With the rise of aspiring entrepreneurs and small businesses, the need for skilled bookkeepers has also increased. 80% of these businesses believe in the importance of hiring a bookkeeper to maintain their financial performance. On the other hand, 95% of businesses who go bankrupt have reportedly poor record-keeping. This data emphasizes the crucial role bookkeepers play in the business landscape which clearly explains the growing demand for these services.
A bookkeeping business plays a major part in analyzing the profitability of every business. As a lot of businesses consider hiring an expert bookkeeper nowadays, it is the perfect time to start your own. If you are wondering how to start a bookkeeping business, this informative article will help you go through every phase and eventually lead to your career growth.
A bookkeeping firm manages the financial records and transactions of a certain business, individual, or a large company. They offer various kinds of services including checking ledgers, preparing financial statements, and managing payroll. Usually, these firms hire skilled bookkeepers to do the job of maintaining accuracy in financial records from a company's supporting documentation which is crucial for future business planning. These documents include receipts, bills, invoices, and purchase orders.
Most firms use an Excel spreadsheet or a journal to carefully record and manage these transactions. But as the modern times dictates, some bookkeeping firms already use software such as Quickbooks and Xero to make their work easier and to accommodate more bookkeeping clients. With the help of a bookkeeper, business owners will be able to assess their budgetary capabilities, focus more on their operations, and enjoy the profit.
The bookkeeping industry has been one of the most underrated in the market. With approximately 88,652 firms in the US, it offers a challenging and competitive landscape to those who want to start this business. The market has also reached a value of $77.6 billion in 2024, showing a remarkable growth of 6.0% CAGR compared to the previous year. Recently businesses and individuals have acknowledged the importance of bookkeeping. It helps promote better financial performance and well-managed cash flow.
The digital transformation has led to efficiency and productivity in the field as 41% of professionals and business owners in the US have embraced the use of record-keeping software and data privacy protocols to enhance their income and expense tracking methods. On the other hand, 67% of bookkeepers prefer cloud-hosted solutions to keep track of a business' financial aspect.
For a basic start, it only costs $500 to $2,000 to launch a bookkeeping business. This is ideal for those who want to achieve work-life balance by working from home. With this very minimal startup cost, the possibility of reaching profitability may happen as early as the first month. However, to keep your income stable for the next few months, you must need consistency and enough effort to do so. But some professionals suggest that it may take almost five years to establish a profitable practice. To reach this milestone, it is crucial to set competitive prices and target quality clients. Statistics also show that 56% of accounting firms in the US have experienced increased profit by enhancing and adding more to their range of services.
The industry offers a high success rate due to the persistent growth and demand. To achieve meaningful success, here are some factors to consider:
Launching your own bookkeeping business should always begin with having a good understanding of what a bookkeeper does and how they help with business operations. Their job is primarily focused on recording accurate and updated transactions. Through proper data organization, entrepreneurs will have a clearer picture of what their financial status looks like, eventually contributing to a well-managed cash flow. A bookkeeper also handles tasks related to credit card or bank statement reconciliation, bill payments, managing money, and financial report preparation. All of these greatly contribute to the overall efficiency of a business or a company.
A lot of people mistakenly see a bookkeeper performing the same job as an accountant. What makes them different is that bookkeepers don't provide auditing and tax-related work. They focus more on data entry and providing significant insights about budgeting. Thus, a skilled bookkeeper is considered an important role to any business, making sure that there's a smooth transition for your finances and geared up towards growth.
Starting your own bookkeeping business can be overwhelming, but it can be very rewarding once you got into the right way of doing it. Step by step, we will show you the simplified process on how to start a bookkeeping business so that you can already start as soon as possible.
As the bookkeeping industry continues to grow every year, the target market also evolves. In the year 2024, the bookkeeping services market in the US has reached $77.6 Billion which marks a 6.0% growth compared to the previous year. To stand out in this competitive market, you need to identify your niche and choose to specialize in a specific sector. You may opt to work with micro businesses, freelancers, or online sellers.
There are other factors that need to be considered when choosing a niche such as local regulations, software preferences, and the complexity of the tasks in your chosen niche. Once you've identified your target audience, you can now start brainstorming for your business strategies.
A good business plan is a detailed overview of your business which includes a strategic approach that includes your unique goals that should align with specific market conditions. It also allows you to project future revenue streams, expenses, and possible profit. Understanding the needs of your target market helps you determine the pricing and types of services that you will offer. A comprehensive business plan should have the following:
Complying to local and state regulations is the first step in building a reputation for your new bookkeeping business. The first important step is to determine your business structure to have an idea of the taxes you will pay and the kind of insurance to get. Whether you prefer to work as a virtual bookkeeping freelance, partnership, or limited liability company (LLC), it is important to register your bookkeeping business in order to operate legally. There are specific permits and licenses to secure before you can officially start your business. Non-compliance to the requirements will affect your business' credibility. Also, do not forget about investing in liability insurance to protect your business from potential errors and risks.
The right tools and software is important for your bookkeeping business to thrive. According to recent statistics, 41% of businesses in the US prefer using a bookkeeping software for their record-keeping needs. This adoption to digital modernization has led many bookkeeping businesses to explore more on available accounting tools and software in the market such as QuickBooks, Xero, Jetpack Workflow, Taxdome, Sage, and many more. Given that bookkeeping tasks require accuracy for proper data management, it is crucial for you to invest in a good accounting software to maintain client satisfaction.
A successful bookkeeping business starts with good profitability. Setting a reasonable price for your services can greatly affect your business. A very low price may affect your profit while expensive pricing can drive away clients. Research about the average pricing your competitors offer in your area and take it from there. You can choose among three common pricing models - hourly rates, flat monthly fees, and value-based pricing. Tiered packages can also be offered depending on the needs of your clients. Choose what works for you and make sure to provide services that are worth the price.
Landing clients is one of the challenges to face when starting a bookkeeping business. To do so, you need to create a marketing strategy that works. One effective way to attract clients is to build a strong online presence. Create a professional website and social media accounts for your business. Post simple yet relevant content that will drive more traffic to your online platforms. Here are practical SEO techniques to establish a good website:
Email marketing is also an easy and effective strategy. Sending a weekly newsletter to your target audience can increase the possibility of a close deal. Through this way, you can reach a wider audience for your business. It is also important to build long-term professional relationships with your existing clients as they can give word-of-mouth referrals and positive feedback for your bookkeeping business.
In this competitive bookkeeping industry, it is crucial to make a name and stand out among your competitors. There are a lot of things you can do to make sure you are on top. First and the most important thing to do is to continuously enhance your bookkeeping skills. Learning should never stop, especially that you are starting a business. You need to be updated of any modern development and new trends in the bookkeeping practice. Recent surveys show that 95% of accounting and bookkeeping practices have considered cloud-based bookkeeping and 63% have reported great results from their customers. This simply means that adapting to digital advancements will surely make you distinct among your competitors by fostering trust and reliability.
Knowing your niche helps you focus more on improving your services and eventually, become an expert in your chosen sector. It is easier to attract clients when they know you have already set the bar high for your bookkeeping business. Focusing on their unique needs and giving tailored solutions will boost your business naturally, leading to your career growth.
When you start bookkeeping, it is essential to consider a lot of factors before finally immersing yourself into the business. Studying about how a bookkeeping business works will save you from potential failure. Here are some factors that you should think about as you go through the process:
Balance is the key to achieving growth and success in your bookkeeping career. Weigh the pros and cons first and get expert advice or comments from the leading service providers if possible. Start your brainstorming and planning with the help of these important factors as your guide.
With careful business planning, complying to state regulations, investing in a reliable software, and attracting clients effectively, you will be able to successfully overcome the challenges faced by startup entrepreneurs. Indeed, there is profitability when bookkeepers open their minds to modern ways and technological advancements. This promising business provides stable income and career growth when done correctly. Follow this comprehensive guide on how to start a bookkeeping business and enjoy the fruit of your labor.
Ronald Osborne is an Australian entrepreneur and experienced business coach. With over ten years of business and mentoring experience, an MBA specializing in Finance, along with launching/partnering with over 10 of his own companies around the globe, he has been able to achieve his version of success. Ronald has been able to help large telecommunication companies, law firms, trade businesses, and everyday business owners improve their business and take it to the next level.
