The first time I started my own company I was 32. I was working in a Big 4 Accounting firm, my dad had passed away with cancer and his clients needed someone to prepare their tax returns. I started the CPA firm in his name and never looked back. I have taken a couple detours but landed right back to running my own company as it is ideal for my “work-4 kids-1 husband-life balance”. And I love it!!
Here are some things I have learned along the way:
- Choose a Legal Entity – I know that it’s common knowledge that you should form some type of entity in which to operate your business. However, I can’t tell how you many times I meet entrepreneurs and business owners that “haven’t gotten around to it”. An LLC or other legal entity provides it owners with so many benefits besides just limited liability protection. From a practical standpoint, a legal entity makes it easier to run and grow your business. Obtaining a bank account, liability insurance, and executing agreements with clients is much easier if you have a corporate structure. Some clients will not hire independent contractors who are individuals or sole proprietors due to liability concerns.
- Sign-up for Insurance – Not only will you need malpractice insurance but you also need general liability insurance, auto insurance and potentially worker’s compensation insurance. I can’t recall any agreements that I have recently executed for projects or new clients where I didn’t have to acknowledge that I would maintain each of the above for at least $1 million of coverage per occurrence. Even to qualify to lease my office space, I had to have a least $1 million dollars in general liability coverage. (They actually asked from $3 million but I negotiated it down.) So don’t put off getting insurance as it can seriously affect your ability to grow your business or obtain new clients.
- Start with Sufficient Savings – You really should have 9-12 months of savings available. When I started my first company after my father died, I would say I had insufficient savings. I consider myself lucky that I was able to secure a couple of really big projects from referrals from my old firm. Plus, working in tax technology, my projects for software implementations tend to run 9 to 18 months long which helped with a continuous cash flow as I grew my client base. It takes a lot of investment to grow your business as well as lot of hard work. Living paycheck to paycheck during this start-up stage will complicate your journey and bring added stress…so plan accordingly.
- Business Plan, Mission Statement, & Employee Manual – I know, I know..duh right? But sometimes we get so focused on getting started that we don’t take the time to lay the foundation we need to grow our business. My first company grew so fast that I hired 5 employees within the 1st year and a half of starting. While I was busy getting new clients and work, I hadn’t created an environment where my employees shared my vision of who we were, how we treated clients, and how we respected one another. As a result, I had clients who were unhappy with services from my staff and staff who did not know how to conduct themselves in a client service environment. Inter-office drama, poor client delivery, and a sense of loss of control caused me stress and uncertainty. At 32, I had no idea how to motivate my staff and handle daily HR issues that they don’t teach you in law school or business classes.
So my advice is to define in writing what services you will provide and what clients you plan serve. Define your market, service offerings, and expected revenues and expenses. Document and share your vision and mission with your employees. How will you be different than all the other service providers out there? Sure accounting, audit or tax services are not the sexiest, most innovative services offerings but they are broad with a number of specialties that can provide you with a niche or means of distinguishing your firm from others. I recently used LivePlan.com to create a business plan for my most recent endeavor and found it invaluable. There are other great tools available on the web that can assist with the process.
Even if you don’t plan on hiring help right away, get an employee manual in place as soon as possible. You never know when your next big project or client will fall your way, requiring you to hire help. I learned the hard way. I hired a former staff member who I worked with at my old firm. We got along great and worked well together on clients. Then suddenly he was taking paid time-off in the middle of tax return crunch deadlines without much more than a day or two’s notice. He felt that his time-off was his to take whenever he wanted. I expected to be given sufficient notice and an approval as client deliverables took precedent. But he never knew of my expectations as I had not provided him with any prior notice or employee manual that defined how paid-time off worked. This disagreement eventually lead to the demise of our working relationship.
Lesson learned: Take the time (and spend the money) to have your company policies documented. Have each employee and contractor sign-off that he or she has read and understands the policies outlined, therein.
- Invest in Software Tools – Research the types of software applications you will need to support and grow your practice. Accounting applications or cloud-based solutions such as QuickBooks, Xero or FreshBooks are a no-brainer. However, there are a lot of choices, so do your research and find the one that will be right for your needs. Time tracking applications are also a good idea to look into even if you start out as the only employee. As you gain more clients and hire associates whether contract or employee, time tracking software saves time and helps you bill clients more efficiently. Some of the cloud-based accounting applications have time and expense billing as a feature including FreshBooks and Sage. There is also BigTime, Tsheets and many others that can integrate with your accounting software application.
It goes without saying that Microsoft Office or other applications like Google Docs are necessary for any practice. I currently use Office 365 as it gives me all I need and then some to run all aspects of my company including Outlook, Skype for Business(fka Lync), PowerPoint, Excel, Word, Publisher..you name it. I hope to give up my side job of IT manager soon but Office 365 provides the tools I need until I outsource the function in the very near future.
Training applications or webinars are also important as running your own practice takes time…a lot of time. There are a number of training and CPE offerings out there, too many to mention here. I found the video based training where you can start, stop and re-start again most helpful as it was difficult to find 2-3 hours of uninterrupted time from client calls and emails. Making time for the training is extremely valuable. I took for granted how important and convenient all those “firm sponsored” training sessions that I could no longer access were to my practice and clients.
Whew…well, I hope that helps. I could go on and on with lessons learned but the above should get your started. Good luck!!