If you're an accountant who's dreamed of owning your own practice, today may be the day to start living the dream.
The passage of Sarbanes-Oxley, as well as Arthur Andersen's demise, swamped the largest accounting firms with work, forcing them to push clients to top-100 accounting firms. In turn, those firms are shedding their smallest clients, and the trickle-down effect has increased business for sole practitioners, says James Metzler, vice president of small CPA firm interests at the American Institute of Certified Public Accountants (AICPA). "It's a good time for people to start firms."
Aspiring solo CPAs who prepare wisely can take advantage of this business environment. Here's a game plan, offered by Metzler and successful sole practitioners.
Build a Client Base
Metzler advises accountants to network at the next level up in their firms: "Be the recipient of clients they're going to shed. Because of the busyness of firms, there are clients grumbling about the service they're getting."
Alternatively, you can sign up for some of the workload. "Align yourself with a medium or small firm (and offer) to help them out per diem," recommends Neil Fishman, CPA, of Fishman Associates CPAs and a board member of the National Conference of CPA Practitioners (NCCPAP).
Leverage a Talent Network
To widen the scope of services to offer your clients, consider forming a network with other CPAs who specialize in areas where you may be weak, such as estate planning or business valuations, suggests Paul Cunningham, CPA, manager of Albright Crumbacker Moul & Itell. "In this profession, you have a lot of specialties. The more people you bring to the drawing board, the more you can offer the client."
Prepare a Financial Plan
Starting your own CPA firm isn't cheap. You'll need computers, accounting software, malpractice insurance and telecommunications equipment, as well as money for marketing, maintaining your credentials, reference materials and insurance -- plus enough cash to live on while you get the business up and running, Metzler says.
The minimum investment? About $100,000. "If you're a good salesperson and you live modestly for the first couple years, plan on breaking even the first year," Metzler says. AICPA surveys show the average income for the owner of a small firm (10 or fewer employees) is $100,000.
However, Fishman warns, you must be willing to sacrifice in the beginning: "There may be months where you can't draw a salary. If you're someone who must know you have a paycheck week after week, you may not be happy striking out on your own."
And be prepared to serve as your firm's secretary, administrator and custodian until you can afford to hire staff. While you have flexibility over when you work as a sole practitioner, you may actually work more hours since you'll be marketing and running the practice in addition to doing the accounting.
The AICPA offers two books that can help you deal with these and other issues: Solo Practice: An Owner's Manual for Success and On Your Own! How to Start Your Own CPA Firm.
Assess Your Skills
To be successful as a sole practitioner, a practical, technical, numbers-oriented accountant must add new skills: leadership, consultative sales and networking. "Clients come to you with a problem of some kind," says Walter D. Smith, CPA, a partner with Wegner LLP, CPAs and Consultants. "You'd be surprised at how much counseling we do about divorce, death, troublesome kids or financing."
You'll also need self-confidence and risk tolerance. "When you start out in business for yourself, you don't know if you're going to be successful," says Smith, who is also the NCCPAP's executive vice president. "You have to be willing to say it may not work out, and I may be sending out resumes again."