As the tax industry continues to evolve, the prospect of becoming a solo CPA, or establishing a small tax firm, can be increasingly appealing. Not only will it provide the autonomy to grow your career in the way that works best for you, but it will also offer the opportunity and flexibility to potentially earn more income than you could in a salaried role at a larger, more established firm.

In this guide, we explore strategic approaches to scaling your independent accounting practice that can help you increase your revenue and develop your skill set, and how Harness Tax can be your catalyst for growth.

Table of Contents

  1. The Salaried Path: A Brief Overview
  2. The Solo Path: Opportunities and Challenges
  3. Earnings Potential: Salaried vs. Solo
  4. Rate Setting: Strategies for Success 
  5. Harness Tax: Your Catalyst for Growth

The Salaried Path: A Brief Overview

From desirable pedigree, steady income and employee benefits, extensive resources, and a structured career path, working in a salaried position at a well-established accounting firm can provide a myriad of benefits. However, large companies have significant overhead. On average, accounting firms spend around 25% of all revenue on operational and administrative expenses, leaving less money for compensation.

In addition, large tax firms have a hierarchical structure that leads to incredible competition, especially as you work towards the partner tier. All of this, combined with limited work-life balance from demanding billable hour requirements, and a lack of ownership over your client base, could lead many in this position to wonder if perhaps charting their own path could lead to more satisfying career advancement.

The Solo Path: Opportunities and Challenges

Embarking on a solo path or establishing a small tax firm opens up a realm of opportunities, but not without challenges of its own. While you will gain the autonomy to set your own rates, choose your own clients, and manage your work on your own terms, you will lose the backing and stability of a larger firm. You’ll need to attract and retain new clients, build your operational framework, grow your team, and spend significant effort managing the operational layers of your new business.

Starting your own accounting firm is no easy task, and it’s not for everyone. But through analytical comparison, it becomes clear that charting your own path can not only open the door to greater financial opportunity, but it can also allow you to live a more balanced life.

Earnings Potential: Salaried vs. Solo

To offer a more comprehensive comparison of the earnings potential in both salaried and solo careers, let’s look at salaries and hourly rates side by side.

Note that the figures are approximate and can vary based on many factors, including geography, firm, years of experience, and area of expertise.

Position Salary (source) Potential at Harness*
Manager $90,000 to $125,000 $287,000
Senior Manager $140,000 to $180,000 $315,000
Director $190,000 to $242,000 $350,000
Partner $250,000+ $375,000+

As of September 18, 2023.

* Based on top-performing accountants within the Harness Tax network and does not represent a guarantee of earnings potential.

Already, we can see that by going solo, your annual income could far exceed what a salary could offer. At Harness Wealth, our advisors operate on a combination of annual fees and billable hours, which are on average $1,000 per client and $250 per hour, respectively. Based on the national average of 1,400 billable hours per year, even at the lowest rate of $250 per hour, that would amount to $350,000 per year.

However, achieving 1,400 billable hours per year, which translates to around 30 hours per week, is an unreasonable expectation for most solo CPAs, and this is where Harness Tax comes in. Our in-house support team can take operational work off your plate, freeing up your schedule to focus on what you do best: providing high-quality accounting services.

Rate Setting: Strategies for Success 

When setting your own rates, it’s crucial to consider several factors to ensure the financial viability and success of your firm. For one thing, you will need to plan ahead for tax obligations, overhead, and the general costs of running your own accounting firm. You’ll also need to set your rates based on income and lifestyle goals. And lastly, you’ll want to make sure that your rates are competitive and fair based on the market conditions. Price your services too low, and you may attract low-quality clients. Price your services too high, and you might find yourself struggling to attract and retain clients.

Harness Tax aids advisors in setting the right rates. We have established a minimum per-client fee of $1,000 per year, and we have set pricing for ad hoc and other services. Not only does this offer the potential to build predictable income for your tax practice, but it also aids in maintaining your rates, so that you don’t sell yourself short. 

Let’s go into the various expenses you’ll need to account for when setting the rates for your accounting firm.

Setting your income goals

This is the first target you should establish when setting your rates. Start by taking the salary you last had before leaving to start your own firm, and calculate the number of billable hours it would require for you to meet that number. In addition, keep in mind that as a solo CPA, you’ll need to set aside income to cover your own benefits, such as health insurance and retirement savings.

Accounting for overhead

Next, you’ll want to factor in any tax obligations, operational, software, or other overhead costs. Ideally, especially if operating solo, you won’t have too many expenses in running your tax firm, but you’ll want to make sure that any business expenses you do incur do not take away from the amount you pay yourself

Building a runway

Lastly, focus on setting aside some amount of revenue for the long-term growth of your business. Saving even a small percentage of your revenue can make it easier for you to grow your firm over time and provide you with a financial cushion to fall back on during slower periods of growth.

Advisors who join Harness Tax gain valuable support in rate setting. Not only are rates of Harness Tax Advisors publicly listed on our website, but our advisors are also coached and provided resources on how to set the best rates that reflect the services they offer. In addition, accountants who join Harness Tax gain access to a community of like-minded tax experts, providing ample opportunities to stay on top of industry trends in compensation.

Harness Tax: Your Catalyst for Growth

At Harness Tax, we offer a comprehensive suite of software solutions, marketing, and operational support, and a robust community of tax professionals to help you manage your firm and build a foundation for success.

Starting your own tax firm is an incredibly nuanced process. If you’re interested in learning more about how Harness Tax can be your catalyst for growth, 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 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.