Don’t Let These Myths of Starting an Accounting Firm Stop You
July 28, 2022 •Oak Street Funding
If you’ve been encountering myths of starting an accounting firm, it’s probably because you’ve actually been thinking of starting an accounting firm. Whether you’re currently working in another public accounting firm or playing a financial role in another organization, the idea of starting a CPA practice may sound very appealing.
But just when you start to get excited about the possibility, someone you're talking to or an article you're reading throws a roadblock in your way. It appears to be a truth that makes you question whether your own accounting firm is such a good idea. In reality, it's just a myth repeated by people who simply don't know better.
If you’re thinking about starting an accounting firm, you’ll encounter myth after myth. Fortunately, when you audit those myths, you’ll usually discover opportunities, not roadblocks. We’ve collected several of those myths to show you how it works.
#1: Who needs another accounting firm?
Your industry is already full of firms, so what chance does someone new have? Actually, a pretty good chance.
Like other businesses, CPA firms change over time. A local practice that has a good reputation today may fall out of favor once the senior partner retires. A company’s new CFO might shift their business to a golf buddy. That firm down the street with plenty of low-dollar business doing personal tax returns can’t find employees, so its service falls off.
What are you going to offer the marketplace that’s different … and will anyone care? Maybe you’re going to focus on helping women entrepreneurs run their companies while growing their personal wealth. Perhaps you want to be the go-to guy for every franchise restaurant operation in your region. Could be you intend to target tech-savvy business owners who don’t care if they ever meet you in person.
In today’s market, specialization can offer a particularly effective way to carve out a profitable place. But don’t act on a hunch (no self-respecting CPA would). If you think there’s an opportunity, do your due diligence to find proof.
#2: You’ll have to do everything
Yep, you'll be CEO and chief toilet-scrubber. Entrepreneurs like to brag about all the roles they had to play while getting their companies off the ground. Hey, it's kind of fun to spend a couple of days organizing your cloud storage, building new shelving, or trying to figure out which cheap website service looks easiest to work with.
You can spend so much time doing everything a CPA shouldn’t be doing that you’ll cut into your revenue. Turn the cloud planning over to your admin, hire a local handyman, and invest in a decent web developer … then devote your time to growing your practice and handling billable tasks. Do what you’re best at, and delegate and outsource the rest.
#3: And you’ll always be working
Well, there’s some truth there. A common saying among people who have started businesses like accounting firms is, “I stopped working 40 hours a week for someone else so I could work 80 for myself.” Frankly, you might find yourself working longer just because it’s more fulfilling when it’s your own company. When you’re working for someone else’s firm, the only thing you get from overtime is tired. When you’re the owner, overtime usually means you’re making more money.
The one thing you’ll be better able to control is your work-life balance. Sure, there are going to be times when you’re burning the midnight oil or quietly sneaking out of the house before the sun rises, but you’ll have the power to set boundaries that work for you so you can balance the extra effort with plenty of rest and recreation. Taking care of your mental and physical health is a sound business strategy.
#4: This is a bad time to start an accounting firm
The market’s in a dive. Or it’s climbing too quickly. There might be a recession. Those interest rates. Know when it's the perfect time to start an accounting firm? Never! The closest you'll ever get to the best time is right now. Many of the most successful businesses were started in the depths of recessions. In fact, when things aren't going well, someone with a new approach can stand out and give others hope. Want to put the idea you've been focused on to the test?
#5: You’re not enough of an expert to start a firm
You look up to leaders in your profession, but those people didn’t always know they were leaders. You’ll never know as much as you wish, but you know a lot. If your instinct is telling you there’s an underserved opportunity out there, maybe you should pay attention.
That said, if you haven't spent any of your career working in a small CPA practice, it would be wise to spend at least five years to explore that environment. CPA certification doesn't mean you're automatically qualified to run an accounting firm. Spending a couple of years working in a small practice can give you a front-row seat for understanding what's involved. You'll get experiences you would never have elsewhere. And after five years, you'll understand what your boss does well and what you can do better. You may even decide you're happier as an employee than you would be as a firm owner. If not, don’t let the myths stop you from striking out on your own!
If you have started your own firm and developed a successful business, it’s time to grow your firm through acquisition! Oak Street Funding has the capital you need to reach the next level. Contact us today!
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Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.