How to get money to start an accounting and payroll business

Being an accountant can potentially be a lucrative profession. There will always be businesses, large and small, who need help interpreting their financial records, doing their taxes, or any number of other financial tasks where errors can cost them money. Some people have decided to go into business for themselves. However, starting a business take business owners some degree of capital. First, I’ll explain what it takes to raise capital. Then, I’ll explain possible sources of capital.

To get money to start an accounting and payroll business:

• Make a Business Plan and Pitch
• Ask Friends and Family
• Look into private Investor Groups
• Consider Bank Loans

Making a Business Plan and Pitch

The first thing you need to do is make a business plan. You’ve probably heard this term before but let’s do a short review. A business plan is a document you make that outlines your goals and what you will do to achieve them. Many business plans plan years in advance. It also lists what you need to have to achieve them. This includes money.  Business plans can and should be updated periodically to reflect changes in circumstances, new opportunities, or fixing something that isn’t working out.

Your business plan will be unique to you and your needs. To wit: If you’re running your accounting business out of your garage, your business plan will be different from someone who is starting an accounting firm in a physical office. You should endeavor to make your business plan as unique to you as possible rather than copying one from a more successful business. When you make your pitch to investors, they’ll know the difference between a business plan that has had thought put into it and something that has just been copied and pasted.

Secondly, you need to work on your pitch. Even your best friend probably won’t invest in your business if you just say, “I want to start my own accounting/payroll business.” You need to make a pitch. This includes showing your business plan. You will need to explain what skills you have to carry out this business plan as well. But before I go into the various people you can make a pitch to, let’s go over something important: Responsibility to your investors.

Understanding Your Responsibility

When you get capital from investors (be they family, investment firms, or anyone else), you must make sure that money is spent wisely, efficiently, and only on the things that pertain to the business. For example, if you’re getting office space, the office doesn’t need to have expensive top-of-the-line everything. You shouldn’t try to get the cheapest things possible. That can be just as expensive in the long run. Your startup just needs what works. If you misuse that money, you could be sued or charged with embezzlement and other crimes.

You also must be honest with your investors. You can’t just say things are going fine when they aren’t. If it comes to it, you need to say that your business is going under and file bankruptcy and find ways to pay your investors back. It is a humiliating experience but it’s better than getting sued or being arrested for financial crimes. Honesty is the best policy.

That includes honesty with yourself. Before you start trying to get money from friends or investors, look inwards and ask yourself if you have what it takes to run a business. It takes more than being good at accounting to start an accounting business and make it successful. You need marketing skills, management skills (both for yourself and potential employees), and the ability to balance the stress of running a business with your personal life. Not everyone can do it. It’s better to do this evaluation before you find yourself in over your head and have banks wanting loans repaid or family members wanting a return on their investment.

 

What are some other ways of funding your business?

Asking Friends and Family

The obvious first place to look for capital is friends and family. There may be someone in your family or friend groups that can help you. Of course, if they say they can’t, let that be the end of it. If you’re polite, you may get lucky and they may decide to invest in you if their fortunes change in the future. If you’re too pushy, they definitely won’t help you.

There’s always a chance that you’ll get someone who will give you some money or some material good (accounting software for example) as a gift and not care if it gets paid back. You should still make sure this money is used properly so you don’t fall into bad habits. You should offer to pay them back once your business is on sure footing and even if they say they don’t care, get them a nice gift during the holidays.

You should pitch to them the way you’d pitch to banks and investors. It will be good practice.

Private Investor Groups

In any given community some people are looking for ways to do some investment but perhaps don’t have the money for a large number of stocks in high-value companies. Or they could be passionate about supporting local businesses. Let’s look at a few.

Angel Investors

Angel investors are individuals who have decided to invest their money in a small business with the intent of helping them grow. Often, they are people who worked in that business before you and want to pass on their knowledge while making some money. Since they will be able to work with you closely, they can offer expertise. But you must clearly outline their role and when you’ll pay them back.

You can potentially find angel investors online at sites like this one.

Equity Investors

Equity investors are people who will give you money for a stake in your company. They are often risk-takers but they do expect a high return on investment. Before you pitch to equity investors, you need to make sure your business plan is solid. They need to see that they will have a return on their investment. They are risk-takers but they want to see that you’re serious and worth the risk.

Peer-to-Peer Investors

Peer-to-Peer (P2P) investors are groups that source loans from third parties to invest in other businesses. Third parties typically handle the repayment and other aspects. P2P investors are often investors trying to diversify their options. They also want to see that their investment will pay off. Since they are a group, they tend to be less inclined to take risks. You will need an ironclad plan. You will need a track record of success too. It may be best to go to P2P groups when your business is established and you’re seeking to expand.

Banks

Bank loans are an obvious source of capital. However, you should only borrow what you need so the debt is manageable. You will need to deal with an interview process so dress your best and be ready with your business plan.

Frequently Asked Questions

1. What are some tips for my pitches?
First impressions are everything. Dress like you would for a job interview. Make sure to have multiple copies of your plan if dealing with multiple investors at once.

2. Are there grants from groups like the Small Business Administration?
Typically, the SBA doesn’t get involved with startups. However, there are private grants out there. If you are a minority, there may be minority businessowner grants in your community.

To learn more on how to plan your own accounting and payroll business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.