SettingUpYourPractice
Preparing your business plan
Working out how you’ll set up your practice and operate is central to your prospects of success. Calum Fuller explores what you need to cover and how to do it
At a glance
At a glance
Understand your vision and use that as your starting point
Consider how you fit into the market
Decide on your funding model
Without a sound business plan, it is unlikely you will be successful with your practice. Having a clear understanding of your aims and how you will fund your practice and your place in the market are all vital factors that will have a major bearing on your fortunes.
When constructing your plan, clarity is key. It should be simple and easily understood by people who know nothing about your business. Remember, too, that your plan is a working document that you should regularly update, and that it’s okay to change your mind about aspects of it.
We spoke to two AAT licensed members who have been through the process and established successful firms.
What is your vision?
It’s crucial to have a clear understanding of your ambitions for your practice and how quickly you want to achieve them, as all other aspects of your plan will flow from that.
“What’s the vision? Why are you becoming self-employed? What do you want to get out of this business?” says Rachel Harris FMAAT, of striveX and Accountant_She, which she founded with her husband, James. “Some people want to build a £120,000 portfolio that will give them a really good profit and match their income in employment, but give them way more flexibility. A portfolio of that value could have 12 big clients with very little client contact. You live very flexibly and have a better work/life balance.
“Other people are like me and want world domination, to grow as big as they can and have a team, so long-term vision is a really good place to start, because very often the funding and risk profiles of that business are different depending on if you’re one or the other.”
She adds that other practical decisions, such as software packages, are also affected by the kind of firm you intend to be.
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Size up your competition
Success and growth are unlikely without first analysing your competition and where you fit into the market, whether that’s on a local level or more market-based.
Doing so refines your vision and helps you understand whether you’ve identified any gaps in the market you can target, or whether those potential client groups you are focusing on are already well served.
“This is another area where having a clear vision will really help,” explains Rachel Harris. “The core focus of striveX is to become the accountancy practice of choice for celebrities, influencers and business owners who are aligned by values and a desire to feel better about their finances.”
Harris notes that she was fortunate to have undertaken an MBA at the time she and James were planning to launch striveX.
“My first module was marketing, and we had to do market segmentation. You put together a grid plotting levels of service and price, and work out ‘Where do I want to sit?’ Some firms are low cost, low touch point. They would sit bottom left of that. We’re not cheap but we’re also high touch point, high service, so we’d sit at the opposite end, in the top-right corner.”
From a marketing perspective, Harris notes she “definitely saw a gap in the market”.
“There were very few accountants on Instagram,” she recalls at the time she was launching striveX. “The Instagram profiles of the few who were using it felt quite corporate. There was no one with a face attached to their brand. People do feel anxious and scared about numbers, and if they can attach a person and a conversation to that, it will make them feel a lot better, so that’s what we did.”
For Ali Jaw FMAAT and his business partner, Michael Beech, the aim was somewhat more traditional, and market research and analysis led them to make some adjustments in their approach.
Based in Worcester, the pair quickly realised that rather than focus on drawing clients from the town, which was well served by existing accountancy practices, they would switch their focus to nearby suburban Birmingham.
“We set up ourself as a generalist practice; we don’t particularly have a niche,” Jaw explains. “We found out that it was a very saturated market in terms of how many accountants are in the area. Straight away, we knew that Worcester was perhaps not going to be our biggest market, so we ventured into the Birmingham area. To date, most of our clients are from that area – although with social media now I'm doing a tax return for a client who lives in Glasgow, so our clients can be anywhere in the UK.”
What’s the vision? Why are you becoming self-employed? What do you want to get out of this business?
What are your funding options?
Most practices need investment upfront in order to get going. Once you’ve set out your vision and committed to a direction, you’ll need to establish funding in order to achieve your aims. Your options include:
Self-funding
Tapping into your own cash not only provides you with funds, but will help attract external investment, too. After all, you can’t expect others to invest in your business if you’re not willing to do so yourself. When Jaw co-founded his firm, Severn Accounting, he and Beech each put in their own cash initially.
“We wanted to make sure it was as low-cost as possible,” he says. “Luckily, we didn't need an office at the time because I was still involved with another business. All of our costs were mainly for things to be needed to run the practice, i.e the software, we needed insurance, we needed to pay for computers.”
Like Jaw, Harris and her husband self-funded their firm, something she says was “really important” to them as it “allowed us to retain equity and always own the business”.
Borrowing
Taking out a loan from a bank or a start-up loan from the government enables your nascent business to cover all of the costs of starting up, and injects working capital to help with cash flow and, for example, paying suppliers and any staff you might have hired early on.
Another benefit of borrowing is that it reduces your own personal risk. If you’ve got personal savings, you clearly saved for a reason and tying that cash up in your business will mean it won’t be available for its original purpose.
Angel investors
Like bank loans, angel investors offer an injection of funding to cover the costs of starting up and working capital, while reducing your personal risk. They do so in exchange for a stake in your business.
Not only that, but angel investors tend to be entrepreneurs or people with extensive experience in the business world. As such, they are likely to be far more hands-on than any bank would be, offering mentoring and support, and businesses that receive investment will generally benefit from the investor’s time, skills, contacts and business knowledge.
Crowdfunding
Platforms such as Kickstarter offer the opportunity to access alternative funds. Crowdfunding is an innovative way of sourcing typically small-scale funding for new projects, businesses or ideas. It can also be a way of cultivating a community around your offering.
What is your minimum viable product?
When setting up your firm, you should define early on what your minimum viable product (MVP) is and looks like.
An MVP is a product or service with enough features to attract early-adopter customers and validate an idea early in the development cycle.
For accountants launching their own practice, this will often mean serving clients from a compliance perspective, at a value that matches the price charged, Harris explains.
“That’s where you’re looking at the governance: working with AAT, having a licence, doing AML [anti-money laundering] activities. It’s about working out the minimum viable product that you are happy to go live, start creating marketing assets and start selling to people,” she says.
“Do you want your entire client journey mapped out from start to finish? Or are you happy to say to clients, ‘Look, you’re one of my first 10 clients. If you’re happy to be patient with me, I’ll be patient with you, and you can help me build my business’. Working out your MVP is the first part of going to market and being able to sell to the people at that level.”
