How to Start a CPA Firm: Top Checklist Items | Poe Group Advisors


Are you exploring the idea of starting your own CPA firm? Or perhaps you are ready to re-invent the one you have? Either way, we’ve gathered some of the key focus areas to help you create your plans for the future. Our planning checklist can help the aspiring sole practitioner or small firm owner address startup considerations such as defining your target market, outlining a business plan, knowing your financial requirements, understanding the landscape and more.

Step 1: Self assessment and pre-planning

Your jumping off point should start with a serious look at whether or not starting a CPA is really the best move for you. Should you consider working solo vs. managing a full firm? Or maybe it’s better to consider buying an existing CPA firm that has established staff, processes, and clients. These questions will help you determine what to consider…

  1. Should you start your own CPA firm? This is a great place to start, don’t you think? Not everyone is cut out to own their own business. Starting a CPA firm takes a variety of different skills and talents. For a deep dive on this, you might like to download a Profile of a Successful Practitioner. In the meantime, here is a short list of what’s needed to thrive:
  • Adequate experience in public practice
  • You need plenty of motivation and determination to help you grow and get over the natural ceilings that you’ll encounter
  • Good work habits. You need to be efficient and hard-working as an owner with a focus on results. Can you get stuff done? Because effort alone won’t cut it even in a small CPA firm.
  • Communication skills. You have to be able to articulate your thoughts concisely and effectively in order to work well with clients, prospective clients and staff.
  • Positive attitude
  1. Create your vision. A lot of the best young entrepreneurs I’ve ever met have a natural inclination to skip planning and get right to work. In contrast, a lot of the most successful older entrepreneurs I’ve met have learned about the incredible value of planning. When you put planning first, things tend to get a lot easier, require less work, and become more profitable. People who have learned that lesson the hard way know the value of planning! Getting clear about what you want to build is a great place to start. Here are a few questions to help you focus on what you want and create the outline of your vision:
  • How would I describe my ideal practice model?
  • What type of work will I focus on?
  • What will we not do?
  • How much time do I want to work in the practice?
  • What are my 5-year revenue goals?
  • How would I describe my ideal prospective client?
  • How would I describe my ideal employees?
  1. Calculate how much capital is needed. Once you’ve done that, add twenty percent for good measure. Trust me, you’ll probably need it. Budget out your first 24 months or so and do it by month. CPA practices typically have very seasonal revenues so cash flow can be challenging when starting out. The 24-month cash flow projections will help you anticipate those dips and help manage costs and expenses.

Step 2: Market research and tactical planning

It’s important to understand the current market in your area and develop a marketing plan to generate new clients for the business. Marketing is an important part of any business and it’s crucial to understand what the needs are for potential customers and how you can set your firm apart from the others to meet those needs. With some initial research, you can develop a marketing strategy tailored specifically towards reaching these target groups effectively so they know about all services offered by your CPA firm.

  1. Understand the landscape. The main things for business owners to understand are the competitive landscape and the general business environment. It’s a lot easier to start a practice in a geographic location that is experiencing strong economic growth. If you have a unique value in the marketplace, you will have an easier time differentiating your services in order to attract new clients.
  2. Define your target market. Perhaps one of the biggest mistakes we’ve seen accounting practice owners make as they grow their firms is they try to be all things to all people. It’s a recipe for burnout, low profit and long hours. It’s much better to be highly focused. I had a very wise business owner once tell me that, “Niche rhymes with rich.” He was absolutely right. You may need to be somewhat of a generalist at first in order to get started. However, in planning, the more specific you can be about the firm’s target market the better. It will have a major impact on your marketing and sales efforts. Here are a few questions to get you thinking:
  • What industries do you enjoy working with and what is a likely list of their accounting and tax service needs?
  • Which past clients have been ideal? Describe what made them so.
  • How can you add the most value? Is it tax planning, estate work, business advisory services?
  1. Develop a sales and marketing strategy. First of all, sales is an art! One of my favorite books on the subject is based on century-old proven strategies created by John Patterson who is considered to be “The Father of American Salesmanship.” One of his best quotes is, “People don’t like to be sold, but they love to buy.” If you are serious about becoming great at business development, you can’t go wrong with the strategies found in The Patterson Principles of Selling. As to marketing, there are a lot of different channels available to reach prospective clients. A good website is the cornerstone of a successful marketing strategy.  Here are a few other channels to consider:
  • Clients from your previous accounting firm (If you are not under any non-solicitation or non-compete restrictions.)
  • Social media networking and paid advertising
  • Google organic search and paid advertising
  • Traditional networking through community involvement
  • Referrals marketing
  • Writing and speaking

Step 3: Develop your vision for your firm

Businesses are started for many different reasons, but it’s important to have a vision for the “why, what and how” you’re starting your business. Why do I want this? What are the target goals for what we plan on doing? How can we build this business to better serve our target markets? Identifying this vision can help set the baseline for everything from your company culture and business processes to what tools you’ll need to do the job the way you want.

“If you don’t like the road you’re walking, start paving another one.”

-Dolly Parton

  1. Develop a vision for the client experience you want to create. Most clients want someone who is knowledgeable and easy to work with. Personal touches are extremely helpful. If you are serious about getting top clients through referrals, step one is creating a great client experience. You can build an amazing practice through word of mouth and referrals – as long as you first provide service that is worthy of a referral. This needs to be an ongoing effort. At Poe Group Advisors, when we know a right-fit client is happy with our service and receiving value, they are happy to refer others to us. All we have to do is ask. There’s a great book titled Giftology that has several great ideas on how to improve the client experience.
  2. Develop a vision for your firm culture. This starts with defining the values that will guide your team. Ours are published and you can read them. This is more important than firm hours or dress code…although those too are things to decide upon. One of the top concerns existing CPA firms report on is their challenges in attracting and retaining good talent. A fun, productive environment where people can learn and grow is key to building a great team.
  3. Plan your schedule. Burnout is real. If you are like most people starting out, you won’t mind long hours. In fact, it won’t really feel like working for a good while. There is a certain amount of adrenaline and excitement that carries the day. When I started Poe Group Advisors, I worked a lot the first couple of years and it was a blast. However, it’s not healthy to stay at that pace forever. In fact, it can hurt not only your personal life, it can actually stunt the growth of your business. This is counter intuitive for many, but some of the most successful CPAs in practice that we’ve encountered take significant time off. To learn more, check out What Would Happen if You Started Working Less?
  4. Choose an office. Depending on your business model, office space may matter a lot or just a little. Be aware of your environment and tie this back to your overall vision.
  5. Chose your technology. More and more, this can be a game changer! Do you want to create a modern practice with a remote team and virtual clients? There are a lot of great options available. Refer back to your overall vision and your ideal client to help you make the best decisions. Switching software platforms is much easier than it used to be, but it still has some pain points. Make sure you know how well the software you chose will scale with you. It might be better to pay a little more up front for systems that you won’t have to change as you grow. There are numerous cloud-based applications for bookkeeping and tax that can help you serve people from anywhere while improving the client service experience.
  6. Develop your pricing model. In our opinion, value pricing is the best way to go. Rather than go into detail here, we’ll just refer you to the thought-leader on value pricing in the accounting industry – Ron Baker.  Years ago, Ron did a guest post for us and you can read it here.
  7. Develop a client selection process. This may take some time and may need to be refined once you are established. A few items to consider are:
  • Ease of doing business
  • Compatibility with your planned service offerings
  • Financial stability
  • Integrity/reputation in the community
  • Size of opportunity
  1. Decide how you will get paid. Cash flow is often a key concern when starting out. It helps to have clear expectations with clients on what’s expected. If you can avoid carrying any accounts receivable, then that is ideal. Many firms require payment upon delivery of tax returns and auto-drafting or auto-charging for monthly work. Collecting and chasing money is stressful, time consuming, and not where you want to put your energy. If you do have to carry accounts receivable, develop methods to communicate with clients quickly and consistently when payments are not made when expected. Get rid of clients who don’t pay.

Step 4: Put together a business plan, pick it apart, and then make a backup plan (or two)…

Starting a new accounting firm can seem daunting, but having the right plan in place can help keep things on track. A formal business plan should include things like information about your projected revenue goals, services you will provide, specific knowledge or skill sets, various costs involved as well as other key business variables. It’s also a good idea to put together your own personal backup plans for various scenarios as well as future plans for your potential short and long term goals. Being a business owner comes with a variety of challenges so being agile and flexible can be a valuable factor in long-term success.

“Entrepreneurial business favors the open mind. It favors people whose optimism drives them to prepare for many possible futures, pretty much purely for the joy of doing so.”

-Richard Branson

  1. Develop a business plan. Even if you don’t need one for financing, the process of creating a formal business plan is incredibly valuable. The required discipline forces you to be clear about how you will establish and grow your practice. It gives you the opportunity to make your mistakes on paper instead of in practice. If you would like to get a complimentary sample business plan and guide, simply go to our contact us page and type “Free sample business plan” in the comment box.

Note, regulation has intensified in a number of practice specialties, and therefore, take extra care to check with state and national rule-making bodies and professional associations like the state societies and the AICPA to determine which requirements will apply to you or your accounting firm.

  1. Identify and evaluate all of your potential stumbling blocks.

Once you have a well developed plan… poke holes in it. You need to acknowledge any weaknesses or shortcomings in your plans. You may even want to seek out other people to find issues within your business plan. Take at least 10 minutes to develop a complete list of any stumbling blocks so you can develop plans to work through them. 

It is important to remember that ideas and plans need a certain “incubation period” to be strong enough to withstand real objections, but not so strong that you are firmly attached and there is no turning back. Make sure you are in that sweet spot when finding flaws. 

If you’d like to see a short list of pros and cons to starting a CPA practice from scratch, check out Buying A CPA Practice Versus Starting Your Own Firm.

  1. Consider an acquisition. Admittedly, we are not completely objective here since we sell CPA firms. However, we have had many buyers come to us after getting a practice off the ground who see the value in buying a practice that is already established. The key here is to find one that fits your plan. For more information, you might like to read our free guide – The Ultimate Guide to Choosing the Right CPA Firm For Sale.

18. Consider a partnership. Partnerships can be tricky…just ask someone who has had a negative experience with one in the past. However, partnerships can also be an excellent choice for some. In our experience, the best partnerships have partners with complimentary skills along with the good sense to allow partners to take on different roles and responsibilities within the firm. For example, one partner may be excellent at business development, while another is great at developing the firm’s talent. Both of these are essential elements of growing a successful practice. Sometimes 1 + 1 can be a lot more than 2.

P.S. – Whenever you’re ready, here are 4 other ways we can help:

  1. Seller FAQ: Answers to the questions sellers are asking. From practice value, to timing, we’ve got you covered.
  2. Strategic Guide to Selling your CPA Practice Video: The how-to of selling a CPA firm.
  3. Accounting Practice Academy: If you’re looking for benchmarks, our 8-week workshop has a community of established firm owners that will help you get perspective, reduce your owner hours, and raise your bottom line. email with “APA” and we will fill you in on the details.
  4. If you want to chat about your exit strategy, email with “strategy call” or request a call here.

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