Can a small bookkeeping team earn a profit?

Clients carry forward; setup is earned once

Each month starts with prior clients less tier-neutral churn, then accepts new clients only where delivery and owner review fit. Base gross requests reach 2.5 per month after a six-month ramp; churn is 1.5% of opening clients each month. New clients follow the chosen starter/core/complex mix. Retainers bill each active client for a full modeled month, with the same month’s delivery obligation. Setup fees $300, $500 and $800 are earned once per accepted client. Cleanup affects 30.0% of new clients at $900 for a bounded 12.0 delivery-hour task plus 2.0 owner hours.

Fractional client counts are expected portfolio averages; no actual contract can be divided this way. Starting clients and new requests require evidence. Fees, wages and fixed allowances escalate together by 3.0% each model year; no calendar-seasonality uplift is assumed. Intuit’s separate cleanup/monthly workflow is a scope reference, not validation of the case price or ramp. Service comparison

Pay the roster before allocating its usable hours

One delivery FTE costs $5,197 monthly before annual escalation, from 160 paid hours at $28.00 and 16.0% burden. Only 112 hours are assumed deliverable; paid leave, training, meetings and internal administration consume the balance. The model hires in 0.5-FTE steps, up to 3 FTE. It pays the owner $4,000 per month for 160 hours, with 80 available for client review.

BLS’s May 2025 national median is $50,670 annually / $24.36 hourly. That comparison does not confirm a California hire or the complete burden. Occupation and geography; Employer tax components

EBITDA subtracts paid staff, owner labor, workflow/document tools, licences, insurance, marketing, connectivity, administration, workspace and maintenance. It also subtracts expected bad debts and collection-month processing fees. Net income additionally subtracts hardware depreciation, interest and California LLC minimum/fee. The statements normalize owner labor as a paid expense; a tax adviser must map payments to the entity’s statutory accounts. Personal income/self-employment taxes are excluded. Entity tax boundary

Inspect the failure as well as the stronger result

Lower requests are 1.2 per month, churn 3.5%, fees 0.9 times base, workload 1.2 times base and billing-month collection 75.0%. Higher requests are 4.0, churn 1.0%, fees 1.1 times base, workload 1.0 times base and current collection 98.0%. Accepted growth is constrained; higher demand does not authorize free overtime. The owner is paid in every scenario.

The lower scenario remains economically weak through the horizon and shows −$374,870 lowest cash. Its negative balance is an unfunded requirement, not a modeled overdraft. The base also has negative months; reported later balances assume the planned work/payments can somehow continue and therefore cannot establish financeability until the gap is resolved.

Cash recovery is conditional on surviving the ramp

The recovery calculation is the first month cumulative operating cash after scheduled debt principal and replacement capex reaches the entire $65,648 opening funding basis. Base reaches that arithmetic crossing in month 56; higher reaches it in month 22. Lower does not recover within 60 months. Base equity-basis crossing is month 49, but it carries the same unresolved financing path. These are undistributed modeled cash crossings, not investor distributions, IRR or guaranteed returns.

Four workstations are depreciated over 36 months and replaced for $5,200 in month 37. Principal reduces debt instead of net income; depreciation reduces net income without a same-month cash payment. Initial borrowing is a funding source, not revenue. Download the monthly cash values from the exhibit below when testing timing.

Keep compensation separate from residual profit

The owner receives modeled year 1 labor compensation of $48,000 before personal taxes. EBITDA and net income already deduct it. Residual profit or the cash balance is not an additional paycheck, because receivables, debt, tax timing and equipment replacement affect distributable funds. A person doing sales and review cannot be counted as an unpaid capacity source in this case.

Track hours by recurring close, document follow-up, onboarding, cleanup and review. If the owner’s review ceiling or usable employee hours prove optimistic, reduce accepted clients before presenting higher sales. The unit guide shows why a new staffing step can reduce cash even while client count rises.

Compare the monthly cash path

Download all scenario cash values (CSV). This educational case export is separate from the planned personalized Excel model.