After graduating with a master’s in accountancy and passing the CPA exam, many professionals dream of opening a CPA firm. While starting one’s own business can be rewarding, it also comes with challenges. Starting a CPA firm means digging deep, answering tough questions and formulating sound plans.
Graduate students who choose an accountancy career have many professional options, including working for large companies, mom-and-pop businesses and governmental agencies. But with the shortage of talented CPAs across the United States, the time is right to open a CPA firm. CPAs with an entrepreneurial spirit are in high demand.
Experts encourage CPAs to forge career paths that take measured chances. Blake Oliver, senior product marketing manager of FloQast Inc., told Accounting Today that he and his peers have worked on their own terms with great success.
“You don’t have to follow the traditional career path in the Big Four anymore. It’s not about ‘making it to manager and then going to industry.’ You can start in industry. You can go to public after that if you want. You can even start your own firm in your twenties these days if you’re good at marketing yourself online,” Oliver said.
Graduate students who hope to open a CPA practice have several steps they can take. The first is earning a master’s degree in accounting, including a master’s in accountancy (M.Acc.) online.
Reasons for Starting a CPA Firm
CPAs have plenty of reasons why they would want to start a private firm, from having a better work-life balance to earning more money. Many CPAs with a clear vision for their future open private firms to further their dreams. Other reasons for starting a CPA firm include:
- Increased demand
According to the U.S. Bureau of Labor Statistics (BLS), accountants and auditors are in high demand and will remain so through the next decade. The BLS, which is a branch of the U.S. Department of Labor, said the employment of accountants and auditors would grow by 10% from 2016 to 2026. The average growth rate for all occupations in the United States is 7%.
At the same time, the accounting profession is losing employees at breakneck speeds due to baby boomer retirements. The American Institute of CPAs found that 84% of multi-owner firms are concerned about succession in the coming decade.
- Low overhead
As a sole-proprietor startup, CPA firms can generally have low overhead. Many CPA startups opt for working out of a home office, which can dramatically decrease operating cost. For a home office, CPAs need a designated space for work that includes a desk, a reliable computer with the appropriate software, communication equipment (cell phone or landline), and reference materials to stay current on rules and regulations. CPAs who choose to have public office space have the additional expense of the office lease and furniture.
CPAs in private practice have a chance to specialize and establish a foothold in a niche market. Specializations include personal financial planning, forensics, taxes, nonprofit and international accounting.
“There’s something about having specific responsibilities that allow you to get really focused on a defined skillset. This is perhaps the biggest benefit of specialization. When you’re able to stop wasting your time on low-returning tasks and instead drill down to what really matters, suddenly you become a more valuable commodity,” Small Business Trends said in its article “3 Pros and 3 Cons You Need to Weigh About Specialization in Today’s Job Market.”
Perhaps the most challenging part of opening an independent CPA firm is taking that first leap forward.
“Launching your own CPA practice is one of the greatest professional challenges you’ll ever undertake – and potentially one of the most rewarding. Fraught with hard work and long hours, it’s nevertheless a chance to build a business, provide real value to clients who depend on you and, ultimately, shape your own destiny,” the Journal of Accountancy said in “Start Your Own Practice.”
Steps to Starting a CPA Firm
The first part of launching any business is developing a business plan that will serve as a blueprint for current and future work. The business plan is particularly important for CPAs who are seeking investors or business loans.
“The business plan is an extremely valuable tool since it contains detailed financial projections, a marketing plan, and forecasts of the business’s performance. The forecasts are highly useful in determining the attainability of the firm’s goals. They will guide the business from startup to profitability, establishing milestones along the way,” The Tax Adviser said in “How to Start a Firm.”
Other steps to starting a successful CPA firm include:
- Choosing a legal structure
Determine if the business will be a sole proprietorship, partnership, S corporation, C corporation or any other limited liability firm. The status of the company will determine the type of record keeping that is required.
- Considering a marketing plan
When advertising the business, find the target client market and focus marketing efforts. Business owners must determine the best way to communicate with potential clients, including a website for the business.
“A new owner with the right technology and knowledge can build, develop, and maintain the site, or engage a developer to do so,” The Tax Adviser said.
- Protecting assets
Experts recommend that CPAs who start private businesses cover their assets with umbrella professional liability insurance. In some cases, practitioners should seek general liability, commercial property and business income insurance.
“Claims or potential claims against CPAs often happen to even the finest of practitioners. If something goes wrong for your client, that client will often look to nearby deep pockets to recoup costs, regardless of how strong your work was,” CPA Practice Advisor said in “What Accountants Need to Know About Professional Liability Insurance.”
Of course, anyone seeking to open a CPA business must start the process by earning the best education possible. The University of North Dakota’s M.Acc. program prepares students to sit for the CPA exam through one of two distinct tracks – students who have not completed significant amounts of undergraduate accounting coursework can join the fundamentals track. Those who have earned an undergraduate accountancy degree are eligible to enroll in the practitioner track. Both programs graduate students with an M.Acc. degree and prepare candidates to sit for the CPA exam.
About the University of North Dakota’s Master in Accountancy Online Program
UND’s online M.Acc. program prepares students to master accounting principles and learn in-demand skills in the field of finance. Students connect with like-minded individuals nationwide through the online format.
UND M.Acc graduates consistently beat the national average on the CPA exam and go on to become business owners and community leaders. Part of the University’s College of Business & Public Administration and accredited by the Association to Advance Collegiate Schools of Business (AACSB), the program has been ranked in the top 5% of business schools worldwide. For more information, contact UND now.
Why is there a Shortage of Accounting Talent?: HHStaffing
Great advice for young accountants: Accounting Today
Accountants and Auditors: U.S. Bureau of Labor Statistics
Succession Plan Top Concern at CPA Firms, as Baby Boomers Retire: Bloomberg Tax
What Equipment Is Needed to Open a CPA Firm?: Chron
3 Pros and 3 Cons You Need to Weigh About Specialization in Today’s Job Market: Small Business Trends
Start Your Own Practice: Journal of Accountancy
How to Start a Firm: The Tax Adviser
What Accountants Need to Know About Professional Liability Insurance: CPA Practice Advisor