START & RUN A BOOKKEEPING BUSINESS
Angie Mohr, CA, CMA
Self-Counsel Press
(a division of)
International Self-Counsel Press Ltd.
USA Canada
Copyright © 2012
International Self-Counsel Press
All rights reserved.
Introduction
To those with a “head for numbers” and some computer knowledge, it may seem like a natural thing to put out your shingle and offer bookkeeping services to small businesses and individuals who need to track their investment portfolios.
However, knowing how to keep the books doesn’t necessarily translate into business savvy, and many would-be bookkeeping services suffer from the same entrepreneurial ailments as businesses in every other industry. Ninety-six percent of all small businesses in North America that are started today won’t be around in ten years, and bookkeeping businesses are no exception. They either go bankrupt, close their doors, or otherwise give up the dream of “making it.” Not having a full complement of business management skills leaves business owners in the air without a flight plan.
That’s the bad news. The good news is that financial management skills can be learned. These skills include the following:
• Human resource management
• Record keeping
• Financial statement analysis
• Budgeting and forecasting
• Billable-time management
Every single entrepreneur who starts a small business can develop and hone business prowess. The added benefit to those who run bookkeeping businesses is that they can pass on these learned skills to their clients, thereby increasing client loyalty and, as a result, fee income.
Accurate record keeping is one of the cornerstones of small-business success. Yet a shocking number of entrepreneurs do not possess this skill. There are over 24 million small businesses in the United States and Canada alone, each with a need to track their business results so that they can interpret the “story” those results are telling them. The process is much like a physician reading lab results (which look like hieroglyphics to the average person) to diagnose what’s wrong with a patient. There is a constant need for bookkeepers to help keep businesses both on track with government and taxation reporting and regulations and up to speed with prudent internal reporting requirements. A high-quality bookkeeping business can help its clients track the numbers and understand what they mean.
This book is designed for people who want to start or improve their bookkeeping services business. It covers not only the basics of running an entrepreneurial enterprise but also those issues specific to a bookkeeping operation, such as tracking client work, increasing your customer base, and determining when to involve a professional accountant.
There’s no need to read this book in the order it has been presented. Feel free to jump in wherever you’d like. Different chapters will naturally appeal to you at different stages of your business start-up. This book will cover such diverse topics as finding the money for your business, pricing your services, working from home, and marketing and promotion.
I do recommend that you eventually read the entire book, for it sheds new light on many critical business subjects and may help you with challenges you didn’t even know you had.
One final word about currency. Throughout this book, I use dollars and cents for consistency and ease of use. However, the business principles contained here are equally applicable regardless of the country in which you conduct business and are not directly related to any particular set of accounting rules or tax laws. Terminology may differ from country to country, and the dollar signs for some readers might be pounds or rupees or euros, but the underlying business principles are the same.
As you read the book, drop by our website, www.numbers101.com, to access our library of business articles, cool biz tools, and other great links and resources for your business. You can also sign up for our monthly e-newsletter while you’re there.
For now, please put your luggage in the overhead bins, put your tray tables in the upright position, and prepare for takeoff!
1
Getting Started
Before you jump in with both feet, it’s useful to take some time to examine your motivation for starting your own business. This will most likely save you vast amounts of time, money, and grief in the future.
Assess Your Skills and Goals
Every business owner/manager has to learn three major skills: building a business, managing a business, and doing what the business does. You may be interested in doing only one of these three things. For example, you might get great pleasure out of hairstyling, but have little patience for managing the day-to-day operations of such a business. In that case, you might want to reconsider your decision to open a hair salon. No matter how much joy it gives you to “be your own boss” while doing the thing you do best, you will come to despise all the other tasks that go along with owning and managing a small business.
On the other hand, you may love building the business: designing the office space, putting together the marketing plan, forecasting, and building the customer base. You may, however, be thoroughly bored with the management aspect or with doing what the business does. Entrepreneurs who feel this way tend to build a business, get it up and running, sell it, and start all over again. The thrill for them is in the creation process.
If you plan to build your business, manage it, and be its chief employee, make sure you have the energy and the skills to do all three things. If not, you will have to hire other people to do the things you do not wish to do yourself — or rethink your business plan entirely.
Once you have assessed your strengths and weaknesses in terms of building, managing, and operating a business, it’s time to look at your personal goals. Why do you want to start your own business? You may want to start your own business to make more money than you could if you were an employee. You may get a rush from building something from nothing. There are a myriad reasons why entrepreneurs start businesses. Let’s look at three of the main motivators: money, freedom, and “empire building.”
(a) Money. Owning and running a business has the potential for providing you with a higher level of investment return and remuneration than you would receive working for someone else. The profit potential is definitely there, but high profits are a trade-off for high risks. Starting a small business is a risky proposition and you, as the owner, face the potential for financial loss as well as gain. It’s important to keep this in mind as you build your business. Make sure you not only have the financial ability to survive failure, but also the ability to tolerate risk.
When small-business owners talk about money, though, they don’t usually mean they want money for money’s sake. Money means something slightly different to each person, but in general, it represents financial independence, prosperity, and security. Think about what money represents to you. The more time you spend planning your business model before you begin, the more likely you will be building a profitable enterprise that will meet your personal financial goals.
(b) Freedom. Many small-business owners like the freedom that comes with not having a boss and being able to make their own decisions. However,