Accounting & Bookkeeping Business Plan

The small business accounting market consists of virtually every small business in the United States. As businesses grow larger than one person sole proprietorships, they generally require expert help with at least their tax preparation, and often with additional bookkeeping and accounting services. Even many non-employer sole proprietorships will use accounting help at some point. While some small businesses hire bookkeepers or CFOs directly, many successfully outsource these types of services.

The accounting service market as a whole includes the following:

• Corporate accounting and auditing firms: The “Big Four” (PricewaterhouseCoopers, Ernst & Young, Deloitte Touche Tohmatsu, and KPMG) and their competitors
• Small business accounting
• Personal accounting (by H & R Block and the like)

The National Society of Accountants states that it represents more than 30,000 independent practitioners who provide services to 19 million individuals and businesses. The continuing evolution of U.S. tax laws guarantees work for tax accountants on an ongoing basis. The market is somewhat recession-proof, as businesses which are contracting use accountants to help cut spending and limit tax liability just as growing businesses will use accountants to launch and prepare financials for expansion, mergers and acquisitions.

Market Segmentation

The market of small businesses in Chicago for The Sorcerer’s Accountant represents approximately 85,000 businesses in 2010. It has been divided into three groups:

Non-employer firms: Without employees, these firms do not have many of the concerns of larger businesses. However, the owners must be vigilant to protect their own tax liability and sort out how their personal and business tax returns intersect. These firms are generally buyers of QuickBooks services and tax preparation services. As they grow, this group becomes ripe for outsourced bookkeeping services before they can hire an full-time in-house bookkeeper.

Very small businesses: Made up of businesses that are designed to stay small and those which are growing through a phase, these businesses require payroll services, bookkeeping, and tax preparation. They are concerned about losing control, but can generally be convinced of using outsourced accounting and bookkeeping with cost analysis. With the stakes higher, these businesses can make greater use of management accounting services, especially as most cannot afford a dedicated CFO. Many do not need a full-time bookkeeper, but can make do with part-time help, which limits their hiring options.

Other small businesses: Many of these businesses will have some in-house financial management and bookkeeping help. However, they may be able to save money by outsourcing these services, as they are not generally core to what the business seeks to do. These businesses may be comfortable with their situation as a cash producer for their owners or intent on growing or positioning themselves for sale.

Target Market Segment Strategy

The Sorcerer’s Accountant will focus on the “very small business” target group for its bookkeeping services as this group can make the most consistent use of part-time bookkeepers. The type of student bookkeepers whom these businesses would hire are generally students of the same kind. However, these businesses often do not have the resources to provide proper oversight or training to their bookkeepers, and will suffer from not having the leverage to hire the cream of the crop. The Sorcerer’s Accountant can provide the solution to these problems.

Service Business Analysis

The small business accounting industry consists of numerous independent accountants and bookkeepers as well as many small firms. Larger firms tend to pursue medium and large business clients.

Accounting and bookkeeping services are purchased by owners and top managers of small businesses. They will contact businesses by phone and generally meet in person (at the client’s office) to interview and discuss the prospect of working together.

Competition and Buying Patterns

Major competitors in the Chicago market include:

• Corporate Bookkeeping Services: Provides general bookkeeping services, not taxes. Seeks entrepreneurial clients specifically, especially in the real estate industry. Business has only been in existence for a few years and has no CPA leadership.
• MasterType Accounting Business Services, P.C.: Accounting and bookkeeping services, including a bookkeeping software package. Their major weakness is the reliance on their own software package rather then QuickBooks, the industry standard for small businesses.

For bookkeeping services, the business also must compete indirectly against the prospect of businesses hiring their own part-time bookkeepers. This gives businesses the advantage of greater control and perhaps development of a future full-time employee. If the hire works out, the cost can be lower for a business than an outside service. However, this can lead to employees who are not as well-educated or experienced as bookkeepers through a bookkeeping service who have worked with a range of businesses. Generally, the cost is lower in the long run with a bookkeeping service, as training is done more systematically and supervisors are more regimented and experienced.  

To choose between competitors, factors considered by clients include:

• Positive references (especially from known sources or other businesses in the same industry)
• CPA leadership (protects the businesses, even if work is being performed by non-CPAs)
• Price (often low on the list of considerations, as long as price is not exorbitantly high)