Now may be the perfect time to start an accounting firm.

With client demand growing and many baby boomer CPAs hitting retirement age, there is certainly no shortage of work, and advances in technology have lowered the cost of launching a new business. 

But experts say there is much to consider before accountants jump into the deep end, such as their personal financial bandwidth, whether they want to do the technical work in their firm or just manage it and where to find support. Perhaps the best place to start is figuring out why you want to start your own firm in the first place.

By and large, there are two kinds of firm founders, experts say: Those who are natural-born entrepreneurs, and those who become founders as a result of some professional or personal change that requires them to have greater flexibility.

The first group can look like accountants who have lots of ideas but who may not be able to implement them at their current firm. Or it could be an accountant who sees what their employer is doing but believes they could do it better.

The second group can look like accountants who are starting families or battling an illness, or accountants whose firms are undergoing a structural change like a merger.

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Logan Graf, founder of the Graf Tax Co. in Austin, Texas, said, “You have to want it. I would not recommend starting a firm unless you have a burning desire for doing something on your own.”

He added that firm founders must be inquisitive—they need to be willing to test things out and experiment where things can be improved. 

Miklos Ringbauer, treasurer and secretary for the California Society of CPAs and founder of MiklosCPA, recommends that firm founders work for someone else first, learning the ropes in another firm and determining what they want to do differently.

“You don’t know what you don’t know,” Ringbauer said. 

Stephen Buller, founder of Buller Accounting in Tacoma, Washington, added, “Learn the ins and outs, the rights and wrongs, while getting paid for it.” 

Will I have enough clients?

Before actually starting a business, any savvy founder should consider whether there is a market for their services. For accountants, that translates to whether there are enough clients.

The answer is “not only applicable for accountants, but for all startups – it’s an unknown,” according to Ringbauer.

That’s where professional experience and understanding comes into play, he said. Accountants should consider a couple of factors: their personal financial obligations—whether they have children, student debt or a mortgage—and their personal savings. 

If you don’t have enough runway to sustain yourself for a year or two, then you may need to plan longer or save more, Ringbauer said.

One common practice among accountants is buying a book of business to secure an established set of clients. However, Angie Wood, founder of Wood CPA in Edina, Minnesota, advises against it.

“Don’t buy a book of business,” she said. “I learned that the hard way. You don’t need to.”

Many clients will make the switch to the new firm, Wood explained, “but a lot of them choose to leave shortly after because it’s a different process. It’s a different person, it’s a different relationship. Fees change. The relationship is so personal, so it’s just not worth buying a book of business because clients can leave. There’s no guarantee.”

How do I do this legally?

The legal requirements for setting up a CPA firm vary from state to state, and the requirements are different for a CPA firm versus a firm offering bookkeeping services. Ringbauer recommends that accountants do their due diligence and research on their state’s requirements, but he offered a few tips and tricks. 

“Some states limit certain things,” he said. “For example, in the State of California a professional limited liability company, PLLC, is not allowed, domestic or foreign, to operate and offer services in the state. Versus in Texas, you can be an LLC. So understanding state rules and regulations is incredibly crucial.”

In addition, many state boards of accountancy have special language requirements that must be included in a firm’s bylaws or incorporation documents. He also reminds accountants that you can always incorporate later.

“Depending on the type of services you offer, you may not necessarily need to incorporate upfront for liability purposes,” Ringbauer explained, using his own experience as an example. “For a very long time, I was doing the self-employed Schedule C. Then when our clientele started to change — when things got more complicated, when I ended up doing offshore voluntary disclosures, very scary IRS compliance stuff with clients having hundreds of thousands of dollars of penalties because they were not right previously, filing their returns with their foreign assets — I decided that this was too much risk for me and incorporated.”

Ringbauer recommends hiring a lawyer, “so you understand what your requirements are and the pitfalls or benefits of the different entities. … A lot of people think that just because you are a CPA, you know the tax laws.”

Do I need to hire?

The next big question for firm founders to consider is if and when to hire.

Buller said it’s important for the firm owner to first decide whether they want to continue as the main service provider in their business. Do they love actually doing the technical work, or is their goal to manage a firm and its employees? 

“You should hire your first employees when you have a good process and good systems in place to deliver the service that you can charge for and that will make it easy for you to train an employee to generate revenue for your business,” Buller said.

“If you’re going to hire somebody, it basically means you’re taking a pay cut and a bunch of your time is then going to be spent training this person,” he continued.

For most accountants, the easiest and most logical first hires are usually admin and a bookkeeper.

“Affordability is a factor, and then what are the tasks I wanted to get rid of?” Wood said. “Tax was my strong suit, so I held on to that for the longest and found somebody else to do the other things that I didn’t really enjoy doing as much.”

What if I’m not ready?

Founding a firm isn’t for everyone, of course. And there are those who start their firm but realize that it isn’t the right fit for them. But most people quit because of some personal circumstance, not because they weren’t making enough money, according to Ringbauer. Thankfully, accountants have a safety net in that they can always go back to being an employee. 

“The most beautiful thing in accounting is that if you are fit to do the practice, you will always make enough money to put food on the table,” he said. “It’s a secure and very viable business.”

Throwing in the towel on a firm isn’t a mark of failure, either, Buller said.

“I think it’s a good idea to have this attitude of, ‘How could I replace myself in this business in the long run?'” He said. “And then you start thinking about all these systems and processes you need to create to make it so somebody else could do the work, and then immediately you have started to create some value that you could actually sell to somebody. That’s one exit plan.”

Do I have enough support?

There is a litany of resources available to accountants looking to start their own practice, including the American Institute of CPAs and state CPA societies, which host networking events, workshops and post reading materials. Even insurance companies have boilerplate engagement letters and guidance support.

Then there’s an accountants’ personal network, which can include friends, colleagues, partners and sole practitioners. 

Wood said she experienced overwhelming support and advice when she told her network she was starting her own firm. “If I would have known how much support I would have gotten from people, I would have done this so much earlier,” she said.

Graf said he received support from other tax experts on Twitter when he was starting out. And in October, he created his own online community of firm founders called Counter, which now has over 200 members.

At the end of the day, for most accountants, there will never be a perfect time to start a firm, according to Buller—you need to just do it.

“It’s kind of like having a kid,” Buller said. “People can tell you there’s challenges. People can tell you how hard it’s going to be or various things you’re going to have to do. And you’re going to have to be ignorant about it, no matter what, to some degree, until you do it yourself.”

“That’s one of our biggest hurdles,” Ringbauer said. “We believe that we need to know everything, and we are afraid of reaching out for help. The best thing is, most accountants now are looking at each other as support rather than competition.”

He continued, “Of course there are articles and books, but the most important thing to understand is that books give you the basic idea, but your own unique life experience and circumstances will dictate what may work from it or what doesn’t.”