Are You in the Start-Up Game?

Pennsylvania is a great state for small businesses, and the number of new businesses is on the rise. Since 2020, the number of startups decreased due to COVID and the subsequent economic downturn; but in 2023, new business applications increased significantly. And every one of those new companies needs an accountant or CPA to help it succeed. Working with startups is a valuable niche that can help you grow your practice and provide you with a very loyal customer base.

Some small business statistics

Only 10% of startups survive for 10 years or more, with about one-third failing within the first year alone. Many entrepreneurs have to self-finance, and nearly two-thirds of startups have less than $25,000 at their disposal during the startup period. It usually takes several years for a startup to make a profit, almost guaranteeing a cash flow problem. 

Most startups are simply not prepared financially. This is demonstrated by the top reason why new businesses fail, according to recent LendingTree research. Some of the top reasons listed include:

1.       Ran out of cash – 38%

2.       No market – 35%

3.       Flawed business model – 19%

4.       Regulatory challenges – 18%

5.       Pricing issues – 15%

The good news is that, as an accountant, you can help your clients overcome many of these issues to increase their likelihood of success. 

Helping your clients’ businesses succeed

You can help your entrepreneur clients in a variety of areas that will insulate them against many of the main causes of early company failure by:

Determining the best business structure: Sole proprietor, LLC, partnership, corporation

Developing a financial strategy: Short-term and long-term financial goals; maintaining liquidity; seeking loans or investors; risk management; overhead and expense management; creation of financial reports for ongoing business planning and strategy

Developing a business plan: Clearly defining goals; determining business steps and purchases necessary to attain those goals; differentiating yourself from competition; building a client base

Advising around start-up costs: Purchasing vs. leasing of building or equipment; proper tracking and reporting of pre-opening and start-up expenses; proper reporting of fees, licensing, and certification expenses

Providing tax advisory services and tax preparation: Advising on the tax implications of major purchases and other business decisions; preparing quarterly and yearly tax filings; avoiding audits by tracking and submitting appropriate documentation and advising against business decisions that may look suspicious to the IRS

Keeping the company compliant with regulatory requirements: Cyber security and privacy regulations, financial regulations, industry regulations 

Advertising your services

Be sure to include startup services in your marketing plans. Your website should have a well-developed explanation of your services (with testimonials as soon as you have them). Include this information in any online marketing that you do. And be sure to let all your current customers know; some of them may be considering starting a business, or they may know someone who is.

Do you have a particular business niche that you prefer to work with? Become an expert in a particular industry and you will not only find many clients who will seek you out for your niche knowledge, you will also be able to increase your rates because of the added value you offer.

Working with startups is never boring; it’s exciting and always offers new opportunities to grow professionally as you build your business. Be sure to reach out to members of our PSTAP community for advice and brainstorming to help you grow this aspect of your practice.