Introducing Accounting Business in Oman
Description of the Potential Opportunity Identified
The favorable Oman business environment is the main factor for the continued growth is businesses performances and increasing business innovations (Kechichian 2010). With the increasing product innovation and significant inventions within the Oman service industry, individuals, small businesses, middle-sized firms, and large companies consider opportunities to outsource their accounting and bookkeeping services to a group of accountants with relevant skills in auditing (Bailey 2005). The Accounting and Bookkeeping Industry possess viable opportunities that can be explored for possible investment decisions. It is true that the Oman labor market keeps regular supply of experienced accountants and qualified tax editors who at times fail to get permanent employment in relevant organizations (Bailey 2005). By establishing a bookkeeping and tax audit business, the bulk of underemployed or unemployed accountants will be reduced and their unexplored skills or expertise converted into resourceful human capital.
Other than the favorable business environment, the corporate law in Oman is also a driving force for more business inventions in the sense that the law allows businesses to be run on unlimited corporate regulations (Bragg 2011). Currently, the cost of starting and running a business in Oman has reduced significantly following the government’s decisions to eliminate the bulk of formal registration requirements that for a long time has impeded growth in businesses (Gonzalez, Rand Corporation., Rand-Qatar Policy Institute, Rand Education & Labor and Population Programn2008). The more flexible corporate laws and other factors discussed in this paper may make it possible for a group of individuals to start and operate a bookkeeping and tax audit business.
Market analysis (Industry, Competitors and customers)
- In what industry does this idea come from?
The idea comes from the Oman bookkeeping and auditing industry, which provided services like recording commercial transactions on behalf of other firms and business organizations (Kelly, Barrow & Epstein 2011). In this service category, the business idea is more concentrated on the small and medium sized firms, which will account for over 50 percent of the company’s businesses. With the introduction of technology and internet services, the industry bookkeepers and consultants are expected to explore online services in order to improve their communication and interaction with customers (Marshall 2003). The available industry statistics and trends allow business planners to identify unexplored products, services and markets, and use every available opportunity to increase profitability. In other words, business positioning in the industry provides the basic plans that can be used to analyze the key factors influencing market operations, and how best the business management can counteract such factors and improve on the most needed bookkeeping services (Price, Waterhouse & Co 2006).
- Who would be the target market?
The business idea targets from small to medium-sized firms who require bookkeeping and tax auditing services. It is very true that target market is highly segmented into small, medium, and large firms each targeting the same services provided by the few available bookkeeping and auditing firms. Among the many firms, the company’s target firms are defined based on annual revenues, distance from the business location and expected expenses (Saba and Co 2009). On the side of revenues, the business targets those firms with revenues exceeding 300, 000 dollars. In addition, annual revenue of 300,000 dollars at the minimum count qualifies a business organization to be recognized for the services the accounting firm will be offering. As a start, the business will concentrate on organizations at close distances in order to reduce the cost of travelling, which may add to the initial costs of operation (Saba and Co 2009). The targeted business organizations should also be ready to part with close to 250 dollars for the basic accounting services; an amount that will be increasing based on the type of bookkeeping or auditing services required.
- Who are your competitors?
Even though the Oman market has few bookkeeping and auditing companies, the industry is known to attract the interest of many accountants and tax auditors. The fact that the industry is at its initial stages of growth is an indication that there are still opportunities to be explored, and since there are no restrictions to market entry, it is predictable that the market will continue to experience new entries (Taylor 2008). As at current, most business organizations and individuals concentrate on hiring professional accountants and auditors. Since exiting firms highly require bookkeepers, accountants and auditors, it is not by chance that nearly all graduates find their ways into the service industry each year and filling the job market (Taylor 2008). The increasing undergraduate and graduate employment in newly established firms is a challenge to the bookkeeping and auditing industry. At the same time, the high demand for the undergraduate and graduate students in various organizations make the increases labor costs making its hard for bookkeeping companies to maintain lower prices for the services they provided.
In general, the demands for business accounting services are known to be dependent on new business formations, the increasing complexities to existing businesses and the revenues earned over the periods of accounting (Taylor 2008). It is common to see clients scrambling to secure the services of the fewer accounting firms since these firms provide wide range of services that best serve the interest of clients. In most cases, large accounting firms are the main targets of these clients since they operate from many locations and can serve customers within the shortest time. The fact that large accounting firms have the advantage of providing many services at the same time make small firms to specialize and always struggle to provide superior services in order to compete effectively (Taylor 2008). Even after taking such a prolific step and investing specific accounting activities, large firms still gain competitive advantage because most business aiming at outsourcing their accounting services have more trust in large firms.
Financial projections
The business financial plan will be entirely financed by the positive cash flows from the projected operations. The business will also rely on outside investments and additional owners’ investment as other sources of finance. The fact that business is capital intensive does not limit owner’s intentions to increase the fixed costs, which must be recovered from sales of the services. The projected financial plan as presented by the one year cash flow below shows that the business idea is feasible and worth investing.
| Year 1 | |
| Cash Received | |
| Cash from Operations | |
| Cash Sales | $109,050 |
| Cash from Receivables | $105,612 |
| Subtotal Cash from Operations | $214,662 |
| Additional Cash Received | |
| Sales Tax, VAT, HST/GST Received | $0 |
| New Current Borrowing | $0 |
| New Other Liabilities (interest-free) | $0 |
| New Long-term Liabilities | $0 |
| Sales of Other Current Assets | $0 |
| Sales of Long-term Assets | $0 |
| New Investment Received | $0 |
| Subtotal Cash Received | $214,662 |
| Expenditures | |
| Expenditures from Operations | |
| Cash Spending | $93,600 |
| Bill Payments | $111,643 |
| Subtotal Spent on Operations | $205,243 |
| Additional Cash Spent | |
| Sales Tax, VAT, HST/GST Paid Out | $0 |
| Principal Repayment of Current Borrowing | $0 |
| Other Liabilities Principal Repayment | $0 |
| Long-term Liabilities Principal Repayment | $0 |
| Purchase Other Current Assets | $0 |
| Purchase Long-term Assets | $0 |
| Dividends | $0 |
| Subtotal Cash Spent | $205,243 |
| Net Cash Flow | $9,418 |
| Cash Balance | $29,418 |
It is possible that the business can be established and expanded using the current balance reserves. It is also possible that with an increased marketing and set-up expenses, the business will register positive cash flow within the first quarter of its operations (International, 2013). Since the business will still be considered a new venture, the cash reserves can still be generated from subsequent operations to be used in acquiring additional service expansion so that the owners can get their dividends once the business has established.
The business will however start to break-even once there is an increase in marketing activities, business capacity to accommodate all the service requirements, improvement in employees and other stakeholders’ payroll and general benefits (International, 2013). At the break-even point, the business’s fixed costs and current costs will be in a position to finance all the activities, new expenses and also allow for maintenance of old business equipment like computers and software updates. The mentioned increased activities will move the break-even point higher meaning that the business will have to expand its services to meet the increasing fixed costs and other expenses as shown in the graph below.
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Group evaluation of the business concept
The strength of the business venture lies on the availability of skilled and experienced employees with the relevant CPA knowledge. The extensive knowledge on issues of accounting, bookkeeping, and tax auditing is expected to allow the business to perform its activities and provide the most relevant accounting services (International Business Publications, USA 2012). The first requirement for any accounting business is compliance with the internationally recognized accounting standards, which according to the analysis conducted, are provided by various training institutions across the country.
The idea also recognizes the fact that the tax and bookkeeping business require relatively low start-up expenses, operating and overhead costs and this could result into higher profit margins (International Finance Corporation & World Bank 2014). From the analysis conducted, starting a bookkeeping and tax audit business is highly advantageous because the owners can still decide to make the businesses home-based. This means that the business does not necessarily require an office establishment or space to meet its operational needs (International Business Publications, USA 2012). On the same note, the business does not require expensive manufacturing operations or high maintenance costs. As a home-based service business, there is a reduction in the initial cost of establishment and subsequent rental costs. The owners are also assured of continuous operations even if the business fails to meet its expected monthly rental fees.
The third strength lies on the technological changes and the introduction of new accounting software that can be used to simplify the bulk of accounting and auditing work (International Finance Corporation & World Bank 2012). The software becomes an area of competitive advantage, especially if it is a proprietary and has features relevant to the basic accounting principles. The accounting software is an advantage to the business because most existing companies have not incorporate such software in their accounting systems.
Even though the business idea has numerous supportive strengths, it is also important to consider some of the weaknesses that may prevent the owners from meeting their profits objectives (Foster 2002). One of such weaknesses is that the business is highly seasonal and if affected by economic fluctuations. The business, especially on the part if tax preparation depends on the fix tax rates, which at some point may not correspond to market conditions. The tax adjustment methods will keep on shifting from time to time and this may affect the tax validity principles (International Business Publications, USA 2012). Such changes in tax evaluations systems may not be well understood by customers, and this may portray a bad image on the side of the accounting firm (Foster 2002). It is also important to understand that the tax auditing process require along tax time hour, and the available annual round-work may be limiting. The business may also find it hard to acquire and retain highly qualified staff within the short duration of tax season. This is because most of the accounting services tend to increase during year-end requiring higher number of personnel, and reduces during other periods of the year.
- Is the business concept feasible?
The success of a new business venture relies on certain factors like the market size (demographic description of a country), strategic location, and infrastructural development, the country’s economy, political and social systems. By accessing the most prolific factors like the market size, the competitive advantage, management ability, initial endorsement and the initial capital requirement of the business, we were able to determine that the business is feasible and worth investing.
On the side of market size, Oman has been slowly diversifying its economic operations into other sectors like banking, gas production, industrial processing, and tourism, which has been equally successful (Clark 2011). The numerous businesses cropping up within Oman constantly require related services like bookkeeping, financial accounting and tax auditing services, which they can outsource to another company or groups of professionals to meet their performance expectations. The fact that the country’s industrial sector is rapidly growing means that in the near future, the bookkeeping service industry will be among the highly performing industries in Oman (Clark 2011). In other words, Oman currently enjoys stable economic, political, and social systems, which offer a strong base for market expansion and improved service delivery.
On the side of competitive advantage, the Oman bookkeeping and accounting service industry holds unexplored opportunities and the few firms in the industry enjoy huge profits from extended operations and higher pricing (Business International Corporation 2005). Most clients find it hard to outsource their bookkeeping services to other firms or businesses because of the high costs involved. It is therefore important to note that an opportunity exists for the bookkeeping company to provide even better services to clients at relatively lower costs while maintaining regular contacts. With more efficient and effective services at relatively lower costs, the company is expected to gain a higher competitive advantage over existing firms.
The management roles and abilities are also important in determining the success of the business. Based on the service description of the business, the organizational management plan will consist of the position a senior manager, business administrative staff, customer service manager and an overall administrative staff (Al-Kharusi & Loughborough University 2003). The roles and responsibilities of the senior manager for the bookkeeping firm will include staff recruitment, controlling regular business operations and company finances as well as ensuring growth though remuneration. Apart from the senior manager, the customer service managers will play a crucial role in ensuring proper customer relations. This is because the business successful operations will retail around customer’s willingness to seek and pay for the bookkeeping and accounting services.
It is also important to note that bookkeeping business does not require high initial capital investment. The initial costs are those costs associated with the purchase of computers and related accounting software, the cost of establishing an online retail site where customers can bid for the services of the company as well as the cost of acquiring professional accountants and business managers (Al-Kharusi & Loughborough University 2003). On the part of professional accountants, the company can employ undergraduate interns and graduate students and still do better in its operations. Compared to the cost of employing a professional accountant, the cost of employing an undergraduate intern or a graduate student is lower. This means that even with the lower costs of operation, the company can still improve its bookkeeping services and meet the expectations of customers.
Apart from the above mentioned factors, the rapidly growing Oman population could also be an indication that the business idea is feasible (Jaumann 2010). Out of the 3.1 million people, about 570,000 people are experts in various fields. The huge proportion of the elite population provide endless workforce services to the labor market (Bizmanualz 2008). The country’s demographic information indicate that 54.7 percent of the population are between the age of 15-64 years indicating a lager section of the population in its most active years.
References
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