The payroll and bookkeeping industry generated a staggering $81 billion in 2019. More than 300,000 American-based companies provide these services. Some specialize in billing or general accounting, while others offer the complete package.
Any company that employs people needs payroll services. If you’re good at working with numbers, consider starting a business in this niche. You’ll not only increase your revenue but also make a difference in your community.
Wondering how to start a payroll company? First, you need a well-thought-out business plan. Second, it’s necessary to legalize your business and obtain licensing.
Below we’ll cover the key aspects of starting a payroll business. Read on to find out more!
Research the Market
Start by researching the payroll services industry, your target audience, and your competitors. About 90 percent of companies use online payroll self-services. Nearly 70 percent of them, though, feel that they’re still developing their workforce management strategy.
The truth is that payroll can be complex and time-consuming.
Employers are responsible for managing this aspect at the state and federal levels, which makes everything a lot more complicated. A payroll service company can free up their time and make it easier to achieve compliance.
Read industry reports, case studies, and other relevant materials. Find your niche, whether it’s tax services, general payroll services, or billing and bookkeeping.
Analyze your competitors to see what they do best and what could be improved.
How to Start a Payroll Company: Make a Business Plan
Next, develop a business plan that covers all aspects of starting and running a payroll service business.
There are no set rules on how long your business plan should be. You can write as few as two pages or over 100 pages. Just make sure you include the following sections:
- Executive summary
- Company description
- Short- and long-term objectives
- Industry and competitive analysis
- Target audience
- Products and services
- Strategy and implementation
- Financial statements and projections
- Organization and management team
- Marketing plan
- Legal aspects
This document will serve as a roadmap for your payroll company. It defines your objectives and guides you through each step of starting and managing a business.
Invest in Specialty Software
As a payroll service company, you’ll need specialty software to automate time-consuming tasks and prevent human error. PayStubs.net, for example, makes it easy to create paystubs and ensures accurate calculations.
Some payroll software programs are designed for small and medium-sized businesses. Others appeal to corporations and big organizations with thousands of employees.
When choosing a software program, think about the markets you’ll pursue and what services you’re planning to offer.
For instance, if you work with startups and small companies, it doesn’t make sense to use a fancy program with complex features that you don’t really need.
Comply with the Law
Last, take the steps needed to legalize your payroll company. Choose a business name and legal structure, register with the state, and then apply for a tax ID number. If you operate as a sole proprietorship, you may use your social security number under certain conditions.
Business licensing requirements vary among states. Contact your local Chamber of Commerce to see what licenses and permits you need.
For example, if you have a physical office, you may need zoning permits, signage permits, and more.
Get Your Business Off the Ground
Now that you know how to start a payroll company, define your ideal customer and brainstorm marketing strategies.
Remember, you’re competing against hundreds of thousands of other businesses. The only way to succeed is to think outside the box.
Need inspiration? Browse the rest of our blog for startup marketing tips, growth strategies, productivity hacks, and more!
