Forbes.com says that the accounting business is one of the most profitable businesses to start. A few reasons are that every business needs an accountant, overhead expenses are low, and repeat business from existing clients lowers the marketing costs.

However, you should do you homework before deciding you are ready to build a new accounting firm. Below are 7 reasons accounting startups often fail:

Don't Make These 7 Mistakes

• Not Enough Start Up Capital--You should really have enough personal money put back to cover all of your new business expenses for a solid year. Worry about money is just going to cause you stress and keep your mind off the main goal, building a successful accounting practice.
• Learn About Marketing for Accountants-Surprising as it may seem, many new accounting firms rarely budget funds for marketing and lead generation. They intrinsically think that joining the chamber of commerce along with friends and family will generate enough leads for new business. As a result, they will ramp up slower than expected in the first six months which will create cash flow issues in year two.
• Don't Under Sell Your Services--Many accounting firm start-ups are willing to accept fees that are too low at the onset. They figure that rock bottom prices will make the medicine easier to swallow. Unfortunately, it is challenging to move those clients obtained in the first six months of operating to reasonable fee levels down the road. As a result, you are stuck with the perception that your fees are “below market norms.” And referrals that come from these clients will expect “below market” rates as well. Learning how to price your accounting services and clearly justify the value to small business owners is key to avoiding this mistake.
• Poor Cash Collection Process – Many new accounting firms don’t realize that very few businesses pay promptly. They intuitively think that mailing out monthly bills is adequate, which it is not. Successful service businesses transition cash collection into a process that ensures they get paid promptly. In fact, cash collection needs to be a core competency to avoid cash flow crunches.
• Failure to Differentiate your Services – Many new accounting firms start off without a plan to build a “better” mousetrap that yields higher profit margins. They think that building just another accounting firm is adequate. The new rule for our very competitive marketplace is to find a way to set yourself apart.
• Overlooking your Loved Ones – Startups in any industry demand longer than normal workweeks, create financial strains, and cause periods of going into survival mode. The commitment required to start this business extends beyond me, and must be we. Gain support and buy-in before you hang out your shingle.
• Lack Advice from a Mentor – Gain insight into the development process from someone who has developed a successful accounting practice. People like to talk about their business – don’t be afraid to ask questions. And because this is not a new industry, there are plenty of accountants who can offer sage advice. Learn how to do it smarter and avoid obvious pitfalls.

In the end, we all make mistakes along the road of entrepreneurship. Your goal should be to avoid the obvious ones and learn from your mistakes so you don’t repeat them as you build your new accounting practice.