Starting a Tax and Consulting Practice
To start up a new tax practice within the United States. Three people coming together to build a new firm under a LLC (partnership structure). Partner 1- Mr. B 33.34% (age 64 and very experienced), Partner 2-Mr P 33.33% (age 34-13 years of profess. experience and Partner 3-Mr M 33.33%-10 years of experience). We need to build a 10 year time line/plan starting 1/1/2025-12/31/2034 under the Two scenarios-
Scenario 1- All three partners make the initial investment assume $10,000 each. Neither partner brings any existing book of business. How do they build? How do they get clients? How do they grow?
Scenario 2- All three partners make the initial investment assume $10,000 each. Partner Mr. B bring a $900,000 of business. Partners Mr. P and Mr. M bring $50,000 each of business. The new partnership is required to pay 20% for next 5 year to an outsider as commission on the entire 1 million business. How do they build? How do they get clients? How do they grow?
Sample Solution
Building a Tax Practice: 10-Year Plan (2 Scenarios)
Partners:
- Mr. B (64 years old, Experienced) - 33.34% Ownership
- Mr. P (34 years old, 13 years experience) - 33.33% Ownership
- Mr. M (10 years experience) - 33.33% Ownership
Scenario 1: No Existing Book of Business
Year 1-2 (Focus: Foundation & Client Acquisition)
- Legal & Business Setup: Form an LLC, obtain EIN, establish business bank account, secure necessary licenses & permits (consult accountant/lawyer).
- Develop Business Plan: Outline goals, target market, marketing strategy, financial projections.
Full Answer Section
- Develop Expertise: Identify specialization niches (e.g., small businesses, specific industries) based on partner strengths.
- Marketing & Client Acquisition:
- Build a professional website with clear value proposition and contact information.
- Develop online presence through social media and online directories.
- Network with local businesses, chambers of commerce, professional organizations.
- Offer free consultations or seminars to attract potential clients.
- Explore online advertising targeting local businesses.
- Deliver Excellent Service: Provide high-quality, personalized service to build client trust and loyalty.
- Referral Programs: Encourage satisfied clients to refer others through incentives.
- Expand Services: Offer additional services like bookkeeping or payroll to existing clients.
- Continued Marketing: Maintain online presence and network actively.
- Technology Investment: Utilize tax preparation software and cloud-based solutions for efficiency & security.
- Hire Employees: Consider adding staff (e.g., junior accountants) to handle workload as client base grows.
- Continue Specialization: Further refine and promote niche expertise to attract more targeted clients.
- Invest in Team Development: Provide ongoing training and development opportunities for partners and staff.
- Succession Planning: Start considering long-term plans for potential retirement or expansion of ownership.
- Integrate Existing Clients: Develop a smooth transition for Mr. B's clients to the new firm.
- Client Communication: Establish clear communication channels and service expectations for all clients.
- Leverage Existing Network: Utilize Mr. B's network and reputation to attract new clients.
- Marketing & Client Acquisition: Similar to Scenario 1, but potentially with a stronger initial foundation due to existing clients.
- Commission Payments: Factor in the 20% commission expense for Mr. B's transferred business into financial projections.
- Optimize Service Delivery: Streamline processes to handle the increased client base while maintaining quality service.
- Upsell Additional Services: Encourage existing clients to utilize a wider range of offered services.
- Targeted Marketing: Focus marketing efforts on Mr. P and Mr. M's specialization areas for client acquisition beyond Mr. B's network.
- Technology Investment: Invest in technology solutions to manage larger client volume efficiently.
- Team Building: Similar to Scenario 1, consider hiring additional staff to manage continued growth.
- Develop Leadership Roles: Leverage Mr. B's experience for mentorship and strategic guidance.
- Develop Mr. P & Mr. M's Clientele: Nurture a strong client base for Mr. P and Mr. M independent of Mr. B's initial business.
- Profit Sharing & Ownership Structure: Revisit profit-sharing agreements or ownership structure after the commission period ends.
- Develop a Strong Brand Identity: Develop a clear brand message and image that resonates with your target market.
- Maintain Compliance: Stay up-to-date on tax law changes and ensure adherence to all legal and ethical regulations.
- Professional Development: All partners should continuously pursue professional development opportunities.