If you’re an accountant with your own practice, you also have to be a savvy entrepreneur. You can increase your chances of success by developing a clear idea of your target market and by carefully managing your company’s finances.
A Vision for Your Firm
Think about exactly what kind of accounting practice you want to have, including what type of clients you most want to serve. Let these ideas help you establish a clear brand identity.
Your brand image is the picture you want potential clients to have in their minds whenever 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. That included using a graphic image of a patented sprocket part as its company logo.
Establishing a solid brand identity accomplishes three things for your accounting practice. First, your brand identity tells potential clients what is uniquely valuable about your firm’s services. Second, having a clear, consistent brand image helps you create marketing that reinforces the basic value message of your firm. Finally, choosing a brand identity helps you identify your desired target market and focus on attracting those clients. You can 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.
Managing Your Company Finances
Many businesses fail because of financial problems. As an accountant, you have an advantage over many entrepreneurs through your expert knowledge of concepts such as working capital and cash flow.
Your training and experience has 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 to set aside extra money to cover unexpected expenses such as replacing costly office equipment.
Operational Expenses of an Accounting Firm
One of the major expenses for an accounting practice is the computer hardware and software necessary to provide top-quality accounting services. This is one area of spending where you don’t want to skimp or try getting by with inferior products. Your clients want to feel assured that you are 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. 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, they may not end up doing that 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 marketplace, so initial marketing and advertising costs are likely to be significantly higher when you are first starting out.
The Importance of Analyzing Your Business Finances
Beyond budgeting for expenses, you also need to carefully plan spending to maximize your firm’s revenues and profitability. You may want to track what percentage of your revenues 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 of revenue 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 are generating very little income from existing clients, then you may want to create a marketing campaign specifically 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 revenues come 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 cease to be sources of any additional revenue. Therefore, it is very important to your firm’s long-term financial health to have a steady flow of income from new clients.
Financial Planning for Business Growth
A substantial investment is required to initially 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 revenues. Always maintain a cash reserve as a financial safety cushion to manage your business needs for extra working capital.
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 in developing your business.