Your boss didn’t love you, so you were kicked out the door. You didn’t become partner, so you walked out the door. The world is flat and there is opportunity around the corner. And, now you’re in practice by yourself and all is right with the world.
Or is it?
Used to be you were an accountant. You added ciphers. You divided numbers. You keyed in data. Everything balanced, and all was right with the world. You were a titan among mere mortals. Now, you’re a petty shopkeeper, with overhead to pay, and possibly a payroll to meet, rather than just one to do.
Well, if you left the warm bosom of the big corporate employer or major accounting partnership, you may have gone into practice because you didn’t think there was any alternative, based on your current skillset.
I wanted to be home with my new family, instead of traveling around the US of A fifty out of fifty-two weeks each and every year, but I didn’t have the capital to go back into the restaurant business, I had used that up paying for a college education in accounting. I sure as heck couldn’t go back into showbiz. Besides being a bit old to enter that field (ever notice how they all start young), it is a field that on average pays less than most anything except the ministry. All I could do was open my own practice.
I don’t know what thoughts you had that drove you into practice, but I do know one that I’ll bet sure wasn’t there, and I’ll bet it was something like “I want to go into an accounting practice because I know how to sell.”
Come on, tell the truth, was that what you were thinking when you opened your practice?
Probably wasn’t. Why? Because for one thing, you weren’t trained to be a business operator, you were trained to tell others how to operate their business. You were trained to be expendable, not vital to the success or failure of an enterprise. You were trained to be a cog in a wheel. Part of a big machine that is now rolling along merrily without you.
Sometimes the truth hurts. You were expendable.
Sometimes reality hurts. You are now absolutely vital.
Accounting majors are a dime a dozen on many college campuses. But according to some, they may be worth even less. More than 20% of U.S. undergraduates are business majors, nearly double the next most common major, social sciences and history.
According to the AICPA, the future couldn’t be brighter for CPA candidates. Enrollment in accounting as a college major is projected to rise by 11% annually, and if my memory serves me right, median starting salaries are projected to be around $40,000 and in some cases reach $57,500. They even tout the median salaries of the profession overall of just under $63,000 as a matter of pride.
But, those statistics on accounting majors and starting salaries should give you a couple of things to think about. They are misleading. Very misleading.
First of all, it sounds to me like there is very little in the way of upward salary mobility in the profession. Yes, you can start out in a profession where the starting salaries average 20% above starting salaries in most other professions, but you plateau almost immediately. And, by the time you reach the median salary range of around $63,000, you’re probably trying to support a small family. And, when the income required to support a family in the US is around $68,000, the profession is pushing you into poverty.
Take a look to the left at what the folks over at PayScale have dug up. Does that salary curve look anything like it values years of experience, or even keeps up with inflation. After twenty years, the average CPA is barely able to support a family. Heck, the 100 year inflation average would indicate a doubling of salary in only ten years.
Secondly, you are expendable. Recording debits and credits as a skillset is a mature field. There hasn’t been much change since Fra. Luca Pacioli published his seminal work, “Everything about Arithmetic, Geometry, and Proportions” back in the 1400’s with double entry bookkeeping as just one of his five treatises in this publication. Not much has changed since then, except the slicing and dicing of the sums, which means you can be replaced with someone cheaper, and possibly with some fresh ideas on the slicing and dicing.
So, income and competition have forced you to open your own practice.
And, despite the years you have spent telling others how to run their shop, the probability is that you have no idea how to run one of your own, because that was the one thing that the perfesser didn’t teach you, how to manage your own business. And especially, the importance of becoming a salesman, or saleswoman (trying my best to be gender neutral here). For all intents and purposes, you are not a ‘professional,’ you are a shopkeeper.
So that becomes the crux of the problem for an accountant. On the one hand, the perfesser’s and academics profess to be imparting great wisdom and knowledge, yet they fail to make available, and omit details about, something that someday will be needed by over half of their students, how to run their own small business, their own accounting practice.
So, when you were forced out, or chose to walk out as I did, into a brave new world (apologies to Aldous Huxley), and became an accounting practice “shopkeeper,” more than likely, your income took another hit. Like most accountants, you are probably good at telling shopkeepers how to run a business, but not very good at running one.
First of all, starting your own practice isn’t cheap. You’ll need computers, accounting software, malpractice insurance and telecommunications equipment, as well as money for marketing, maintaining your credentials, reference materials and insurance — plus enough cash to live on while you get the business up and running.
If you’re a good salesperson and you live modestly for the first couple years, plan on breaking even after the first year. But, here’s the kicker, AICPA surveys show the average income for the owner of a small firm (10 or fewer employees) is $100,000. That’s not much more than you were making as an employee, and before you took on all that risk.
And, there may be months where you can’t make a draw out of the business income. If you’re used to a paycheck week after week, this may create cash flow problems you didn’t prepare for.
And, since you also have to act as your own secretary, administrator and custodian until you can afford to hire some staff, you are certainly going to wind up working more hours than you did as an employee, since you’ll be running the business in addition to doing the accounting work. Typically putting in a 60 to 80 hour work week, year round!
Net result, with a 60 hour week, 50 weeks per year, and an average of $100,000 net, your hourly income of approximately $33 per hour, is most likely now lower than your hourly rate as an employee. And, if you are putting in 80 hours per week during the sixteen weeks of tax season, your hourly rate drops another 10% to approximately $30 per hour.
And, that’s not even taking into account the extra 7% (approx.) you’ll be paying in taxes, since you now have to pay the employers side of medicare and social security also.
I’m pretty sure that if you have read all this so far, you either think that I’m full of horse manure, or I have gotten you so totally depressed, you’re going to buy a farm in Kentucky and start raising Blue Grass.
But, Dear Friend, there is a solution to all your accounting practice income and fee woes. A simple solution. You are now a shopkeeper, start acting like one. Get out and sell your services.
Think of this as what the minister would call your “Come to Jesus Moment.” (Or, whatever is applicable for the persuasion you may adhere to. Old geezers like me do have to struggle to be politically correct.)
And, if you’re gong to make a sale, you have to understand that your clients don’t really give a rat’s left whisker about your ciphers, or your interpretations of them. They want their needs answered, and their needs are not for another beautiful financial report.
It is usually for something like more customers, lower costs, less pilferage, higher employee production, or anything other than a comparative financial statement. Unless of course, that comparative financial statement answers their need in a way they can understand. And you better be prepared to answer the need.
Again, if you’ve gotten this far, there must be something burning inside you that makes you identify with my interpretation of the income statistics surrounding the accounting profession. And, you are probably having your own moment of realization that you need to worry less about your work product and more about your client base.
So, I’m going to give you something of a kick start, by giving you the opportunity to enroll in the “Absolute Beginners Guide To Starting And Building Your Own Accounting Practice When You Are Flat Broke” training course for only $21, a savings of $6, or over 20%, just by clicking on the button below and entering the coupon code “ABGfor21.” Enter the code and then click on the “Apply” button to get your discount applied.
You’ll be glad you did. But hurry! There are only 47 coupons available to get the course at this price. Hurry before they are all gone.
I would love to see you become a part of the Practice Builder Publishing, and work with you personally to reach maximum profit potential this year! Nothing I teach or help you with damage your credibility. It will simply get you more clients and help you make more money.
Best to you and yours,
P.S. Think I’m full of B.S.? Maybe you ought to let me know what you think. Plop your comments in the section down below the related articles images and if you’re a member (meaning you bought something or downloaded a freebie), your comments can earn you credits toward free stuff. I’m still setting up the credit store, but you can start earning comment credits today!