[Anonymous]

Has anyone had experience with starting an accounting/CPA firm? How should an aspiring entrepreneur prepare for it? What are the challenges and difficulties? Why do so many CPAs rather work for others instead of starting their own shop?

It seems to me the number one problem with starting a CPA firm is client acquisition. My plan is to start a firm doing mostly tax work. How should I go about avoiding the pitfalls in client acquisition and what kind of personality should I have to succeed in this endeavor?

Also, when would be a good time to market tax service? I assume it would be 5-2 months before the filing deadline, so maybe Nov-Feb and May-July?

[jstay]

i saw somewhere about going to town meetings and doing their work for a bit lower then normal just to network, seemed like a good idea. check reddit too

[Anonymous]

Has anyone had experience with starting an accounting/CPA firm?

No. Your state board of accountancy should be able to help you out.

How should an aspiring entrepreneur prepare for it?

You're a salesman now. Not an accountant. Start prospecting for business. Start now.

What are the challenges and difficulties?

Making money. There are some pretty high start up costs on decent software too. Depending on your work, you may want to consider professional liability insurance. CPAs have personally, unlimited liability for their acts and lords knows people aren't afraid to sue these days.

Why do so many CPAs rather work for others instead of starting their own shop?

Actually, quite a few have their own shop. I think the figure is somewhere around 20% of all CPAs are sole practitioners.

It seems to me the number one problem with starting a CPA firm is client acquisition. My plan is to start a firm doing mostly tax work. How should I go about avoiding the pitfalls in client acquisition and what kind of personality should I have to succeed in this endeavor?

Avoid the rate squeeze early on. Also, don't be afraid to turn away clients that you think are shifty or won't pay their bills. There are plenty of successful personalities in public accounting. That being said, I think we should ask what is the best frame of mind? That would be customer-oriented.

Also, when would be a good time to market tax service? I assume it would be 5-2 months before the filing deadline, so maybe Nov-Feb and May-July?

I would start now. Extensions are due in the fall. You may be able to pick a few up. Maybe some straggling compilations. As far as timing the main busy season- that would really depend on your intended consumers. If you're looking to do more complex tax returns (higher net worth individuals and businesses), you're going to have to approach them differently than you would John and Jane Doe who are both teachers and are generally more price sensitive.

“Network Management” would be the best approach for high net worth. For easy, high volume work, I'd try Facebook, direct mailings etc.

If you're trying to do both, you may want to consider opening two firms. High Net worth people generally don't get their taxes done by Harry the Tax Guy, CPA who they just got a direct mailing from. They use Stratton Oakmont & Associates who they were referred to by their attorney.

Food for thought-

If you're targeting individuals and/or small businesses (whose financials are often intermingled), you should consider getting a CFP/PFS or similar. A nice value add for this market is the ability to do financial planning, retirement services, maybe elder care. You can get more revenue per customer for minimal increase in cost.

[Anonymous]

Starting from scratch, like anything, is difficult.

I think the most common method is actually acquiring the practice of a retiring CPA. The standard sales price seems to be 1x gross billings.

Check out “AccountingPracticeSales:. They seem to be a premier broker for practice sales. They also have helpful guides for buyers and sellers. Most CPA practices are sold via owner financing. You would need to come up with a 25% or so deposit and have some working capital.

Unless you have a large family of business owners, this may be your best bet.

[h0wdyus]

Keep in mind you will need working capital set aside for expenses such as rent and other office expenses/

Further you will need to budget money for your personal expenses and rent for home; food ; medical insurance etc.

You need to be able to survive at least 2 years without making money. So have enough money saved up for the expenses mentioned above before you start.

FAR - 81 29th Aug 2013
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FROM NJ

[Anonymous]

Thank you all so much for the helpful input. I have the following questions in addition to what I mentioned above:

1.If a small business requests tax service from the firm, what steps will be involved before the engagement begins?

2.What information will be required to be transferred to the firm and by what date?

3.Can the tax services be provided remotely?

4.Are compilations usually bundled with tax return services? Why?

5.What methods of payment are usually accepted?

[Anonymous]

I'll give this a shot:

1. Same as when you did your audit hours (assuming you have worked in public accounting). Everything begins with the engagement letter begin signed.

2. Don't understand the question

3. Of course

4. Compilations fall under attestation services. If you intend on providing attestation services (compilation, review, audit) you will have to undergo peer review, register as a CPA firm, etc. Many small firms do not provide attestation services.

5. If you use one of the major professional tax software's (Drake, ATX, etc) I believe you can deduct your fee from the clients return. You will can also register to accept credit cards etc (check out AICPA store). Can also accept checks of course.

[Anonymous]

Thanks for your reply. My second question meant to ask what information would the client be required to transfer to the CPA firm and by what deadline(how long before the due date of the filling).

[Anonymous]

This is from my experience working at a small CPA firm which focuses primarily on taxes:

1) Same as what Charlie said.

2) This question is both client and engagement-specific. For monthly compilations for our most complex accounts we typically require information from the client at least two weeks before we'll issue a compilation. For taxes (individual, partnership, corporate, etc.) we typically require all of the tax forms and information necessary to prepare a return for a client anywhere from three days to one month prior to completing the return. However, we do have slacker clients who will bring in their documents on October 14th when we can't extend them anymore and beg for help. In the end it's up to you as to how you'd want your turnaround time and deadlines scheduled.

3) Yes, and it's our preferred method of receiving client data as our office is mainly paperless. We use a secure client portal via our website to receive documents from clients and share compilations and return copies via password-encrypted files through email (make sure you read up on Circular 230 if you choose to employ this method).

4) No, not normally. We do have several clients we perform CFO services for that have their financial statements and tax returns bundled in terms of pricing but compilations are almost always billed separately from tax return preparation at my firm.

5) We accept cash, checks, and credit card payments. We use an online credit card processor, so it's fairly cost effective for us. We use UltraTax CS and have deducted our fees from client refunds in the past at the client's request as Charlie mentioned, but my employer had shared an article a few months ago that stated the IRS would be curtailing this practice starting next year. I don't have a link to the article, but I believe the information was either directly from the IRS or the AICPA. I'm not sure if that's something they plan to enforce right away or if it's something they're considering doing, but I know we need to look into it at my firm more before next tax season.

[h0wdyus]

@amandilee

“We use a secure client portal via our website to receive documents from clients and share compilations and return copies via password-encrypted files through email (make sure you read up on Circular 230 if you choose to employ this method).”

I wanted to know how the IT infrastructure is set up. Is there a IT company that provides services for the desktops in the office and maintenance of websites etc. Some names of the IT firms; description of service rendered and fees they charge. Is all the data store in the cloud/ Managed hosting or you have a sort of a datacenter in our office with dedicated IT staff.

Thanks

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
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FROM NJ

[dpad124]

ClubChowder

My question to you, how much accounting experience do you have?

Based on some of your questions, you aren't too familiar with how a firm operates.

My suggestion is to get more experience before you jump in.

Another option would be to work with a retiring cpa and then take over their business.

BEC Oct2014 - 85
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[tomq04]

@ h0wdy

I'm talking from my experience at a software company, you (a firm) can have as much control as you like. Folks like us can help get you set up, and train you how to run everything and you can call in times of emergency. Alternatively, you can do monthly subscriptions with us and have continual support with the knowledge that everything will be up, or have very limited down time.

Like most things in life, you can pay as much as you like!

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[Anonymous]

Thank you all for your helpful responses.

With my forth question, I meant to ask is it necessary to perform compilation services to a client if you would like to just perform tax services to the same client? Why is compilation services required to for tax services?

I ask this because I would like to provide tax services exclusively without providing compilation services.

[h0wdyus]

@tomq04

Thanks for the response. I am not going to start up anything right now .. Was trying to just find out how much will it cost to get the maintenance contract and then the other option where I could just be trained to use and fix the systems.

So you are currently work in accounting or you are a techi.

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[Anonymous]

[Anonymous]

@h0wdyus, we do have an IT company that handles all of the desktops in the office as well as our server and our website is separately hosted and maintained through cpasitesolutions.com. CPA Site Solutions has basic templates for websites you can use and can provide content if you don't want to write anything up, plus they set up and maintain the file share portal we use to interact with clients. I'm not sure which package we actually use, but I think they offer hosting and routine services at a fixed monthly cost and then if you call to make a change they'll charge extra. However, I have admin access to modify our site's HTML, so if there's something basic we want changed we can just do it ourselves.

As far as the IT company goes, we use a smaller local firm and they handle everything from recommending and ordering new desktop computers for us to server maintenance and fixing someone's email that isn't working properly. Really, if there's something computer-related that we can't figure out ourselves or that we don't have the time to research, we just call them and they handle everything. The IT company we use offers both hourly service at $95/hour and also monthly contracts at set prices for businesses if that's what they prefer. We have computer issues (minor or major) about once every 3-4 months, so we just use the hourly rate fee structure with them. The only monthly cost we pay to them that isn't related to data backup is $95 for monthly sever maintenance.

Our data is stored on a dedicated server that we have located in our office. The IT company performs maintenance on it monthly and is on hand if we have any issues with it in the meantime. They also have our data synced to iBackup in case of a catastrophe with our server.

In terms of getting a system like ours set up initially and if you have at least a few employees who will need computers, I can tell you from recent experience with one of my CFO clients who also uses our IT company that for a new server, five desktop computers, and installation the total price is around $5,000. Their data is also being synced to iBackup at a rate of $100/year for 100 GB.

I hope this helps!

[Author]

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