Share this content

Starting own practice and securing fee bank

Wanting to make the plunge but am I talking myself out of it?

Didn't find your answer?

Hi All, I'm looking to leave industry after c 12 years after qualifying in practice as an ACA. Recent industry experience is more group reporting and group Financial control in listed organisations.

 

I am really keen to operate as a sole practitioner in the cloud preferably to avoid unnecessary overheads. 

 

I appreciate I need to brush up on my tax knowledge which I will go on suitable CPD courses alongside finding some selling/marketing tactics.

 

However the main thing will really be getting fee income of c£40-50k in the first year. I would be really grateful on links how to get this. All I see is retiring accountant and maximiti. 

 

I aim to leave full time employment by the end.of the summer as I wouldn't be able build a fee base on side under my contract of employment. 

 

Any tips and advice would really be helpful as I know this will be a big.challenge but I believe I'm conticiencous and hardworking enough to do this the help of outsourcing certain things with time as it grows. 

 

I did look into the franchise route and is still an option, however I would ideally prefer to set up remotely. Perhaps offer the Virtual FC type services too on a monthly basis. 

Replies (40)

Please login or register to join the discussion.

By Moonbeam
10th Apr 2022 18:23

Fee income of £40-£50k in first year really stood out to me. How good are you at sales and marketing? Most accountants aren't. Setting up on your own is very hard work indeed if you're looking for small businesses to work for. You need to build up a good 6 months worth of savings, if not more.
However, the virtual FC services option would earn you a lot more money. It's something I do for several clients. However the marketing is just as tough going.
Please don't go down the franchise route - I've read too many others' stories about the amount of money they paid over and how they still had to do just as much work to get clients as everyone else.
I'm sure come Monday you'll have lots of other responses from some very savvy accountants to help you get to grips with it all.
I've found that AccountingWeb members have been very supportive to me over the years - I'm sure you'll find the same.

Thanks (7)
avatar
By Truthsayer
10th Apr 2022 18:29

'However the main thing will really be getting fee income of c£40-50k in the first year.'

Unless you buy a block of fees, you're in cloud-cuckoo land with that expectation. It will take a lot of effort to even reach £10k in the first year.

Franchises are mostly a con. That applies in all industries, including accountancy.

Thanks (5)
Replying to Truthsayer:
Heather Townsend - accountant's coach
By Heather Townsend
12th Apr 2022 09:41

I'm not sure I agree with this.

If you want a fee bank of £40-50k in your first year then you need to brush up on your sales/marketing. Ideally start to build your profile with your target audience NOW rather than wait.

But if you want to do the part-time FD route £40-50k fee bank in your first year could be as little as 2-4 clients. You may find that calling a few of your contacts over the years helps you find these first clients.

Thanks (0)
avatar
By DKB-Sheffield
10th Apr 2022 19:22

Another one concerned about the fee projection! Is the £40K to £50K the gross fees, or the take-home? You would need to factor in at least £20K for overheads (software, insurance, practicing cert, CPD, basic advertising, website...). That is not to mention accepting that a large amount of time will be spent on 'unbillable' work (probably around 20% - much higher when starting out)!

Also agree with others... franchising - don't bother. There's only usually one winner - the franchisor! You are much better gaining and building your client base on merit. With a franchise, you may actually find that you are building *their* profile... and are at risk of losing *your* profile if the franchisor gets bad press! Think about key franchises (Express by Holiday In for example). You have a great experience at the Express by Holiday Inn Sheffield and 'they' (Holiday Inn Express) are great. You then visit the Hull hotel, have a bad experience and think 'they' (again HIEX) are rubbish! In actual fact the franchisee in Hull is poor, the franchisee in Sheffield is excellent. BUT, the reputation of one affects the other!

The key recommendation is, as Moonbeam very rightly said, you *need* sufficient finance behind you. Starting from a base of zero clients, with significant fee expectation, and little in the way of a financial cushion would not be a good start.

Furthermore, the key expectation of all small businesses is that their accountant has a good knowledge of tax! They rarely care about FRS105, FRS102, Ratio Analysis, Budgets/ Forecasts etc... they need to know what they owe, when they owe it, *AND* how it can be reduced. A 'brush up' of CPD wouldn't suffice, you need a good thorough working knowledge (across the board). If you have that, great. If you don't you need to crack that before you start looking for clients!

'Taking the plunge' is no walk in the park! You *will* work long days, and indeed *most* days whilst you get up and running (probably 2-3 years, or more), will be on call at all hours (I got a client call at 10pm last night, a text message at 8am this morning, and I've been at this for a good number of years), and will lack all of the security you currently have in employment.

However, it is worthwhile, it is enjoyable, and would I go back to working full time in industry (even for a signigicantly increased income)? Absolutely not!

Good luck!

Thanks (3)
avatar
By wilcoskip
10th Apr 2022 21:10

I’ve had two practices since I went self-employed (about 18 years ago, now - how time flies.)
First one I built from scratch. Really, really tough. In the end I couldn’t get to where I needed to be and had to pack it in.
Second one, I bought out my ex-boss (who I initially started sub-contracting for) on a monthly payment based on GRF, done on a handshake (we’re still friends now). With that basic fee bank in place, which paid the bills, I had the security and cash to build sensibly and turn away/get rid of any problem clients.
If I were doing it again, I’d hunt down someone thinking of retiring and strike out some kind of deal.

Thanks (4)
Replying to wilcoskip:
By Moonbeam
11th Apr 2022 08:31

It would be good to read posts elsewhere of how people bought up tranches of fees. I'm sure more of us would be interested in a longer version of your story here.

Thanks (1)
avatar
By HiddenAccountant
10th Apr 2022 21:43

I run my practice part time and it was in the 5th year I breached the £50k mark in turnover.
I accept I don't put in as many hours you are likely to.
Although not impossible that sort of turnover is unlikely in the first year particularly considering traditional billing method where for new companies or newly self employed you don't see any significant payment until about 18 months down the line when you ready to file the first accounts.

As others have said, either have a financial cushion of about 12 months or have a part time job that allows you to practice outside of your job.

Good luck

Thanks (1)
Replying to HiddenAccountant:
By Moonbeam
11th Apr 2022 08:33

I see nothing wrong with billing one twelfth of the fee every month over the accounting year of the client concerned. That's what I do, so your 18 month situation just isn't necessary and there's no chasing for the money.

Thanks (2)
Replying to Moonbeam:
avatar
By HiddenAccountant
12th Apr 2022 01:15

You are quite right, I have now got about 30% of clients on monthly and working to increase that.

Thanks (0)
Replying to HiddenAccountant:
Heather Townsend - accountant's coach
By Heather Townsend
12th Apr 2022 09:44

Definitely start out the way you mean to go on by charging a fixed monthly fee - ideally the subscription model. That way you are not waiting potentially 12 months before you get paid for your first set of accounts. And ideally you will be giving client service all year around.

Thanks (1)
avatar
By Calculatorboy
11th Apr 2022 06:55

As everyone says you're being way too optimistic ...People just don't knock on your door ..I dont think you'll make a penny in first year

Thanks (0)
avatar
By Catherine Newman
11th Apr 2022 08:28

Worcestershire has a business hub in the libraries with business advisers available for free sessions. They also produce free webinars. If you have something similar in your area arrange a meeting.

I have been in business since 1996 and my turnover has hovered around £50K only in the last few years when the girls got older. In 2013 a local accountant retired and I took on his 50 or so clients doing the work for 2 years and accounting for half the fee. All the clients are really happy and the only ones that have left are the ones that are taken out of SA or are no longer alive. It was hard work but it is a lucky breakthrough.

Thanks (1)
Replying to Catherine Newman:
By Moonbeam
11th Apr 2022 08:38

The best business advice service I've ever seen for accountants is here on AccountingWeb. The accountancy practice world differs from the commercial world in some significant respects, and not all generic business advisors understand that.

Thanks (1)
Replying to Moonbeam:
avatar
By Catherine Newman
11th Apr 2022 15:59

That's good advice.

Thanks (0)
avatar
By bernard michael
11th Apr 2022 09:51

With franchises often the clients belong to the franchisor and not you. This means in reality you are building a practice for them for just a share of the fees
Also
I know I bang on about it but have you considered the impact of MTD on both you and your prospective type of client base ??
Industry can be very warm and cosy away from the problems of practice

Thanks (2)
Avatar
By I'msorryIhaven'taclue
11th Apr 2022 10:07

Suggestions for acquiring a client-bank rapidly:

wetakeanyclient.com
lastminuteaccounts.com
accountantsforstartups.co.uk

Don't go near a franchise. The chunk of your t/o they'll take appears to be small, but it'll be a large chunk of your profits.

You could set the ball rolling now by getting together all the forms you might need (LofEs, MLR-related, quotations / work orders, letterheads, practice certificate application) as that's a first step that would ease you into it. And cobble together a business plan - you don't need to hit and hope with this project, but can instead use your skills to financial-model it.

Thanks (1)
avatar
By CJaneH
11th Apr 2022 11:49

I am a bit concerned you have not been in practice for 12 years. There have been a lot of changes in that time. You seem more worried about marketing yourself and turnover than your capabilities to provide a service.

Thanks (1)
Routemaster image
By tom123
11th Apr 2022 12:04

Do you really want this though?
I am a CFO, and recently changed sectors (from manufacturing to education).
Never worked in practice, (bar a couple of friends BTL accounts).
I used to think it appealed, ie after Uni, thinking of KPMG etc.

With 12 year's industry experience do you really want to start looking at paper bags of other people's receipts..

I enjoy reading about it on here, but, 20 years of Aweb has not persuaded me yet.

Thanks (1)
Replying to tom123:
By Moonbeam
11th Apr 2022 13:15

The world has changed. You don't have to take on clients with paper bags of receipts any more. I haven't had a client like that for several years. Most of mine are on Xero and upload supplier invoices to their bookkeeping software.

Thanks (0)
Replying to Moonbeam:
Routemaster image
By tom123
11th Apr 2022 15:37

I guess, ideally..

I use Xero for a couple of charities I am trustee of - and it's quite nice.

It's just that newbies probably end up taking on the dross that established folk such as yourself have turned down :)

Thanks (1)
Replying to tom123:
Heather Townsend - accountant's coach
By Heather Townsend
12th Apr 2022 09:46

There is no need to take the dross or the bags of receipts type of clients.

And as Moonbeam said, the world of accounting has moved on leaps and bounds in the last few years. MTD for ITSA should remove the last few clients who hand over a bag of receipts.

Thanks (0)
avatar
By Andy556
11th Apr 2022 12:38

£40k - £50k in a first year is hopeful as you're coming direct from industry assuming you have no real contacts in practice and you've mentioned you can't have any clients while still employed.

I was in practice for 12 years, left to go to industry for a couple of years while applying for my practicing certificate and building a small client base in addition to working full time. I was working 9 - 5 then 8pm until 1am most evenings.
It still took 18 months to break 50k turnover solely from my new accountancy practice after I left my full time job and I had pretty good contacts to help me out.

Doing it without any help from scratch, depending on how good your marketing is and if you're not going into a niche sector then I would say you're looking at 3 years minimum unless you do something amazing

Thanks (1)
My photo
By Matrix
11th Apr 2022 13:44

I assume you are doing this for work/life balance since it would be hard to match the corporate benefits as a sole practitioner.

I would start with some virtual FD clients where you are comfortable and bigger clients will pay more. You need loads of micro clients to make decent money.

Do a search on here, loads of threads to help, also do the ICAEW questionnaire to check you are ready. The general rule is you shouldn’t be taking on work you do not have the knowledge or experience to do. You may think you know about the known unknowns but what about the unknown unknowns?

Thanks (0)
Replying to Matrix:
avatar
By Tax is always taxing
11th Apr 2022 15:47

Are known unknowns unknown, if they are known... and can anyone know about the unknown unknowns, otherwise they would be the known unknowns.. or is it just knowns?

Thanks (0)
avatar
By RobbieT
11th Apr 2022 16:17

As others have said, expecting a £50k year-one turnover requires either buying a block of fees, a [***]-ton of marketing budget or a large circle of acquaintances all looking to change accountants en masse. Unlikely. However, if you can secure a couple of day-a-week FC gigs then that gets you a long way down the track. It may give the you luxury of growing your practice organically where you can choose your customers (or at least have the option of not accepting bad business, which can 80:20 you into a breakdown)
Also, consider your optimum client. As a one-man band it's tricky to walk into a large prospect and sell that you're as efficient as a 10-partner firm with 30 juniors & bookkeepers. So, who are you looking for? If you're not going to out-source bookkeeping then you're likely tilting at 1- or 2-director SMEs providing cloud bookkeeping, payroll, VAT, mngt accounts & stat accounts. How many of those can you service in a month? Any time spent servicing those clients cannot be spent on marketing, onboarding, getting your software stack set up, agent references etc. There is a LOT involved in setting up a practice on top of client acquisition & servicing said clients.
For what it's worth, Y1 £50k is achievable, but it requires some stars to align as well as some prep. Happy to discuss in private. My situation was similar 6 years ago

Thanks (1)
Replying to RobbieT:
avatar
By SNS83
19th Jun 2022 15:42

Hi. Is there a way to contact privately without giving my private details to the wider thread? Kind of new to this platform.

Thanks (0)
Replying to RobbieT:
avatar
By SNS83
19th Jun 2022 15:42

Hi. Is there a way to contact privately without giving my private details to the wider thread? Kind of new to this platform.

Thanks (0)
Replying to SNS83:
avatar
By DKB-Sheffield
19th Jun 2022 18:35

Hi

Click the username in the post (underlined), then click "Send #### a private message"

Thanks (1)
Replying to SNS83:
avatar
By Hugo Fair
19th Jun 2022 18:36

Yes ... but only to someone who's already replied within this thread - and you're a bit late in replying to or following-up with any of those responders.

* Find a post by the person with whom you wish to communicate ... and click on their name at the start of that post
* This will take you to their Profile page ... where you can select the link labelled 'Send username a private message'
* This will open a page where you can send a DM to that person without it being visible to other users (although it can still be read/moderated by the site mods)
* It is up to that person as to whether or not they choose to reply to you (or indeed to share other contact details)

Thanks (1)
avatar
By tonybrown
11th Apr 2022 22:01

Have you got a practising certificate ? 12 years away is a long time with everything moving rapidly. I would suggest doing sub contract work whilst still employed and build up from there. Moving from FC/FD to listening to Peggy Nails telling you how many sets of nails she has done a week is not for everybody.

Thanks (0)
Replying to tonybrown:
avatar
By DKB-Sheffield
11th Apr 2022 22:42

tonybrown wrote:

Moving from FC/FD to listening to Peggy Nails telling you how many sets of nails she has done a week is not for everybody.

Not to mention then asking how many she has actually done!

"No really... how many? Not just the ones who paid by card, all of them. Yes, include 'cash sales'. Of course 'mates rates' are included! Are you seriously telling me that in 6 days you only had 3 customers? And 'no' you can't claim tax relief on your vets bills - even if your mates say you can!"

Thanks (4)
avatar
By Peter Bussey
12th Apr 2022 09:46

In terms of brushing up on knowledge from CPD, my view is the theory is very different from what is needed in practice, and no one teaches how to set up agent accounts with HMRC and the other foibles of dealing with HMRC.

Thanks (0)
Stuart Walker Yellow Tomato Copy
By winton50
12th Apr 2022 09:51

The really important point here if you want to attain that kind of fee income that quickly is that you won't be an accountant at all.

You will have to totally transform the way you think.

You suggested that the course you do would be on tax. I'd argue that this is probably one of the last things you need to be doing.

You need to be doing courses on sales and marketing. You need to get your offer right. You need to understand subscription models and you need a stunningly good website.

You either need to completely understand marketing and SEO or get someone really good who does.

Why do you think that franchise operations do so well? It's not because they are brilliant accountants, after all, they get other people to do that! It's because they are really good at marketing a lifestyle to unsatisfied corporate accountants.

If you want to get to £40k in your first year you will be spending 100 hours a week filling your sales pipeline because you have to kiss a lot of frogs.

Remember that you can buy in bookkeeping, accountancy and tax expertise whenever you need it.

Your USP needs to be that you can market to and talk to real people rather than your corporate buddies.

Your alternative is to go down the remote FC/FD route but I warn you that competition is incredibly stiff in that sector and although you'd think that every growing business could see the need for a virtual FD/FC you'd be amazed at how few owners agree.

I've had gigs turn up 18 months after an initial networking meeting. So I'd say if you are thinking about making the leap, start preparing the groundwork way way in advance of day one and then at least you'll have a running start.

Thanks (0)
Replying to winton50:
Routemaster image
By tom123
12th Apr 2022 09:59

But isn't the saying that you "shouldn't contract out your core competence".

If the OP goes this route then they are surely 'just' a sales rep.

Not to say that sales is not a skill, it is, but again, - totally different to the OP work.

Thanks (0)
Routemaster image
By tom123
12th Apr 2022 09:57

Many others on Aweb have launched over the years intending to do virtual FD type stuff.
In the end, they have ended up with compliance work.
Not saying that isn't paying the bills.
It is just so different from the work the OP is currently doing, (and indeed what I always do) that it is almost a totally different profession.

Thanks (1)
Replying to tom123:
By ireallyshouldknowthisbut
12th Apr 2022 10:17

When I came out of industry many moon ago I offered "virtual FD", but had no takers. I do actually act as virtual FD for a couple of my clients, one of whom I have acted for since I started (20 years) and has grown from a partnership to 20+ heads. I started of course doing their compliance work. And even now, they mainly pay me for that and get a bit grumpy when I suggest I might like to bill for the 2 hours we just did on their business planning so I mainly build it into their accounts fee, and would not wear (I have tried) a monthly "FD" fee to cover a number of advice hours a year.

People will pay to "file stuff for them" they will rarely pay for advice unless its very specific around tax planning.

Thanks (2)
Replying to ireallyshouldknowthisbut:
By Moonbeam
12th Apr 2022 21:40

Yes, your experience tallies with mine.

Thanks (1)
avatar
By NewACA
12th Apr 2022 10:41

I started my practice in 2012, when it was easy to build a firm, as almost all prospects (over £30k profit) benefited hugely by incorporating. I made £30k turnover in first year, and by year 3 was on £100k turnover, which included buying a £30k fee bank in my third year from a retiring accountant. If you need to ask how to find a retiring accountant, being self employed is about being a go getter - you should be able to work out yourself how to find almost retiring accountants and go get them!

Having said that:

1. I made a loss of £14k in first year;
2. I needed two years worth of living expenses to find (in fact I didn't have any savings, I borrowed from my Dad and managed to pay him back 5 years later, plus got tax credits as I have children, got £12k from HMRC in the first year I think it was in tax credits - as no income - before they applied the self-employed minimum deemed income, so you won't get that much now).
3. I was a senior manager in a small practice prior to setting up myself, I was the main person dealing with prospects and went on lots of courses on how to do sales and marketing in the accountancy world.
4. I got my chartered tax adviser status while I didn't have much work in the first year .

So when I struck out on my own I already knew exactly what I was doing. Coming from Industry, you'll probably spend a lot of time getting up to scratch not just technically in terms of micro-accounts and tax, but also how clients think and what they want, burning money on what marketing works and what doesn't, how to systemise your practice etc etc. The chartered tax adviser status helped me with tax planning, and was a badge to attracting multi-million turnover businesses with good profits that wanted to pay for decent tax planning, clients that want a high level of personal service. My biggest client was £9m turnover.
5. I also did bookkeeping at the beginning, which made up about 30% of my turnover perhaps, I only got rid of most of the bookkeeping after 5 years, when I could dump it as it was less profitable. So I had a variety of rates: £59 for bookkeeping/hour all the way to £200/hour for quality tax planning. My average rate was about £90/hour overall, with most of the work being doing accountants and tax returns. I only got £59/hour for the bookkeeping, as I spent a month (first year when not much work) designing my own macro-powered double-entry bookkeeping spreadsheet that took my half the time to do the bookkeeping compared to others using Xero, QB or Sage, plus of course avoided all the Xero, QB and Sage fees.
6. Got to £215k turnover by end of year 5, with 2 members of staff (£130k bottom-line profit for me).
7. Note however, that the block of fees retiring accountant I bought £30k GRF from took 10 years for him to get to £30k turnover (he told me), as he (a) did it part-time (b) came from industry, so knew very little, (c) didn't have the get up and go attitude. Incidentally, he also joined a franchise...

I would say I was relatively unusual, in that I noticed I was prepared to do what others didn't: get a chartered tax qualification, wipe the floors and clean clients bottoms on evenings and weekends if necessary. As self-employed, you get what you put in. To succeed, you really need to know what a client is like (and there are different types) inside out, so that you actually know what they want and what there problems are before even they do, plus know what tools you are going to use to make you highly profitable (less than £30 a client per year on all services, including bookkeeping software). If you can do that, and you'll be ok. To be great, you'll need to be good at problem solving and thinking outside of the box: both in terms of clients solutions and how to do marketing. The best marketing that works is usually something that nobody else is doing - so those doing that are never going to tell you what are the real diamonds in finding clients.

Thanks (7)
Mark Telford Chartered Accountant
By Mark Telford
25th Apr 2022 18:02

Why are you looking to change? Running a small accountancy practice is a million miles away from being big finance cheese no.2 in a big corporate.

£40-£50k fees is achievable.

I did more than that in year 1 but did work very hard to get that.

You need to be very clear on what it is you will be doing, who your ideal client is, where you'll find them, how you'll network and spread the word, how you'll do the work, how you'll charge.

Can you remember how an accountancy practice operates (the admin/AML/HMRC/compliance side of things)?

Get a part-time contracting/consultancy role to give you some income (and peace of mind) for the first 6 months.

Try and get a part-time/contract role in an accountancy practice so you can see how they do it.

Plan, plan and plan some more.

Thanks (1)
avatar
By JD
19th Jun 2022 21:46

Spend some time building relationships, defining what you plan to offer/what problem you are solving and your systems for delivering your service. It will take time and you may want other income/employment as you build your list.

Thanks (0)
Share this content