Can your new firm be profitable in its first year?by
Is it really possible to create a profitable firm within the first 12 months of trading? Will Cole chats with Mark Telford on how he reached the £100,000 milestone in year one and how others can do the same.
Making the decision to set up your own firm can be daunting for accountants working in practice and those who may have grown comfortable with the corporate experience. In a recent Any Answers thread, user SNS83 put this dilemma to the community, questioning whether moving away from a 12-year stint in industry to strike out on their own was really viable.
While members were happy to offer their advice, SNS83’s “£40-50k” first-year income estimate triggered a spirited debate among users on the financial realities of going solo.
Any Answers regular Moonbeam advised approaching the challenge with more realistic expectations: “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 six months worth of savings, if not more.”
Many users agreed with Moonbeam’s assessment, with others believing that such an estimation was optimistic for someone starting from scratch with no investment into marketing and sales.
Heather Townsend, founder and author of the Accountants Millionaires’ Club, argued that: “If you want a fee bank of £40-50k in your first year then you need to brush up on your sales/marketing. Ideally you need to start building your profile with your target audience now rather than wait.”
Others were even more sceptical of the original poster’s income projections. “As everyone says, you’re being way too optimistic,” cautioned Calculatorboy. “People just don’t knock on your door – I don’t think you’ll make a penny in the first year.”
An achievable goal
Mark Telford, founder of Telford’s Chartered Accountants and formerly known around these parts as Kent Accountant, took a more positive stance on income potential in the first year of business.
His firm surpassed £50,000 turnover in its first year by a substantial margin and Telford was keen to emphasise that becoming profitable within the first 12 months was achievable.
“If somebody takes the right approach when it comes to setting up a profitable practice, you can definitely smash through it. I was able to make far more than that in my first 12 months of business,” Telford said.
From the outset, he prioritised generating a stable income, as his savings would only carry him so far.
“I was in a situation where I was moving from a full-time role where I had been on a six-figure income. My overriding driver was I needed to get my income up to that level as soon as possible because I didn’t have loads of savings. So it came down to really asking how I could do that.”
Rethinking the model
While able to smash his targets in such a short amount of time, Telford said the early success was down to a good business model, especially when it came to remaining cash solvent: “The main way I stayed afloat in the beginning was by not working on this traditional accountancy type model from day one, which was ‘I need to get x amount of clients, whatever it might be, and build a base from there.’”
Instead Telford focused on transitioning to “subcontractor consultancy type work for one, two or three days a week to allow me to pay the bills”. This subcontracting and consultancy lifeline gave him peace of mind in the short term while generating cash to help him build the practice on his own terms. “A subcontract or part-time role while building up your accountancy practice makes things much more manageable. It avoids you taking on those clients that really aren’t a good fit, allowing you to be a bit more selective.”
However, while reconsidering the traditional route was a key driver for Telford, he noted that individuals moving from industry are in a unique position to achieve success. “Somebody moving from industry has a lot of different skills compared to somebody who’s only ever worked in practice,” said Telford.
Leading on from the Any Answers community, Telford agreed on the importance of investing in marketing, arguing that a key area he focused on when starting out was to ensure he utilised every contact he had to get his firm’s name out.
“The main thing was making sure that I told everybody that I’d ever worked with what I was doing,” Telford said, adding that he would contact everyone “from customers and suppliers, to old work colleagues”.
And it is this network, Telford believes, that helped drive the more long-term marketing goal of reference and referral, something which his firm prides itself on to this day.
“Primarily, most growth comes through referral and recommendation. When you do get those clients, make sure they're completely happy with the service you provided, and then ask if they know other businesses that would benefit from working with you. That type of approach still does work.”
Rounding off our chat, Telford brought things back to basics by putting a real emphasis on the planning stages of starting a firm. While understanding that this may seem obvious to many, he noted that a lot of the time, new firms haven’t laid the groundwork required for sustainable success.
“Plan for it,” Telford said, adding: “You can’t plan enough when you’re setting your business up. Having clarity and a good idea of what your ideal clients look like and really understanding what it is you want to achieve – that’s key.”