[Recked]

So my current employer of 16-17 years who had paid me below market value with the promise for equity (verbal) is not delivering on the equity. We’re now approaching 5 months since I’ve been licensed, 6 months is my go/no-go date to start setting up a solo practice. I have already obtained an EFIN, and I have the seed funding for startup.

So I’m working on some budget figures and thought I might be able to get some input.
Specifically targeted for people who are currently self employed or have experience.

Running 3 different gross receipt ranges, figuring conservative of 70k but could be 130k or higher.
So I’m running 70k, 100k, and 130k. Currently $300/hour billable rate.

Current overhead figures.
Rent (700-1500, most likely about $1000/month) 12000
Insurance (Liability/ E&O and ballpark 5k for HD health plan in NY) 10000
Computer (Commercial use Dell with 3 monitors) 3000
Software (UltraTax PRP to start, e-file cabinet, quickbooks) 10,000?
Cable Internet $110/month 1320
Phone and Fax 1200
Copier/Scanner lease 2040
Security 300
Office Supplies (paper/toner/etc) $5000?
Advertising 1000?
Postage 2000?

Ballpark 47,860 with the above. net 22k, 52k, 80k

What am I missing?

[Jay]

Find a job that can pay your bills and allow you to pursue your Firm. If I had quit my job after getting my CPA, I would be a homeless CPA. Getting and retaining clients is not easy.

Giving up is not an option.

REG 82
FAR 76
Aud 8/31/2016
BEC 11/30/2016

[Recked]

My house is paid for, and I will be taking my current book of business with me (no non-compete). My conservative figure is using clients that have already told me they will follow me where-ever I go, the 130k represents the additional portion that I feel will follow me as I have serviced them very well over the years.
I've been in the game for long enough to know the challenges of getting and retaining clients. I appreciate your input.

[Anonymous]

Unless you'll be gaming at work, I don't think you'll need (even) a 3k computer. I'm still using Windows 7 and Server 2008 which are both supported until 2020. Fully functional/compatible, stable, and less bloated.

And for 2k you should be able to get a used top of the line industrial copier which should pay for itself.

[NYSCPA]

perhaps try to start a home office since you own a house to save money on the rent part and move to a office location once you gain more clients

[Recked]

Good point on the used copier, I didn't think about that, I will have to research it.

I was using 3k as a high estimate on computer. I currently am running an Optiplex 9000 series, with 3 monitors, also using Win7 and Server 2008.
When I jump ship I'll more than likely get a higher end Optiplex again, capable of running 3 monitors. I was thinking the tower with graphics card and MS suite would probably run about $1000-1200 then 3 monitors at $200 a piece, a monitor stand, and printer. But I can probably use the copier/scanner as a printer at a lower cost per page.

My home is currently only 1200 sq ft, with a WAH wifey, 2 dogs and 2 cats.
I have the possibility to expand with a semi finished walk up second floor, but it would require some renovations.
The majority of my client base is located about 30 minutes away. Home office for personal use would be okay, but really trying to have a professional space to meet clients or host audits.

Currently quoting liab/cyber/E&O policies, those might come in substantially less than $5k total.

[turo9992000]

I'm sorry the deal you had with your boss did not materialize. I have a similar deal, but in my case, my boss has let me run the office since January and we are signing papers as soon as I am licensed, hopefully before the next tax season. My office has six people and the expenses that ended up larger than I expected are below:

Office supplies (toner, paper, misc)
Internet and phone ($400 per month)
Health insurance ($5,000 per month)
Meals (average $50 for lunch with client) My boss eats lunch with someone every day.

The stuff you might be missing are below:
Continuing education ($2,000 per year)
License renewal fees.
Email, Domain
IT Guy, I could do a lot of stuff myself, but an IT guy does it faster. It's expensive though.
Credit Card processing fees.
Office cleaning person
Buying fundraising tickets from whatever nonprofits your clients are in or from their kids.

Are you going to hire anyone? an admin person? I doubt I could be productive if I had to answer the phone all day.

[Anonymous]

Yeah, I think a lot of people don't realize that an operating system, as opposed to software, doesn't really add anything new except eye candy. What's funny are the ones who upgrade the OS only to make it look like Win 7 (or even Win 95) again.

You should definitely shop around on insurance, I've saved the company thousands just by getting a second quote.

[CS]

Will you also be doing the actual bookkeeping entry work yourself? I am in a similar situation but it is agreed upon by my boss who is essentially retiring and more of a passing of the clientele. We have a book keeper who is also close in age to retirement and there is no way I can do the book keeping while doing the higher order work for the clients. I was thinking of using a part time remote book keeper but am open to any options, as it’s probably not enough work for a full tome job, though could be if I can assign other responsibilities. I also understand your sentinment about a home office, I can log in remotely but don’t want clients and employees at home, have 2 young ones although both in day care but I also prefer a professional setting.

[Recked]

I've been in contact with my insurance broker.
Office liability will probably be required by landlord and is estimated at 450-550 a year and will cover contents as well. So I just need E&O and professional liability/cyber I guess.
The health insurance is going to hurt at $5k for a high deductible plan in NY.

Turo – No I will not be hiring an admin staff to start out. It sounds like you have substantially more volume that I currently have, and much more than I anticipate when I start on my own.
We currently have 2 part time admin staff.
My boss just turned 73 and should be looking to transition out, but due to poor choices is forced to continue working, and also cannot afford to honor his end of the deal.
I am going to go through your list and add some more line items to my budget, thanks for the input.

SBNY – I don't think I will be doing bookkeeping. We currently have staff do some in house, but more and more I refer bookkeeping work to outside services.
Our staff is really just data entry, not accountants in any way, and I prefer to shift the liability/blind eye so it's not on my neck.
I might have to take on more write up work at a reduced hourly rate to attract new business or keep myself busy.
It's a slippery slope, but I guess if I eventually want to have an admin person, I would need to take on bookkeeping at least in the short term so I would eventually have enough low level billable work to keep them busy besides just answering the phone and assembling returns. In a perfect world both bookkeeping and payroll would be sent out to outside service providers, I'd like to focus on tax prep and planning/consulting.

[Anonymous]

CA is required by law to publicly disclose WC rates, so what I did was look up and contact the top insurers on that list directly. Some of them were not available to the public, however.

I see that NY apparently doesn't have these lists, but you could probably just use the CA list:

https://www.insurance.ca.gov/01-consumers/105-type/9-compare-prem/wc-rate/

[CS]

@Recked – Thanks for your input. So when it's time to file the returns, you get your client's ledger/file from those services? Also, you charge at an hourly rate? Since my boss set up the practice 30+ years ago, he's always done a monthly fee for the clients (quarterly for smaller ones), and back then, bookkeeping and payroll was what tied the clients to him. Nowadays, payroll becomes a hassle and our clients are moving to services i.e. ADP on their own (or our associates), but I will need to find a way to keep the bookkeeping in-house until I restructure operations/fees

I'm with you, ideally, payroll and bookkeeping would be done outside and tax prep/planning/consulting would be my meat.

[Tncincy]

Tax is my thing, but since everything is geared around cutting out the middle man we'll have to restructure our market and market strategy. I really can't go any further without my license. Research is the key. Good luck and keep going.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Recked]

@Calvin Thanks for the pointer on WC, but no employees = no WC policy to worry about just starting off.

@SBNY Yes, we usually get QB files (prefer acct copy, but will work with qbb) or accountant access to the QB Online file.
Some clients with their own internal system I will just get a P&L and BS.
I can count on one hand the entities that gross in excess of $1Mil. Most of the client base is small business and individual.
We sort of charge a flat rate for tax returns, but that rate is derived by value and/or hours invested. There are a few clients that are leftovers from the monthly or quarterly billing days but not many.
If you attempt to transition to outside bookkeeping services, you can retain your quarterly fees by doing a review of the QB file/bookkeepers work. You can post your quarterly depreciation estimates etc, and offer the owners advice on how the numbers look, where you see things going, how they can improve bottom line, or how to avoid a big tax hit. We don't do much quarterly review as we don't push it too hard, but its a great way to keep your ties to the client, and to help them excel. You just need to sell the value in the service.

Flat fee above does not mean a flat fee for a 1120, it just means most clients receive one invoice per year from me, when I do their tax returns.
We are incredibly lax in tracking billable time for calls or e-mails throughout the year. Lax = we have no time tracking system. All new clients that I obtain I advise $300/hour tracked in quarter hour intervals. Works out well for me, especially with basket cases, which seems to be what I attract.

[Anonymous]

Sorry if I wasn't clear, I was suggesting that that list could be used to identify low-cost insurers in general. But obviously you know what you're doing, and 450 sounds about right for office liability.

[j3cpa]

Hi. What is your method for determining your billable hour rate? $300/hr seems high to me.

I recently passed the CPA and working for myself has always been on my mind so I’m going to transition out eventually.

Your expense list is very detailed but I would suggest taking your costs and times it by 1.5 and work off that figure.

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Author]

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