Ten decisions to make when starting up in practice
Mark Lee outlines some key considerations for new practice success.
Decision 1 – Who will you target?
You will secure more clients faster if you are perceived as having a special focus on a specific niche – be that clients in a specific business type (e.g. shop owners, hospital consultants or dentists); those with specific issues (e.g. overseas property, divorce, large family, business start-up) or those willing to use your preferred bookkeeping and accounting software? Most accountants start up with no such focus and simply try to be all things to all people. You will be more successful faster if you have a clear focus.
Decision 2 – How will you distinguish yourself?
Try to avoid being seen as just another accountant. Unless you do this you will probably struggle to pick up work from established businesses and from taxpayers who already have an accountant. Your distinction needs to be real and not a figment of your imagination - and it needs to benefit your target clients.
Will you be targeting those who are looking for their first accountant or those who are fed up and want to move to someone new and different? That difference may be financial (as in lower fees) or it could be fixed fees, different services, a more businesslike approach, a more confident style or something else that the old accountant didn’t do in the way the client wanted.
Decision 3 – What services will you offer?
Many people start up and offer their services to everyone and anyone, which invariably results in loads of small low fees and no clarity as to what distinguishes the accountant from all the others. That then makes it difficult to grow and to attract more profitable clients.
Will you be servicing private clients? Unincorporated businesses? Partnerships? Limited companies? Will you be compliance led or also offering advice? On what subjects do you have the credibility and experience to provide valuable advice? If you would like to enhance your service offerings over time, where will you learn the additional skills you need? What support will you require?
Decision 4 – Know your competition
Research online, in local newspapers, directories and in the high street. Check out what others are doing, saying and claiming. You may find someone else has a similar focus to you. Their credentials and promises will be different to yours. You will need to understand those differences and whether this offers prospective clients a choice or means you should consider an alternative niche.
Decision 5 – Your pricing and billing strategy
Many accountants start by undercutting the competition. This means they build small practices full of cost conscious clients who will never move onto paying commercial fees. Is that what you really want? Do you really believe that everyone who uses an accountant chooses who they engage solely by reference to the lowest price?
Decide whether to adopt fixed fees value based fees or the more traditional time based charges for compliance work. Decide how you want to deal with advisory work. Rather than turn it down, as many accountants do, or undervaluing it as many others do, consider how you might collaborate with nearby specialists and sub-contract to them when clients want advice that goes beyond your knowledge or capabilities.
Beyond fee levels, determine your payment terms – up front, partial upfront, standing orders or only billing after the work is completed with payment due within 7 days/14 days/30 days. What will you do if your payment terms aren’t met?
Decision 6 – Your marketing plan
How are you going to secure new clients? Where will you go? What will you do? What will you say? What will you spend? Consider the costs of securing new clients, whether through marketing, networking or advertising.
You probably assume that it’s easy to get friends, family and other people you know to tell their contacts about you. This is called referral marketing. Many established accountants claim to get most of their new clients this way. However, when you’re new in practice it’s more difficult unless you really understand how to present your firm and your services in a way that enables other people to refer you on to their contacts and clients.
Decision 7 – Decide on your business plan
As a trained accountant you should understand the concept of business plans and of cashflow forecasts. You wouldn’t dream of starting in practice without one would you?
If you want to build a successful and profitable practice you will need a plan. Wishful thinking is never enough.
What do you want to achieve in revenues within a year, two years, or five years? What will you need to do to achieve those objectives and what will be the consequences and cost of doing so? Drafting the plan and incorporating cashflow projections will force you to consider related issues and to plan what actions you will need to take to achieve your objectives. All of the decisions on this list will also inform your business plan.
Your cashflow should include all of your business costs including PI and other business insurances. Will you work alone or need admin, secretarial or technical support staff? Will you do everything alone or use a virtual assistant? What about sub-contractors? How will such decisions impact your cashflow projections and the money you need to earn from clients?
Decision 8 – Establish commercial processes
The more systems you have in place the more efficient and organised you will be. That may not be your style of course. You may decide to hold off choosing your software support, but you’ll never have more time than when you’re starting up.
What compliance software will you use for the production and filing of tax returns and accounts? CRM (your client and marketing database? Practice management? Bookkeeping? Preferred bookkeeping and accounting software for clients to use? What about client sign-up procedures, anti-money laundering identity checks, through to billing and cash collection procedures. Internet banking? Will you be happy to work in the ‘cloud’ or will you need hosted applications and backup facilities?
How many screens will you need for your office work? Many people now consider two to be a minimum. If you’re planning to keep paper to a minimum then three screens are almost a necessity (one for internet/research, one for source documents and one for the output you’re creating).
Decision 9 – How will you keep up to date with relevant developments?
Do you still use books? Which ones do you need to have to hand and which can you access online or in libraries? When you need to check technical developments will you go online or look things up? Don’t buy too many books at the outset – just those you need, when you need them.
Online resources such as AccountingWEB are helpful for quick, up to the minute updates on key tax information or general practice advice. If you prefer hard copy, updates subscribe to relevant magazines too. Consider your CPD obligations and how you will satisfy these.
Decision 10 – Anticipate the level of support you will require
You will feel more comfortable and be more confident if you know you can rely on a support network.
That might simply be ex-colleagues who are always on hand, or your professional body may provide a helpline facility. You may want a more objective and independent mentor to work with you and to encourage and support you.
Mark Lee is Consultant Practice Editor of AccoutingWEB and chairman of the Tax Advice Network, which provides tax support to over 2,500 accountants across the UK.