CPAs striking out on their own should, like any successful entrepreneur, start with a vision.
Aspiring sole practitioners must imagine the type and caliber of clients they wish to serve. They must invest in the resources that will attract and retain this roster. And then they must adjust expectations - beginning with revenue.
"There is no cash flow until that first client," said Lou Fuoco, founder and managing director of regional accounting and consulting firm The Fuoco Group. "There is a significant amount of risk, so you have to have the fortitude to hold on for a few months or so of preparations before you see dollars. The service business is a negative cash-flow business. You're laying out cash today, hoping you can collect tomorrow."
The realities of walking away from a reliable source of income should not scare burgeoning sole practitioners into taking on just any clientele, however.
"When you're starting out, really think about the type of firm you want to be, the type of clients you want to have," offered Melinda D'Antuono, co-founder, with Douglas Smith, of Princeton, N.J.-based Axiom CPAs & Advisors. "You don't necessarily want to take on every client to get revenue, but make sure it fits with the long-term strategic goals. You have the luxury of shaping the firm you want it to be."
D'Antuono and Smith are still in the shaping phase, having just opened the firm's doors this July after a 30-day push. They also had the unique benefit of bringing over clients from their previous tenure at New Jersey accounting and business advisory firm Bartolomei Pucciarelli, where Smith was a partner for the past 11 years. Even with this advantage, the two emphasize quality over quantity in every facet of their new venture.
"If you're looking for high-quality, larger corporate clients, you want to look like them, act like them," added Smith. "Go with quality stuff - marketing materials and office space. Do it right the first time so you don't have to rebuild the image later."
Of course, those practitioners who signed non-solicitation agreements with their previous employers or otherwise don't have the luxury of a built-in client base should prepare to start with more mom-and-pop clients (unless they have a specialty niche) and expand from there.
Fuoco, who advocates this model of steady growth, knows all about expansion. More than 20 years ago, he opened what would be the precursor to his current practice with a partner. According to Fuoco, that partnership began failing because of a disagreement over the size of clients - his partner came from a Big Four firm and wanted to retain large-revenue business - so Fuoco started his current firm 15 years ago in the basement of his house with one employee.
That employee, Brian Henry, is now a partner, having handled the operational aspects of the firm in those early years while Fuoco "knocked on doors" to drum up business.
He stressed the importance of this balance between rainmaker and technician, citing small-business author Michael Gerber's concept of the "entrepreneurial seizure" as plaguing many new sole practitioners who are better technicians than strategists.
CALL AND RESPONSE
Marc Rosenberg, president of Chicago consulting firm The Rosenberg Associates, agreed that many accountants are not naturally hardwired for the hard sell.
"Practitioners tend to be closer to the stereotypical introverted person who doesn't like going out with people," he elaborated. "It's a real push to get slow practitioners to get out of his or her office or make calls. I'm not talking cold calls - but calling clients, attending community events and networking activities."
The only way to overcome this trepidation is to dive in the deep end, according to Rosenberg. "For bringing in business, you're going out and selling and trying to meet people; you have to keep on doing it, on an ongoing and regular basis, to get comfortable with it," he advised. "It's like public speaking - the best way to deal with that fear is to go out and do it."
This is especially critical for the next generation of accountants, who will have access to an unprecedented number of firms on the market as Baby Boomers begin to retire in the next 10 or so years. Though sellers will outnumber buyers, having a well-rounded skill set will ensure that the next wave of owners make successful transitions.
ADD AND SUBTRACT
Once submerged in the entrepreneurial mindset, new practice owners should remember the familiar 80/20 rule, wherein 20 percent of clients represent 80 percent of fees, as well as the reverse. It's only when revenues start taking off that sole practitioners can begin balancing the scales.
"That 80 percent can really bog you down," Fuoco revealed. "They don't like to pay fees and are problematic clients. What you need to then do, once you're at the point where you have enough money to pay the bills and cover overhead, now you need to look for the 20 percent clients. Once you find quality clients, you're going to fire the non-quality clients."
This, of course, is contingent on successful practice development, in which, Rosenberg explained, an "incredible" 80 percent of all partners in multi-partner firms under $20 million in size are not active.
Rosenberg leads a roundtable of 25 sole practitioners who have met eight times a year for 16 years. Practice development is always a hot topic, but when he asks participants about their progress, discussion turns cold. "I throw it open to the group: 'What are you guys doing?'" he explained, to which they respond: "'We're not doing anything, don't want to do anything.' They want to make a million dollars but don't want to work."
Luckily, the risk that CPAs take when hanging their own shingle is also their greatest impetus to succeed.
In other words, Rosenberg specified, "They have to feel like their livelihood is at risk."
SWING AND MISS
This motivation should keep sole practitioners in a big-league mentality.
"It's all about times at bat," Rosenberg continued, instead of a good batting average. "The more bats you get, the more hits you get. There is a fantasy, myth, naÃ¯vetÃ©, including for restaurants, that once they hang out their shingle, people will come, like Field of Dreams."
Fortunately there are "various ways to get your name out to the public," according to Fuoco, and out of the dugout.
"The best way is to start networking with a number of different kinds of groups - find the area you want to work in," he recommended. "Find out where the associations you want to be involved with are meeting. Go network, press flesh, hand out cards; be aggressive in wanting to service those clients."
Networking should go beyond attracting clients and extend to roundtables of business-owning peers in an effort to retain and grow this new business.
"So many people are determined to be a sole practitioner, living in a cocoon, and are alone and don't have partners to talk to when they have an issue," Rosenberg said. "But there are ways to give yourself a virtual firm in many ways. If there's a roundtable group in your area, join it. If not, start it yourself."
REVIEW AND PARTNER
Beyond allowing practice owners to spread their wings, these groups provide all-important accountability.
"What expectations do you have for yourself?" Rosenberg asked. "If you have a goal, but don't tell anybody about that goal, odds are you won't achieve it. Tell three to four other people in an advisory board."
Axiom co-founder Douglas Smith has also found these conversations helpful: "Melinda and I are involved in 'mastermind groups' - groups of other unrelated business owners where you can bounce confidential ideas off of them; independent, unbiased feedback that's helpful."
Even more helpful, Smith continued, is seeking this brain trust in a partnership. "If you are going out in business on your own, you don't have the ability for that type of relationship," he said. "You should seriously consider having a business partner, someone you can relate well to."
Smith found this in D'Antuono and their "similar professional goals" and complementary backgrounds and expertise that balance each other out.
Fuoco and Rosenberg agree that those elements are critical, in addition to that aforementioned perspective.
"If you go into a partnership, you have to have the same vision," Fuoco stressed.
And once that vision is realized, all that risk reaps large rewards.
"Have fun," Smith advised. Starting your own practice, he added, "can be one of the most rewarding experiences someone can have in their professional career."
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