Starting an accounting firm, like any new business, requires a certain amount of start-up capital. From incorporation fees to purchasing tax and accounting software to optimizing your human capital (time), we’ll explore the many costs associated with starting an accounting firm and the operational expenses you should anticipate as you grow your new business. Additionally, we’ll explore how Harness Tax can play a crucial role in optimizing your expenditures and maximizing the growth of your accounting business.
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Startup Costs
Having a sufficient financial runway is critically important when starting an accounting firm, and you should try to save between 3 and 6 months of living expenses before going off on your own. Not only will this provide you with a safety net as you grow your new accounting firm, but it’s separate from the funds you’ll need to cover accounting software and other startup expenses needed to best serve your clients. Ensuring that you have both personal financial security and the necessary capital for business expenses will set you up for success.
Incorporation Costs
Incorporating your own accounting firm should not cost you more than a few hundred dollars in 2024. There are a number of online services that make establishing a new small business a very quick and easy process. Not every type of business entity costs the same to incorporate, and not every accounting firm chooses the same legal entity structure, but many are set up as either LLCs or LLPs.
- Limited Liability Company (LLC): An LLC will cost around $250 to establish, plus state filing fees, and annual fees
- Limited Liability Partnership (LLP): An LLP will cost around $150 to establish, plus state filing fees, and annual fees
Software and Services
Your new accounting business will need a modern software suite to meet the needs of your clients, and having your own firm is a perfect opportunity to build a tech stack that you’re most comfortable with.
- Accounting Platforms like CCH Axcess by Wolters Kluwer, or SurePrep by Thomson Reuters play a vital role in delivering high-quality accounting services to your clients. The document-reading technology and other features they provide will help you significantly improve efficiency and cut down on manual data entry, setting you up to grow your client base without being weighed down by administrative tasks. The costs of these accounting software programs can vary based on a number of factors, though more comprehensive solutions cost anywhere from $10,000-20,000 per year, and increase with scale.
- Customer Relationship Management (CRM) platforms make it easy for you to keep track of your many current clients and prospective clients, and can even enable you to run basic marketing campaigns such as email newsletters or online blogs. There are many different CRMs to choose from, and they can range anywhere from $2,500 to almost $15,000 per year for a small business team.
- Invoicing and Billing platforms are essential tools for successfully running an accounting business. Popular options for small businesses, such as QuickBooks or Xero, make it easy to collect payment from your clients, and generally start at around $500 per year for small businesses.
At Harness Tax, there’s no need to manage lots of subscriptions. Our holistic solution provides you access to industry-leading software to ensure you have everything you need to manage your own firm.
Business Insurance
Even with a robust software suite, it’s important to protect your business against any disputes or other unexpected events that could bring financial harm. For an accounting business, you may want to consider errors & omissions (E&O) insurance, which will primarily protect you against any mistakes or claims of negligence in your work.
E&O insurance policies are relatively affordable in 2024, averaging around $800 a year for $1 million worth of coverage.
As your business grows and you begin to hire full-time staff, you will also have to purchase employment practices liability insurance (EPLI), workers’ comp insurance, and other types of insurance. On average, EPLI insurance will cost around $1,000 to $5,000 per year for each employee. Workers’ comp insurance costs on average 93 cents per $100 of payroll.
Preparing for Growth
Once your accounting firm is operational, and as your business grows, you’ll want to start planning for a future where you can offload administrative, sales and marketing, and other non-core areas of focus to other members of your team, so that you can continue to focus on what matters most to you.
Administrative Support
Building your new accounting firm should enable you to focus on developing your core skill set, and not drag you down with administrative tasks. And as your client base grows, so too will the need for more client servicing, from ad-hoc email support to basic tax filing and preparation needs. The first person you should hire for your new tax firm should ideally be there to help fill this new area of need. You can think of this first hire as a Tax Assistant, and they should be responsible for client servicing, data entry, and other administrative tasks. Based on current market rates for 2024, you should expect to pay a Tax Assistant anywhere between $50,000 and $100,000 per year.
When you join the Harness Tax platform, our in-house team will serve as your Tax Assistant. Not only will this eliminate the time and money needed to recruit, train, and manage a team of staff, but it will also save you the burden of needing to budget properly for payroll and other employment expenses.
Sales and Marketing Support
Promoting your new accounting firm will require just as much effort as managing administrative tasks. From content marketing to online ads, and more, learning how to properly market your business can be incredibly challenging. Sales and marketing tools, software, and employees can add significant costs to your accounting firm, not to mention the time, effort, and money needed to carry out an effective marketing strategy.
However, as with administrative support, joining Harness Tax also provides you with the sales and marketing support you need to attract and retain new clients for your accounting firm. Our internal marketing team focuses on driving new leads to the platform through content marketing, online ads, and other means, indirectly benefiting all advisors. And our in-house Concierge team then manages the sales cycle, booking meetings for you with new prospective clients, and following up with them along the way to get the deal signed.
Growing Your Accounting Firm with Harness Tax
Starting an accounting firm doesn’t have to break the bank. At Harness Tax, our holistic tax and accounting software solutions, administrative support, and sales and marketing support can make the journey of growing your accounting firm more predictable and cost-effective than ever before.
Harness Tax works on a revenue share model that offers the flexibility of being able to scale with your accounting business as it grows. If you’d like to learn more about joining Harness Tax, click here to schedule a call with our team today.
Tax services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is an internet investment adviser registered with the Securities and Exchange Commission (“SEC”). Harness Wealth Advisers LLC solely acts as a paid promoter for unaffiliated registered investment advisers. Harness Wealth Advisers LLC’s registration as an investment adviser with the SEC does not imply a certain level of skill or training.
This document should not be considered tax, legal or financial planning advice. It does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific topic discussed above, please consult a tax, legal and/or financial professional for advice specific to your individual circumstances.
