When Should You Hire a Bookkeeper?
Updated: Sep 21, 2020
Building a truly successful business takes longer than people think. Tons of entrepreneurs set out to build the next unicorn like WeWork, or AirBnB—but what most don't realize is building a business doesn't happen overnight. It takes years..
Publications like Forbes, Entrepreneur, and Inc.v interview thousands of entrepreneurs and have found franchises and small businesses have predictable patterns of growth in their life-cycle, and typically take 3 yrs. to become profitable.
Early Stages: Year 1
Your first year will be full of excitement. You'll legally form your business, create your website, and maybe land a few customers. All of these milestones will seem like huge wins as you try to get your startup off the ground, but this doesn't necessarily mean you be successful long-term.
Your first year will also be full of mistakes, but you'll learn from these failures and further refine your process. Although this will be a tough experience, it will be intrinsically rewarding.
At this point, you likely won't need a bookkeeper unless you're dealing with large transactions, a lot of system building, and excessive start-up costs.
Reality Check: Year 2
By this point, you realize starting a business is way more expensive than you thought, and are probably running low on funds. You've reached a few peaks where you thought you were going to "breakthrough," but issues came up or deals didn't go through.
This is normal.
You may be questioning whether or not you made the right decision, and realize starting a business is really, really hard. Debt is beginning to pile up, and you're starting to get anxious. This is when you need to put your nose to the grindstone and start building your castle, one brick at a time.
There is likely no need to hire a firm for bookkeeping services at this point. Most of your transactions can be taken care of manually, unless you're experiencing unusual growth or are involved in a high-ticket industry with large, complex transactions.
Year 3: The Honeymoon is Over
You've gotten a good taste of what starting and running a business is really like, and may be questioning whether or not you've made the right career decision.
You've had a few years to validate your idea, and are questioning whether or not this is something you want to pursue long-term. A few key take-aways.
If you're still struggling to breakeven, this is where you're supposed to be.
Building a truly healthy and profitable business is still a few years away.
You're asking yourself if you can continue this for another 2-3 years. You know exactly what you signed up for. (If you aren't still excited, now is the time to exit.)
There's still a chance you won't be successful going forward, so don't worry about what people are telling you.
Year 4: Time to Start Looking for Bookkeeping Services
These are serious entrepreneurs, and took them many years to find their footing. Those app entrepreneurs who make billions overnight are not the common story. Never, ever use that as a guide for success. Most companies don't find their footing until year 4 because it takes that long to refine your business processes. (customer acquisition, development, message, team, etc..)
All of these aspects take numerous iterations to finally get right. Time is the only way to accomplish this. The past 3 years of grinding is exactly what it takes to dial things in and begin running a real business.
According to Inc., Overnight successes typically have been around for 4 years or more.. Most that are considered an "overnight success" has actually existed for 10 years or so.
Let's get one thing straight: Rapid success in business is a miracle. You have a .00006% chance of building a billion dollar company according to First Round. You should expect many, many mistakes on your entrepreneurial journey. What you should focus on are incremental steps forward.
As you reach your 4th year in business, you should look for the following hallmarks of success:
Higher understanding of your brand and place in the market
Better marketing plan and strategy
Systematic customer acquisition processes
New product development
Deeper understanding of customer wants, needs, desires, and pains
Now is the time to hire a bookkeeping service firm. If you've made it this far, and are beginning to see success, you'll want to be sure your finances are in order so you can reap the benefits in the future.
Sounds Fun, huh?
Starting a successful business is one thing. Running a successful business is another. There are no shortcuts to the challenges you will face. Think of it as a marathon, not a race.
Once your business begins picking up traction, it's imperative you have a solid bookkeeping firm so you can save on unnecessary taxes, plan growth, and reinvest in your organization.