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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.
 


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