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Discussion:How much experience do you need to go off on your own.

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Discussion Forum Index --> Business Growth Community --> How much experience do you need to go off on your own.


BJtheCPA (talk|edits) said:

30 November 2010
I'm afraid that this forum has seen this exact question many times. However, I did use the search function for "experience, experience starting, how much experience, and starting", as well as a number of other search terms and didn't come up with any such discussions.

I apologize if I'm beating a dead horse. But I'm a fairly young CPA mid-late twenties, I've been out of school for three years. I started at a Big Ten firm and left after the first tax season as I quickly realized I was being pigeon-holed. I then spent about a year with a private manufacturing company as I couldn't find public work. Finally, I ended up where I am now, at a small CPA firm with two partners, two staff, some part-timers, and an office manager, I've been here for about a year and a half.

The firm is at a size that they don't want to grow anymore, and neither partner is retiring anytime soon, so there is not a lot of potential upside to me being here as I can't really take on my own clients and pursue partnership.

I don't want to go to work for someone else, I want to go out on my own, but I'm concerned about experience. I'd like to start off making at least a similar income to what I'm making now (low 40's), so I would guess purchasing my own firm would be the route to go. I've been frugal and have the financial assets to make a down payment on a purchase. I know that there is no "golden rule" as far as how much experience is needed, but are there "any" guidelines?

I've spoken with a broker who is also a CPA, and she's assured me that I have the skills to take on a practice that has mostly tax and book-keeping clients. She says I should buy this firm that's grossing between 250-300k, has two employees and some part-time help. However, I realize that's about as unbiased of an opinion I'd get as going to a car salesman and asking if they think you need a new car.

BJtheCPA (talk|edits) said:

30 November 2010
I forgot to mention, my experience with the Big Ten firm was 100% audit, manufacturing company was controller type functions, and current job is 70% Tax (all types, 1120, 1040, 1041, 5500, 990, bookkeeping, and payroll) and 30% audit (50% NFP, 50% manufactoring).

DZCPA (talk|edits) said:

30 November 2010
You are ready! Go for it. You will continue to learn during the next 40 years.

PHIL MOODY (talk|edits) said:

30 November 2010
You do not say much about money, except the down payment. Just keep in mind:

Your health Insurance. It may take 2-3 months to get the pump primed and the cash to start flowing in, rather than out. Even then, you will have ups and down is cash flow time periods. No matter which clients you purchase, you will lose some of them. You need financing in either a line of credit (loc) at a bank, or a home equity loan for those periods of time when cash flow out exceeds cash in. Prepare cash flow analysis by week for a two year period. Some of your time will be administrative for your firm, thus non-billable.

Trillium (talk|edits) said:

30 November 2010
You're sure to get more posts on this topic, but if you're also interested in reading prior discussions, or even just learning more about the site's search engine, I would suggest this search: "starting out" experience "business growth".

You searched on starting and experience, but those words can be found in so many contexts that you probably got a high percentage of results that weren't on point. "How much experience" was probably the most fruitful of the searches you mentioned trying (if the quotes were included), but "experience starting" on the other hand, would only have found those two words in that order, so I'm not surprised that didn't turn up anything. Here are some more Hints and Tips on How to Search on TaxAlmanac, in case you're interested in more info.

Kevinh5 (talk|edits) said:

30 November 2010
Many of us started with only one year of experience as an employee for another firm. I suppose some started on their own with only an H&R Block class. The keys are:

1) Don't be afraid to tell your client you don't know, but will find out. Then look it up.

2) Do invest in good quality CPE and a few research materials. The internet doesn't count.

3) Have plenty of money to live on for two or three years while you plow everything back into your practice.

4) Charge a professional fee. Don't try to be the cheapest on the block. You will not keep cheap clients once you raise your fees, so why attract them to begin with?

5) Ask for referrals.

6) Press the flesh. Don't rely on advertising, rely on marketing which includes YOU getting out there and shaking people's hands and handing them your card. Advertising is expensive and half of it doesn't work. The problem is that no one knows which half doesn't work.

Bbowers (talk|edits) said:

30 November 2010
The timing is perfect if you can close before tax season. Take the time to lay out your cash flow using conservative numbers based on the practice history. If the numbers work I'd jump in. You'll never know everything you should so plan on lots of continuing education. Find a good mentor to help you as you get started. Good luck!

BJtheCPA (talk|edits) said:

30 November 2010
A lot of thanks to the replies so far. It's very encouraging to have like-minded professionals reiterate what I've only thought up in my own head. I'm glad I've found this site.

To some points that have already been made:

1. You are ready! Go for it. You will continue to learn during the next 40 years.

I noticed in a lot of other messages that your a huge advocate of purchasing firms to start out. Is there a certain size you would be hesitant to go after when just starting out? (i.e. too small to make any $ or too large to reasonably manage without experience)

2. You do not say much about money, except the down payment. Just keep in mind... Prepare cash flow analysis by week for a two year period. Some of your time will be administrative for your firm, thus non-billable.

This is top-notch advice and I really appreciate it, I will definitely build that into my business plan. I'm not comfortable giving out specific #'s of what I can and can't do right now, but for ball park figures let's say I have access to $50,000 in cash, home equity, and other assets.

3. ...but if you're also interested in reading prior discussions, or even just learning more about the site's search engine, I would suggest this search: "starting out" experience "business growth".

Thanks for the search hints, this site is awesome and the tips will come in handy!

4. Many of us started with only one year of experience as an employee for another firm. I suppose some started on their own with only an H&R Block class. The keys are...

Great points and definitely are in line with the business structure I will be leading. A lot of the reason I'm not happy where I am right now is I've had three clients approach me who were needing reviews or audits done (about $15-20,000 combined in projects), and my employers said we don't have the time to do the work.

I have the ability and ambition to do the networking (I already am active in my church, the state society association, my fraternity alumni association, and volunteer in my community), but if I can't take clients from it, it's just a waste. (Of potential, not time as I do enjoy doing those things)

5. The timing is perfect if you can close before tax season.

This is a little difficult for me to do, I suppose I should pull up my training pants and be a man about it, but I really don't feel like leaving before crunch time is an appropriate way to treat my current employers.

They do not know that I'm considering purchasing my own firm (even though in the interview process I let it be known that I'm aspiring to become a partner). I do not want to leave them out to dry for busy season. If I do end up purchasing a firm, it will probably be in the October-November time frame and I will let my current employers know a bit before.

Sorry for being long-winded but I like to cover all bases. Thanks again for replies and I look forward to more.

Kevinh5 (talk|edits) said:

30 November 2010
There have been several discussions here on TA regarding doing attest work. The concensus seems to be to make sure you have adequate E&O coverage and make sure that you charge enough and do enough to cover the mandatory peer review (or other state requirements). Good luck.

Tax Writer (talk|edits) said:

30 November 2010
I agree with all of Kevin's advice, especially about the E&O if you are going to do attest work. You can charge a nice premium for those services, but CYA, CYA!

It sounds like you are pretty well connected already--it doesn't sound like you need to purchase a practice. An EA friend of mine just struck out on his own last year and had 150 clients the first year--more than enough to keep afloat and pay the bills, and of course, now he's expanded considerably into his second year. Remember that you can purchase a practice at any time.

Ukbones (talk|edits) said:

30 November 2010
What do you want out of your practice? What will be your area of expertise?

Death&Taxes (talk|edits) said:

30 November 2010
An angel helps; I was fortunate enough to have a client lend me money, and at a rate 2-3% over market but with a five year term. My associate/partner and I began in late May so that money carried us until the next busy season. It enabled us to buy a group health policy, hire our office manager 2-3 months in advance, and attend auctions where we bought office furnishings.

In addition, it helped to have a credit card, two or three. When time came to get equipment, I found the interest rates when leasing to be non-competitive so we used plastic (just before busy season) and paid it off in six months.....which begat more offers of plastic....

BJtheCPA (talk|edits) said:

30 November 2010
I have a large network, but not a lot of leads on actual work yet. I do believe I could "make" it work but I'm just not comfortable with going from zero revenue to hoping that I have "some" revenue before my reserves are depleted. So I guess I'm essentially purchasing cash-flow when purchasing a firm.

What do you want out of your practice? What will be your area of expertise?

I'm hoping to focus on small business clients. Namely professionals such as doctors/dentists, pharmacists, lawyers, and veterinarians. I will offer tax, book-keeping, payroll, compilation, review, and business valuation services. (I'm currently working on my CVA) Obviously, the tax, book-keeping, and payroll areas are segues into the higher hourly jobs such as the valuation services.

I have many connections in both the medical and law industries around my city, as I have a surprisingly large group of friends that have attended the local medical and law schools. I will distinguish my firm as a professional tax consulting firm, rather than a tax shop. I'm planning on this distinction to allow me to charge a reasonable hourly rate that the clientele expects to be paying for the level of service I deliver.

I may eventually offer audits, it depends on the size of the firm and how much of the market I feel that I can capture or am comfortable with.

Obviously if the strategy that "works", isn't the one I "planned", I will adjust accordingly. This also limits my options on purchasing a firm as I have a pretty specific niche I want to build into. That being said, there is no reason I can't buy a firm with a "good" client base and turn it into a "great" client base of my own, as the difference in the two is largely perception.

An angel helps

Depending on the size of the firm, I may have my parents sign onto a loan with me or loan me the money personally, as they have a good amount of liquid backing. Obviously, that will be one of the last options that I will exhaust.

Waynecpa (talk|edits) said:

30 November 2010
As to your question on whether the $250-$300k practice with 2+ employees, I feel that I can speak to that since that is exactly what I did 5 years ago. My only regret is that I didn't have a little more due diligence with the employees. I asked the person I bought the practice from what the employees' strengths and weaknesses were and she said she couldn't think of any weaknesses. This should have been a little bit of a red flag - about 4 months after I took over one employee left and she ended up contacting some of my clients to solicit their business. It took me another year to fire an employee who I felt was just putting in time for a paycheck.

Lesson learned - Be sure you are ready to deal with employees if you go into this situation and make sure you are working toward the same goal. Your employees need to have your back and at this size of practice, they frequently are the first impression a new client may get of your practice.

AEM CPA (talk|edits) said:

30 November 2010
Which Big Ten firm did you work for? I'm a Penn State fan myself. Don't say Ohio State. I'll never get over the horrendous injustice that JoePa's boys suffered in 1994 when they were ranked #1 going into the Ohio State game, obliterated them 63-14, and yet somehow dropped to #2 in the polls the next week. Unbeaten, untied, unrewarded. Absolute travesty.

BJtheCPA (talk|edits) said:

30 November 2010
Hah, yeah the firm liked to refer to itself as a "Big Ten" firm since they claimed the Big Four didn't exist anymore after all the scandals and melt-downs. It was probably more wishful thinking of brand image and notoriety than anything else, but yeah, they were one of the ten largest in the country and they loved referring to themselves as such, for whatever that's worth.

I'm a huge Ohio State anti-fan. Way over-rated most years.

AEM CPA (talk|edits) said:

30 November 2010
To mix sports, then, they were in the Second Six.

Xz (talk|edits) said:

1 December 2010
Yes. You have enough experience to work on your own. You will learn a lot as you go. Now you roughly know how a CPA firm works. The key is to research and keep learning.

I have been in business for a year - not even full time since I have a school-age daughter - I do work and think a lot whenever I can. I made a small profit, moved to a bigger office and expect my gross income to double next year. (My family does not rely on my income).

You have the urge to work on your own and the ambition, go for it! We invest too much time and money on schooling. Why don't we invest some time and money on becoming our own boss? Your world is as big as you can dream of.

Fletch (talk|edits) said:

1 December 2010
go ahead and fill out your profile. Just cut and paste from this thread

Waynecpa (talk|edits) said:

1 December 2010
BJ - Check your user page for a message.

Thomascpa (talk|edits) said:

December 1, 2010
I just wanted to wish you the best of luck. I wish I could offer up some advice but I am actually in a very similar boat as you. I am in my late 20's and started out at a Big 4 after college for about 5.5 years, then left to go to a private company tax department (currently here for a little over a year). My partner and I had been doing 1040's and small business tax and accounting on the side for a few years now and will bring in a shade below $20K in revenues for 2010. We just recently formed a CPA firm under a PLLC in NY.

We have found through the advice of many well respected opinions that the best way for us to go is to find a practice that fits our needs (pretty much same client mix you are looking for) and buy one. Since there are two of us we are looking in the $500-600K range. The hardest part is waiting for one in our area to become available.

It is nice to see other young professionals such as yourself realize that you want more out of your career and be willing to take a risk and do what's necessary to accomplish all of your life goals. Nowadays it seems as if the majority just look for a free ride or the easy way out. I have already taken some good knowledge out of this thread and I hope the useful info from those who are more experienced keep coming.

Good luck to you!

DZCPA (talk|edits) said:

2 December 2010
Buying firms is a great way to grow. Just purchased my 7th last month. Preparers are getting older and retiring. Keep your eyes and ears open for sales. They go fast! Clue: the selling preparers look old!!!

CrowJD (talk|edits) said:

2 December 2010
Buy a new car (Chevrolet) and new clothes. You won't be able to afford either for 10 years.

If you were planning a divorce or an affair, go ahead with it now so they don't get a piece of the business. Get it out of your system. Sow your wild oats one last time because the rest of your life they'll get mown instead of sown.

Then get ordained so you can preach part-time for extra money (or whatever your particular religion requires). It doesn't demand much intelligence (I should know). You can pretty much read anything into these great religious texts, and the congregation will eat it up.

Get on a local religious show, and mention from time to time you are a tax preparer and have your address, phone and Email flashed up. Bill yourself as "God's Accountant" or "The Merciful Accountant". Have T-shirts made. (Using "Merciful" will attract the non-filers and give you several returns to bill for at once).

Hold a huge open house party and turn water into wine (they sell kits for this). Or get another miracle kit for whatever religion you preach.

QUOTE Kevin: 1) Don't be afraid to tell your client you don't know, but will find out. Then look it up.

I agree with that. Don't wing it on the job. It will come back to bite you.

Good luck. I'm trying to give you the straight dope on how it works. I hope it's useful. Tailor it to your needs.

Aa1123 (talk|edits) said:

17 December 2010
I've been on my own for almost 15yrs now. My public accounting experience is very limited. Started out doing audits for quasi goverment agency similar to the GAO. Since this was a 2nd career for me I always wanted to go out on my own. At this point mine is a 2nd income. Every once in awhile I regret not having a Big (8 when I started at least) experience, however, I hated auditing. I did take the HR Block course before starting out which was helpful. Now I make sure I take lot's of continuing ed and stay current. A few years ago I did a reality check and was hired for tax season by a local practice. Huge mistake after working on my own for so long I couldn't just do the data entry piece, found I missed knowing who the clients are and what their goals are - in other words the total picture. If that makes any sense.....

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