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Starting a CPA Firm With No Experience – A Complete Guide

Do you want to start a CPA firm? If YES, here is a complete guide to starting a CPA firm with NO money and no experience.

Okay, so we have provided you an in-depth sample CPA firm business plan template. We also took it further by analyzing and drafting a sample CPA service marketing plan backed up by actionable guerrilla marketing ideas for CPA firms. In this article, we will be considering all the requirements for starting a CPA firms. So put on your entrepreneurial hat and let’s proceed.

Why Start a CPA Firm?

It is a known fact that people enjoy making money, but learning to manage all the aspects of money can be complex and tedious. For that reason, most people prefer to hire an accountant to track their income, expenses, taxes and other financial details. For an accountant to operate a successful business requires not just the education and experience in accounting but knowledge of business building as well.

Accounting is a difficult profession than it is often given credit for, and it can offer both the stability of a long-term employer and the autonomy of self-employment. Many people who study accounting do so with the eventual goal of starting their own CPA practice.

Starting your own CPA business is no easy task, but the route to self-employment in accounting has been thoroughly mapped. Learning how to start an accounting business means following the steps that have proven successful to other self-employed CPAs.

If you think really starting a CPA firm is what you want to do, then you can take this how to start a CPA guide really seriously.

Starting a CPA Firm With No Experience – A Complete Guide

  • Industry Overview

CPA firms provide services such as auditing, bookkeeping, payroll processing, and tax return preparation. They are certified to audit the accounting records of public and private organizations and to demonstrate compliance to generally accepted accounting practices.

Certified public accountants (CPAs), included in this industry, provide a variety of accounting services, including auditing accounting records, designing accounting systems, preparing financial statements, developing budgets and providing advice on matters related to accounting.

  • Interesting Statistics About the Accounting Industry

The revenue of the accounting and payroll services industry in the United States reached approximately 137 billion U.S. dollars in 2013. By 2018, this industry is expected to generate around 160 billion. Accounting services, specifically, accounted for 94 billion U.S. dollars in 2014.

In 2013, there were 1.17 million accountants and auditors and 1.59 million bookkeeping, accounting and auditing clerks employed in the U.S. The number of accountants/auditors and their administrative staff were forecasted to rise to 3.44 million in 2022.

California was the state which employed the most accountants and auditors in 2013 but it was the District of Columbia which paid its accountants and auditors the highest wages. In one of the best paid occupations in the U.S. the gender pay gap still loomed large: female accountants earned just 76 percent of the wages of their male counterparts.

The number of people using accountancy services in the U.S. appears to have dwindled slightly in recent years, falling by approximately four million from the first half of 2008 to the first half of 2013. Despite this, members of the American Institute of Certified Public Accountants have expressed increasing confidence in their businesses since the end of 2012.

In the second quarter of 2014, the Certified Public Accountants Outlook Index score was the highest it had been since before 2011, indicating increasing activity in the industry. Payroll services account for 25% of US industry revenue; tax preparation and auditing each account for about for 20%. Tax planning and consulting, bookkeeping, general accounting, and billing services each account for about 5%.

Other services include management consulting, financial statement review, and services related to computerized accounting systems services. Some accountants have branched into accounting-related information technology consulting, business consulting, and personal financial planning. Small business owners often rely heavily on their accounting firms for advice.

Starting a CPA Firm With No Experience – Market Feasibility Research

  • Demographics and Psychographics

Having or managing a CPA firm is mind blowing. It is indeed a business you should look up to if you have the necessary training and qualities. People need the services for various reasons and these reasons may include; Changing Tax Laws, an Improved Credit Rating, reducing Debt, for your Investments, et al. Those who are in need of the services of a CPA firm include; People who earn More Than $200,000, people who have a multiple stream of income.

List of Niche ideas in the CPA Business

Deciding on what sort of accounting business you want to start is a major decision you have to make when starting a CPA firm. Most commonly, self-employed accountants maintain very small firms, often including only themselves, any partners, and 1 or 2 administrative staff.

These firms often cater to individuals for tax preparation or to small businesses for basic accounting, auditing, and tax filing services. However, your own expertise and past experience in accounting may lead you to establish a different type of business.

If you have consulting experience, for example, you could establish an accounting consultancy firm. Your business could offer clients solutions for streamlining their accounting process and tightening their internal controls. This might include software training and staffing recommendations. Entering a specific area of accounting can define your firm’s core competencies and set you out from your competitors.

However, trying to enter too narrow a niche may keep you from getting enough clients to get off the ground. In the early years of your accounting practice, try to remain open to any opportunities for new clients. Other niches may include bookkeeping, auditing, tax preparation, accounting for medical professionals, accounting for insurance companies, accounting for real estate etc.

  • The Level of Competition in the CPA Business

The Global CPA industry has a low level of market share concentration. The industry’s major players account for roughly 27.0% of global revenue, representing a low market share concentration. This share has increased slightly during the past five years as the larger accounting firms became more globalized.

Growth for these firms was underpinned by greater economic improvement and making the most of strong development in emerging nations. However, a majority of companies in this industry are small- and medium- sized enterprises. Due to the vast service offerings in this industry and the multitude of businesses that require accounting and tax related services, many of these smaller players operate on a local, national or regional scale.

The Demand for accounting services depends on new business formations, the increasing complexity of corporate business, and personal income. The profitability of individual firms depends on the right mix of services and effective marketing.

Large firms have advantages in providing wider ranges of services to large corporate clients and having the resources to serve customers with many locations. Small firms can compete effectively by specializing and providing superior service. The US industry is fragmented: the 50 largest US companies account for just less than 50% of revenue.

List of Well Known CPA Firms in the United States

There are several CPA firms that have done so well for themselves in time past. Here are some of the firms;

  • Deloitte
  • Touche
  • Tohmatsu
  • Ernst & Young
  • KPMG
  • PricewaterhouseCoopers
  • McGladrey
  • Grant Thornton
  • CBIZ/Mayer Hoffman McCan
  • BDO
  • Crowe horwath

Economic Analysis

As with most of the financial sector, the Global Accounting Services industry’s revenue fell in 2009, after reaching a historical peak in 2008. Accounting firms have since rebounded and hit a new historic high in 2011. While the nature of work undertaken by the industry will begin to switch back to cyclical activities, such as corporate advisory work on expansions and major transactions, these activities will remain relatively depressed compared with before the financial crisis.

Demand for services related to bankruptcies, liquidations and restructures will continue to be relatively strong as high levels of public and private debt constrain growth in many major economies. Payroll services account for 25% of US industry revenue; tax preparation and auditing each account for about for 20%. Tax planning and consulting, bookkeeping, general accounting, and billing services each account for about 5%.

Other services include management consulting, financial statement review, and services related to computerized accounting systems services. Some accountants have branched into accounting-related information technology consulting, business consulting, and personal financial planning. Small business owners often rely heavily on their accounting firms for advice.

Is a CPA Firm Worth Starting from the Scratch or is Buying a Franchise Better?

Taking the plunge of starting a business can be approached in several ways. Starting from scratch is an attractive option, but picking up part-time clients, partnering with an established accountant, and buying an existing firm are also options.

Starting an accounting practice from scratch gives you the most control. You won’t have to deal with existing “baggage” like old software, existing pricing, and prior service issues. However, this option makes it most difficult to attract start-up capital and to market your business to those first few clients. Starting a part-time accounting practice is a good way to hedge your bets. Working with clients on the side of your full-time job allows you to “test the waters” of owning an accounting business without the huge financial risk.

Establishing relationships with these clients will also smooth the transition into running your practice full-time. Partnering with an established accounting professional can help you get a business off the ground. Working with a partner means more industry connections, more capital, and more potential client relationships.

Buying an existing CPA firm will keep you from having to deal with many start-up issues, but it reduces your level of control and can cost a fortune up front. In addition, it takes time to shop around for firms that are selling in your area.

For the sake of this article, buying into a franchise is a better option than starting from the scratch. The CPA business is a lucrative business where having a brand affinity would naturally mean you can compete in the industry with a competitive advantage.

Possible Threats and Challenges of Starting a CPA Firm

Many accountants dream of setting their own work hours, maximizing their income, and becoming their own boss.  Now is a great time for anyone who has considered starting his or her own accounting practice to take the plunge.  But there are few challenges and barriers to starting your CPA business and they may include…

  • Determining what sort of accounting business you want to start
  • Choosing an entry strategy for your accounting practice
  • Constructing a business plan for your accounting practice
  • Incorporating and marketing your fledgling accounting practice
  • Learning the policies that govern the financial aspects of your target market

Starting a CPA Firm With No Experience – Legal Aspect

  • Best Legal entity for a CPA Firm

In order to intelligently select the legal structure of your business, you must be knowledgeable about the alternatives from which you may choose. A business venture can be structured in several ways; however, the law classifies businesses so that most fall into one of three legal forms. They are: Sole Proprietorship, General Partnership and Corporation.

There are also variations on some of these basic legal forms — the S corporation, the limited partnership, and the limited liability company (LLC), a relatively new form of business organization, which has gained legal status in a majority of states. But for the sake of this article, the LLP is the best legal entity for a CPA firm. The reasons are:

  • Liability Protection

In general partnerships, each participant is personally responsible for the actions of the company. This includes debts, liabilities and the wrongful acts of other partners. One advantage of a limited liability partnership is the liability protection it affords.

This type of partnership structure protects individual partners “from personal liability for negligent acts of other partners or employees not under their direct control.” In addition, individual partners are not personally responsible for company debts or other obligations. This is advantageous for an individual partner when potential lawsuits or claims of negligence against the business are concerned.

  • Tax Advantages

Individuals in a partnership are normally liable for filing personal income taxes, self-employment taxes and estimated taxes for themselves, according to the Internal Revenue Service. The partnership itself is not responsible for paying taxes.

The credits and deductions of the company are passed through to partners to file on their individual tax returns. Credits and deductions are divided by the percentage of individual interest each partner has in the company. This can be beneficial for partners who have a limited interest in the company or special tax requirements due to their interests in other businesses.

  • Flexibility

Limited liability partnerships offer participants flexibility in business ownership. Partners have the authority to decide how they will individually contribute to business operations. Managerial duties can be divided equally or separated based on the experience of each partner.

In addition, partners who have a financial interest in the company can elect to not have any authority over business decisions but still maintain ownership rights based on their percentage interest in the company. Flexibility in business operations can become a disadvantage when partners make decisions based on personal interests and not the interest of the partnership as a whole.

Catchy Business Name ideas for a CPA Firm

There are several names of the CPA firms that exist. If you are looking to start such a firm but do not know what name to go for, you can consider any of these names;

  • Accounting Comes Active
  • Accounting Gurus
  • Accounting Resolutions Ltd.

Choosing the Best Insurance Policy for your CPA Firm

Accounting professionals and other financial specialists work with a lot of sensitive, personal financial information, which can expose your small business to heightened levels of risk. And that’s in addition to the other risks small businesses face, like property damage to your office or loss of important data. Insurance needed for your CPA firm include.

  • Business Owner’s Policy
  • Professional Liability Insurance Coverage (E&O)
  • Computers & Media Insurance Coverage
  • Data Breach Insurance Coverage
  • Valuable Papers & Records Insurance Coverage
  • Business Income for Off-Premises Utility Services Coverage (OPUS)
  • Workers’ Compensation Insurance
  • Commercial Auto Insurance
  • Home-Based Business Solutions

Getting Intellectual Property Protection for your CPA Firm

Your CPA firm competitive edge and its future value may depend on the way you protect assets such as trademarks, patents, copyright and industrial designs. By understanding the rules about trademarks, patents and copyright you can protect your firm’s works and innovation and safeguard from potential legal difficulties.

Intellectual property (IP) rights play an important role in monetizing innovation—if you make it easy for competitors to copy ideas, you can ultimately destroy the firm’s success. Have you ever considered how many people have access to your IP during the tax preparation, review and audit process? In other to protect your ideas in the CPA firm you need to do the following

  • Use a non-disclosure agreement liberally
  • Be proactive in protecting your IP
  • Invest in universal IP protection, where possible
  • Discover your business advantage

Is Professional Certification Needed to Start a CPA Firm?

The CPA certification is the most common certification in the accounting world. It is required by almost any accounting firm or employer regardless of other certifications held. You should plan to get your CPA certification when starting a CPA firm regardless of what other certifications you are hoping to achieve.

There are several different accounting certifications. Each of them requires the passing of an exam for their specific focus. It is common for an accountant to hold more than one certification, and some accounting jobs have duties that overlap between skills in two or more certified areas. They may include…

  • Certified Management Accountant
  • Certified Financial Manager
  • Certified Internal Auditor
  • Certified Fraud Examiner
  • Certified Government Financial Manager And Many More.

List of Legal Documents Needed to Start a CPA Firm

Many state and local governments have laws about what sorts of businesses need to be regulated by the government. Check with your local laws to determine if you will be required to get a license for your CPA firm before you begin. Listed below are common documents needed for your CPA firm

  • Business license
  • Insurance
  • Policies
  • Preparer Tax Identification Number (PTIN)

Writing a Business Plan for your CPA Firm

The business plan is a formalized document that covers all the mechanics of your business, as well as defining its vision, mission, and core values. The business plan is crucial when trying to obtain financing from lenders, and it can also help you make sure you’ve planned everything well.

Defining your firm’s vision, mission and values will be key to carving out your practice’s niche and giving it direction. A vision represents your broadest view of your firm’s place in the world, while a mission represents the more concrete method you will use to realize that vision.

A business plan should also cover major areas such as marketing strategy and projected costs and revenues. Overall, the plan should demonstrate that you understand your target market and have plans in place to manage the administrative and financial aspects of your accounting firm. Business plans generally include the following:

  • Executive summary
  • Company description
  • Descriptions of products and/or services
  • Market and sales analysis
  • Strategy and implementation of your products and/or services
  • Management summary
  • Financial plan

It may sound overwhelming, but you’ll be surprised at how creating a business plan will help you better define your business and give you the plan necessary to succeed.

A Detailed Cost Analysis for Starting a CPA Firm

Accounting is the process of recording and reporting a company’s financial information. Small businesses often use accounting to determine how well they are generating profit compared to the amount of money spent on business inputs or resources. Starting a CPA firm can be stressful but it’s sure lucrative. Listed below is the cost analysis of starting a small scale CPA firm.

  • Education, training and certification – $500
  • Office Furniture – $600
  • Computers – $200
  • Communications – $500
  • Reference Materials – $200
  • Marketing – $500
  • Miscellaneous – $500

From our detailed analysis, it will cost you $3000 to start a home base CPA firm. For a medium scale CPA firm, it is estimated that you will need $105,956 and $958,850 for a large scale CPA firm.

  • Financing your CPA Firm

All businesses require outside funding, but many entrepreneurs don’t know where to find it, or how much to ask for. Whether you need loans, small business grants, angel investors, venture capital, crowd funding, or investments from friends and family, you can greatly improve your chances of securing business capital. Ways of financing your CPA firm may include:

  • Personal savings
  • Pitching
  • Angel investor
  • Partnership
  • Venture Capital
  • Loans and grants
  • Alternative funding source like Crowdfunding

Choosing a Suitable Location for your CPA Firm

As a prospective CPA, you should be familiar with the national chain accounting businesses in your area. They are easy to spot. It is tough to come across a strip mall that does not have one of these guys already in it, but you should ask yourself: why do they choose these locations? You can rest assured they have done their homework.

The reason they choose their locations typically are due to population density, average adjusted gross income (AGI) in that surrounding area, and proximity to their target market. You should use the same factors when considering locations for your CPA firm.

If you are familiar with the specific area you are considering you probably have a pretty good idea how many people have access to that location, what income level they belong to, and you can do a survey of competitors by driving around. There are specific demographic and socioeconomic reports that provide specific detail relating to these topics. But you should be thinking about all of these factors before signing on lease for your CPA firm.

Many CPAs opening new firms choose their homes as a business location. The clear advantage is saving money on overhead expenses. However, some business owners choose to operate from commercial offices because it conveys a professional image to clients. If your funds are limited, you may want to consider starting your business in your home, then eventually moving into a commercial space once you earn a profit.

Starting a CPA Firm With No Experience – Technical and Manpower Requirements

  • Furniture

Whether you have a small one-room location or a large office, you need furniture to provide work areas for you and your staff. You also need furniture to accommodate your clients. The basic pieces of furniture needed include desks for each employee, office chairs, reception chairs and filing cabinets for your records.

Bookshelves are also typically found in a CPA firm; they hold reference materials and other books. You also need stands for other office equipment that isn’t freestanding, like computers and printers. If you have a conference room, plan to purchase a large table and chairs as a gathering and work place for your employees.

  • Computers

Computers, and all their components, are essential to a CPA firm. The computer is often where all client records and information are kept. Specialty software aids in the actual accounting process, and helps you store all the data you collect. You also likely need a printer that connects with your computer so you are able to print documents as necessary. Buy individual printers for each computer, or one networked printer that allows all users to print remotely to it.

  • Phone

Communication equipment keeps your CPA business connected. A reliable phone system with enough lines to handle your incoming calls provides a direct line of communication with your clients. A voice messaging system allows clients to leave messages when you aren’t available. A fax machine is a business staple that allows for fast communication between clients and other business contacts. An all-in-one machine that faxes, copies and prints allows you to consolidate the machinery you need to purchase to start your firm.

  • Library

Your CPA firm faces a number of rules and regulations that you need to stay current on. A reference library in the office gives you a functional area for researching and verifying specific tax and accounting situations, so you can handle each client’s needs legally and within regulations. In the reference library, include bookshelves, chairs, tables and adequate lighting to allow yourself and your employees to use the reference materials efficiently.

The Service Delivery Process Involved in a CPA Firm

CPA firms try to improve the efficiency and effectiveness of their processes in all kinds of ways. Some research and study what other firms do and try to implement their best practices. Others rely on best practices from technology and software partners. And some use a small management team to make changes that are then driven down into the organization.

Which of these approaches should your firm used? How effective will it been? You should be looking at more than just being effective. The real question is how effective are you at servicing clients in an exceptional way?

  • Implementing best practices of other firms

Granted, there are things we can learn from each other. However, what works optimally in one firm does not automatically work perfectly in another. Every firm is different and has unique situations to address. It is very difficult to apply a multitude of best practices across your firm and call it an effective process. Plus, you have no buy-in from the people who have to implement the changes.

  • Using software best practices as your firm’s procedures
  • Driving down process improvements from management

Starting a CPA Firm With No Experience – The Marketing Plan

  • Marketing strategies and ideas for a CPA Firm

To grow your CPA firm, you need three things working together: A big database of existing clients and prospects (most firms have very few prospects to whom they market), A sharp brand that reflects who you are, what you do and how you do it consistently.

For example, if you tell a prospect you are an expert in helping small business grow, but they go to your website and all they see if your expertise in tax and accounting, that is a branding problem,  and Lots of marketing activity.

  • Bring in a dedicated marketing resource
  • Implement a referral strategy
  • Visit your existing clients systematically
  • Build events
  • Build alliances with other referrers of work

Selecting the Right Pricing Strategy/Model for your CPA Firm

Good pricing strategy helps you determine the price point at which you can maximize profits on sales of your products or services. When setting prices, you need to consider a wide range of factors including production and distribution costs, competitor offerings, positioning strategies and the business’ target customer base. Pricing strategies which you can choose from may include…

  • Pricing at a Premium
  • Pricing for Market Penetration
  • Economy Pricing
  • Price Skimming
  • Psychology Pricing
  • Bundle Pricing

Strategies for Winning Competitors in the CPA Industry

There is a huge competition in the accounting field to get more clients. Large firms have in-house marketing and PR teams to take care of business development. Small firms, however, need to be strategic in their marketing efforts.

  • CPA firms often make two common mistakes when approaching their marketing strategy: They become bogged down in a flurry of marketing activities without stopping to evaluate the tangible benefits of those tactics, and they fail to adequately employ existing marketing assets.
  • Firms that want to initiate or revitalize their marketing program should start by scrutinizing existing marketing activities and determining the value that each activity brings to the firm.
  • Eliminate activities that aren’t delivering a payoff for the firm. Instead, focus on marketing activities that will bring value to your firm through business development and building client loyalty.
  • Don’t mistake tactical results such as media exposure, website traffic, email click-through rates, and social media “Likes” and “Followers” for tangible business outcomes such as lead generation, conversion rates, and acceptance of new service offerings among existing clients.
  • Capitalize on intellectual capital to get a foot in the door with prospective clients. For example, when a firm member presents at a conference, use that opportunity to reach out to related target audiences following the event by leveraging the presentation’s content as a hook to engage prospects in a meaningful conversation.
  • Learn to sell “intrinsically” to demonstrate your firm’s expertise on a first-hand basis and establish greater trust with prospective clients. Effective marketing facilitates the engagement of prospective clients in a substantive discussion of their specific situation, challenges and goals.

Ways to Increase Client Retention for Your CPA Firm

The market is crowded, accounting services are increasingly commoditised and hungry competitors are circling your clients. Clients that you fought hard to win. And you have to keep spending time and money winning new clients just to stand still unless clients stay with you year after year. Ways to keep your clients may include…

  • Quantify the Value of Client Satisfaction to Your Firm
  • Deliver what’s important to your clients
  • Find and Fix Problems with Client Satisfaction
  • Take control of clients satisfaction to increase revenue

Strategies to Boost Brand Awareness and Create a Corporate Identity in the CPA Industry

  • Attract and engage your target market
  • Enhance and reinforce your brand
  • Position you as a trusted advisor and go-to resource
  • Generate and identify leads for more business
  • Develop more profitable relationships with clients, prospects and referral sources

Creating a Supplier/Distribution Network for your CPA Firm

Today’s electronic accounting systems tend to obscure the traditional forms of the accounting cycle. Nevertheless, the same basic process that bookkeepers and accountants used to perform by hand are present in today’s accounting software. Here are the steps in the accounting cycle:

  • Identify the transaction from source documents, like purchase orders, loan agreements, invoices, etc.
  • Record the transaction as a journal entry
  • Post the entry in the individual accounts in ledgers. Traditionally, the accounts have been represented as Ts, or so-called T-accounts, with debits on the left and credits on the right.
  • At the end of the reporting period (usually the end of the month), create a preliminary trial balance of all the accounts by (a) netting all the debits and credits in each account to calculate their balances and (b) totalling all the left-side (i.e., debit) balances and right-side (i.e., credit) balances. The two columns should be equal.
  • Make additional adjusting entries that are not generated through specific source documents. For example, depreciation expense is periodically recorded for items like equipment to account for the use of the asset and the loss of its value over time.
  • Create an adjusted trial balance of the accounts. Once again, the left-side and right-side entries – i.e. debits and credits – must total to the same amount.
  • Combine the sums in the various accounts and present them in financial statements created for both internal and external use.
  • Close the books for the current month by recording the necessary reversing entries to start fresh in the new period (usually the next month).

Nearly all CPA firms create end-of-year financial reports, and a new set of books is begun each year. Depending on the nature of the company and its size, financial reports can be prepared at much more frequent (even daily) intervals.

Tips for Running a CPA Firm Successfully

Owning your own accounting firm can be an incredibly rewarding experience with an impressive side of perks. However, before you make the jump into starting your own business, there are several key issues to be aware of and there things you should understand.

  • Choose wisely and avoid tactical soup
  • Use your assets wisely
  • Develop a written strategic marketing plan
  • Never fail to market yourself
  • Understand marketplace motivation
  • Choose a niche
  • Always seek advice
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