Strengths
Bookkeeping practices are businesses that play a vital role in helping small businesses ensure that companies operate properly. They are also incredibly important from a tax standpoint as proper documentation regarding sales and expenses are required to be submitted to taxing authorities on a quarterly and yearly basis. One of the nice things about owning and operating a bookkeeping practice is that their revenues are generally immune from negative changes in the economy. For small business owners, doing the bookkeeping on their own is a very time-consuming task that is better outsourced to a third party. Additionally, many bookkeeping practices are able to work in tandem with certified public accountants in order to ensure that proper tax filings are conducted when necessary.
The startup costs for a bookkeeping practice are relatively low as well. Any individual that has a background in accounting can start their own business for as little as $1,000 to $2,500. What is primarily needed is a website as well as specialized software for inputting revenues and expenses. In some instances, an entrepreneur may want to establish a larger business from the onset of operations. In these cases, the startup costs can range anywhere from $10,000 to $50,000 depending on the number of staff bookkeepers that are going to be hired to render services to the company’s clients. This larger amount of capital is also required to conduct a more comprehensive marketing plan in order to onboard small and medium-sized businesses within the Company’s target market.
From a business ownership standpoint, bookkeeping practices are outstanding businesses to own among people that want to keep their own hours. Although in many instances bookkeepers are required to go to their client’s location to source the necessary paperwork – the vast majority of work can be completed in a home office or in a small commercial space. For people that need a substantial amount of time flexibility, bookkeeping practices provide them with this degree of freedom while also producing highly recurring streams of revenue that they can count on for years to come.
Weaknesses
As it relates to weaknesses, these businesses face ongoing competition in any local and regional market. Although there are low startup costs for starting these types of companies, any person with a background in accounting can effectively render bookkeeping services. As such, it is imperative that a new bookkeeping practice engage in a multifaceted marketing campaign to effectively secure an ongoing client base. Given that these businesses generate recurring streams of revenue, once a client base is established the ongoing risks decline drastically.
Opportunities
For opportunities, there are numerous ways that a bookkeeping practice can expand their operations. Foremost, they can expand the scope of their marketing campaigns so that they are able to generate interest among small business owners within their respective markets. Second, given the availability of online communication channels – these businesses can rapidly expand their operations by providing their services on a virtual basis. In fact, one of the major trends within this industry is to do just that. As nearly all transactions and expenses are recorded using electronic means, bookkeepers have the ability to expand the scope of their practice by providing services to companies that are outside of their target market area.
An additional method of growth can include providing tax preparation services during the Spring and Fall months while also providing payroll services. These additional revenue streams produce recurring streams of revenue as well as substantial profits during busy tax seasons.
There is also the opportunity to partner with certified public accountants that want to be able to provide bookkeeping services to their clients without having to directly hire an individual to work on staff. By operating a subcontracted capacity, bookkeeping practices can rapidly expand the number of clients that they provide service to on a monthly basis.
Threats
As it relates to the threats, outside of competitive matters there are really no major issues that are facing the industry. While there are technological changes that improve the efficiency of bookkeeping, human interaction and verification of transactions is still needed. This is especially important for high volume businesses or companies that deal with very large invoices.
In regards to economic threats, severe and sustained economic recessions can have downward pressure on the industry as small businesses close. However, this risk can be ameliorated by working with clients among a wide range of industries including among businesses that are not impacted by negative economic changes such as healthcare businesses, dental practices, law practices, and other entities that are required in any given economic climate.