Have you ever wondered what it would be like to start your own fraud examination practice? To be your own boss? To be free to take the reins on a case? Perhaps you’re already a self-employed fraud examiner, and you’re looking for ideas on how to find balance in your life. Or perhaps you’re looking for ideas on how to find clients. If so, I hope my experience and advice will help you on your journey.
In 2007, with a promising career at a well-known firm ahead of me, I thought I was set. Visions of partnership and my own (corner) office danced in my head! What I couldn’t foresee were the changes taking place that forced me to stand up for my ethics and change my definition of success. I had plenty of employment offers — many from other prestigious accounting firms — but I found myself at a crossroads. Building a practice for another firm seemed daunting, at best.
I discussed it with my spouse, who said, “If you don’t start your own business now, you may never get another chance.” “Who, me? A business owner?! The one who plays it safe, who has a plan? Who isn’t, by nature, a big risk taker? Yeah, right!” The idea was as farfetched as my flying to the international space station.
But, nearly seven years after that conversation, that’s exactly who I am. A business owner operating a thriving forensic accounting (fraud investigation and litigation support) practice.
While the practice has grown exponentially over the last several years, it hasn’t been easy. I’ve learned several important lessons along the way, which I will share here.
Take time to plan
A quote by an unknown author says it all: “If you fail to plan, you plan to fail.” Planning your business takes time and energy. And planning is not a one-time effort culminating in a static document.
At a minimum, plan your budget. Consider costs such as business insurance, professional liability insurance, taxes and licensure. If you intend to immediately secure office space, be certain to factor in the cost of rent, leasehold improvements and utilities of the new space.
Research professional fee rates in your area, and price yourself in a median range. Take your minimum budget requirements, divide it by your set hourly rate and you’ll have the minimum number of hours you’ll need to bill clients and generate revenue.
But don’t stop there. You’ll need to factor in at least 30 percent more time for running your business. Marketing, billing and other administrative tasks will devour more time than you can imagine. This is work that doesn’t generate revenue but is crucial to running a successful business.
Regularly take time to evaluate your plan and measure it up to your reality. Rework as necessary.
Don’t navigate waters alone
If you’re a fraud examiner you need the skills of an accountant, a psychologist, an attorney and a technical writer (to name just a few). Realistically, most of us don’t come to the table with all of these skills. For example, I’m a CPA. Before I was exposed to fraud and litigation work at a big firm, I could tell you about preparing tax returns and performing financial statement audits but nothing about writing a fraud examination report.
Perhaps you have a background in law enforcement with excellent investigative and interviewing skills, but you’re unsure of the accounting-related facets of an engagement. Whatever the case, don’t attempt to offer services or skills that you don’t possess. You don’t have to be everything to everyone. (Remember the third point in the ACFE Code of Professional Ethics: “A Certified Fraud Examiner … will accept only assignments for which there is reasonable expectation that the assignment will be completed with professional competence.”
Much of my success has come from putting together teams of professionals who offer complementary skills. It’s not uncommon for me to be engaged on a matter and subsequently contract with a computer forensic specialist, a business valuation expert or a private investigator with more interrogation skills.
Stick to what you know and do it well. Team up with other professionals in your area. You will find that they, in turn, will remember you next time they need your specific skills.
Communication is key
Client communication at our firm starts with a robust engagement letter. This letter communicates the type of service to be performed, document retention, fee schedules, billing and payment agreements and dispute resolution. We don’t perform any work until the client (and its attorney, if applicable) executes this engagement letter.
Communicating and understanding expectations is key to any successful engagement. Not all clients (or their attorneys) are the same. Some attorneys loathe email communication as it relates to their client’s matter; others use it as the only means of communication. One client might want a full written report of investigation when you’ve completed your assignment; others may only want an oral report. It’s imperative to understand your client’s wants and needs up front to ensure you understand what the end goal looks like.
Communicating about fees can be difficult for some, but it’s imperative for cash flow. A common fee issue is when an estimated budget clearly isn’t going to be sufficient for the amount of work necessary to do a job well. You’ll know this is the case when you’ve spent one-half of the client’s money, but you’re not nearly halfway through the work. When this happens, stop working. We call a timeout and contact our client. We explain the nature of the issue (perhaps it’s a lack of documents, or we’re finding more than we first expected) and ensure there’s an agreement for further funds. Or, we give the client options for a different scope of service. Communicating with your client at all times during the engagement helps to ensure that you’re meeting their expectations and they’re honoring their obligations.
Pick your head up
Unlike a traditional tax or accounting practice, a fraud examiner doesn’t have the luxury of annuity work. It can easily be feast or famine. Just when I’m convinced that no work will ever come through the door again, numerous potential clients will call me or dormant cases will fire up again.
So, when there’s work to be done and we’re being paid by the hour, we often put our heads down, pencils up and charge forward. However, losing yourself in your work can ultimately damage your practice. You have to find time in your day to do some sort of marketing. Take a local attorney to lunch, write a newsletter or schedule yourself to speak at a professional networking function. Consistent, frequent and targeted marketing (even when you’re busy with client work) helps to ensure your pipeline will always be full.
Cash is king
You’d think a CPA would have cash flow down to a science, but it can be an ongoing struggle, especially with a feast-or-famine practice. But losing the cash-flow worries can be as simple as working on retainer.
Admittedly, it’s not easy to ask someone to pay you money before you’ve even met them or started work. The first time I asked for a retainer, a whopping $1,000, I prepared myself for the refusal, or worse — the potential client walking away from the engagement. So, I was surprised when he pulled out his checkbook and wrote a check immediately! We hold client retainers in a separate account until we’ve earned the money. We then transfer the funds to our operating account for paying bills immediately. Another way to manage cash flow is to bill clients weekly, semimonthly or immediately when we complete an engagement.
We’ve made it a practice to stop working if retainers haven’t been replenished, or if monthly invoices aren’t paid by the tenth day of the month. We communicate this clearly in our engagement letters, and sometimes we’ll stop work on a case. It’s funny how the money arrives in the mailbox when you cease working. Don’t waste your time or talent on clients unwilling to pay you.
It’s a marathon, not a sprint
Building a client base does not happen overnight. We’ve cultivated a successful practice by making clients happy — one at a time. Happy clients tell others about you. Cultivate your own satisfied clients by knowing your strengths, planning for your future and communicating clearly and often. Success may not look like the dream of the corner office you once had in your head. However, perhaps, like me, you’ll find that the reality of entrepreneurship is better than any dream you could imagine.
Published in Fraud Magazine, September/October 2014 Issue