Are you an accountant with your own practice? If you’re just starting out, there are a few tricks of the trade you need under your belt to be a savvy entrepreneur. You can increase your chances of success by developing a strong idea of your target market and by carefully managing your company’s finances. It all begins by having a clear vision for your firm.
Developing the Vision for Your Firm
What kind of accounting practice do you want to have? What type of clients do you most want to serve? The answers to these questions can help you establish a clear brand identity.
Your brand image is the picture you want potential clients to have in their minds when they see or hear the name of your company. Your brand identity includes your primary company values and the most noteworthy points about your company compared to your competitors. It may indicate the main type of clientele you serve. For example, Bombadier Recreational Products successfully created a brand identity around its innovative snowmobile design, which included using a graphic image of a patented sprocket part as its company logo.
Establishing a solid brand identity accomplishes four things for your accounting practice:
- Demonstrates the unique value of your firm’s services.
- Reinforces the basic value message of your firm.
- Identifies your desired target market.
- Attracts mutually beneficial clients.
If you choose to brand your firm as serving a particular niche market, such as retailers or medical practices, or as offering specific services, such as business tax planning, you can find clients who need the specific service you provide.
Operational Expenses of an Accounting Firm
One of the biggest expenses for an accounting practice is the computer hardware and software necessary to provide the top-quality accounting services discerning clients are looking for. This is one area of spending where you don’t want to skimp or try getting by with inferior products. Your clients want to rest easy in the knowledge that you’re using the most complete, full-featured, and technologically advanced accounting software to help them manage their businesses.
Also consider the cost of employing accounting associates. As your practice grows, you may not be able to handle all your clients alone. One of the realities an accounting entrepreneur has to face is the fact that running the company may become the main focus of their job. Ultimately, you might not end up doing much of the actual accounting work. If you really love the nuts and bolts work of accounting, then you might be happier working as an employee of an accounting firm or just setting up an individual practice rather than heading up your own accounting firm. Staffing costs include salaries, insurance, vacation pay, payroll taxes, contributions to the Canada Pension Plan (CPP), and training and travel expenses.
Marketing and advertising costs are another major expense for accounting firms. You have to make your new accounting business known in the area where you want to practice, so initial marketing and advertising costs are likely to be significantly higher when you first start out.
Accounting Tips for Analyzing Your Business Finances
Beyond budgeting for expenses, you also need to carefully plan spending to maximize your firm’s revenue and profitability. You may want to track what percentage of your revenue comes from new business and what percentage comes from existing clients. You can calculate the value of both existing clients and new clients by looking at the respective income from both categories over the previous few months. There is no magic, ideal percentage of new client business versus existing client business to aim for. Instead, use this analysis to direct and fine-tune your marketing efforts.
For example, if revenue analysis shows that you’re generating very little income from existing clients, then you may want to create a marketing campaign aimed at generating more revenue from existing clients. You can do that by convincing them to buy new products or services. If only a very small percentage of your company’s revenue comes from new business, that may be a warning sign to increase marketing designed to attract new clients. Over time, a certain percentage of existing clients ceases to be a source of additional revenue. Therefore, it’s important for your firm’s long-term financial health to have a steady flow of income from new clients.
Managing Your Company Finances
Many businesses just starting out fail because owners don’t properly assess all angles of running a new business. As an accountant, you have an advantage over many entrepreneurs because of your expert knowledge of concepts such as working capital and cash flow.
Your training and experience have probably also taught you the value of careful business budgeting and financial planning. A good basic approach to budgeting is to overestimate the cost of operational expenses and set aside extra money to cover unexpected expenses such as replacing costly office equipment.
Financial Planning for Business Growth
A substantial investment is required initially to fund the start-up phase of your business. Later, you may need to make additional investments to grow and expand your business.
You may also need a cash infusion at times to help you navigate a period of unexpected expenses or a decline in revenue. Always maintain a cash reserve as a financial safety cushion to manage your business needs in the long term.
At some point in the life of your business, you are likely to need financing. Prepare in advance by cultivating relationships with lenders and establishing a solid credit rating for your business.
Starting your own accounting firm can fulfill a long-held career dream. Make your dream a reality by using careful financial analysis and financial planning. Ready to begin your entrepreneurial journey? QuickBooks Online Accountant offers powerful tools for accounting professionals. Sign up for free.