Shifting From Employee to Owner
Your attitude and confidence is huge in making the shift to becoming a business owner. You have to be able to keep your eye on the prize and smile and enjoy the challenges of building a business. You are not simply running a business, you are building one. You must be enthusiastic and confident that your plan will work. Consider the following points:
- Nearly everyone you now meet is a prospective client or referral source.
- Your work schedule requires more time and energy, not only for performing tax and accounting services, but also for developing new clients. Social, civic, and professional activities in the evenings or on weekends are also an important source for new clients.
- Involvement in various community and professional organizations, both inside and outside your practice, should be expanded. In addition, strive to increase the degree of responsibility you assume in these activities. Instead of merely belonging to a group, seek to be a leader, for example, chairperson, board member, or president.
- Your confidence and professional reputation will help to attract clients. Be aware of how you carry yourself--your appearance, language, office atmosphere, decor, and so on. You should always be authentic, but know that when you are serving the public, you will necessarily have a more public persona.
- You must think of yourself as a leader, an employer, an entrepreneur, and a salesperson. Adopt and project the image of a take-charge professional.
Family Involvement
We have already considered the importance of balance. In some instances, CPAs involve their spouses or partners in their practice on a day-to-day basis, and this involvement can be beneficial. However, before the decision is made to work together, you should both consider the potentially positives and negatives. In some cases, your significant other might better help your practice by contributing income from another job. Relationships are so important, and working together may or may not be good for the relationship.
Regardless of the extent of your family's involvement in your practice, be sure you have established good communication. Because a practice demands a great deal of your professional and emotional energy, sharing your hopes and fears with your family is very healthy for all involved.
Understanding Potential Stumbling Blocks
Despite planning and preparation, new practices do run into problems that can ultimately cause them to fail. These stumbling blocks fall into three categories:
- Insufficient client base
- Poor selection of a partner or other business associates
- Bad choice in a practice acquisition
From my experience advising owners, I have found that these problems usually occur because the practitioner lacked objectivity (underplanned) or was just overconfident.
Insufficient Client Base
An insufficient client base is the first and most critical stumbling block. Starting practitioners may unrealistically expect certain clients to come over to them. They assume the clients they took on through moonlighting, through anticipated references from friends and associates, and through their previous employment will follow them to their new practice. This can be a really bad assumption. People don't take switching accountants lightly. From the clients' perspective, if they are fairly happy with the service they have been getting, switching is quite inconvenient. It requires their time. Clients often don't switch accountants as hoped or expected for a number of reasons, including the following:
- Clients established on a moonlighting basis may not want to use you in your own practice because of perceived or real fee increases. (One more reason to never sell your services for below-market rates.)
- Friends and associates, as well as referrals from these contacts, may choose not to use you because they do not want share their personal information with you. After all, accountants are privy to some of the most sensitive information that people have, including level of income, past business dealings, lawsuits, and tax history.
- Former clients at your previous employment who might want to use you may feel it is prudent to wait until you are established. They may also have more loyalty to your employer than you might realize, and switching is a hassle.
- Finally, some employment or noncompete agreements require the purchase of clients leaving with a departing CPA.
Having a mentor or two to provide a sounding board is also a very big help. Your banker, other CPAs, and seasoned business people love to help ambitious people looking for guidance.
Partner Mismatch
A mismatch with a partner or other business associate is the second stumbling block that will severely hurt your business. Because working with others requires effective communication and the ability to compromise, it is imperative to really know your potential associates. In large practices, clashing individuals can work around each other, but such polarization cannot be tolerated in small firms. Be sure you understand the personality and background of your associates and establish well-defined boundaries for working with each other.
Practice Acquisition
Just as one can make a poor choice in a business associate, one can err in a practice acquisition. A poorly chosen acquisition, combined with a poorly executed transition, can turn into a nightmare. Most acquisitions that fail are the result of a mismatch of technical skill, management style, and personality. Losses also are incurred by not planning and executing the transition well. To counteract the possibility of this happening, you need to evaluate carefully any potential acquisition and weigh the pros and cons objectively. (See chapter 6, "To Buy or Not to Buy?" for an extended discussion on buying a practice.)
Questions:
- Who are potential mentors that can help guide me?
- Why would clients want to use me?
- What role will my spouse or partner play in the practice, if any?
- Who will be my closest competitors?
- What is my biggest stumbling block?
- Who is likely to be my anchor client?
- How well do my business goals mesh with my other life priorities, such as family, community, and personal interests?
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