Author Topic: HELP-Want to start my own bookkeeping biz but not sure whre to start  (Read 1965 times)

BeanCounter

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I'm a CPA with 15 years small and large business experience (mostly healthcare and insurance). No firm experience and I flipped to a finance role about 7 years ago. I am currently director of finance at a large hospital system. I would like to leave the full time corporate workforce and build my own accounting business. I'm thinking small business bookkeeping and individual tax. But I'm not sure where to begin. And I'm concerned that most of my experience does not translate. So I'm hoping that someone on MMM can provide some advice.
 -Should I consider taking some classes again to refresh my knowledge or just dive right in? Or would it be beneficial for me to take a huge pay cut and work in a bookkeeping business for awhile?
 -I'm worried about selling myself and finding a few businesses to hire me. What is the best way to do this?
-What is the best way to figure out what to charge for these services?
-If I get a few clients and I come across a question I don't know how to answer, what do I do? I'm used to having "experts" to go to, not BEING the EXPERT.

Can you tell I have so much self doubt holding me back!!!

Background- age 40, married with two school aged kids. FI, however the cost of health insurance and future teenagers has us scared to RE. DH will continue working for insurance and his job also provides free college tuition. I would like to build a business to fund some fun travel and keep my skills fresh.

oldmannickels

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #1 on: October 05, 2018, 07:58:43 AM »
To build your skills volunteer to be the treasurer at a non-profit. Their bookkeeping is always atrocious so whatever you do will be better and you can learn different software kinks before you have clients.

Do you live in a metro area? Try to develop a niche when you are starting. Bookkeeping is different for different industries like lawyers and their escrow accounts or insurance and pre-billing.

Are there entrepreneur groups in your area. Show up to one and say I'd like to start doing your bookkeeping for very cheap. And then learn by doing their work.

One thing about bookkeeping is that some people will never value the work. No matter what you do they will never give you the information you need to actually do the work. Do not be afraid to fire them because they will make your work miserable.

jwright

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #2 on: October 05, 2018, 09:02:02 AM »
Do you know how to use Quickbooks?  Do you know payroll? 

In my area there is a huge shortage of knowledgeable bookkeepers.  I was in public accounting for years, and every CPA I talk to would love to farm out work to a bookkeeper.  Partners that know good bookkeepers hoard them and spoil them so they will stick around; there always getting poached by other firms or to come on board internally with the client full time.   Network with these people through local events and groups.  Getting Certified in Quickbooks would be huge.  Also, once you have a relationship with a CPA, then you can go to them with questions and issues and/or refer work back to them.

One issue is that the service is undervalued, and I don't think you can charge what the time is worth.  As a CPA in a firm doing tax work, my billing rate was $175/hour. with Sr managers and partners charging more - $300 and up  When I picked up some side work for bookkeeping, I charged $45-50/hour.  I've worked with skilled but non-certified accountants who only charge $25-$30 per hour.   Unfortunately, you are not considered on the same level as other consultants. 

You can definitely keep yourself busy, and with QB online you can easily service multiple clients from home.  You know more than you think you do - don't sell yourself short!


BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #3 on: October 05, 2018, 09:14:21 AM »
Thank you for the responses. Very helpful.
I do know QuickBooks, I am by no means an expert, but becoming certified would not be an issue.
It has been a very long time since I have done payroll. I think I could pick it back up pretty quickly.

As far as the billing rates, I do realize that I won't really be getting fully compensated for my CPA. I'm hoping that it will just help bring in business. I would like to bill somewhere between $60-$100 per hour. With some sort of a minimum for both bookkeeping and individual tax work.

Not sure how to start working with a small firm without them thinking I'm trying to poach clients. Or maybe due to demand that is not an issue?

onlykelsey

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #4 on: October 05, 2018, 09:24:36 AM »
This is not my field at all, but do you have a non-compete in your employment agreement with the hospital?  I'd check that, first.  If you do, there may be a carve out for non-profit work... so that may be a great place to start, as @oldmannickels  mentioned.

jwright

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #5 on: October 05, 2018, 09:29:28 AM »
Unless you are in a HCOL area, I don't think you can get $60-$100 per hour.  Maybe $60-$70 if you push that you are a CPA.  In my old firm we had a roster of about five or six bookkeepers that we would try to use to outsource work to, and the most expensive was $65/hour everyone else was under $40.  About six months ago, another message board I frequent had a poster (from a different area) ask what rate they should quote for bookkeeping; that potential employer wouldn't budget past $35/hour.

The way it works in my experience is that a business will have "messy" books or not a set of books at all (just looking at cash in the account to make sure they don't bounce a check).  They will go to a CPA firm at tax time (or when they start thinking about tax).  The CPA firm doesn't want to deal with the clean up; that's not where they are looking to spend their time and not the best use of firm resources because of the time/labor intensity.  They will refer to a bookkeeper who will get the documents in shape for the CPA to be able to prepare the return.  From there the client says, well it would be nice to have reports on a quarterly or monthly basis, and you've got recurring work and a relationship as the go between with the CPA and client.    Seek out firms that are more than just one person, I would bet more are trying to get rid of bookkeeping than take it on.
« Last Edit: October 05, 2018, 09:34:05 AM by jwright »

BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #6 on: October 05, 2018, 09:32:52 AM »
This is not my field at all, but do you have a non-compete in your employment agreement with the hospital?  I'd check that, first.  If you do, there may be a carve out for non-profit work... so that may be a great place to start, as @oldmannickels  mentioned.
I absolutely do not have a non-compete.
What I've actually been doing for the last twelve years is insurance accounting and finance. Specifically health insurance. Was the director of finance for an ACA plan that the hospital run and subsequently shut down. Now working in benefit plans and risk agreements for alternative payment methodologies for the hospital system.
I have had a couple insurance brokers and State Farm agencies ask me about possibly doing their book keeping.
I also know the restaurant business pretty well. And a little bit of the construction business.
How to narrow it down and get my name out there? And should I quit before I start doing that?

pbkmaine

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #7 on: October 05, 2018, 11:44:50 AM »
Become active in your local CPA society and ask lots of questions. You will find a ton of people who have done the same thing. Network, and you should find out where the most profitable niches are. You might also get an offer to work at a small firm, which would be an easy way to break into the business. Keep a list of all your contacts. It will be gold.

MarciaB

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #8 on: November 10, 2018, 12:29:03 PM »
Hey BeanCounter - do you have an update for us?

john c

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #9 on: November 11, 2018, 08:25:14 PM »
I did this about 6 years ago.  Almost four years ago I transitioned to running my CPA firm full time.

Like you, I didn't have any CPA firm experience, so I worked part time for a couple of years at a small CPA firm preparing taxes.  The most valuable thing I learned was the process of running a tax firm.  It was very valuable.

I then purchased $15k in CPA business being spun off of another firm.  Two years later, I bought a $75k in CPA business from a retiring CPA.  Four weeks after closing that deal, I was laid off from my corporate finance job. 

I have my staff do a fair amount of bookkeeping.  Generally, my clients come to me with bookkeeping needs, and I supply it. 

It's very tough to build a business from scratch, to include tax prep and bookkeeping.  From doing this a while, I tell my clients that it takes 5 years for a business to really get going.  The first two years you will make NO money, while you build your clientele.  Years 3, 4, and 5 you'll make a little money, but starting in year 6, you'll be doing better than before.   But it's a hard slog.

Obviously, some businesses are better/easier than others.  But these businesses have less upside.  CPA work definitely falls in the first camp.  The first $300 return you'll do, you'll make money.  But it'll take you 5 years to get 100 clients. 

If I were in your shoes, I would:

-Get really good at QuickBooks.  Get a certification, of course, but learn it better than that
-Buy a book of bookkeeping business.  It will then be very easy to peel of clients from their existing CPA and do their taxes. 
-Tax prep is VERY easy, if you're doing the books.  You know everything already, and you can avoid anypitfalls from the beginning.

I could go on forever about this business, but that's the gist of it.

Good luck!  CPA work is a really great FI gig.

BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #10 on: November 12, 2018, 07:10:36 AM »
@john c ,
 Thank you so much for your response. It's really helpful to read a story of someone who has done this before. I have some questions if you don't mind-
 - how in the world did you work in your corporate finance job AND do part time tax work for a firm? I'm not sure if this is something I should be looking at, or if it's even possible for me. I can see how it would be extremely valuable to work a couple tax seasons at a firm.
 - How did you find out about the CPA businesses that you purchased. Since we are FI, but my DH is still working this would be a real possibility.
-Can you give me an idea of what kind of pricing for various work I could charge? And how did you figure out what to charge. I've already had some input on this, but more is always better.
-One thing that's been on my mind is what kind of liability insurance I would need. Any thoughts there?

Again, THANK YOU.

MarciaB

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #11 on: November 12, 2018, 07:16:29 AM »
BeanCounter - try the website www.bizbuysell.com     It is an online marketplace for buying/selling businesses. You can take a look at listings for CPA businesses, or bookkeeping businesses, or tax prep ones...you get the picture. You don't need to have an account to search. Spend some time looking around to get a feel for what other people value such businesses at. There are also listings for business brokers, which may be an avenue you might want to explore. Good luck!

BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #12 on: November 12, 2018, 07:22:16 AM »
Hey BeanCounter - do you have an update for us?

Well, not the best update as I have made very little progress. Baby steps I guess.

A few weeks after posting I was at my son's Taekwondo practice and I mentioned to his instructor that I was interested in quitting my day job and going out on my own doing basic bookkeeping and tax. She said that if I was really serious with that she would be happy to introduce me to her group of local small business owners. She also mentioned that her dad who does the schools books would be retiring soon and she would be looking for a bookkeeper. I would be willing to take them on as my first client.
Then another friend from our church messaged me, we had recently had a Kindergarten mom's breakfast and I expressed some interest in going part time. She had been doing a part time controller/CFO job for a local developer but wanted to go back to banking. She said she could make some introductions for me if I was interested. I have not followed up because........
MY DAY JOB IS GETTING IN THE WAY.
My current job, which is going through a merger is very busy. Lots of work consolidating. Lots of people getting laid off. I was actually hoping I might be one because I would get six months of severance and it would be the kick in the pants I need to switch gears. Sadly, or happily I don't know, they decided to formally extend an offer to me to stay which included another raise.
Add in that my husband's job is in a crisis situation that he is afraid will not end well and he feels better if I am working full time until that is sorted. So here I am. (I am having trouble convincing him that we really could quit working, despite kids but that's another topic all together)
So I don't know, maybe another year here and then start getting really serious about going independent. It would be nice if I could find a way to slowly transition. It would be less of a shock to me I think.
Suggestions welcome.
This FIRE thing is harder than it looks. :)

BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #13 on: November 12, 2018, 07:24:44 AM »
Become active in your local CPA society and ask lots of questions. You will find a ton of people who have done the same thing. Network, and you should find out where the most profitable niches are. You might also get an offer to work at a small firm, which would be an easy way to break into the business. Keep a list of all your contacts. It will be gold.
This is on the top of my to do list for this year. I'm hoping it will help me segue.

john c

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #14 on: November 12, 2018, 11:14:29 PM »
@john c ,
 Thank you so much for your response. It's really helpful to read a story of someone who has done this before. I have some questions if you don't mind-
 - how in the world did you work in your corporate finance job AND do part time tax work for a firm? I'm not sure if this is something I should be looking at, or if it's even possible for me. I can see how it would be extremely valuable to work a couple tax seasons at a firm.
 - How did you find out about the CPA businesses that you purchased. Since we are FI, but my DH is still working this would be a real possibility.
-Can you give me an idea of what kind of pricing for various work I could charge? And how did you figure out what to charge. I've already had some input on this, but more is always better.
-One thing that's been on my mind is what kind of liability insurance I would need. Any thoughts there?

Again, THANK YOU.
To answer your questions:

1) I had a pretty low key job, that allowed me to work from home most times.  I easily adjusted my work hours at my regular job.  Also, tax firms run 16 hours a day, seven days a week, during tax season.  You could EASILY work a couple evenings per week, and one or two weekend days, for a firm.  You would probably get $35 to $50 an hour, in my area.  I'm in a HCOL area.  When I was working part time, I worked evenings and weekends.   It's tough with kids, but I was home at least two nights per week, and it's only for 8 weeks.  If you're in management with a serious company, this will be hard, just from the demands of your primary job. 

2) I worked with CPA practice business brokers in my area.  They generally list their practices for sale online, so you can browse them without contacting them.  If you want more info, you need to contact them and submit your information, including your ability to actually purchase.  I'm happy to fill you in on my experience.  I had two good practice purchases, and one that didn't turn out as well as the first. 

3) I'm happy to discuss this offline.  Generally, use the price structure of the firm you acquire, or just ask new clients how much they're currently paying.  They're generally relieved when you'll do it for the same amount of money. 

4) I use Camico, which is basically malpractice insurance for CPAs.  It's expensive, but I wouldn't go without it.  To offset the cost, they provide free CPE, which is nice.

CPA work can be very mustachian.  You can have a small practice of 100 returns and make $40-$50k, gross.  You'd only work a couple months out of the year.  You can easily work this until you're 70 or 75.  Plus, I really like my clients, and enjoy working with them.

I think there are a couple of questions you're not asking, like what software to use (Drake, if you're only doing personal returns, or a very few 1120/1120S/1065 returns); also, be wary of new clients; and some others that don't immediately pop into my head.

john c

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #15 on: November 12, 2018, 11:17:19 PM »
BeanCounter - try the website www.bizbuysell.com     It is an online marketplace for buying/selling businesses. You can take a look at listings for CPA businesses, or bookkeeping businesses, or tax prep ones...you get the picture. You don't need to have an account to search. Spend some time looking around to get a feel for what other people value such businesses at. There are also listings for business brokers, which may be an avenue you might want to explore. Good luck!

Bizbuysell is okay, but I used a couple of brokers that exclusively sell CPA firms.  They're the ones that cross list these on bizbuysell.  Once you figure out the ones that are big in your area, browse their listings directly.

john c

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #16 on: November 12, 2018, 11:23:27 PM »
Hey BeanCounter - do you have an update for us?

Well, not the best update as I have made very little progress. Baby steps I guess.

A few weeks after posting I was at my son's Taekwondo practice and I mentioned to his instructor that I was interested in quitting my day job and going out on my own doing basic bookkeeping and tax. She said that if I was really serious with that she would be happy to introduce me to her group of local small business owners. She also mentioned that her dad who does the schools books would be retiring soon and she would be looking for a bookkeeper. I would be willing to take them on as my first client.
Then another friend from our church messaged me, we had recently had a Kindergarten mom's breakfast and I expressed some interest in going part time. She had been doing a part time controller/CFO job for a local developer but wanted to go back to banking. She said she could make some introductions for me if I was interested. I have not followed up because........
MY DAY JOB IS GETTING IN THE WAY.
My current job, which is going through a merger is very busy. Lots of work consolidating. Lots of people getting laid off. I was actually hoping I might be one because I would get six months of severance and it would be the kick in the pants I need to switch gears. Sadly, or happily I don't know, they decided to formally extend an offer to me to stay which included another raise.
Add in that my husband's job is in a crisis situation that he is afraid will not end well and he feels better if I am working full time until that is sorted. So here I am. (I am having trouble convincing him that we really could quit working, despite kids but that's another topic all together)
So I don't know, maybe another year here and then start getting really serious about going independent. It would be nice if I could find a way to slowly transition. It would be less of a shock to me I think.
Suggestions welcome.
This FIRE thing is harder than it looks. :)

It all comes down to how much your burn rate is.  If your expenses are low, you can easily work in a small firm during a couple tax seasons.  You can actually do phone support for Turbotax for $50/hour, though this is brutal.  It's only during tax season. 

So, do the bottoms up numbers on your household finances.  Then do the numbers on different options.  I found that once I cut ties with my corporate job, small opportunities pop up everywhere.

BeanCounter

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #17 on: November 13, 2018, 09:01:39 AM »
Thank you @john c for taking the time to answer my questions. I feel like a path is starting to come together a bit.
I don't think I can do seasonal work for a firm and my day job while also having grade school aged children. I'm a finance director and that alone is too much. Which is why I want to transition. We are largely FI (on a budget), but since the kids are still young my DH feels that it is important to continue to work as our burn rate is high. I just provide discretionary spending and help with tuition. Which is why doing just part time tax work would be ideal. And since the weather sucks here from Dec-March I might as well be working. I also like that my boys would (hopefully) get to see their mom build a business of some sort. Your posts make this seem very doable. So I'm thinking I'll finish out 2019 here. Then quit once the 2020 budget is done in November and look for part time tax work for winter of 2020. Do that for a couple seasons and see how I feel about buying a business. All while keeping my feelers out for clients I can do on my own. I did a search locally for seasonal tax work and came up with lots of options many by my house. I was surprised. Not sure what they pay.
In the meantime I plan on refreshing my tax knowledge (have to do CPE anyway) and joining the local CPA society and maybe AICPA.

john c

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Re: HELP-Want to start my own bookkeeping biz but not sure whre to start
« Reply #18 on: November 18, 2018, 08:50:39 PM »
In what part of the country are you?  If you're in a crappy climate, and are paying a boat load for private school tuition, and your husband's job is on the rocks, it sounds like a great opportunity to get off the treadmill.  You could easily make $60k working part time doing tax, and have your husband help you in the office.  It's a very powerful combination.

Check out Accounting Practice Sales.  I often browse the Hawaii listings.  Interestingly, these are listed for lower asking prices than where I am.  I'm in CA, and practices list for 1.2 times revenue.  In Hawaii, practices list for 1.0 times.  Although I'm pretty set where I am, I often look at those practices and think of living in Hawaii.  For LCOL areas, you can browse Arizona.  In tax, you could easily get out of town for the hot months, and your kids would be out of school.  I've purchased several practices over the years, and have a lot of experience as to what works and doesn't work in transitioning a practice from seller to buyer.

With respect as to what you should be making at a local firm, obviously this is very region specific.  However, I've heard on good authority that this job pays $50/hour for seasonal work:  https://careers.intuit.com/job-category/6/customer-service-and-support/job/2018-6491/seasonal-turbotax-tax-advice-community-specialist

Or it may be a slightly different role where you work from home taking customer support calls for Turbotax users.

Finally, the two big industrial tax software packages are Lacerte and CCH ProSystems FX.  Lacerte is the bigger one.  You would do well to start learning it.  I actually use a second tier package, but only because I bought a firm using it already.  Among the smaller packages for sole proprietors or small offices, I recommend Drake.  It very easy to use for individual tax prep, and by far the most cost-effective.