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Reasonable Growth Expectations

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#1
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Hey everyone, I just wanted to get some input on what y’all think a reasonable growth from scratch could/should be for about an 18 month window. If someone started after this tax season, to the end of 2022, what kind of revenue would you expect for 2023? I understand that all markets are different, but want to make some goals for myself.

Additionally, what have you found the best way to gain new business clients for monthly bookkeeping? How do you find/contact new businesses, or approach ones that already have a CPA?
 

#2
Gr8ful  
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We all had to start somewhere and the key is to be happy with whatever growth you have but not complacent. I offer a small referral fee to clients who send their friends. That helps a great deal. I will say the growth is exponential with 5% at first and now more of a 10%. You also gain more complex returns with experience so you charge more. This obviously help revenue grow quicker. Good luck. I do not work on payroll or bookkeeping but I’m sure being full service is a great way to get new clients.
 

#3
Webster  
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Not sure what starting from scratch would be like because we bought a book of business, and then another. Now we are absorbing a number of clients from a closed firm. If you can find a book to buy, I highly recommend it. Best of luck either way.

We do very little bookkeeping, although I would like to expand that. Even selling quarterly QB review is a hard sell for my clients. I haven't tried approaching clients directly, and don't really like the idea. Client referrals and a few good referral sources are great. We get quite a few referrals from an attorney we recommend for entity setup and in individual who does QB setup.
 

#4
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Are you going to focus 100% on bookkeeping? Tax would be higher value-add.
 

#5
ATSMAN  
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IMHO the growth is in the business return and consultation segment rather than the run of the mill 1040 returns. Lately I have seen a decline in the revenue and # of 1040 returns and more opportunity is 1120S and 1065 returns. You have to add value to client's experience with you rather than be a "chain store" type tax return preparer.
 

#6
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ManVsTax wrote:Are you going to focus 100% on bookkeeping? Tax would be higher value-add.


I’m going to do bookkeeping payroll and taxes. Ideally I’d like to work on getting additional business owners and doing their personal returns as well as the business ones
 

#7
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ATSMAN wrote:IMHO the growth is in the business return and consultation segment rather than the run of the mill 1040 returns. Lately I have seen a decline in the revenue and # of 1040 returns and more opportunity is 1120S and 1065 returns. You have to add value to client's experience with you rather than be a "chain store" type tax return preparer.


I currently work for someone and do business returns as part of that. What do you find to be the most successful way to grow your business side of it outside of referrals
 

#8
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Webster wrote:Not sure what starting from scratch would be like because we bought a book of business, and then another. Now we are absorbing a number of clients from a closed firm. If you can find a book to buy, I highly recommend it. Best of luck either way.

We do very little bookkeeping, although I would like to expand that. Even selling quarterly QB review is a hard sell for my clients. I haven't tried approaching clients directly, and don't really like the idea. Client referrals and a few good referral sources are great. We get quite a few referrals from an attorney we recommend for entity setup and in individual who does QB setup.


How do you find the books of business to buy?
 

#9
Webster  
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I don't have good advice on that. For anonymity I don't want to say too much. the first was a prior firm cutting back, the next two events involved the same firm and a felony. We were offered another partial book from a firm looking to dispose of some clients but didn't like the client base or the terms.

Others on here have written about purchasing from older preparers looking to cut back. Watch the average client age if you do. Some preparers seem to have gotten most of their clients from their demographic.

Are you looking to moonlight or go full-time from scratch? If moonlighting, starting from scratch is doable. If full-time, the cashflow from a purchased book might be worth it.
 

#10
novacpa  
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I'd encourage you to get QucikBooks Certified, or go back to school and take more Accounting Courses and try to get an Accounting Degree. In some states like Maryland (a Blue State) you must have tax credentials before you are allowed to prepare tax returns for compensation (paid preparer). I'd know those statutes well before setting up shop. Unenrolled Preparers can anticipate consumer legislation coming out of this blue Congress requiring greater preparer licensure.
 

#11
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novacpa wrote:I'd encourage you to get QucikBooks Certified, or go back to school and take more Accounting Courses and try to get an Accounting Degree. In some states like Maryland (a Blue State) you must have tax credentials before you are allowed to prepare tax returns for compensation (paid preparer). I'd know those statutes well before setting up shop. Unenrolled Preparers can anticipate consumer legislation coming out of this blue Congress requiring greater preparer licensure.


I need to update my stuff b it I do have my accounting degree as well as my cpa. I will look into getting QuickBooks certified as welll
 

#12
novacpa  
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You want to correct your Profile - next to CPA indicate "Yes" that makes a big difference.
 

#13
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My practice saw the following growth (as an EA):

Retail 1040 tax returns - About 200 new clients per year (blogging, asking for referrals, yelp/google presence/a little bit of pay for click google ads)

1120s/1120/1065/1041 - About 25 new clients per year.

Payroll - about 12 new clients per year (usually with an s corp package)

Bookkeeping - about 5 new clients per year - but was very picky.

My only regret is being too cheap. I was scared that I couldn't pay my business and personal expenses, so I made my prices cheap to make sure I picked up some immediate volume.

Big mistake.

I ended up with some crappy clients and revenue could have grown just as fast had I been expensive. Most of that is fixed now, but it was NOT easy to fix.
 

#14
novacpa  
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Now that we know you are a CPA - the single most important decision you will make is where to
locate. Locate in an area where the "per capita income" is the highest. Those folks who make
loads of money - need tax planning advice - tax return preparation & e-file, tax payment scheduling, and tax Notice resolution. Sometimes they need tax representation before the IRS or a State Revenue Dept. All of that is good money making work, and reoccurring, at good rates $200 per/hr and up. If you are ambitious - get a firm license and prepare
financial statements for companies seeking borrowing lines of credit, revolving credit, etc. good money in shopping loans.
You can get exposure by getting good Yelp reviews, and sourcing from the State Corp Commission registry.
If you are in a sparsely populated rural area, I think growth will be real slow.
 

#15
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What kind of experience do you have?

Bookkeeping and employment tax returns are lower rate, lower margin, lower value-add.

It might make a lot of sense, and be better long-term for your career, to go to work for a tax firm for 2-4 years and soak up everything you can.
 

#16
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ManVsTax wrote:
It might make a lot of sense, and be better long-term for your career, to go to work for a tax firm for 2-4 years and soak up everything you can.


DEFINETELY go work some where before practicing on your own - oh my goodness.

2-4 years, I agree.
 

#17
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I have about 5 years experience with individual taxes. Doing businesses as well for ~3.5 of those. Bookkeeping, payroll etc the whole time. Also was a controller for a large company for a total of around 2.5-3 years
 

#18
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If that's the case I would hold myself out primary for income tax compliance services if I was you....not for bookkeeping and payroll.

Make that your bread and butter, and up-sell tax consulting where you can.

Depending on what kind of business tax returns you did, that experience may or may not help. For example, if you did primarily C Corp returns, you may find that most small businesses are Sch C (1040), partnership or S Corp.

I agree with nova that your geographical location matters. Locating yourself in a town/city that has higher disposable income than the surrounding area, and a growing population and economy matters, a lot.

If your boss will allow you to work on the side, that's the safer route at first. That's not always an option though.

Your biggest problem initially, and the one you need to work on, is generating leads.

You'll also need savings to cover yourself during the start-up period. Remember the motto: everything in business takes twice as long and costs twice as much as initially thought.

Good luck.

Might be opportunity for CFO services as well given your background.
 

#19
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Do you have any experience with offering cfo/controller services?
 

#20
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No. But there is a poster on this forum who does. Maybe he will chime in.
 

#21
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Generating business leads is going to be the hardest part. I like the idea of having some bookkeeping for additional monthly revenue and locking in the business and individual returns. I’m just not sure the most effective way to do that
 

#22
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You have a CPA and 5 years of individual tax preparation experience (among other experience, of course).

1040 preparation is all you need to get started and you can specialize outside of that with whatever you enjoy or what you are good at.

Within 2 years you will be getting by, 3 years to making a living, 4 years to a nice one, 5 years to a great one.

Unless you are in the total boondocks, the more successful clients will seek you out. Just price out the demographics you don't want.

Hang a shingle and get out there and get some clients. Ask politely and honestly for referrals. Do a good job for people and they will refer their family and friends. When you ask them, they will do it, you'll see.

I'm not saying it's easy. But a piece of the pie is there waiting for you.
 

#23
ATSMAN  
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When I was young, starting out I would take any engagement just to pay the bills. Over the years I have become more "choosy" on what type of clients and tax work I want to do. So at this stage of my life I only take new clients that are referred by existing clients. For business tax returns I will review their books and records, last 3 years of returns, and do my due diligence especially with the bookkeeper or other person that keeps and maintains the business records. I absolutely refuse to take on a business that has a "flake" doing the books. Generally it turns out 9 out of 10 times to be a family member unfortunately! I also weed out clients that are chewing 80% of my time and NOT significantly contributing to my revenue. In this business you have to do a good cost benefit analysis as the engagement gets more "tangled" over time. :roll:

So for the poster starting out, I guess you are in my shoes 20 years back and at this point in time based on your knowledge and resources you will need to create a business plan that works for you. Others on this forum with more experience can perhaps guide you with the pitfalls and what works based on their experience.

Hopefully you get to a point where you only accept new business from referrals and weed out all the other "junk" that chews up 80 % of your resources.
 

#24
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Itdepends & Tasman, This may be a dumb question, but what does it sound like when y’all ask for referrals?
 

#25
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I blogged a long article on how I was successful in getting referrals, am I allowed to post the link? There are no ads on the blog and I'm not selling anything on it. I just like to write....
 

#26
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I’m not sure what the official rules are regarding that, but you could also send it to me as a private message if you wanted because I’d be interested to read it
 

#27
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ItDepends wrote:You have a CPA and 5 years of individual tax preparation experience (among other experience, of course).

1040 preparation is all you need to get started and you can specialize outside of that with whatever you enjoy or what you are good at.

Within 2 years you will be getting by, 3 years to making a living, 4 years to a nice one, 5 years to a great one.

Unless you are in the total boondocks, the more successful clients will seek you out. Just price out the demographics you don't want.

Hang a shingle and get out there and get some clients. Ask politely and honestly for referrals. Do a good job for people and they will refer their family and friends. When you ask them, they will do it, you'll see.

I'm not saying it's easy. But a piece of the pie is there waiting for you.


THIS times a 1000. Here in NC CPAs are in demand. The entire northeast is moving here looking for a good CPA.

Location is key.... but if you do good work, they will find you. I NEVER would do payroll. It makes you look like a bookkeeper. make your self an expert in tax and small corps and they will throw money at you. any client that wants you to do payroll is too small.
 

#28
ATSMAN  
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TaxMan2020 wrote:Itdepends & Tasman, This may be a dumb question, but what does it sound like when y’all ask for referrals?


You have to prepare your client before you ask for referrals. The first thing is you have to make sure they are happy with your work and when they are in te right mood you have to say something along the lines. " I am very happy that you like my work and I would like to do the same for your friends and family. So if you know someone who could use my services, I would appreciate if you give them my business card. I will treat them professionally and fairly as I have done to you." Keep it sweet and to the point and then wait!

In my career a point has come where my existing clients who I have not yet asked for a referral, often call me and tell me to contact a friend or relative of theirs. I have noticed this happens a lot around Thanksgiving, Christmas and right after tax season end! Go figure :?:
 

#29
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PM sent.
 

#30
CP Hay  
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Due to the sensitivity of what we do I’ve always believed that tax work was, and still is, a referral business. The one issue that I find is that even if you have current clients who trust you doesn’t necessarily mean that you can depend on them for all your business. They may not know anyone who is your ideal client.

Also, I try to market on a national scale because I prefer to work remotely. I’m curious to know from those of you with a steady flow of referrals, how many of the referrals are local versus out of state.
 

#31
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CP Hay wrote:Due to the sensitivity of what we do I’ve always believed that tax work was, and still is, a referral business. The one issue that I find is that even if you have current clients who trust you doesn’t necessarily mean that you can depend on them for all your business. They may not know anyone who is your ideal client.

Also, I try to market on a national scale because I prefer to work remotely. I’m curious to know from those of you with a steady flow of referrals, how many of the referrals are local versus out of state.



On a percentage basis, I get just as many from out of state and out of country referrals as I do local referrals.

But as someone who is trying to specialize in s corporation compliance, I worry about "competence" with state tax issues.

For example, if an issue with payroll or sales tax comes up in Hawaii, I feel "experienced". But I'm not sure I'm doing clients a favor by having s corporation clients in 40 states.

I have one client in Florida, also for example, and I didn't warn him about the LLC renewal/penalty.

So other than for "simple" individual taxes, are multiple out-of-state clients worth it?
 

#32
ATSMAN  
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I ran into this problem when I was doing payroll. I could keep up with the state and local laws of my state and one neighboring state but trying to learn other state laws was spreading too thin with the limited resources I had. So I would not accept any engagements beyond my state. Frankly I don't regret that decision. It probably saved my sanity :o
 

#33
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TaxMan2020 wrote:Do you have any experience with offering cfo/controller services?


ManvsTax may have been referring to me with his comment. I offer CFO/controllership services. It is not the easiest work to obtain, but it comes along through referrals. Sometimes you luck out and a company needing such services will find your website and make contact (this is how I started doing work for one client that generated $75k/year income before I became their employee, and resigned due to misery after only 15 months).

Avoid payroll whenever possible. It is a PITA with no added value. I only take on payroll for clients that provide me a lot of other work and that will adhere to the very specific terms concerning payroll (must be semimonthly, minimum fees, etc.).

Try getting involved with a Chamber of Commerce and go to events they host. Keep your face in front of people. I have gained a lot of quality clients because of my participation with one of the local Chambers.

Spend money on a quality website and SEO. You want your business to appear at top of page one for specific search terms, so identify the search terms you want to target and manage SEO accordingly. Figure out how you can set yourself apart from other firms and do not allow your website to state the same things as every other accounting/CPA firm website.

I do not advertise at all. Referrals are my leading source of new clients. Others find me via my website or from social media posts/recommendations (NextDoor, for example).
 

#34
novacpa  
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When I started out Solo - I found a great Realtor who got me a 3-story brown stone on Lawyers Row,
County Court House a short walk away. There were 300-attorneys and at most 30-CPAs.
I dropped cards are some offices, shook some hands, and in came the business.
Lawyers love to bill clients for "Consultation with CPA for__________"
I hired 10-support staff in 5-years, and a CPA from Coopers & Lybrand.
Never had a slow period, busy year round.
Lesson to learn where you locate is key.
 

#35
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novacpa, more importantly, are you being paid by the client or lawyer when they bill out "Consultation with CPA for _______"?

Location is important, but even more so, the caliber of people that will be seeing or know of you based on location. My prior firm was located in a very nice office in a very nice bank, but the average caliber customer of the bank was not CPA client material--they were TurboTax types, in most cases. The lawyer that was upstairs along with a doctor at one point did not have sufficiently high end clients to bring anything of value to our firm. The walk-ins and referrals ended up being absolute nightmares.

Meet and gain the trust of financial advisors, too. I have made a ton of money from financial advisors referring clients to me. I still need to get my Series 65 to expand in this area, but it is absolutely an opportunity for strong growth. Just make sure you trust the advisors, are in good standing where they are licensed, and they do not BS people.
 

#36
novacpa  
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Corner..I fully agree with your point, and many times it is overlooked when selecting an area to locate.
A CPA (or other tax professional) must have an abundance of potential well paying clients. I advise
searching for areas who command the highest "Per Capita Income" - search by zip code.
Rarely do high-income earners do their own tax prep, via Turbo Tax - they know the tax code
is far too complicated for them to get it right.
I had a Do-it-Yourself call me last week, a lady from out of state who did live in Virginia and worked in
Maryland, she just got a Tax Assessment Notice from Virginia proposing a $3,200 assessment. When she
prepared her own tax return, she made the mistake of paying Maryland a Non-Resident tax on her wages,
her Employer had withheld Maryland Income Taxes in error. She claimed a tax credit on her Virginia return,
that (last week) was disallowed.
I said to her, "if you had hired me and paid me $500 in 2019 you wouldn't have this problem - I can fix it for $1,000"
She wanted to negotiate the fee, I stayed at $1,000.
Any Taxpayer who makes over $100,000 and lives in a multi-state jurisdiction should not file their own returns.
 

#37
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Correct. Target 6, 7, 8 figure earners and you can do well as long as you also have the experience (and perhaps more importantly, significant research skills). Very few of my clients earn 5 figures but those that do are excellent, I have worked with them for 15+ years, etc., and for the most part, pay decent tax prep fees.

These people also talk once you gain their trust. They are friends with other high earners (or high net worth) and they definitely discuss professional services and tax matters more freely than lower earners (who are often afraid to reveal their incomes to anyone, let alone ask for referrals). And, certainly, TurboTax is often their best choice.
 


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