of when the work needs doing. It gets them used to parting with their money and gives you some cash to be going on with. 

And a bonus - save as much as you can for a bit longer - scrimp and cut down on non-necessities so that you've got more dosh and you're used to going without before you really have to do so. And while you're still working get procedures and software in place so that you can hit the ground running and not be wasting time. 

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By ShirleyM
21st Apr 2014 08:41

I went the other route

We had paid off our mortgage, so we borrowed against the house to start my practice in a serviced office. My husband was in full time work, so we had some regular income. We blitzed the area with telemarketing, newspaper ads, and I went networking. I employed staff almost immediately. The practice became self -sufficient pretty quickly, but I was working silly hours non-stop as we didn't really have efficient working practices in place.

5 years later after almost suffering meltdown I realised I couldn't continue on the same path. I downscaled, retained one full time employee, and sacked half the clients (the PITA's and time-wasters). Until then, I had been firefighting, and never had the time to sit back and take stock. Now I had time to plan, get systems and procedures in place and review every client.

I am not wealthy and my practice isn't the most profitable, but I am much happier.

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By taxation4
21st Apr 2014 09:20

Preparation, preparation, preparation!

There's no point going into practice in February if you will be dealing with 6/4 year end small businesses.

I had also been collecting clients for over 6 years and dealing with them in my spare time before I took the leap - it was a now or never scenario. This helped with confidence in attracting clients as well as knowing I would have some clients/income for the future.

Timing wise I waited and jumped in April (with 6 months bills/costs savings) and the option of getting back into employment in the September when practices would be starting to look for employees to help with the tax rush.

Thankfully I had put out enough feelers for new business well ahead of time so didn't need to consider going back into employment.

I'm now 8 years down the line and can say it's the best thing I ever did.

 

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By ming_the_reasonable
21st Apr 2014 09:54

Thanks again everybody. I really appreciate your advice!

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By Jekyll and Hyde
21st Apr 2014 14:28

for me
It was 12 months of normal expenses.

I would also recomend taking out an additional £5k loan on to of this to buffer working capital.

But that is me and helps with reducing stress whilst building up a practice.

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Mark Lee headshot 2023
By Mark Lee
21st Apr 2014 21:01

Hoping to find clients at networking events

Well done on deciding to go out on your own. And well done too on seeking the advice of your peers - a very sensible thing to do.

I've never started my own practice so have nothing to add to what's been said above as regards the main thrust of your question.

I did however think you might find it helpful if I add a couple of comments re your throwaway line about networking. I do hope you aren't seriously hoping that you will find clients at networking events. You wouldn't be the first to make this mistake. But when you think about it how many people do you think attend networking events and expect to find a new accountant there? 

If you  want to build your practice by bringing in clients who have never had an accountant before and have just started their own business, you MIGHT find some at networking events that attract start-up businesses. 

Beyond this though you will generally only generate new clients over a period of time from your Networking activity. I wrote a series of articles about Networking for start-up practices on AccountingWeb.  Here's a link to the first part of the series; it contains links to the other 3 parts too. 

Good luck

Mark

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Replying to Justin Bryant:
Red Leader
By Red Leader
22nd Apr 2014 11:52

sub contract

I think you really need to look at doing some sub-contracting while you build up your practice.

In any case, it's unlikely you will be able to fill a working week with just marketing activity. Few/No clients + marketing = say 20 hours per week?

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By zarathustra
22nd Apr 2014 12:39

Unsecured loan?

What about borrowing say £15K before you get started, over as long a time frame as possible. This should give you an extra few months of extra wiggle room, even allowing for the loan repayments. Three months reserves is not long enough, quite frankly.

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Man of Kent
By Kent accountant
22nd Apr 2014 12:49

Nothing

I started with nothing, but then I was doing consultancy/subcontract work from the start - up to 5 days a week gradually reducing to nothing 18 months in.

For my first year only 75% of my income was from consultancy/subcontract work.

This reduced to 34% in year two.

This meant I had less pressure on me to get accountancy work of any type and at any cost. Meaning I never tried the hard sell or low balled to win work.

So yes go the subcontract route if you don't want to take on debt or eat into your savings too much.

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Glenn Martin
By Glenn Martin
22nd Apr 2014 15:30

Depends on Lifestyle and what yor expectationa are.

I took the plunge just over a year ago.

In the final months of my employment I put s much money away as I could. I had  enough money

to pay my bills for about 10 months without drawing any money from the new business.

In addition I had always had a handful of clients and a practicing certificate so I push for a few extra clients and started with around £15k worth of GRF on day 1.

A lot of the work I had signed up was not going to kick off until later on or into the following year i took on a few consultancy roles which worked out very well and were better paid than my old employment, so I never actually dipped into my savings too much,

if you are going to base your new business solely on compliance based work you will either need to get some work signed up whilst still in employment or put some time in building you savings up as already said 3 months is no enough if you have a mortgage and a family to support.

 

 

 

 

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