How to Start a Tax Practice Part 2: Creating a Business Plan

Hello and welcome back to our How to
Start a Tax Practice Series. Today in part two of the series, we’re going to be talking all about creating a business plan for your tax practice. Now before you create a tax and accounting business, you should establish a clear
vision of what you want your company to become. The more you focus on your
overall vision, the more likely you are to achieve it. One of the best ways to do this is to create a business plan. A business plan
is often referred to as the road map of a business. It’s a comprehensive document
that outlines important aspects of your current and future business operations.
It also helps give your business direction by clarifying your objectives
and goals. In this video will walk you through seven things you’ll want to
consider while building a business plan for your tax practice. Number one- the
type of entity. An important step in your business planning process is to decide
what type of entity you will identify as. The different types of business entities
are limited liability companies, also known as LLC’s, C corporations, S
corporations, partnerships, and sole proprietorships Each has specific legal
rights and responsibilities, from tax requirements, to lawsuits, the number of
shareholders, and profit divisions. Many small businesses start out as sole
proprietorships and only look to other types of entities as they grow. Sole
proprietorships are the simplest type of entity, however they don’t offer much
legal protection from litigation or debt collection. As the sole proprietor or
member of a partnership, personal assets, such as your house and savings account, can potentially be seized to satisfy business debts . Organizing as an LLC is a
good alternative for small businesses who want to separate their personal
liability from business liabilities. Number two- insurance costs. Insurance is a costly expense but is it extremely important. Purchase the necessary
insurance to ensure that you and your company are protected against any
unexpected liabilities. Common insurance selections for tax practitioners are
professional liability and health insurance. If you want additional
protection, you can also consider purchasing disability, business
interruption, errors and omissions, or property insurance. We know there are a
lot of insurance options but don’t feel like you have to get every one. We
recommend clarifying what your risks are and moving forward as you see best.
Whichever insurance options you choose, be aware of recurring costs and ensure
that they fit into your budget. Speaking of budgets, let’s talk about
number three- finances and budgeting. Budgeting is one of the most important
aspects of starting your own business, so make sure that it’s one of your top
priorities as you build your business plan. The initial time spent creating
your budget will have a huge effect on the business you’re planning. Not only
will it help ensure that your finances are under control, but it will help give
you the confidence you need to focus on creating a thriving business. Your budget doesn’t have to be overly complicated, a simple spreadsheet detailing your
expenses and income is a great place to start. Number four- client payment methods.
It’s hard to manage your budget if your clients miss payment deadlines or
neglect to pay them entirely. As a business owner you should do all you can to prevent this. A business plan is a good place to formalize your strategy
for effectively collecting accounts receivable. The easier you make it for
clients to pay you, the easier it will be for you to collect your payments on time.
Consider offering a combination of traditional and modern payment options
to your clients, including check, credit card, PayPal, or other online services.
There are also many cloud-based accounting softwares, like Canopy, that
help you effortlessly send invoices directly to your clients. Number five- services offered. Focus on what you are best at and make it a foundation of your company. Some accountants prefer bookkeeping and tax preparation, while others prefer tax resolution and wealth management. Other accountants prefer to focus on a very specific type of client and provide a
wide range of services to that niche. Whatever you prefer make sure you have a clear strategy articulated in your business plan. You may decide to broaden your offerings, but limiting your focus is extremely helpful as you’re getting
your new practice off the ground. Not only will it help you keep from getting overwhelmed with limited resources, but it can also help you acquire more of the
right kind of clients as you build your reputation in a specific area. Number six- consideration for your business plan scope. In addition to plans
for the immediate future, a business plan is a good place to write down your goals
for the long term. What do you want your business to look like two, five, even ten
years from now? These goals will help you make better decisions today, decisions
that help move you toward your long-term goals. For example, you would take a very
different action if you wanted to be a small, sole proprietorship versus a top
100 firm. Scope should include how many people you want to employ, anticipated
revenue, number of locations, etc. When determining your scope, be realistic, but don’t be afraid to give yourself a challenge to work towards. Number seven- executive summary. The most technical part of the business plan is the
executive summary. It is a one page written overview of your company that gives a
quick snapshot of where the company is at. This summary is vital if you plan to
look for start-up capital to help jump-start your practice. Whether you’re
considering approaching investors or just getting a small business loan, this
summary will be one of your most important tools for securing startup
money. For this reason, the executive summary should summarize your entire
business plan in an insightful and appealing way. A good executive summary should be attention-grabbing, easy to digest, and concise. Invest time
and effort into your executive summary so it can sell the entire business to
the readers. That’s all we have today. If you found the video helpful please give it a thumbs up and subscribe to get notified when we publish the next video
in the series. If you have any comments, tips, or questions, we’d love to hear from
you in the comment section below.

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