Discussion:Starting a CPA firm

I am a CPA and have been in accounting for 5 years. I passed my CPA exam a year ago and was in public accounting for 2 years. I want to start my own firm. But I'm not sure if I know enough to be able to do this. I like the idea to work for myself and feel that I can venture into this right now since my husband has a stable job. I would like to start with providing bookkeeping, tax planning and tax return preparations for individuals and small businesses.

1) Is it a good idea to jump into one's own practice with few years of experience in public accounting? 2) Can I run my practice from my home office? 3) Do I have to set up an entity (I'm thinking - professional LLC) before I accept any kind of work? 4) Do I need to have professional liability insurance before I start? 5) I have been out of public accounting for a year now. Does anyone know where I can take any courses on current tax rules for

  individuals and small businesses? 

6) How important is it to have a website before I start?

Sorry - my question list got too long. I would appreciate any responses and advice.

Thank you.

Then do a search (in the yellow box) on 'CPE' to find our favorite course providers.

Many of us have no website - it is a fallacy that you need one to attract clients.

Yes, you should get liability insurance. The AICPA has discounts with some companies. Landy Insurance is also well priced.

Do a search for tax CPE courses. There should be some refresher/update courses you can find.

I recommend a website, but it's not absolutely necessary. I did get quite a few clients that googled for an accountant, found my website, and called. There are low cost options you can use to create your own, like Fatcow.com, or you can get a nicer one from CPA Site Solutions, ClientWhys, etc.

Best of luck.

Also, why would you set up an LLC? Do you have a partner? If it is one person you then have a disregarded entity and it goes on the Sch C, or you can elect to file as a Corp. If it is just you, set up a S Corp.

Office: I see a lot of virtual offices out there, you might want to try that just to meet clients. Otherwise depending what city you live in??? you can get a suite from 250-450 per month. Lack of an office will give the perception of lack of professionalism - also it is harder to charge decent fees if you work from home, again appearance.

A website is good because it gives again, a good appearance. Also, it allows you to show your knowledge and give information.

Liability insurance - the insurance will cover you from the date you enroll onwards - before that date, you are not covered. Try the AICPA value plan.

CPE: I really like Accountants Education Group, I dislike Surgent McCoy.

Good luck!

Kevinh5: Thanks for the advice. I will look at all the CPE options.

Floridacpa: I live in Texas and the rent around here would be around that much. You are right - it is just me and S corp would be a better option. A friend wants me to help him with his books right now. Since setting up my practice, filing papers etc will take time - can I accept that work or should I ask him to wait till all this is taken care of?

Floridataxes: Any books that you recommend as a refresher for bookkeeping and taxes (individual and small businesses)?

Of course, giving out candy to strangers at this time of year is a no brainer, but I mention it anyway.

or was it the whole van and trenchcoat thing? I don't remember.

good luck starting your own practice in this great state, please register your frim, it's only $50/ year, review all the rules and coses @ [TSBPA]. 1) yes 2)yes , but maybe use a PMB for business 3)No 4)No , but could be a good idea, gives your clients someone to sue 5) many resources for CPE classes 6) webstie could get some traffice, along with SWBYP's, however after 10 years I do neither,

Another note, please follow, read, and understand the Peer Review requirements for CPA's in Texas, create engagement letters, set your price and don't sell yourself short. Respond quickly to your clients either by email or phone calls, if you take on an engagement that is more than X, don't hesitate to ask and get a retainer

that's my nickel (wooden)

TexCPA 13:19, 30 October 2009 (CDT)

Go local. Try the neighborhood newsletters if you can find them. The more local the better.

Some people will disagree with me, but in my opinion, if you wait around to January, you won't have a tax season unless you are extremely lucky.

Don't worry about entity or any of that for now. Just be a sole prac. Your sole concern is clients, clients make all things possible.

One bad small business account early on can ruin thousands of dollars in good fees from individuals that you will miss messing with the business. I am only slightly exaggerating. Call these lessons from a failed tax business experience, for what they're worth.

How about new homeowner letters - when would be a good date for that?

What about a classified ad in the local newspaper/pennysaver?

A lot of people wait until the last minute to find an accountant and file taxes...

I would like to hear more about front loading.

I placed an ad in a local newspaper this tax season and it barely paid for itself so I do not see myself trying that again. I have heard the Pennysaver ads work well if you want to attract the RAL/EIC group and you place it very early in January.

By homeowner letters...I personally had NO luck with any kind of direct mail like that. I used postcards. I think you have to send out a very high volume for that to work, and then the response is supposed to be 1-2%.

If you can find some of these neighborhood newsletters, the rates are low, and you can run a consistent, larger ad. Consistency is extremely important, so therefore cost is extrememly important. (The newsletters also come out monthly and people tend to keep them).

However, it could be that you find these in the older, more established neighborhoods. I'm just not sure.

I think in a smaller community, the newspaper might work. The pennysaver, I've always seen that as something people go to primarily buy-sell things, not services (even though services are advertised).

P.S. You probably won't get any calls now, but you are planting your name in their minds. So, keep at it in the same publications you choose. One shot advertising is worthless. I saw a statistic somewhere that you had to run a print ad 21 times to get your name out (though it doesn't always take 21 times to get a call of course).

Your public library should have some books on marketing services, probably with some more modern ideas than I have. Another side benefit is that the libraries often lay out all the free local papers and newsletters for you to take some. You can learn a lot about the local communities around town by going around to the different branch libraries.

CrowJD - Just being a sole pract is a good idea for now. Would you happen to know if that is okay as per the Texas state laws? I still have to talk to an attorney here, but I have heard that there are different rules here for professionals starting their practice.

To All: What kind of advertisements are allowed for CPA's - I mean when we advertise in newsletters, newspapers, etc. - what kind of wording is acceptable? Can someone give me an example of how they advertise?

Thanks again.

Your state society should be able to give you some rules on the question, and also on advertising.

(Because of a very unfortunate Supreme Court case in the '60s, there are not many rules on professional advertising.

I see CPAs advertising just about everywhere you could think of. Just like lawyers. Check the CPA ads out in the yellow pages will give you some idea.)

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TexCPA 21:24, 1 November 2009 (CST)

mail to arrive Tues, Wed or Thurs around Jan 21st (when W-2 forms are arriving). That has worked best for me. My results over many many years:

nearest 4-5 zip codes. For me that gets 3,000 new homeowners at cost of 60cents each (Total cost under $2,000) typical result is 60 new 1040 clients. Always get a couple of small biz returns too and always get maybe 15 part-yr resident state returns, too.

At $250each, 1st yr revenue = $15,000.

25 (40%) return in yr 2 @ $250, so year 2 revenue = $6,000

12 (half of yr 2) come back pretty much forever, so annual revenue = $2,500 per yr forever, but say forever is 5 more yrs

ROI yr 1 = 15,000 / 2000 = 7:1

ROI yr 2 = 6,000 / 2000 = 3:1

ROI yr3 thru 7 = 2,000 X 5 / 2000 = 5:1

ROI for 7 yrs of ONE YR'S investment is upwards of 15:1

plus each yr those 60 newbies will refer 3 or 4 more that same yr

none of the small biz or referrals counted above

If you have a back-end to your biz (mid-yr tax planning, yr-end tax planning, IRS representation, investments/financial planning, write-up, payroll, etc) and you do this consistently for several yrs and you begin to leverage these into a full-time biz

One other thing, especially if you're new (and broke): the first surge of 15-20 out of the total 60 new tax prep clients will come in by Feb 12th. Collections from them ($250 X 15 = $3,500+) will pay the whole cost of the marketing program before the $2,000 credit card bill is due!

(if true) you shoulda come in for either a mid-year or year-end "no surprises" meeting to avoid this result when I sent you the invitation. I offer these meetings SPECIFICALLY to prevent what just happened. Why didn't you come in?

and / or

Wanna prevent this from happening next year? Come in for a mid-yr or year-end....

See what they do on weekends. Do have have yahcts, or just a fishing boat? Where do they shop? Walmart or Tiffany's?

This will give you some idea of what they are able to charge in your area. This is not spying, its' called market research. Don't just go to the larger firms, go to a lot of the smaller outfits too.

Would you mind sharing the letter that you send to new homeowners? Or at least a list of things you include (welcoming them to the neighborhood, listing the services offered, etc...) I did postcard mailing in Jan last year. I mailed about 1,600 and only got 2 responses. :(

However, one of anything, even if Shakespeare writes it, will do no good.

Frankly, I am not a fan of direct mail. Real Estate agents use it pretty well however by targeting a smaller geographic area each month.

The rule of thumb I read about was repeating your ad at least 21 times. Consistency is the single most important thing in advertising. The words of the piece can change, but the look of it, the placement of your name and critical information, should not change.

However, my quantities were very small and I only sent it out once. Fletch - do you send out the letters only once a year to new homeowners? Around Jan 21? Also, what is considered a new homeowner? Someone that purchased their home in the last 2-3 months, perhaps everyone that purchased since last April? Thanks!

In the past I sent out direct mail in January and December most often...

I have found that my direct mail returns to me 2-4 times the cost in the first 12 months.

Mike

1) A few years of experience isn't much but if you have specialized in a specific area, say taxes, and have a good grasp of it then stick to that area first. Take lots of CPE in all areas to ramp up quickly. 2) I think having a separate office is better for meeting clients and separating home from work. 3) You can be a Sch C filer first and do a S-Corp later if you want. 4) I'd definitely get E&O insurance before doing any work! 5) Google CPA CPE and you'll see lots of options. 6) I think a website gives you a more professional look. We use ours to describe our services, backgrounds and even provide directions. It's easy to point prospective clients to a website.

See if there's a BNI network group in your area. It provided a lot a quick and good clients early on for me. Best of luck. You should get out, what you put it!

What is a $3000 per year client? What services do you provide that client?

Mike

I know several CPA's that have good luck with "new home owner" advertising; however, it did not work for me...

Mike