What about a "real profit" after allowing for a notional salary.

Isn't the owner of a bookkeeping business worth at least £40,000 a year?

My guess is that most would make a loss.

BobHarper wrote:

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Isn't the owner of a bookkeeping business worth at least £40,000 a year?

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 I look forward to that day, for now I'm just glad to be master of my own destiny.

Kris

BobHarper wrote:

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Shamus - more or less?

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 lol Bob.

less was implied.

To clarify though my response related to one person bookkeeping businesses who offered only bookkeeping and directly related services.

Start hiring people / subcontracting work and going into other area's such as IT, process design and financial management and £40k is a very achievable salary target.

 

 

Interesting post and in the interest of peoples voyeurism I have attached my year to date P&L below.

Note I am not 'Star Wars Bookkeeping' and I am posting under a new login to protect my anominity.

Points to note:

I started my business, as a sole trader, in February 2011 after leaving employment in the previous October. I spent October / November 'finding myself ' then studied and passed up to level 2 ICB. I have 20 years experience in a non accounting employment and did not have any clients to start with.

I suffered a £3k loss between Feb and 5th April 2011 with purchase of new PC, Sage Accountants Club and Home Office kit out, but offset that against tax paid on my previous employed income.

My target for year one was £5k net profit (before drawings), and £15k year 2. I am well exceeding year 1 target.

I do not need to take a huge amount out of the business in the first 12 months which gives me the patience to develop in a strategic manner. Most of us in this trade should know that lack of cash kills businesses, not lack of profit, and taking an unrealistic amount of drawings from day 1 is not a good way to start.

I will develop my practice to offer Single Director Ltd company accounts and CT return as my experience grows and other value added services but I wanted to demonstrate that bookkeeping is a business model that can work though I also believe that to earn 'proper' money then further 'accountancy' services will need to be bolted on.

If you have the right attitude and are prepared to work harder than anyone else then you will succeed in this business. Just don't expect it to be easy, but also do not let others get you down - only you can make things happen.

Hope that ramble on, and my personal experience helps.

Cheers

L Skywalker

 

 

 

						Profit and Loss (Monthly Breakdown)
		From:	Month 1, April 2011
		To:	Month 8, November 2011
		Chart of Accounts:						Star Wars Bookkeeping
			Apr	May	Jun	Jul	Aug		Sep	Oct	Nov	Totals
	Sales
	Bookkeeping Income		630.00	60.00	700.00	1340.00	665.00		1305.00	1485.00	1249.00	7434.00
	Tax Return Income		0.00	0.00	0.00	0.00	0.00		510.00	89.00	189.00	788.00
			630.00	60.00	700.00	1340.00	665.00		1815.00	1574.00	1438.00	8222.00
	Purchases
			0.00	0.00	0.00	0.00	0.00		0.00	0.00	0.00	0.00
	Direct Expenses
	Labour		0.00	0.00	0.00	0.00	0.00		100.00	0.00	30.00	130.00
	Sales Promotion		111.00	101.72	324.02	0.00	118.80		10.00	36.00	0.00	701.54
			111.00	101.72	324.02	0.00	118.80		110.00	36.00	30.00	831.54
	Gross Profit/(Loss)		519.00	-41.72	375.98	1340.00	546.20		1705.00	1538.00	1408.00	7390.46
	Overheads
	Website Fees		0.00	0.00	0.00	0.00	80.00		0.00	0.00	0.00	80.00
	Printing		45.46	0.00	13.99	17.54	152.80		80.40	0.00	20.00	330.19
	Postage & Carriage		0.00	0.00	0.00	0.00	0.00		0.00	5.45	0.00	5.45
	Telephone		0.00	0.00	0.00	0.00	12.60		12.00	0.00	0.00	24.60
	Office Stationery		92.03	0.00	13.53	0.00	108.68		79.99	79.09	58.55	431.87
	Professional Fees		0.00	0.00	0.00	0.00	0.00		0.00	10.00	38.00	48.00
	Software & Licence Fees		44.50	0.00	59.99	0.00	0.00		238.80	0.00	0.00	343.29
	Repairs & Renewals		0.00	0.00	14.99	0.00	0.00		0.00	0.00	0.00	14.99
	Institute Fees		25.00	0.00	0.00	0.00	0.00		0.00	0.00	0.00	25.00
	Professional Indemnity Insurance		0.00	0.00	0.00	0.00	0.00		218.09	0.00	0.00	218.09
			206.99	0.00	102.50	17.54	354.08		629.28	94.54	116.55	1521.48
	Net Profit/(Loss):		312.01	-41.72	273.48	1322.46	192.12		1075.72	1443.46	1291.45	5868.98

-- Edited by RedFive on Wednesday 30th of November 2011 08:51:54 PM

Sad but I even get the link to Star Wars (and Luke) of the username!... Think that it's people of a certain age that remember Rogue squadron from the first film.

For that turnover your paying too much in PII. Have a look at the deal from Arlington as there above a hundred that you can shave off your expenses there.

All in all that's a pretty good first two thirds of a year (assume that you took a holiday in August). The trick now of course is to start applying time series analysis to the results to start setting growth targets moving forwards.

All in all, much easier bullseyeing womp rats in a T-16 than earning a healthy livable wage in this business!

Ha ha .... peasie....that's impossible, even for a computer.....like that one Shaun?.......I just exported to Excel then copy and pasted in......you are right I bought VT final accounts which I love and use VT+ for all my personal tax return clients, presenting the final accounts in VT. Looks class.

Shaun - Don't want to give too much away but from experience your banking roots are written all over that post....

And yes, I did have 2 weeks with the Mrs and jnr in August, well spotted.

I signed up to the old business link national service providers register which required £250k of pi cover, waste of time to be honest as my previous cover from trafalger which I took in Feb was more than enough at 50k cover and I've had nothing from the nsprr.

Speaking as someone who has earned a very respectable reward in the past, at times with embarressingly large bonuses I can safely say that life is more than just about the money.....and do you know what if I want to bullseye swamp rats all day I can and as Kris alluded too in the other post that in itself is worth a rather large case of tea from China.

-- Edited by RedFive on Wednesday 30th of November 2011 08:45:32 PM

I get to work pretty much when I like, spend loads of time with my kids and pick who I choose to do business with. All this is worth far more to me than money.

I am happy if a bookkeeping business provides people with the lifestyle they want. And I'm sure it does for a lot of people.

But we are talking about profit after drawings are taken into account -  I think, a pure bookkeping business is never going to make much more than minimum wage. Of course, there are innovative pricing models as Crunchers has mentioned in the past, that can help. Providing a wider range of services is another option. But I can't help feeling that you will be lucky to draw more than the minimum wage with a Level 2 ICB qualification, or its equivalent.

I'm not in business yet, so I'm no expert, but is there anyone here that will tell me that Im wrong?????

 

Hi Ray,

your not wrong. We're in a business where often we fight for the scraps that the accountants cannot be bothered with.

One travesty in this business is some training providers (not all of them) in the past have advertised the sort of return that Bob eluded to above. Of course, the only people who really made any real money out of such statements were the training companies.

Pure bookkeeping will as a result of so many people taking this route always be barely more than minimum wage level as the clients that we attract are predominantly those swayed away from accountants on the basis of price so will invariably opt for the cheapest providers of a service driving the prices down for all of us.

Thats not to say that the cheapest providers always win out as clients expect accountant level of service at bookkeeper rates meaning that people working as bookkeepers are really more akin to cheap accountants than doing the sort of work that one would feel comfortable with straight from ICB level II studies.

Like Kris and Red(!) indicated, there is more to taking this road than money alone (ooh, that sounds wrong. Makes it sound like a hobby business which I know isn't what was meant). However, a lot of people go down this road with financial return as one of their primary goals and as you rightly calculated in your hourly rates appraisal Ray, the return is not what people would expect or perhaps have been led to believe.

To my mind either offering accountant level services or Bobs model of aditional services are the only way to turn this into a profitable enterprise.

Shamus wrote:

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Sad but I even get the link to Star Wars (and Luke) of the username!... 

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Never watched Star Wars so didn't get the references - I just heard RedFive being mentioned on "The Big Bang Theory" (which seems to be on every night of the week on some channel or other).

yes Bill, I agree 100%, then again I just do what I feel is right and never turn to anger as that leads to hatred, and we all know where that leads. I'm too nice!

Out of all my clients only one didn't pay me well and they didn't last long as a client. Invoices are emailed out when work is completed and I allow 14 day payment terms. Payments miraculously appear in my bank (£400 today alone plus £140 of cash through my letterbox). I think you need to set out your expectations from the start and clients appreciate a straightforward approach. I dont' have anyone on standing order or direct debit although that is a route I may go down in the future.

I don't understnad why presenting a client with an invoice would be difficult. You have done the work so you deserve to be paid for it. I'm an ex credit manager though, so maybe I'm just good at asking for money!!

However, the key point I would make is too many bookkeepers/accountants/business owners make the mistake of doing too much work. They are too busy earning a living to make a profit.

Thats a very good point above that you made Bob, I think I am in that catagory trying to do to much of the work!

-- Edited by Amanda on Thursday 1st of December 2011 04:22:20 PM

BobHarper wrote:

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However, the key point I would make is too many bookkeepers/accountants/business owners make the mistake of doing too much work. They are too busy earning a living to make a profit.

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Good line.

Got some quotes equivalent to that one.

Theo paphitis "Turnover is vanity, profit is sanity".

My accountants strap line "Its not what you make, it's what you keep that matters" (no idea where they stole that line from but pretty sure it's not something that they came up with themselves).

All come from a similar place. We need to be thinking about the bottom line, not the top one.

Any fool can sell £20 notes for a tenner and would never be short of clients.

I think that some of us may be doing pretty much the equivalent of that. We look at what we're making, not what it's costing us.

Sorry, this just made me think of last nights family guy episode where Peter spends $900 learning to ride a unicycle in order to distract his wife whilst the father in law steals $10 from her purse.

How much different is that to spending £1000's studying accountancy to earn less than minimum wage.

And before people say, but I charge £15/£20/£30 per hour. Now subtract your costs and divide your weekly take between (say) 40 hours to see what the real hourly figure is!

 

Peasie wrote:

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Shamus wrote:

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Sorry, this just made me think of last nights family guy episode where Peter spends $900 learning to ride a unicycle in order to distract his wife whilst the father in law steals $10 from her purse.

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They learned quick thouigh. They moved on to selling drugs to the daughter, knocking the daughter out and taking the drugs back to sell again.

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 lol. And I think that we can all learn a lot from that business model Peasie.

Sometimes you can focus too much on the figures on the paper, It depends on the individual circumstances.

I know my P&L may look that I am not as well off as I was in my last management job, but taking into consideration that I am not paying out petrol money for the 100 miles a week that I spent driving to and from work, less wear and tear on my car, saving at least £30 a week lunches and coffees out of the sandwich bars and cafes, saving on childcare fees not to mention not buying stuff out of shops that I didn't really need during my lunch hour walks up the town, add those savings in with the other tax benefits that I have working from home, I am actually better off as even though on paper I look as I earn less per hour, I have more disposable income 

-- Edited by mushroom on Thursday 15th of December 2011 11:18:49 PM

So how many of you work from home in a small home office? do you need alot of clients just to pay the bills and get a bit of food in the house?

do you prefer the monthly fee option or hourly rate with extra if you have to go over?

For me, the future is looking quite bleak at the moment

I left a well paid job, to go into this but am now having second thoughts as I am seeing more and more losses

I decided to have a lifestyle change as I have a young family

I remember when I started accounting, I was also employed in other job. It took about 2 years to live only on income from accounting. But I had no loss (only small income).