As a new CPA practice, consider the importance of differentiating yourself. Areas of practice (in addition to general tax and compilation work) for some start-ups include:

• Strategic planning services.
• Turnaround services.
• Preparing business plans.
• Dealing with inventory problems.
• Tax planning for high net worth people.
• Industry niches.

Develop your own business plan first. Do research by analyzing websites of other firms. Network with local business owners and find out what kinds of businesses are in your area and what their common problems are.

Don't pick too narrow a niche or you may not cover your overhead in the beginning.

Starting with a home office is okay. It is acceptable to the market and controls overhead. On the other hand, clients may expect lower fees from someone who works at home. Clients may take you more seriously if you have an outside office.

Insurance is going to be a major cost. You are going to need insurance for:

• Employee health care.
• Legal liability.
• Errors and omissions.
• Disability.
• Business interruption.

Technology costs are declining, but expect to pay $5,000 or more each year for software.

Don't rely solely on promised referrals from friends and relatives; they don't often materialize. Conduct a marketing campaign. Define your target market and buy a list of businesses within your selected parameters from Dun & Bradstreet or Info USA. For example you can select businesses with up to 50 employees or up to $10 million in revenues. Out of 5,000 names, you may expect that 200 to 300 are searching for accountants. You will probably want to eliminate names that require audits, such as banks and municipalities.

Send a short, professional letter that, perhaps, includes a tax tip. One start-up practice spent $2,500 per month for telemarketing and $10,000 for a website, newspaper advertising, and the yellow pages. Google provides marketing positioning for which you pay per click through. First year practices often spend 50 to 70 percent of projected revenues on marketing.

Here are some tips from CPAs who started their own practices:

• You may need administrative help if you are going to have the time to make rain.
• Don't price your services too low.
• Admit your mistakes—and fix them.
• You can't sell yourself unless you believe in the value you provide and have a passion for what you do.
• Make sure your clients value your services and are willing to pay for them. Don't feel you must accept any client that comes along.

From Journal of Accountancy, April 2006.