Are you thinking of starting your own accountancy practice from scratch? While owning your own firm can be an incredibly rewarding experience, this article outlines the potential dangers that you need to be aware of when building a firm from scratch as well as outlining why buying into an accountancy practice may be the better alternative.
The risks of going it alone
Making the jump into starting a new accountancy practice may be a lifelong dream, but it doesn’t come without risks. Here are some of the main dangers of starting a practice from scratch:
- Not knowing what to charge and ultimately undercharging – many accountants undercut the fees charged by their competitors to try and win new business. While this may entice new clients to move from their existing accountants, it leads to much bigger problems later. This often results in building a portfolio of too many low-fee paying clients. It also makes it really difficult to increase your fees to a realistic level in future. (Find out how to win bigger and better clients)
- Building an ideal client base – many new practices take on any business that they can at first. They're not thinking about the type of clients that they actually want to work with. While this may bring in money at first, it can again lead to the majority of your client base being low quality, low fee clients. (Avoid this by creating your ideal client persona)
- Taking too long to build up the practice – if your growth plan isn’t realistic, your new practice will take a lot longer to grow. Many accountants also don’t consider the time lag between finding new clients and getting paid in their cash flow projections.
- Choosing the wrong software – Don't take advice from another practice about which software is ‘best’! This could land a new practice in a spot of trouble! Make sure you, do your own research and think about what you actually need. (Read about the 5 things that you need to consider when choosing software)
- Not hiring the right team – your employees are vital to the success of your practice. Finding the right people who share your values, work hard, and believe in the future of your firm takes time. Many new practices rush the recruitment process and hire staff that negatively impact on productivity and on the growth of the firm. (Check out our 5 tips to recruiting decent staff)
- Having to return to work for someone else – If you don’t have enough funding and resources to run a new practice that is taking too long to grow, you may have to give up; the result being a lot of wasted time, money, and energy.
- The probability of success is low – building a new accountancy practice is difficult and has a lot of challenges. The risk of failure is higher than if you were buying into an accountancy practice that already exists.
Why you should consider buying into an accountancy practice
Letting go of the idea of building your own firm from scratch can be difficult, but the benefits of buying into an accountancy practice that already exists far outweigh the potential pitfalls of starting anew.
When buying into an accountancy practice, you can benefit from:
- Negotiating a deal that is sympathetic to your cash flow
- A built-in infrastructure
- A loyal client base
- Trusted suppliers
- Hardworking employees
- Existing equipment and systems
- A positive reputation
Buying into an accountancy practice can be less expensive than launching a start-up (if you negotiate a good deal) and it can also provide you with a solid foundation allowing you to focus more on building the practice rather than starting with nothing and growing slowly.
Should I start my own accountancy practice?
There are a lot of perks to owning your own business, from having full control of your own schedule to controlling the future and direction of your business, but starting from scratch can be a grueling and time-consuming process.
For this reason, as well as the other risks mentioned above, we think that it is always wise to consider buying into an accountancy practice and the advantages that this gives you before making your final decision to go solo.