As we quickly approach the end of the year, tax practices are starting to prepare their clients for the busiest time of year. However, if you’re a new tax practice owner, not only will you be helping established clients prepare but you will also be dealing with getting your business up and running.
If this is the case, we’re here to help guide you and your business in the right direction. Meanwhile, you’ve already done your research and determined your target market. It’s now time to check off the specific items pertaining to running a successful tax practice.
1. Develop a legal structure
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 LLCs), 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 as sole proprietorships and only look into 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 a sole proprietor or a 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. Check out this video for more information.
2. Develop a pricing structure
As we’ve previously mentioned in our post The Strategic Pricing Guide For Accountants and Tax Pros, the most basic strategy for pricing your services is cost plus pricing. Cost plus pricing involves adding a markup percentage to the cost of your services. Your markup is the difference between your selling price and the cost of your goods and services. Most businesses add a 30-50% markup to all their products. At the time your business starts to pick up, paying attention to your markup is crucial, as you want it to be enough to offset your business expenses and generate a profit.
3. Use the latest technology
Technology plays a vital role in the growth and efficiency of any business. As a small business owner, you may already be wearing many hats. For this reason, using the latest technology is crucial.
When running a tax practice you will not only need the latest technology to advise your clients but to skillfully run your business as well. For example, Canopy’s Practice Management software streamlines your business while building strong, collaborative relationships with your clients. With Canopy you’ll be able to stay in sync with your clients with an easy-to-use portal, collect electronic signatures, and more.
4. Open a business bank account
In addition to using the latest technology, digital business banking is a great option for any small business. Its main purpose is to be that one-stop shop for small business owners with features to save time and money at the palm of your hand.
Opening a business banking account will not only aid you in managing your business more efficiently but will also help grow your business. Creating an account that is separate from your personal account will allow you to stay on top of how your business is doing and the revenue your business is bringing in.
5. Market your tax services
One major component to growing your business and grabbing the attention of new clients is being smart when it comes to marketing your brand. You may be thinking, how do I go up against the major tax powerhouses? Knowing your industry, target markets, and the key items that set you apart from everyone else is a great starting point. Once you’ve determined these key indicators you can start promoting your brand by doing the following:
- Promote what you excel at. For example, using the most up to date technology to make things easier for your clients.
- To start, utilize word of mouth. Start by reaching out to family and friends and asking current clients to refer your business.
- Being active on social media. Share the latest industry news as well as marketing what your business is doing in house (community events, getting involved with charity, or promoting any deals you currently have going on for new members).
If you’re able to check off these five components above, you’re already setting your practice up for success!
Want to learn more about starting a virtual tax practice? Check out our virtual tax practice ebook series.