Set up the balance sheet: Experts advise new firms
Many accountants aspire to setting up their own practice. However, all owners of new firms face challenges, such as long working hours and doing every job from marketing and sales in addition to client work.
We asked experienced accountants what advice they would offer to those starting out on their own for the first time.
Define the business: Know thyself. And thy customers
A new business offers exciting but potentially overwhelming possibilities and there is much agreement about how important it is to define what kind of firm you want to be. For startup coach Carl Reader, this is a chance to rethink everything: “Start with a blank sheet of paper, not the operations manual from the firm you started with.”
Focusing on niches and understanding the services you are most qualified to serve was also a common thread: “Be specific about the services you are going to provide,” said Elaine Clark from Cheap Accounting. “Not ‘self assessment’ but ‘self assessment for x type of client’. Focus on what you know and are confident in delivering.”
Jen Gerrard extended this to fully understanding your client: “Build a business around need. What you think potential clients want is usually different to what they actually want.”
And of course make sure they are profitable, added Clare Doherty, the digital tax manager at TaxKings Accountants. “Don't agree to everything, just because the client asks. You'll end up doing it forever.”
“A long-term client billed at reasonable rates is more profitable than a one-shot client billed at high rates,” advised Mark Ivanowski, a 36 year CPA. “If clients think your prices are fair, they will send other clients. Be flexible in the first year. It will pay off.”
Michael Ogilvie of OBC The Accountants encapsulated the whole process with a metaphor: “Only fish in the bits of ocean where fish are swimming, using bait they want to eat, rather than bait you think they want to eat.”
Building the business: Foundations and structures
When it comes to growing the business, a strong infrastructure needs solid foundations. “Start with the end in mind,” suggested Gloria Murray,” and design your business to deliver. I didn't and ended up with a business that couldn't give me the results I wanted. As accountants we know how to do this. But it takes time and it's easy to get carried away with the ‘doing' bit.”
For Florida-based accountant Bette Hochberger, the initial years should be frugal: “Spend as little as possible and make sure it has good returns. Do as much as you can yourself, work from home, don't hire too many staff right away, and don't offer credit to clients.”
At this early stage, there are a lot of pieces to move into position and skills to learn. Alan Woods of Woods Squared feels the business owner should focus on the growth of the company first: “Act like you are starting a business not an accountancy firm. Accountants seem to leave the profit to chance more than anybody else.”
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“Make sure you put in place standard systems for the delivery of each service,” said Jessica Pillow, director of Pillow May: “so that you can easily scale and grow in the future – or survive if a key person gets taken out of the business!”
Archna Tharam, from Oculus Accountancy, offered the 80:20 principle as a metric for prioritising: “Most accountants think setting up a practice is 80% being an accountant and 20% running a business. But it's the other way round. It's only 20% about being an accountant, which most of us are good at anyway. It's the business part a new owner needs to learn.”
Finding balance: The digital practice and the networked accountant
Technology offers invaluable support but the proliferation of products and pace of change make it hard to navigate. Olly Evans, from Bristol-based Evans & Partners, said: “Automate everything and compromise on perfection if you need to by accepting what systems can do now. What's your choice of cloud technology? Ability to integrate across a wide range of systems is key. Keep it simple. Value for money is more important than price.”
Technology is also key to bringing in clients: “Invest whatever start-up money you have into a decent website with some digital marketing behind it,” said Glenn Martin.
Finally, it helps to stand back and get a larger perspective. Woods, again: “You should start your own business to create the life that you want; so that you can do what you want, when you want, with whom you want. Apply this mantra to team members, customers and suppliers, and I don't think you'll go far wrong.”
What is your advice to those who have been in practice for a while and now see the opportunity to create a new firm?