How to Start an Accounting Business and Tax Practices
If you’ve ever wondered how to start an Accounting Business and get clients, you’re not alone. A booming industry attracts more buyers than sellers, which makes it easier to sell a practice. However, there are many factors that you should consider before deciding to buy an existing practice. You must also be prepared to spend some time researching your market, identifying the challenges your target clients face, and determining your own budget.
While big firms tend to be more diversified in their services, small firms may want to consider smaller, local firms. Smaller firms are more likely to offer personalized attention, and a larger firm may outsource work to a smaller company. While many accounting firms start out as generalists, others deliberately build niche practices. A construction firm, for instance, might realize that it has a lot of construction clients, and stop chasing general clients.
For example, a growing tax and accounting firm had $260,000 in revenue in 2021 and is on track to generate over $330,000 in 2022. It has a diverse customer base, including high-end clients. Most of its revenue comes from tax preparation while 25% comes from bookkeeping and payroll. The remaining 10% is from consulting and documentation work. Moreover, the owner received $91,350 in cashflow in 2021. In the long run, these projections assume a growth in revenue.
Business leaders want trusted advisors who can perform audit work efficiently and give advice on strategic planning and business process improvement. In other words, business leaders want to work with a trusted advisor, and accounting firms can fulfill this role effectively. In the Portland, Maine, accounting firm BerryDunn, which has a $118 million revenue, leads the New England market. In today’s challenging environment, corporations must adapt and become more resilient and agile.
Startup costs for an accounting firm can range from $50,000 to $150,000, depending on location, strategic plan, and other factors. There are also legal and financial requirements to consider, such as licensing requirements and equipment. For most businesses, the IRS will issue an Employer Identification Number, or EIN, as well as Federal Tax ID. Additionally, some cities or counties require local licensing for accounting practices. As an entrepreneur, you must make sure you have the necessary tools and know-how to start an Accounting Business and Tax Practices
Pricing models for accounting services vary widely, but there are some common standards. For example, most firms charge fixed fees for bookkeeping and simple tax preparations. When determining a competitive price, accounting firms call other firms and ask for quotes. The average of these quotes will be the price that is acceptable for the service provided. You can also seek advice from local and national associations regarding pricing structures. Large associations may publish a document on recommended pricing structures for accountants.