2017-11-28 00:00:00Firm ManagementEnglishLearn what you need to know about financing your accounting firm's expansion. Discover expansion and funding styles that work for you.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/12/Professionals-in-office-explore-financing-for-expansion-of-accounting-firms.jpgExpanding and Financing Your Accounting Business

Expanding and Financing Your Accounting Business

4 min read

Deciding to expand your accounting firm is an exciting step, and one that can change the trajectory of your business. Expansion can take a variety of forms, but no matter how you choose to expand your firm, you need the funds to do so. Before expanding your accounting business, decide how you want to expand. Also, ask yourself if expansion is the right option at this time, and if so, start researching funding options.

Types of Expansion

While many people think of a business expansion in the physical sense, there are many possible ways to expand your accounting firm. Of course, you can set up office in a new, larger space to accommodate additional employees and clients. You may also wish to expand by staying in the same space and hiring additional employees on a remote basis. Another option is opening up a second location.

Aside from physical space and extra people power, you can also expand your firm’s reach within your market. Merging with or acquiring a competitor can give you an edge on a local business market and significantly increase your client base. Such a move might also result in the acquisition of new employees that formerly worked for a competitor.

Is It Time to Expand Your Business?

Before you jump into an expansion plan, make sure that expanding will actually benefit your business. Just because your business is currently profitable does not necessarily mean that it’s time to grow. Before making a decision, examine the market — is there demand for more of the type of accounting that your firm provides? Would acquiring a competitor give you access to more customers, or would it cause turmoil?

If your plans for expansion involve opening a new location, consider the costs of the new space as well as the extra costs involved with delegating more tasks. You can’t be everywhere at once, so be sure that your firm and your accounting team works just as well without you around.

Ask yourself and your partners whether expansion offers financial benefits and how soon your investment would pay off. If you’re considering taking out a financing loan, is it feasible to expect to pay back that loan in five to 10 years? If you hire more employees, does the increase in business offset the additional wage costs? Does your proposed expansion benefit the investors who are funding it? Ask yourself questions like that, and develop a concrete, long-term plan for your expansion. Don’t be afraid to consult with other experienced business owners to get their thoughts and feedback.

Types of Funding

If you do decide to expand your business, there are a number of different options for funding. The main categories of funding for businesses looking to expand are debt and equity.

As a professional accountant, you’re probably familiar with the two terms. Debt financing involves using a loan to pay for the upfront costs of your expansion. Equity financing means selling stocks of your company to investors to raise the necessary funds. Both methods come with advantages and disadvantages.

The biggest hurdle in financing your business with credits and loans is that these sums need to be paid back. If you choose to finance your expansion with a loan, make sure you’ve done the math. Once your expansion is implemented, the resulting increase in business profits should allow you to pay off your loan in a reasonable period of time. Additionally, if your expansion ends up not being profitable and you are unable to pay back your loan, your lender might be entitled to business or even personal assets. If you’re unsure about your ability to pay off a loan, you may want to look at other financing options.

Equity financing takes some of the liability off of your business. Investors offer you money up front, which you can then put to use in your expansion. With equity financing, the investors shoulder most of the risk — if your expansion doesn’t yield profits, the investors lose money, but you aren’t legally required to compensate them for their losses. For this reason, however, equity financing can be harder to acquire in the first place. Investors generally want to put their money in companies that they can expect to turn a profit. Your business needs to show significant promise to attract investors.

Funding Sources

Now that you know how you want to expand and how you want to fund your expansion, it’s time to search for organizations and investors that can offer you the funding you need. Organizations like the Canadian Investment Network can help connect you with potential investors. Investors may be corporate, or they may be private individuals. Meet with and confirm their credentials before you make any agreements.

When it comes to loans and credits, the most obvious choices are banks and the government. The Canada Small Business Financing Program is one government-run credit initiative that offers loans in various amounts to eligible businesses.

Expansion is a good way to take your accounting business to the next level. Before you do so, make sure that expansion is the right option to make your current business more profitable, and select funding that suits your needs.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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