[Anonymous]

I obtained my license in end of 2011 with goal of starting my own business, as I am increasingly getting tired of the corporate bs. It’s been on the back of my head for awhile and I have also been considering going for an MBA.

Last night I met with a dear friend who proposed an idea of starting business together By doing accounting services for School,he doesn’t have a cpa license but works in education and knows folks who can get us business.

I make a good living but am the main breadwinner of the home with a day job, my buddy’s work is more flexible and he can spend more time in our potential business if business requires.

The question is what percentage of the business should I offer him. With me being the CPA and him doing the marketing and bringing in clients? is 40 Percent too generous? do i give him salary for additional time he invests in? The main thing is, I want it to be an LLC and I want to control the direction of the firm long term, I don’t really have short term financial objectives.

[Lost1]

Giving your partner a fixed salary is too risky in the beginning, usually when a business starts up, you should give it some time to settle and grow for at least 3-4 months.

it seems like you're giving up more than your friend to make this transition. you're currently making a good living doing your corporate bs while your friend sounds like he needs your help to make something happen (altho i'm sure you need his help to start this..) also you have CPA license and he doesnt.

Set up a LLC and give no more than 30 percent share but consider incorporating commission/bonus based on his sales. this way you can keep him motivated. In case business grows in the future and possibly bringing another partner, you need to have control over the company. I have seen many cases where friends start a business together and ends up in a bad term. because they started with bunch of wishy washy “oh I got your back we can do this together” type of empty promises. you need to set this thing clear from the start. I wish you the best luck.

Question: Do you have audit hours? do you have tax experience? what type of work are you doing currently?

"If you can do it, I can do it better."

[Anonymous]

Thanks SeekCPA, you have some good points. One thing i should have added is, my buddy whom i have known since we were kids has a decent job, where he can even take a leave for a year and be guaranteed to still have a job and his wife is also full-time employed. he also has an accounting degree so it's not something completely out of his field. You are right though, at the end of day it would be a cpa firm and i am the cpa. But i think he would be a great asset,IMO the hardest part about starting a services business is landing clients and putting in the time, which he pretty much takes care of. The tricky balance is how do i keep him motivated enough while having control of the business in case business grows in the future.

I have a year of Auditing experience, never done tax and currently i am a Financial Analyst.

Good luck on your upcoming rematch with Aud, my signature doesn't show it but i have failed FAR twice and beat it on third try, this exam is an endurance test more than anything.

[jgrfan1]

CPAASAP

I enjoyed reading your post. I'm in a similar spot. If I'm lucky enough to successfully pass the exams then I'd like to start my own business as well. It would be a one man shopt to start and just tax / accounting / bookkeeping. I have no audit experience. I have a full time job that I plan to keep. This second business is a way to diversify income and maybe one day if it takes off I'll leave my current job. I have just accepted that I'm a corporate drone but if I can funnel som ambition into my own venture then I'm hoping to get some fulfillment / additional income out of it. The thing that really lets me do this is that the work life balance in my full time job is, um, very strong. I could easily put 10 – 20 hrs per week into this side venture.

I think you are right that getting the clients is the hardest part. If I can get a license my expectation is that I would need to do a year of business development before I had any meaningful income. At the end of year two if I could have 5% inconme from my side business that I get from my full time job, I would think that is a good start.

I've heard suggestions that you can buy a practice for 1X prior years earnings. This might be something that I would do in the future once I have my own client base but buying a practice would probably be a full time job. If you can get your buddy to do the BD for you and bring in paying clients quickly, that is certainly worth something. I'm not sure how the BD guys at big firms are compenstated but I imagine for a small venture you could give him a % of the billings to start and then a retainer? Many ways you could do it but as long as you are making $50 – $100 per hour as a second job, having a guy funneling work to you would be valuable.

Also, some unsolicited MBA advice. Do not get one. I have one from a top 15 school and it is not worth the price. Maybe if your firm is going to pay for it and there is a clear career path to promotion contingent on the degree. Definetly do not quit work (which is what I did). The costs are too high and in this economy the payback is at best break even. There are some winners but many more losers that come out of B school. The degreee is completely diluted by these on line / executive / working professional degrees. Work experience and relationship building are more valuable and are much less expensive.

Good luck w/ your venture.

BEC - 5/2012 - 91
AUD - 8/2012 - 89
REG - 1/2013 - 90
FAR - 5/2013 - 88
Wife, 2 kids and a job

[Anonymous]

Getting the clients IS the hardest part. The most important part too because without that you have no revenue. If he's going to bring in the majority of the business, and in the process save you a ton in advertising cost and/or time soliciting clients, 40% is a no brainer. Hell, I'd give him 49% if he wanted it. I wouldn't low ball him cause if the business blows up, he'll be resentful. If he's got an accounting degree, I don't see what would stop him from getting his CPA license and venturing out on his own in the future if he wasn't happy with his compensation.

Like others said don't waste your time with a MBA. In the corporate world higher ups might appreciate it (they seem to be a dime a dozen these days) but I don't see what value it adds if you plan on starting up your own business.

[nill]

im new to this CPA exam thing so plzz help. which part i should take 1st?

[Lost1]

nill, pick any of the four sections and study hard. In my opinion, it doesn't matter really.oh and don't try to hijack this thread! 🙂

CPAASAP, I have a dream to start my own business as well. I have extensive experience in restaurant business (server, cook, dishwasher, delivery, managing..even bookkeeping for restaurants.. I've done it all!) throughout my school years so I feel like I know how to run a restaurant. But I realize if I'm not a professional chef, I can't be in restaurant business. If I can't produce/provide the product or service that I'm trying to sell, then I shouldn't be in that industry (unless I'm an investor).

I also dream about opening up my own CPA firm too. But in my opinion this is trickier than restaurant business because it's very hard to differentiate your service from your competitors. so it comes down to networking and sales skills. Let's face it, no company will give 2-3 men CPA firm audit work.. If you don't have extensive experience, people will not come to you for advisory/consulting services. Thus tax and bookkeeping is the backbone of startup practice.

Before you go further into this idea, you should really think about what services you can offer and why you have an edge over your competitors who might have 20+ years of experience and Big4 title over you.

Just sharing my thoughts because I really like this thread..

"If you can do it, I can do it better."

[jgrfan1]

I think the primary way you win business to start is on cost. I'm perfectly willing to work for $50 per hour. Even down to $20 – 25 per hour. Especially when my alternative is $0 per hour. The only thing that let's me do this is having a primary job that pays all of the bills.

Once you get more work than you can handle then you can perhaps raise prices. Supply and demand.

BEC - 5/2012 - 91
AUD - 8/2012 - 89
REG - 1/2013 - 90
FAR - 5/2013 - 88
Wife, 2 kids and a job

[Anonymous]

@CPAismyonlywayout, You should pursue whatever you have passion for, if the restaurant business is what you really want,go for it. You might not have the skills for cooking but you know alot about the business. Hire/Partner with a chef and make it happen…i will even come support you when you open your restaurant like Jerry supported Babu (lol..sorry i couldn't help it).

Also i have no plans to do Audit anytime soon, there are more requirements for CPA firms that do assurance,attestations, compilations et al (such as peer reviews required), also with audits you need more manpower and hours to commit.

My plan is to do outsourced accounting/bookkeeping/payroll/tax functions for now.

[Anonymous]

@ jgrfan, thanks for the MBA advice.

Buying a CPA firm sounds like a good idea, but you better do some research before you go that route and it sound like something you would do if you are ready to do it full-time right away.

[jelly]

Also check your state unemployment laws. If you lose your current day job, you could be disqualified from claiming unemployment benefits if you hold a position as a partner/officer/president of a corporate entity, because some SUIs consider such a title as being employed (even if you make $0 from the entity).

Couldn't pass again!

[torourke358]

Hi all,

I have experience starting businesses that fail. It sounds like this thread has followed my thinking when I would start out. First and foremost I would fina a group of people (audience) that has a pain. And if you can solve that pain and make some money at it you MAY have a business idea.

If you are just starting out and have not worked with a lot of clients before I would advise working for a small firm where you get a taste for what you are considering doing. I did just what you are considering (one of my failed businesses) and it tanked. I accepted the wrong clients (when could get any) and really wasted my time and efforts. Think long and hard about this. Focus on your potential clients and what they need, not what you want. That way you may get what you want after all…

Don't mean to be Debbie Downer…and just my two cents

[polar21]

^^^ This is spot on advice. I would caution against pricing yourself so low that you get the bottom of the barrel in clientele. There is a reason why other accounting firms do not want this type of client. Think about it, if your billing rate is $50/hr, then your target market is those people right about the HR Block level. Most of these people have somewhat of an idea as to what is going on, and dont want to pay for jack if they could find the same information on the internet.

The successful practices that I know of (small shops < 5 peeps) have a clientele of doctors, lawyers, and hotel/food shop owners that have WEALTH. These people are smart enough to do their own taxes but realize that by the time they spent getting up to speed on the tax code, they could have made more money doing something else. So, they hire you.

If you want to have a bill rate of $50/hr (meaning that you are actually making substantially less than that), you might as well look into owning one of the franchise tax shops and burn and churn those 1040s.

[Lost1]

so I was wondering how much of impact one's background (big 4 experience, school name, MBA, number of years in the industry..etc.) would have on an independent CPA's practice.. do you guys think clients would research your background and don't trust you if you don't have all the fancy titles and brand names on your resume?

any thoughts?

"If you can do it, I can do it better."

[Lost1]

"If you can do it, I can do it better."

[Anonymous]

@OP

Is he just bringing in clients or is he also going to be doing accounting work? I find it hard to believe he can just bring in clients without being involved with the work. Clients will want to hear what he can offer in detail when he is pitching services and the only way he would be able to speak in this regard is to do the work and be familiar with it. Honestly, if I approached a buddy with a business idea and he came back to me offering me 40% or a salary I'd drop them as a friend. 50/50 unless the business required capital investment and they were investing way more capital.

Further, from what I've seen schools are terrible clients.. really.. and you don't mention any experience with government accounting. Its not like you're going to pick up fund accounting on the fly.

---

With that said, I find myself in a very similar position as you. I am unhappy with my job and would love to be an entrepreneur. I've also looked into law school (and now looking away..) and MBA programs.

Can you speak about your job as a financial analyst? typical day, typical tasks, and what you dislike? I was considering trying to move into a job like that and get my foot into a fortune 500.

[Author]

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