Many accountants wonder whether they have what it takes to start an accounting practice and provide financial services to businesses, societies, charities, clubs, and individuals. Starting an accounting practice can be daunting, especially in cities like New York, where competition is high, but these tips from John Savignano, CEO of Savignano accountants & advisors, can help you take those all-important first steps.
Here they are — four tips on how to start an accounting firm:
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1. Complete Your Qualifications
Those who want to start an accounting firm must first train with a professional accountancy body, pass this body’s exams, and gain practical experience in the accounting space. With a professional qualification and membership under your belt, you can hone your skills through work experience and then apply to a professional body for a practicing certificate. At this point, you can use the “chartered” or “certified” title.
With these foundations in place, you’re likely to gain word-of-mouth recommendations, which will help you grow a client base. This has been the case for John Savignano, who says: “We’re attracting a lot of multinational global clients that a firm of my size would never get, but because of my visibility and people referring me to other people, they’re saying go to Savignano, this guy knows everything about everything and he won’t even charge you $1,000 an hour. That seems to get traction.”
2. Research Your Target Clients
Next, it’s important to research your target clients and estimate the demand for accounting services in your area. Keep in mind that people of various backgrounds offer accountancy services, and, no matter your location, you’ll likely have to compete with:
- Qualified accountants who have worked in practices of all sizes
- Lesser qualified individuals who offer basic services like completing income tax and other tax returns and bookkeeping
- Online accountancy businesses, which often charge competitive fees
- Banks that offer personal tax services like submission and tax planning and tax return completion
Some online research should help you identify the competition in your area — the number of competitors, the types of practices they operate, and the services they offer. Make sure you differentiate your practices from the ones that already exist. For example, one of Savignano accountants & advisors’ unique selling points is that it offers the advice and experience that larger firms typically offer but in a more intimate environment and at a lower price.
“If our clients went to a small firm or a sole proprietor, they wouldn’t get the advice or the experience from a firm like us,” John Savignano says. “They would probably have to go to a regional firm or a national firm.”
3. Set Your Rate
When you know how you will differentiate your accounting business from your competitors’ businesses and which services you will offer, you can decide how your pricing structure will look. You could set an hourly rate, which allows clients to pay monthly and spread the cost instead of paying infrequent large bills. Your hourly rate may vary based on the type of work undertaken, the size and reputation of your practice, and the location of your practice. When setting an hourly rate, remember that some of your working hours won’t be billable. You’ll spend lots of time on unpaid tasks such as practice management, training others, continual professional development , and administration.
Sometimes, a fixed rate is a better approach than an hourly rate and simplifies the payment process for everyone. A fixed rate can be ideal for specific tasks like drawing up a business plan. Similarly, you might consider charging a monthly fee that covers a range of accounting and financial services.
You can also decide whether you’ll offer discounts for local charities, churches, and housing associations.
Keep in mind that occasionally you might not be able to recover all of the fees due to you. While you may sometimes feel you can’t realistically bill for the full amount of time a case has taken because the time has been excessive, there may be other occasions where clients refuse to pay the amount you have invoiced. Research shows that fee recovery rates are usually between 80-90%.
4. Seek Authorization to Work in Regulated Areas
If you want to undertake insolvency work, probate services, or audit work, you must be both a qualified accountant and have the relevant authorization from a professional accountancy body. Meanwhile, if you want to do audit work, you’ll also need a recognized audit qualification, which only a recognized qualifying body can award. And accountants who wish to offer regulated activities like investment business, general insurance or mortgage business, or consumer credit services need to be members of a professional accountancy body. These activities must be “incidental” to the provision of your main accountancy, audit work, and taxation services.
Alternative Option: Buy an Existing Accountancy Practice
Although opening your own accountancy business is hugely rewarding, you might decide to buy an existing accountancy business instead. When you buy an existing business, you can take on its clients, staff, premises, and equipment without having to acquire these yourself. If you’re considering purchasing an existing accountancy practice, take note of whether the clients listed are active and whether they have histories of paying invoices on time. It’s also important to evaluate the business’ accounts over the past three years to check the selling price matches up to the company’s financial performance displayed in these accounts. And you should allow budget for professional fees, like valuation and survey costs and legal fees.
About John Savignano
Not only is John Savignano the CEO of Savignano accountants & advisors in New York, but he is also an adjunct professor at Fordham University. His previous roles include: partner of Gettry Marcus Stern & Lehrer, vice president of tax of MasterCard, vice president of tax of ICAP, vice president of Artnet.com, corporate controller and director of tax of Carl Zeiss, and the tax manager of PricewaterhouseCoopers. He has more than 35 years of experience in providing accounting, tax, and advisory services to small- and middle-market-size businesses, Fortune 100 companies, and high-net-worth individuals in several industries.
Learn more about John Savignano.