Is it worth starting a practice part-time?
In response to a recent Any Answers question, Nigel Harris draws together advice from AccountingWEB.co.uk members about setting up your own firm as a sideline.
Back in the summer (remember that?) “Husainweb” posted an
Any Answers question about starting a practice and asked for advice on whether to go full-time from the beginning or to be part-time initially and move to full-time when the fee income permits. “If you were to do it again,” he asked, “which way would you go?” For those that advocated starting part-time and moving to full-time later, what kind of timescale would they suggest?
As usual, the AccountingWEB community pitched in with their suggestions. The general advice was to plan, prepare, get funding in place and go full-time from the outset. Bob Harper gave some detailed suggestions on the budget you might need to set up a new practice and, as a marketing consultant, of course particularly emphasised the need for a realistic marketing budget in order to grow a successful practice. How much is enough to get started? The questioner decided £10,000 should be enough, although Bob thought it would be “very tight”.
Peter Saxton preferred to avoid getting into debt and started his practice while being employed for the first few years full-time and part-time with flexible hours. It involved long hours and six/seven days a week but he now has a practice that gives him a good living from standard hours in a relatively stress-free environment working from home.
Several contributors cited working from home as one of the benefits of running their own practice but Jason Dormer took the opposite view. Renting an office can improve your work-life balance as you can leave your work behind at the end of a day – at least physically, if not mentally. Having your own premises also facilitates walk-in trade and gives you scope for a degree of expansion that wouldn't be possible working from your spare bedroom.
Self belief was referred to several times – you need to believe 100% in your new venture if you want clients to believe in you. Does starting tentatively on a part-time basis indicate a lack of self belief? Some commentators thought so, others thought it was just prudent.
Continued...
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More than one model
I think you're talking about only one particular kind of practice Bob and there are many many more models of how to get off the ground - particularly if your idea of part-time involves the small people that are being shown in the obligatory graphic accompanying the article.
My practice started with 20 small-scale clients, a scuzzy photocpier, a Sinclair QL (there's a scary flashback), no capital and a working wife. Zero profit year 1 and progressive rises since. I was able to run the business in years 2-3 as a house-husband when a travel cot was a valuable piece of kit.
If you want to set up with no clients or only a very small number then yes, you may need capital - to buy clients through marketing, rather than earning them through recommendation and quality work. Similarly sub-contracting is another way of networking yourself in the direction of more clients.
Not every practice measures its success based on the levels of drawings or capital value and you should be well aware in advance as to what sort of business you really want to be driving.
Purpose of the investment
@MarionMorrison - my comments hold regardless of why the business is being run.
However, if the purpose of the practice is to free/deliver time for children then there is an argument that the practice should be based on employees. But, that is down to the practice owner and their family...the cost and time to develop is secondary.
By the way, a good service is part of marketing. The start is to define it and then do it consistently followed up with requests for referrals.
Bob Harper
Adapt or die
My practice started with 20 small-scale clients, a scuzzy photocpier, a Sinclair QL (there's a scary flashback), no capital and a working wife. Posted by MarionMorrison on Tue, 23/11/2010 - 16:26
Which is how 99% of practices start.
The secret to starting any business is adaptability. Tying yourself to some pie-in-the-sky "plan" means you miss opportunities. You might start out with every intention of only taking on companies with a turnover of £1m + , but what kind of fool would you be if whilst waiting for them to come along, you turned down a couple of dozen nice easy subcontractors?
Incidently, you went one better than me, home PCs didnt exist when I started so I had lots of pens, a calculator, and a cheap typewriiter.
Blasts from the past
a calculator, and a cheap typewriiter.
A calculator CD? I had you pencilled in as older than that. I actually still have my very first calculator, a Sinclair Scientific, sold in kit form and soldered by my own fair hand in 1973 I think. It took around 30 seconds to work out trig functions and sadly no longer works but is probably an antique now.
@Bob - You don't seem to be getting it. It's perfectly possible to run a practice on a small scale, not have vaulting ambitions, not want to miss out on client contact by delegating it to staff and not want to spend money or time on directly selling the practice. I'd like to think my way is mainstream and your methods are unusual but I'm not dogmatic enough to Know I'm Right.
If people are considering small-scale, initially part-time practice, you are giving the impression that they shouldn't bother unless they're going to be putting in those marketing miles and that marketing budget. If that is a mistaken impression, do say - I'd love to see you say "hey, a low-fi approach is not my way, but it's perfectly valid".
Clarification
@MarionMorrison - I am not suggesting starting small-scale on part-time is worthless, I am clarifying my comments about the £10,000 quoted in the article.
By the way, people get hung up on the marketing budget; it is more about investing time and creativity, money just covers the cracks.
Bob Harper
Still not getting it
But your clarification still says that
the person would really need make things happen and have plenty of Charisma. What I mean by this is lots of effective networking, public speaking and direct approaches to target clients using the phone. Most accountants can not do this so it costs more (time and money). The person would also need good sales skills, systems and processes. This would include crafting compelling proposals. Their firm would need a sharp value proposition to penetrate the market and a strong corporate image and high quality collateral.
What I'm trying to convince you of (and anyone considering setting up part-time practices), is that you don't have to approach it in the way you describe. There's nothing wrong with your philosophy for those that are seeking that kind of practice - not my cup of tea. You don't have to make things happen, network, speak publicly, cold-call, possess good sales skills or craft compelling proposals. You can set up a practice by being low-key and personable, doing a good job and grow entirely by word of mouth. It's just not the way you'd do it.
Or do you feel there's only one true way?
More clarification
@MarionMorrison - I am clarifying my comment regarding the budget, not your business model. Specifically, the budget of £10,000 to launch a practice IF someone goes full-time and wants drawings.
You do not need to convince me that a business can be started another way. But, if someone goes full-time or part-time with or without drawings then to maximize the opportunity they will still need good sales skills, systems and processes. This would include crafting compelling proposals. Their firm would need a sharp value proposition to penetrate the market and a strong corporate image and high quality collateral.
What I would say is that I have worked with a sole-trader (female with young children) who went from nothing to £400k plus in four years and she did the School run.
When I compare this to what most do I know which I prefer.
Bob Harper
More than one way
But, if someone goes full-time or part-time with or without drawings then to maximize the opportunity they will still need good sales skills, systems and processes. This would include crafting compelling proposals. Their firm would need a sharp value proposition to penetrate the market and a strong corporate image and high quality collateral. What I would say is that I have worked with a sole-trader (female with young children) who went from nothing to £400k plus in four years and she did the School run. When I compare this to what most do I know which I prefer.
What you seem to be saying is that in your opinion, those who do not have good sales skills, compelling proposals, sharp value propositions, corporate image and high quality collateral (what is that by the way?) are doomed to fail. And I'm trying to emphasise that these things are utterly secondary to an actual ability to do the work. If you're good at the job and have good inter-personal skills you will do fine, and I'd hate to see you trying to put people off who don't want to follow your model for practice development.
And whilst I'm very happy for your soaring sole practitioner Mum, it's your preference. Having a business with a higher turnover does not make it a better or more enjoyable practice. Please try and realise that there are people who don't see the world the way you do and not feel the need to insist that they're wrong.
Amazing
@MarrionMorrison - don’t worry about what I seem to be saying and just read what I have said. I am not trying to put anyone off anything; I am just clarifying my position on the financial budget needed to set up in a particular way.
The issue is not the high turnover but the fact that she as the practice owner employs people to do the work so she does not need to work full-time.
The business has provided her freedom to spend time with her kids as well as financial independence because she could probably sell for £500k.
I just happen to think that is amazing! What an opportunity for everyone.
Bob Harper
Reading what you said
Bob - I'm just looking for clarity in what you say. You said that:
if someone goes full-time or part-time with or without drawings then to maximize the opportunity they will still need good sales skills, systems and processes. This would include crafting compelling proposals. Their firm would need a sharp value proposition to penetrate the market and a strong corporate image and high quality collateral.
To me that implies you see these things as essential rather than desirable. Is that right?
Clear as it gets
@MarrionMorrison - it is what it is. One persons essential is another persons desireable.
Bob Harper
Ah
So when you say that these skills are an essential, you're just voicing an opinion and somewhat in defiance of the facts that others do run successful practices without those skills. The difficulty I have is that you are presenting an opinion as dogmatic fact.
My concern is that people toying with setting up a practice and reading this column might think 'Oh I can't sell a tin of beans' and decide that it isn't for them, when they could very well run a practice that is successful on their terms.
Oh
@MarrionMorrison - I wouldn’t be too concerned, I think people AW members can decide for themselves; I doubt any forum post will determine what they do.
Successful is subjective but being effective with sales and marketing will help regardless of the personal goals.
Bob Harper
Success ?
Successful is subjective but being effective with sales and marketing will help regardless of the personal goals.
Posted by Bob Harper on Wed, 24/11/2010 - 10:49
Totally disagree. I couldn't sell water to someone on fire. I'm utterly useless when it comes to selling, but, I learnt from the start one thing that many professionals in many disciplines forget. Just because you have a few letters after your name that doesnt make you any better than the guy you're talking to. I cringe when I hear some people "talk down" to others as if they are somehow superior to them.
I might know a lot more about law or tax that someone else, but I'm damn sure I couldnt build a brick wall like they can, or fix a car like they can.
If you were stuck on a desert island who would you want with you?
An accountant to keep track of how long you'd been there.
A lawyer to tell you how to sue the shipping company, shuld you ever get recued.
Or a poacher who cant read or write, but can catch birds and fish and keep you fed.
Selling is like most con tricks, all smoke and mirrors. If you're good enough, and work for the right price, your reputation will sell your business.
As for "not having to work in the business" - how boring and pointless.
Inner game
@Justsotax - spot on. As well as desire, belief is important and so is confidence built from the basis of competence. The good news is that these concepts are internal so we have control over them and they can be developed.
I have done a lot of research on practice development to work out the magic formula. It is interesting that some people just seem to have it and do really well while others struggle. Like you say, money is just a resource and it cannot guarantee success and there are other resources which are much more important.
These resources can be built with personal development and that is where start-ups should invest.
Bob Harper
Takes all sorts
Although as we've established this is just one of a range of opinions and you don't mean to sound dogmatic do you Bob? You think that belief, confidence and personal development are the important factors for start-ups. Others think that competence, knowledge and an ability to communicate and express yourself well are predominant. Many ways to skin a cat...
Truth is it takes all sorts and there are many models of successful practice. Maximise your skills and if you're only good at sales and marketing then major on that and get other people to do this nasty accounting/tax work.
Game changer
@MarionMorrison - for me personal development is about developing knowledge and the ability to communicate effectively. That is the essence of sales and marketing because accountants are knowledge workers and marketing/sales is a conversation.
By the way, one of the leading thinkers in the world on business is Seth Godin. His position is that there is no shortage of competent. No one cares about very good. He argues he can get very good from just about anyone and cheaper that most. Accountants can have a look at www.crunch.co.uk as an example.
I think this comes down to a definition of success. If baseline survival is the definition, then maybe accountants do not need to invest/worry too much about the sales and marketing.
However, if success means working with great clients, making more than the average then accountants should be investing in sales/marketing because only 4% of accountants make over £100k a year. Even less by working part-time.
An interesting question for people to ask themselves is; if you knew you could build a practice that made you over £100k a year without working full-time AND you know you couldn’t fail would you do it?
The answer is usually "it depends on what the cost is" and that comes back to the budget of time, money and energy. I think most would agree that it a good idea and sales and marketing is the way to get there, technical ability is just the ticket to play the game.
Bob Harper
That's where we differ
No-one cares about very good
has to be one of the sadder things I've seen here and I think gets to the nub of our differences. I care about very good and often I actually care more about delivering very good than the recipients I think. It's important to me and my psyche that what I do, I do with Quality and what I do well is taxes and deploying communication skills to explain tax and accounts stuff to people who struggle to understand a bank statement. It's what gives me fulfillment, in a way that growth in turnover or mere income doesn't. I get the feeling that turnover and income are more important to you.
I also think that working with great clients is also something that brings fulfillment, but that's got nothing to do with sales/marketing. It's the personal qualities of the clients we deal with that actually makes me care about them as people, not as service-recipients. Deep down I'd rather deal with a lovely bloke and make £100 than deal with some price-conscious small businessman and make £1,000.
You can easily achieve much more than baseline survival without lifting a finger towards sales and marketing. I don't consider £100Kpa as being the borderline of survival and my income is below this line (shameful, I know).
I had a browse of Seth Godin's oeuvre and crunch.co.uk and I'm afraid they make my flesh creep. His philosophy seems very alien to me, very redolent of American culture and just geared to quantity over quality. I'm raised on hippy texts of the 70's which possibly explains a lot.
Would you?
@MarionMorrison - maybe we have discovered the nub of our differences but what I am really interested in is value; the turnover/profit is a consequence.
By the way, what was your answer to the question “if you knew you could build a practice that made you over £100k a year without working full-time AND you know you couldn’t fail would you do it?”
Bob Harper
I can and I don't
if you knew you could build a practice that made you over £100k a year without working full-time AND you know you couldn’t fail would you do it?”
In truth Bob, I already have exactly that option if I wanted to pursue it right now. I know where and how I could get extra clients from, I know how I could maximise and increase turnover through cross-selling. But I choose not to, because I'm happy with things as they are and through steady organic growth (and because cross-selling of financial products is the work of the devil). When I sell up, I'll be back working in the practice every so often, simply for the pleasure of continuing to deal with people that I care about.
I see ambition it itself as a vice and my own ambitions relate to quality not quantity.
Selling ethics
@MarionMorrison - selling financial services being the work of the devil is a new one on me!
Having said that, it is consistent with what many accountants think because they do not understand that selling is helping and protecting clients from other suppliers who are not as ethical.
That providing financial services with a coordinated tax strategy thing that provides protection and reassurance to clients wouldn't be right would it?
Nah, how about the profession just stick to charging too much for compliance because the book are a mess. That is far more ethical.
Not selling is not ethical and just selfish!
Bob Harper
Cross-selling
There's nothing wrong with pensions professionals selling pensions etc etc, but the recent past is littered with instances of cross-selling that have gone hideously wrong, banks selling endowments and mortgages, everyone and his dog selling unnecessary insurance on loans and products.
What is problematic is any relationship where trust in a professional is used as a lever to encourage the sale of a product by a third party, where the professional has a financial vested interest.
Not selling is not ethical and just selfish
I do point people in the direction of other good financial professionals that I trust, but I make very clear that I have no commission or financial motive and that this is because he is good at his job. But this isn't selling, it's helping and protecting as you say. The difference is that I seek no financial motive for doing this.
Nah, how about the profession just stick to charging too much for compliance because the book are a mess. That is far more ethical.
I don't doubt that there are accountants who charge too much for compliance because of poor bookkeeping. That's just incompetence rather than bad ethics - failing to know when to bounce them back or get the 3" paintbrush out and trying to rebuild double-entry books out of an incomplete binliner. We work with clients who in the majority, have been trained to get a reasonable and sufficient set of books together. Some are untrainable and barely able to open a brown envelope. We try and deal with them as individuals, not profit centres
Selling and making money
MarionMorrision - to me financial services is more about total financial care than selling a pension. And, earning money from this service line is not the problem - the intent of the sales person is the key. Are they selfish or do they put the client first?
Consultative selling (which is what I train and coach on) is about understanding and exploring the options WITH the client. It is about supporting the client and recommending a direction as a trusted adviser. Being the trusted adviser is not about abdicating this responsibility to someone else or sitting on the fence because of some problem with making money. For me, no-selling is as selfish as mis-selling.
If accountants where better as sales and marketing then all clients would have up to date books which would reduce the resources/fee for year-end work. Accountants could then bundle more into the service like fee protection so their clients are protected from the taxman. They could provide interim tax reviews and provide clients with tax estimates to help clients budget for their tax liability. The accountant could even provide basic consultation and advice on personal financial planning as well as input to the business performance.
Now, back to the original question; if a new start-up is going to do this why would they deprive the market of this by going part-time? On the other hand, if an accountant is going to start up and just do what everyone else is doing I would suggest they don't bother because they are just burning business oxygen.
So, my answer is do it full-time or don't bother because most clients deserve better and the profession needs more passion.
Bob Harper
And back to the OP
So your answer to the original question is No - forget part-time practice because you won't be able to do it justice without capital to substitute for presence and my answer is Yes because practices come in all shapes and sizes and you can shape a practice to your skills. That's a fair enough difference and I think it's important that people who might be toying with it get to see a range of opinions.
However I do think you live in a different world to me Bob. I smirked hugely at the prospect of some of the services you were describing being offered to our typical clients, who are almost universally self-employed by accident rather than design and regard self-employment and the compliance responsibilities that come with it as something of a curse to be lived through. It's our job to hold their hand through what they see as an annual trial to be avoided as long as possible, and at all costs.
Less than 1% of my clients are 'running a business', less than 10% know remotely what their income will be in 6 months time. Less than 10% are Higher Rate taxpayers and tax planning and projection comprises the effort to convince them that it'd be in their interests to know their Jan tax bill sometime sooner than 29th Jan. But I do love 'em all the same.
I hope you're not commending fee insurance policies being arranged practice-wide and charged on - a hideously lucrative profit centre for insurance companies and firms of accountants. What few enquiries we now have are usually dealt with at a cost of a few hundred pounds. With enquiry frequency now below 0.5%, fee insurance policies are the equivalent of Currys selling £100 extended warranties on their £300 TVs. But that's a debate better held elsewhere.
Accounting = financial therapy
@MarionMorrison - the world I live in is where clients have a desire to have a better quality life, to be protected and feel reassured all will be well.
According to the Turner report there is a £27 billion shortfall. Rather than smirking, why not sit with clients and carry out a personal cashflow review/forecast for the rest of their life to make sure they are not going to have any nasty surprises?
If accountants used their financial skills to wake clients up from their financial sleep and challenged their unconscious financial habits with personal financial coaching, with a purpose of improving their family’s lives, they may find clients being more interested in everything.
The business is massive part of the client's financial planning, probably the most important financial - who is advising on this? Accountants aren't because they don't like selling. Now, is that ethical?
Bob Harper
Yep - this isn't my world
According to the Turner report there is a £27 billion shortfall. Rather than smirking, why not sit with clients and carry out a personal cashflow review/forecast for the rest of their life to make sure they are not going to have any nasty surprises?
I'm smirking at the lack of understanding of the concerns and requirements of our clients. Were you to try and sell some of what you're offering to them, they'd simply laugh at you and would be cheerfully abusive about it. You're still on about businesses, personal financial coaching and cashflow forecasts. So how do you carry out a cashflow review forecast for someone who knows what they're doing for the next couple of months and not a clue after that? How receptive to financial coaching do you think someone who is brown-envelope phobic is? What business advice would you offer to a drummer whose work flows from personal contacts (as all work in that industry comes) - other than to maximise such contacts?
No problem
@MarionMorrison - no problem, I am sure you will;)
By the way, all of the above I am doing via the private client work I do with accountants and through Crunchers who are just about to add-on completing year-end accounts and tax returns to the service range.
I am predicting new competition for accountants from bookkeepers with compliance over the coming years, especially if tax simplification kicks in. In Crunchers we have decided to have a accounting/tax centre with 200-300 highly qualified bookkeepers around the UK.
Bob Harper
The Future
Never miss an opportunity to cross-sell with an inserted free link eh Bob?
I am predicting difficulties for the scuzzy-end of the compliance sector by the arrival of Flat Rate Income Tax for any business with a turnover below the VAT threshold. Driving Instructor? You'll pay 8% of turnover. Taxi Driver? That'll be 10%.
Who needs an accountant or a bookkeeper when all you've got to do is add up bankings?
£10,000 but
@Nigel - I just wanted to be clear that £10,000 is for someone who goes full-time from day one and includes drawings but the person would really need make things happen and have plenty of Charisma.
What I mean by this is lots of effective networking, public speaking and direct approaches to target clients using the phone. Most accountants can not do this so it costs more (time and money).
The person would also need good sales skills, systems and processes. This would include crafting compelling proposals.
Their firm would need a sharp value proposition to penetrate the market and a strong corporate image and high quality collateral.
This is why I recommend people invest in personal development before they launch or expect £30k to £50 but sub-contracting can reduce this.
Bob Harper
Portfolio Marketing