“I’ve been working for other accountancies too long. I need some independence, so starting my own accounting firm is my next goal.”

Sound familiar?. Many accountants, at some point, consider breaking out on their own. Before you take the plunge into entrepreneurship, consider what these two certified public accountants (CPAs) have to say about starting up an accounting firm: Jasmine DiLucci, JD, CPA, and principal at JD Tax Law and DiLucci CPA Firm, and Colin Smith, CPA and owner of CPA Exam Maven.

Both DiLucci and Smith have years of experience in the field and run their own accountancies. Keep reading to get their recommendations on the essential elements you need to have in place before you hang your shingle.

How To Start Your Own Accounting Firm: A 7-Item Checklist

1. Know what type of accountancy you want to start.

Smith says one of the first things to concern yourself with should be deciding on the type of services you want to offer. Different types of firms require varying levels of education, experience, and licensing. Here are a few main types that fall under the accounting umbrella:

• Financial advisement. As a financial advisor, you’d help clients decide what to do with their money. “Technically, anyone can call themselves a financial advisor as the term is not legally regulated—though to say you’re a certified financial planner would require licensure,” Smith explains.
• Bookkeeping. This foundational accounting service will see you keeping record of business transactions and preparing financial statements. “Much like financial advisement, there aren’t many entry barriers here since you aren’t required to have a license to offer bookkeeping services,” says Smith.
• Tax preparation. You can prepare taxes for an individual or business without a license as well; however, you need a preparer tax identification number from the IRS. “Even though you don’t need a license, becoming a CPA or even an enrolled agent (EA) will allow you to provide additional tax-related services; it’s also a great way to differentiate yourself in the market,” Smith explains.
• CPA accounting. CPAs require licensure and can offer a wide range of complex financial services to help individuals and businesses plan and reach their financial goals. “Owning a CPA firm means you’ve gone through a certain level of rigor to obtain proper education and licensure, and can act in a consultative capacity, providing clients with greater value,” says Smith.

2. Decide on a business structure.

Both DiLucci and Smith agree there is no “best” business structure for an accountancy. However, two common business structures accountants choose are the limited liability company (LLC) and limited liability partnership (LLP). The LLP is only relevant in situations where you are starting an accountancy with one or more business partners.

“Keep in mind that if you are considered a professional in your state—e.g., a doctor, lawyer, or in some cases a CPA—these states typically require you to create a professional LLC (PLLC) or LLP (PLLP) in lieu of the standard versions,” says DiLucci.

3. Set up a client pipeline.

Starting up an accounting firm of your own means you have to find your own clients instead of depending on your employer to do it for you. Many new service-based entrepreneurs don’t consider this point enough before leaving their jobs.

In this digital era, there are a number of ways you can drum up business—online advertising, content marketing, email marketing, etc.—but DiLucci recommends two methods that many accountants neglect:

• Direct outreach. Reach out to business owners directly in person (assuming they’re local), via phone, or through a social media platform such as LinkedIn. “Every business needs an accountant—it’s just a matter of determining whether the business already has one,” says DiLucci.
• Peer referrals. Connect with other accounting professionals, whether bookkeepers or CPAs. You may be able to get referrals from someone who’s maxed out their capacity. “Consider also that you may offer services another firm doesn’t. For example, a bookkeeper may have clients with additional work that only a CPA can handle. The bookkeeper will likely refer those clients to you if you maintain a good relationship,” DiLucci explains.

4. Get the right insurance.

Smith says it's critical to acquire two types of insurance before you start working with clients:

• General liability. Also known as business liability insurance, this type of insurance covers common claims such as customer injury or property damage resulting from your products, services, or operations. “This is especially important if you don’t plan on starting a virtual CPA firm and will be visiting client sites in person,” says Smith.
• Errors and omissions. This type of insurance typically covers what general liability insurance doesn’t, such as being sued by a client due to negligent acts, errors, or omissions you or employees of your business committed that led to a financial loss. “Negative financial situations happen more frequently than you may think. Even when they may not be your fault—such as a dispute between business partners or shareholders and the business owner—you still may be in the crossfire. Errors and omissions insurance can protect you in these situations,” Smith explains.

5. Decide on your pricing approach.

How much should you charge your clients? What fee structure should you use? Should you collect your fees before or after rendering services?

These are all important questions you’ll ultimately have to answer for yourself, since the value you provide and the market you operate in differ from other accountants. Still, DiLucci and Smith agree that starting up an accounting firm with an hourly fee structure somewhere in the $50–$100 range will be suitable for most experienced accountants depending on the services you offer.

“In general, licensed accountants can charge more, all things being equal,” says DiLucci. “You may find it necessary to dip below this range when you’re just getting started with your own firm, but remember not to undervalue yourself. Eventually, you’ll be able to move into more value-based billing such as fixed fees and retainers.”

Interested in more detailed advice on pricing for accountants? Check out this brief guide that covers strategies, tips, and recommendations from CPAs, CFOs, and other finance experts.

6. Establish your online presence.

“You don’t need a fancy office to be a sought-after accountant—just be good at what you do, add value to clients’ businesses, and secure a mailing address,” DiLucci explains. “Instead of looking for office space, focus on ensuring clients can find and contact you online with a website. Bonus points if you can secure online reviews so clients can see social proof of your abilities before reaching out.”

Establishing your online presence is especially important if you’re starting a virtual CPA firm, as your website or other digital channels will be your primary drivers of new business. Be sure your website clearly explains the services you offer to avoid client confusion.

7. Implement appropriate technology.

You can’t run a modern firm efficiently without technology. Of course you’ll need core accounting software for the services you offer to clients—QuickBooks, Xero, or FreshBooks, for example. However, both DiLucci and Smith note the importance of acquiring support solutions for your operations.

“You need tools to help you manage the myriad financial documents you’ll receive and process from clients, as well as files from your own business operations,” says Smith. “Other areas you need to address include scheduling, time management, and general communication between you, your clients, and your team when you grow beyond being a business-of-one.”

DiLucci adds that, when starting up an accounting firm, efficiency is a must. Without efficient processes in place, your productivity will decrease and the cost of running your business will increase—a scenario that will eventually eat into your profits. “Implement solutions wherever you can to help you do more with less, so you can take on more clients and grow your business. Consider also securing basic services, like a telephone answering service, instead of hiring an assistant. Payroll is often the largest business expense, so the longer you can go without hiring employees the more money you can save.”

Don’t let inefficient client collaboration burden your operations. Make it seamless with Glasscubes.

Client portals like Glasscubes ensure working with clients doesn’t present undesirable bottlenecks. Glasscubes provides a secure online workspace that supports communication, collaboration, and organization—all cornerstones of efficiency. It is used by numerous accountancies to:

• Create customised, client-specific workspaces
• Track multiple client projects
• Communicate and collaborate with clients
• Automate information-gathering processes
• Securely store and share sensitive documents
• Assign tasks to clients and employees

Glasscubes is also security-minded: All data is protected by SSL encryption, and distributed across multiple physical locations across the UK to ensure high availability.

If you’d like a demonstration or want to see how other accountancies are using Glasscubes, learn more here.