I'm still newer to the tax and accounting field. I've grown organically to $150,000 in revenue the past four years, so far it's just myself and an admin. I feel that I'm at capacity at the moment with trying to do things alone. I'm debating on buying a small practice in the $100,000 to $150,000 range. That would give me the volume to hire an EA/CPA full-time. My biggest struggle is where do I go from here.
I'm trying to figure out pricing and profitability metrics to see what's reasonable. As I run numbers, I would want at least a 35% profit margin after paying staff/overhead. If I had a CPA/EA for $85,000 per year, part-time tax season help for $15,000, and office overhead of $20,000, that would be $120,000. My current admin would answer phones, ect. At a 35% margin, that would be $185,000 in revenue. Here are some of my questions for you vets:
1.) Is there a revenue target you aim for per full time staff member you hire? I realize the practice's target market and billing levels would influence how much revenue capacity a new professional could take on.
2.) Is a 35% profit margin reasonable on a block of business that wouldn't have my direct involvement? Is that too high, too low?
My overall goal is to get a team in place for the operations end of the tax/accounting business and focus on bringing in new clients, working with key accounts to retain/grow, and growing the wealth management end of my business. I welcome your candid thoughts. I want to be intelligent on how I go forward.