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There are three categories of accountants that leave their job to start their own practice. Those with five to eight years’ experience; 15 to 20 years of experience and those over age 50 who lose their job for one reason or another.
People with five to eight years of experience usually leave because they are tired of having a boss and working unreasonable hours during tax season, don’t like their clients or the work they are doing, and want to conquer the world with their own accounting practice.
Those with about 15 to 20 years think they could have a better future being their own boss and think they could create equity with their practice. They are also worn down by what they feel are unreasonable and usually uncompensated tax season hours.
Public accountants over age 50 usually can easily get another job in public accounting but are unhappy with the tax season grind and lack of extra pay for it. They want a calmer, less hectic work life and feel this could be accomplished by having their own practice. Further, many of these people have developed a book of business outside of their employer and feel they could take some clients and get started in their own practice. The “taking” of clients could either be accomplished by them asking the clients to go with them or by making an offer to buy the clients from their employer. Some leave because they do not think their “old” boss will ever retire. They don’t want to hang around until their boss dies and then have to deal with the family.
I could write a separate column about each of these, but what I want to address now are the common problems of starting and running a practice. For simplicity’s sake, I will assume they will not have any accounting staff, although this might not be the situation if they have purchased a practice with staff.
The day they leave their job is the first day they are in their own business. They will no longer primarily be accountants; they will morph into entrepreneurs. Entrepreneurs first, accountants second! The services they will be performing will be accounting services, but that will be their “day job.” The rest of the time they will be entrepreneurs. That means they will need to think like businesspeople. Whatever they do for their clients, they need to do the best they can since that is how they will generate revenue. But the businessperson role will be how they generate cash flow, allocate their resources (which means how they decide to spend their time), develop referral sources and generate new clients, establish office procedures and make sure they have paper clips, a courier service account, postage stamps or a postal meter machine, and a way to have their phones answered and messages taken. If a tax return needs processing, they will need to do it, or make arrangements for someone else to do it. In effect everything that needs to be done and should be done is their responsibility.
Nothing is difficult, but it all must be considered and set up and done. Being organized means doing the right things the right way at the right time. It also becomes easier if systems are set up and “cookie cutters” are modeled for repetitive tasks. Reinventing a process each time something that has been previously done is a debilitating motion that will destroy time and remove the ability to conquer your allocation of your time, and for you to grow. Being an entrepreneur means running a business and not being an accountant with you as the boss that simply replaced your previous boss.
Being an entrepreneur means developing a business mindset. Your work as an accountant is basically a 9 to 5 job. Your work as an entrepreneur is a 24/7 job. You need to become aware of everything that needs to (or ought to) be done. You need to become systems and processes oriented, and you need to be well organized.
I have some caveats for those starting their own practice:
- I know many people who started a practice without any side clients, but I think those that did some moonlighting are somewhat entrepreneurial and will have a much better chance of success.
- Starting is an opportunity and should not be treated as a chore or something that you have no choice in what you are doing. You have a choice since you could always get a job with a CPA firm.
- Choosing clients is not a luxury, and I suggest you consider accepting every client you can get, assuming the pricing is right and the services align with your capabilities. You might not have the luxury to turn down clients whose personalities you do not care for, so you should overlook personality peculiarities and concentrate on the work you need to do while doing the best you can do; your ego should not permit you to do less than your best.
- The only clients you should pass on are those who expect you to cut inappropriate corners. You cannot afford the luxury of associating with or working for those clients.
- You do not need to bill every tenth of an hour of work you do, nor charge for every extra you do. What you need to do is price your overall services so at the end of the year you have made a living, fully funded your retirement account, have some funds left over to grow your practice’s infrastructure and have some profits left over.
- Allow two years for startup, and you should be starting year three of your business with the right pricing described in the previous bullet point.
Last week I posted about what I believe non-managing partners should do regarding practice management. Everything there should also be adopted by you. I am providing a link if you haven’t read it instead of repeating it and incorporating that info in this column.
Starting a business is exciting and as interesting as anything you could do. I wish you great success and hope you appreciate the opportunity you are giving yourself to grow your own business. All the best.
Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.
