Accounting is the top industry where new business owners are starting their own firms while still employed elsewhere, according to a recent survey.
The survey, released in March by the payroll and HR services company Gusto, found that 54% of new business owners in the accounting sector launched their business in 2022 as a “side hustle” while employed elsewhere, followed by nonprofits and associations (37%), health care and social assistance (33%), and the food and beverage industry (32%). Those figures were all above the overall 27% rate for new businesses in different industries. Gusto found the top reasons why accountants have been starting their own firms are the desire for flexibility and economic opportunity.
“We’ve been seeing a surge in entrepreneurship across the economy since the pandemic,” said Luke Pardue, an economist at Gusto. “For years, we’ve been seeing declining rates of new businesses being started, but since 2020, we’ve actually seen a 40% increase in the number of new businesses that are being formed every year. We decided to do a deep dive into the accounting aspect, and when we started to dig into the numbers, we saw that the accounting industry embodies many of the trends that we’re seeing in terms of how businesses are being started, and why they’re being started.”
Many entrepreneurs are starting new businesses as side hustles, the survey found, either testing the waters in order to strike out on their own, or to supplement their income. Accountants, like many entrepreneurs, want to have more control over their time and priorities.
“Every single owner in this survey who was an accountant said they started the business as a side hustle because of the need for flexibility,” said Pardue. “That was a really key finding in our survey.”
Young accountants, like employees in other industries, have been quitting their jobs to avoid burnout.
“A lot of people are struggling to rethink traditional nine-to-five work, and the accounting industry embodies those trends incredibly well, especially among the younger folks, where 60% of these businesses that were started were started by owners who quit their jobs,” said Pardue. “Overall, the accounting industry plays a central role in this surge in entrepreneurship that we’re seeing because of the disruptions in the industry, and also because of some of the overall trends in terms of the tight labor market and the burnout that a lot of accountants are feeling.”
Starting their own firm gives entrepreneurs a greater sense of control over their time.
“Flexibility and burnout are the real culprits in the talent shortage, and it’s very real in accounting firms right now,” said Will Lopez, chief ambassador at Gusto. “The data suggests that young accounting professionals are moving away from work-life balance to what I would call ‘practice-life fit.’ They’re looking to achieve a career that is satisfying to them by taking matters into their own hands and starting their own firms. When you think about talent shortages, not only is there a shortage in accounting talent coming out of colleges and universities because of the reputation of the industry, but there’s also a further talent shortage for those who are in industry, who are deciding to become accounting entrepreneurs, further exacerbating the talent shortage.”
Burnout is the No. 1 reason why younger accountants quit their jobs to start a firm, according to the survey, with 75% of accountants between the ages of 25 and 34 saying they started the business because they were burned out and 25% saying they started it in order to earn more money.
“Burnout is a very real thing within the profession,” said Lopez.
He acknowledged the current debate over whether the CPA profession should relax the 150-hour requirement for obtaining a CPA license, but the survey data also suggests a demographic shift going on in accounting.
In 2022, women made up 47% of new business owners. That was virtually unchanged from the 49% rate seen in 2021, but it was significantly higher than the 29% found in comparable pre-pandemic data.
“What’s interesting in the data is that a majority are women, so 56% of the new business owners in accounting are women compared to 47% of those owners,” said Lopez. “When you look at the age distribution of accountants, it looks similar to the larger sample of 28%, as far as new business owners and entrepreneurs in accounting, between 25 and 34, compared to 29% overall. In essence, younger people make up the larger portion of individuals and accountants who are starting firms as side hustles or fully quitting their old job altogether.”
The pay gap for women versus men could be one reason why more young women are leaving firms to start their own.
“Because the majority are women, we know there’s also a gender pay gap,” said Lopez. “I wonder if the two are tied hand in hand. What’s interesting to see around this data is that perhaps women once again are underpaid while being used to the point of massive burnout, so they’re starting accounting firms in higher levels and higher volumes in order to level the playing field or even close that gender pay gap. Because of that, talent is thinning further as accountants — both men and women — are leaving firms and starting their own practice.”
At least they’re not abandoning accounting
Accountants and others who are quitting their jobs to start their own businesses after experimenting with side hustles tend to stay in the same industry where they have been working.
“There’s not too much of a flow where they’re starting themselves in a different industry,” said Pardue. “They might be striking out on their own as a side hustle in order to test the market, to prove out their business model, to make sure that this is the step that they want to take more fully before, maybe in a year or two down the road, they start their own business and quit their job.”
They at least tend to stay in the professional services area, whether it’s technology consulting or accounting itself.
“These businesses are mainly being started in accounting, but we’re seeing this really huge surge in both the use of technology and the start of businesses within the technology industry itself,” said Pardue.
Starting your own accounting firm might not be the ideal way to avoid burnout, as it can mean a lot of time spent developing the business and attracting new clients to support it, but it may also provide a greater sense of control.
“I worked at a public accounting firm for quite a while and then left that because of burnout to start my own practice in order to take my hours back into my own hands,” said Lopez. “What’s really interesting about the data is a younger generation of accountants between 25 and 34 are doing a lot of this work, and there’s a new generation of accountants out there. These are accountants starting their own practices, leaving more traditional practices, starting more modern practices, and launching services. That’s why I left my firm. I said to myself, ‘There’s got to be a better way. I’m out of here.’ So I did find a better way, and that actually saved my life and career in accounting.”
The trend is broader than just the accounting profession.
“We’re seeing this trend across the economy, not only in accounting, but in all of these industries driving the surge in entrepreneurship,” said Pardue. “There’s this thought that there has to be a better way for so many people. They’ve been fitting their personal lives into their professional lives, and that’s nowhere more present than in the accounting industry. For a lot of these people, the last three years have been a chance to reassess what they want out of their career, how they define success, and for a lot of them, it is being able to determine their own hours.”
“Obviously, entrepreneurship comes with its own risks and expectations, but they’re able to pursue what they’re passionate about when they can and on the terms that they can,” he continued. “That’s something that you don’t often get in nine-to-five work, and it’s driving this booming entrepreneurship that we’re seeing right now.”