Starting Up a Small Business (cpa or Accounting Firm)
Establishing a small business is one of the most challenging yet highly rewarding opportunities available to entrepreneurial individuals. During the height of the technology boom in the mid-late 1990s, it seemed as if almost any individual could start a business and become successful. However, as the bear market of the past 2.5 years has shown, what goes up must come down, and not every business will be successful. Starting up a small business offers individuals numerous advantages, both in terms of flexibility (i.e., hours do not have to conform to the rigid 9-5 structure of working for someone else) and potential reward (i.e., profits are generally not split in small businesses, or at least split between fewer individuals. However, there are also potential drawbacks of starting up a small business, including the risk of failure.
This paper analyzes and examines issues related to starting up a small business (CPA or accounting firm). In Part II, the central issues concerning such an endeavor are detailed. Part III outlines the recommended actions. In Part IV, the basis for the recommended actions are reviewed. Part V describes reasonable alternatives. In Part VI, significant factors concerning this endeavor are examined. Part VII entails a factor analysis. In Part VIII, the implementation plan is reviewed. Lastly, this paper concludes with suggestions for establishing a framework to ensure that the small business has the greatest chance of success.
II. CENTRAL ISSUES
Before you can establish a credible CPA or accounting business it is necessary to examine one main issue. Do you have what it takes? When analyzing such a question it is important to look at these other central issues:
Why do you want to start your own business?
Do you have the motivation necessary to start and maintain your own business?
Does your family support your decision?
Do you have the financial means to weather a start up period?
The key to the successful establishment of your own small business begins with the initial reason. If you do not have good reason to start your own business it may not be the best choice. It is essential that the business owner choose this path for good reason. Starting your own company as a result of anger or resentment to your previous employer is a sure cause for disaster. Having a clear mind and having specific goals and objectives the key to success.
Not only do you need to have a reason before starting your own small business you also need motivation. Small businesses require extreme amounts of labor when in the starting phase. Long hours and the possibility of limited funds may cause the owner to find him/herself overwhelmed. Considering this before the onset of the business is essential. Can you handle large amounts of stress? Do you realize that it may takes months or years before the longs hours diminish slightly? What will you do if your business is not as successful as you has envisioned?
All of these questions need to be considered before you can say that you have the necessary personal motivation to take on and win in such an endeavor.
Of course it is also extremely important to have the support of your family. Family will at times be your motivation; your clear head, someone to bail you out financially or emotionally and they can also be your laborers. Without the support of your family you will be facing another serious challenge. It is always best to have people rallying behind you rather than against you.
Finally, the major question to consider: Do you have the financial means necessary to start up the small business. If you do not have the funds yourself off from your own family you must either have a partner who is willing to work 50/50 with you on this endeavor or a partner whose role is simply financial. If you do not have a partner you might consider working with a financial institution. There are many programs available to aid small business entrepreneurship. There are also many government and state grants that will enable small businesses to get off the ground.
Have you answered yes to all of these questions? If you have then you are ready for the next step in starting your own small CPA or accounting business. You have what it takes.
You are now ready to look at the next step in starting your own small business. This step is the business plan. Why business plans? The business plan is an outline of all aspects of your anticipated practice. It captures all your thoughts in a logical, detailed presentation that not only acts as your guide but also tells others what your business is all about. A solid business plan is critical if and when you seen funding for your venture. Financial institutions look favorably on clear and detailed business plans.
There are many options available to the business owner when it comes to creating a business plan. You can create your own plan or have someone else with the proper expertise create one for you.
What needs to be in your business plan and why? There are many different components necessary when creating a business plan. The following components are essential in a proper accounting or CPA business plan:
Outline the goals of your business
Identify the structure of your business
Describe your experience and skills
Describe the services you will provide and competitive advantages you foresee
Identify your market and client potential
Outline pricing of your services
Explain management and staffing
Outline equipment and office requirements
Estimate start up costs
Estimate projected revenue
Define the source of start up and operating capital.
IV. REASONABLE ALTERNATIVES
Essentially there are many other alternatives to starting your own CPA business. One of the most obvious is joining a large accounting firm. When joining a firm you are limiting yourself in many ways. The possibilities of your financial rewards are limited to what the firm decides to pay you. If you choose to start up a small business, you will most likely receive a higher percentage of the profits.
Individuals who decide that working for a large accounting firm is not the right fit for them may decide to work as a freelance consultant or to partner up with fellow accountants or CPAs, and perhaps even lawyers. As with starting up a small business or striking out on your own, there are challenges in partnering with other individuals. For instance, some partners may have different visions about how to bring in and retain business or what areas to focus on. In addition, individuals may have different viewpoints about how compensation should be determined. For a partnership arrangement to work, the partners must agree to discuss the issues in a well-thought out, rational manner which allows for disagreement but also which emphasizes just resolution.
V. IMPLEMENTATION PLAN
Now that you have created your business plan, you are motivated and ready forge on what do you need to do? The following are key steps to follow to begin implementing your business:
Finding Office Space
Many start up businesses begin as home offices. Although the home office offers many cost savings, it may or may not be right for you. Do you have adequate space to devote solely to your business? Is it quiet and away from family noise and traffic? Do you feel comfortable bringing clients into your office? If you anticipate employees, is your family comfortable with this? Do local zoning requirements allow for a business in your home and what restrictions are there on employees, client visits, parking, deliveries, signage?
Renting space in a commercial office building may better fit your business requirements. Rent and lease conditions vary considerably, so it is best to shop around before settling on a location. Before signing a lease agreement, be aware of the long-term commitment and cash requirements. If your business grows rapidly, is there space to expand? Conversely, if your business does not take off, are you locked into a commitment of many years? Does the office meet realistic financial considerations, does it convey a positive image to clients, and does it offer flexibility based on your actual performance?
Many businesses today are using the shared space concept. Within a commercial building, you rent private office space but also use a shared reception area and staff, shared conference facilities, copy machines and phone systems, as well as rest rooms and coffee or lunch areas. This arrangement offers the image and amenities of a large office at shared costs with others.
Necessary Office Equipment
Once your office space is procured, you'll need to furnish and equip yourself for business.