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Making a million bucks, by the numbers

One of the tasks I’ll be embarking on after settling down in Washington state next month is the updating, revision, expansion, and editing of all of my published books. Before the end of the year, I’ll have new editions of each book done.

The first of these to get the update treatment will be my book about building a million dollar taxpayer representation firm. A lot has changed in the 18 months or so since I last revised that particular work, and I need to update it to reflect the ever changing realities of doing tax resolution marketing.

One of those realities is that the cost of client acquisition has gone up a little bit. The primary reason for this has to do with the efficacy of small, cheap postcards. For years, these regular sized postcards were the workhorse of my direct mail lead generation efforts. Today, those same postcards just don’t yield the results they used to.

In general, we’re seeing about 1/4 of the response rate from SIMPLE direct mail compared to what we used to get. By “simple” direct mail, I’m referring to basic postcards and machine addressed letters with postage permits. What’s the reason?

Direct mail is still a great way to generate clients. In fact, since fewer companies use direct mail, there is less clutter in the mailbox to compete against. However, what I think is happening (and this is purely conjecture, by the way) is that mail recipients are more discerning when it comes to sorting there mail — in other words, they are more quick to discard anything that looks like “junk mail”.

My rationale behind this assumption is that dimensional mail and heavily personalized mail are working great. Most readers know by now that I heavily advocate sending 3-letter sequences in sync with the IRS notice cycle following a lien filing, and that these letters should be hand addressed and use real stamps.

Hand addressed? Real stamps? Geesh, that sounds like WORK! And yes…yes it is.

So with that said, what’s it going to take to hit the seven figure mark now?

One of the nice things is that, while marketing costs have increased, so have average fees. In fact, average tax resolution fees nationwide are up nearly $1,000 since I last wrote about this topic here on the blog over two years ago.

Assuming an average fee of $3,500 per client, we need 286 clients per year to hit the magic million dollar revenue number.

As always, let me start with the SIM (Standard Industry Model), on which the fly-by-night tax resolution operates. The average telemarketer (“opener”) must dial 60 tax liens in order to find one interested person, who is transferred to an unlicensed sales closer in most boiler room operations. This closer will close, on average, 9% of these prospects. So, in order to get ONE new client, a company has to churn through 660 tax lien filings, at a typical cost of 35 cents per record to purchase. So, that’s $231 just in lead costs.

Now, the opener also typically gets a 10% commission at most companies, and the closers receive, on average, 20% to 30%. Lets’s again be conservative, and together give the sales guys 30%. Note here that we are also ignoring minimum wage laws and other costs for this sales staff, which most firms do ignore, believe it or not. So our $3500 new client also costs us $1050 in commissions, for a total of $1,281 that we have to spend in order to get one new client.

To hit 286 clients, that’s an annual hard cost of $366,366 in order to generate $1 million in revenue. All else being equal, that’s actually quite an acceptable number, which is why this model works so well within the “tax resolution” standard business model.

Note that under the SIM, all those purchased leads are literally trashed within a week or two, with no effort made at long …

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Have you written your book yet?

It’s the final few hours of the NAEA national convention here in Las Vegas. It’s been a blast getting to meet some long-time Tax Marketing Tips readers face to face, plus being introduced to many new readers as an exhibitor here in conjunction with NTPI. Many thanks to everybody that has dropped by to chat!

This week I want to touch on a subject that is a little off the beaten path of my normal messages: Authority positioning.

We live in a culture that loves to love expertise and authority positioning. If you think about it carefully, it’s the reason NTPI itself exists. As a profession, we tend to embrace anything and everything that that let’s us display expertise (I’m quite opinionated on the subject of “credentialitis”…).

Within the general public, however, it’s a whole different ballgame. Our clients and prospects don’t have a clue (nor do they care…) about all the alphabet soup we put after our name. As an EA, for example, I’m stuck with the challenge of having to explain what I even AM — so I generally don’t bother (it’s rarely questioned by tax resolution prospects, by the way). CPAs and attorneys have built-in designation recognition, but anything beyond that, in terms of public perception, doesn’t mean anything to them.

But if you do something that positions you as an authority, that displays your expertise in a manner that is highly valued by the general public, then that suddenly becomes worth a LOT.

When you write a tax advice column in the local newspaper, or appear regularly on a local business talk radio program, or write a book — you suddenly attach to yourself much higher perceived expertise in the eyes of the general public.

When I wrote my first book over Christmas weekend at the end of 2011, it was driven by being snowed in. But in retrospect, it became one of the best marketing moves I’ve ever made for my tax practice.

After publishing “Tax Resolution Secrets“, it quickly became the best selling tax resolution book on Amazon. It began to routinely generate two to three leads per week coming into my tax resolution practice. With this steady trickle of free prospects coming in, I was able to pick and choose the clients I actually wanted to work with.

Did the book generate perfect prospects every time? Absolutely not. There were definitely a fair number of “tire kickers” calling in. But at the same time, there were enough good prospects calling and emailing that the process of writing the book had been very much worth my time.

Beyond just the lead generation component coming from people that purchased the book, it also replaced my business cards. I have no ordered business cards since writing that book, even three years later. A book you authored is the best business card you can ever give out.

When you hand prospects a copy of your book, the nature of the interaction usually changes instantly. There is massive authority positioning (deserved or not) that comes from being an author. A book doesn’t get thrown away like a business card, either, and it’s great to be able to say, “Oh, see page 74, that covers exactly what you’re asking about.”

With your new position as a recognized expert, interesting things start to happen. People seek you out. You’re able to command higher fees. You’re able to be a bit pickier about the clients you work with. You have something DIFFERENT to send in your “shock & awe” package in response to inquiries from leads.

Writing a book has, without a doubt, been one of the top three most valuable marketing tools I’ve ever created for my business.

I would highly encourage you to do the same. Writing a book isn’t really that difficult (I wrote Tax Resolution Secrets in 4 days). You can also hire ghostwriters to write a book for you, as I’ve done for …

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Cultivating long term relationships with your tax prospects

So you’ve been offering special reports and other educational items to your target audience, and you have built a prospect list of folks that have ordered your information. Once you have built a list of prospective clients, what exactly do you do with that list?

First of all, don’t be disillusioned into thinking that you are going to convert every prospect you communicate with regularly into a paying client. And yes, you need to be communicating with them regularly. It is through this long term communication that people come know, like, and trust you. And never forget that people do business with people that they know, like and trust.

Don’t forget that the same holds true for your existing clients as well. It is important to have regular contact with them, year round, in order to reaffirm that they’ve made a good decision in working with you, and to reestablish yourself as an expert. There are four distinct things you can use your list for in order to cultivate new and repeat business and referrals from your internal list.

The first thing you should be doing is publishing a monthly newsletter. This works much better if you physically mail it, and here’s why: It’s because people discount e-mail. So if you actually take the time to go print out an 8 ½ x 11 two-sided newsletter once a month, you can upload your newsletter to the U.S. postal service, and also upload your mailing list to the postal service. They’ll do all the printing and mailing for you, and it’s dirt cheap. But you should mail it out because it’s going to give more value. People are going to notice it. Even if they throw it away, you’ve now gotten the “hits” on your name and your information. If, within the next couple days, somebody says they need an accountant, they’re calling you.

The second thing you should be doing is sending them regular emails with updates, promotional offers, seasonal reminders, and important announcements. Keep them up to date with what’s going on with tax and accounting changes that may impact them, and also let them know when you’re going on vacation, and to contact you before that to get their needs taken care of. This will encourage them to come in and speak with you.

The third thing you want to be doing is making yourself available to your prospects on social networking sites on the Internet. People actually do want to get to know you as a person. People want to know what their professional advisors are like outside of the office. They want to feel like they know you more so than you’re just an accountant. So give them access to you.

Create a Twitter account and share with them when you do certain fun things or vacations you take or restaurants you go to or sporting events, share whatever your hobbies are. Then people will know, like and trust you and be more likely to do business with you by becoming involved in those things. You can use Twitter, Facebook, LinkedIn, all the different social media websites in order to do that.

The fourth thing you should be doing with your internal client and prospect lists is to create new content, such as blog articles, educational videos, and special reports, and make these available to your prospects. Have a blog set up that people can read, and syndicate an RSS feed through Feedburner for people to subscribe to and follow. Mail and email occasional reports and videos to your list. The bottom line is to proactively make sure that you are constantly in contact with your prospect list. Tax Marketing Premium membership provides you with some special tools to help you accomplish this.

How many contacts should you make with folks on your list? My suggestion is to contact them monthly, at a minimum. However, I will tell you that 30 to 70 …

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How To Expand Your Tax Practice

Expanding into new realms is one of the best ways to expand your tax or accounting practice. In this article, we will discuss how to do exactly that.

When it comes to market expansion of your practice, there are really two ways to go about doing it. The first is to consider geographical expansion. You are already offering your services in your local area, and at some point you will be asking yourself, “Can I offer my services in adjacent communities, also?” You could establish satellite offices in neighboring cities, or take advantage of the growing number of “virtual office” spaces that exist and meet with clients in other cities one day per week. Then, you could perform targeted marketing in those other areas to obtain new clients there.

If you live in a rural area, this strategy could be particularly effective. By establishing occasional office hours in a series of small, rural towns that are distant from a large city, you can quickly create a following of dedicated clients that deeply appreciate your taking the time to come to them. Chances are you could find a client in a small town that was willing to trade occasional-use office space for some services.

The other way of expanding your accounting practice is to look at specific niches. Niches are small sub-groups of clients that you choose to specialize in servicing. For example, providing tax services to construction contractors is a niche. Becoming the “go to” tax advisor for a local major employer is another niche.

The great part of creating unique niches for yourself is that specialization tends to command higher fees. For example, a heart surgeon charges a lot more than a family practice physician. The more specific you can get with the niches that you target, the easier it becomes to focus in and market specifically to those audiences. You can create special reports and marketing tools that are tailored very specifically to your niche audience. For example, you could offer construction companies in your area a free report detailing the “7 Major Tax Mistakes That Cold Kill Your Construction Business”. This sort of targeted marketing is noticed by the relevant audience.

Drilling down into targeted market niches is referred to as “vertical” marketing. Another option is to expand out. For example, some firms also offer various forms of business consulting services, business planning, business valuation services, wealth management, stock brokerage, insurance, and more. This not only allows you to make more money from existing clients by selling them additional services, but also gives you a greater variety of things to talk about in your marketing, and specifically market those services.

Start thinking about unique industries you could specialize in servicing, and also start thinking about additional services you could offer to your existing clients. Both of these methods will give you new avenues for increasing revenue that simply did not exist for you before.

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Setting Revenue Goals For Your Tax Practice

The most common answer to the question of “How much money do you want to make?” is “As much as possible.”

Anybody that is in private practice for themselves, either as a solo practitioner or with a small group of partners, has to take a serious look at this question, however.

Obviously, different revenue levels require vastly different levels of work, commitment, infrastructure, marketing, etc. The decision to make X dollars is not as simple of a decision as what you might think.

I believe in two approaches to this decision process. The first is to decide how much TIME you want to put into your practice, and make revenue and expenditure decisions from there. The other approach is to determine how much take-home income you want, and work backwards from there.

I personally make the decision more from a time standpoint. My lifestyle design objectives are somewhat unique, as I am willing to sacrifice significant financial gain in order to have extensive freedom to travel around the world. You may be more interested in earning a certain income to support a specific lifestyle.

If you want to make $500,000 per year in take home pay, then you are going to need a certain size organization, as it is unlikely you can achieve that income goal completely on your own. That size of organization is going to require infrastructure, employees, office space, etc. All these factors need to be taken into account.

If you want to work as a solo practitioner, and only work 40 hours per week, then this is going to create an income limit for you. You can increase this limit by focusing on niche clients, charging premium fees, performing high end services, and doing specific styles of marketing.

Keeping in mind the various challenges and limitations that come with having certain income goals is important. Keeping an open mind, and having realistic expectations about how much money you can make, and what it will require, is critical to your success as a firm.

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Setting Marketing Goals For Your Tax Practice

Any marketing effort needs to have goals. Otherwise, what’s the point, right?

Different marketing efforts will have different goals. For example, a new prospect lead generation campaign may aim for a specific number of new leads, at a goal of X dollars per lead. On the other hand, a direct mail sales letter sent later to these same leads will have a revenue goal for the campaign, as well as a revenue per prospect and revenue per sale goal.

As an accounting professional, you are likely used to thinking in terms of revenue per client only, either on a monthly or annual basis. You may even only be used to looking at average billings per hour, and comparing that to your actual hourly rate.

I’d like you to start thinking in broader terms.

To start with, look at each of your practice areas. Do you offer a broad range of services, but make 90% of your revenue from just two of the?

Take a look at your hourly billings from your various services. Do you make far more per hour from one or two activities than all of your others?

The reason I want you to look at these particular metrics is because it will tell you where best to focus your marketing efforts.

What if your highest dollar per hour activity isn’t the same thing as what brings in the most revenue? This is not an uncommon scenario. If these two activities are different, then you need to make some decisions. Once you have decided on the practice areas you are going to market, you need to look at revenue goals. We will discuss the revenue side more in the future.

If you’d like to take a trip down the rabbit hole of identifying and attracting IDEAL tax clients, take a gander at this video.

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Measuring Your Marketing Results

One of the key characteristics of a cohesive marketing strategy for your tax practice is to track and measure every aspect of your marketing, like we mentioned last week. Knowing what you’re spending your money on isn’t enough: You must know what dollars are bringing in what results.

Not only must you track the results of your spending, but you must track transactional elements of your marketing. Here are a number of important marketing metrics for you to be tracking.

Cost Per X People Reached: In the TV, radio, and print worlds, this is often referenced by advertising sales reps as CPM: Cost Per Thousand people reached. It provides an apples-to-apples method of comparing various media. However, do not get caught up into thinking that the lowest CPM is the winner. Just because one media is cheaper on a CPM basis, doesn’t mean it’s worth using if it’s not otherwise your ideal target market.

Cost Per Lead: Let’s say you spend $5,000 on a direct mail campaign, and send 10,000 prospecting letters for that money. From this, let’s say you get 200 phone calls, for a 2% response rate (which is an excellent response rate for direct mail, by the way). Spreading the cost of the campaign across the 200 phone calls, you invested $25 to acquire each lead. If only half those leads were qualified prospects, your cost is $50 per prospect. Knowing these numbers for every marketing effort you employ is one of the most important things you can know in your entire business.

Cost To Acquire A Client: For every individual client you have, you should know how much you had to invest in order to attract that client. In other words, you should be able to know every dime that you spent on direct mail to a new client, their share of your seminar costs, the pro rata magazine ad cost of getting their first phone call, etc.

Lifetime Customer Value: Too many firms look at a client from a TRANSACTIONAL standpoint. In other words, how much is John spending today? Instead, you should know the lifetime value of a customer: How much are they going to spend with you over the course of a year…five years…thirty years…The value of referrals they provide you, etc. This is often a foreign way of looking at your clients, but is a profound and necessary paradigm shift to make in order to succeed long term.

Conversion Ratios: You should know your conversion ratio through every step of your marketing and sales process. You should know what percentage of people that call you book an appointment. You should know your ratio of seminar or webinar attendees to newsletter signups. You should know what percentage of people that order a free report then come in for a consultation. You should then know what percentage of consultations turns into entry level clients. You should then know what percentage of entry level clients (for example, tax return preparation clients) become other type of clients, such as wealth management, payroll, QuickBooks advising, etc.

These are just some of the numbers you should be tracking. Create yourself a spreadsheet and start tracking these metrics immediately, as these are the most basic things to track in order to begin making intelligent marketing decisions.

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3 Characteristics of a Successful Tax Firm Marketing Strategy

Many tax professionals live via a “boom and bust” cycle. In order to break out of this cycle of doing work for a client, then having to find another client in order to put food on the table, a successful tax firm utilizes a marketing strategy comprised of three distinct components. In today’s article, we’re going to discuss each of those components.

First of all, the marketing strategy utilized by a successful tax firm is planned. In other words, it’s not a random assortment of marketing efforts with no cohesion. A real marketing plan might consist of multiple, individual marketing campaigns, but they all have a fairly universal message, look, and feel.

The smart tax professional is not swayed by the latest slick advertising salesman from the local newspaper, radio, or television outlet to buy ad space that is inconsistent with their plan. Planning allows you to set goals, set budgets, and track and measure the effectiveness of each piece of your marketing strategy along the way.

Second, any marketing strategy, in order to be successful, needs to be consistent. Successful marketers are persistent and consistent marketers, and one of the key things for you to understand is that, as the owner of a professional practice, your first job is NOT accounting…not taxes…not bookkeeping. Your primary job is to bring in clients….to generate revenue….Because if you have no clients and no revenue, there is no tax and accounting work to be done in the first place.

Therefore, your first job is marketing and sales (I lump these two together, because they are two components of the same thing). Consistent marketing, rather than starting and stopping, is critical to the success of a marketing plan. Without consistency, you’re not really following a plan, as discussed above, nor are you really able to effectively track and measure things, which is discussed next.

The third characteristic of an effective marketing strategy for any tax firm is that the effect of your marketing must be measurable. PT Barnum, the circus guy, once said, “I know I’m wasting half of my advertising dollars. The problem is that I don’t know which half.” Don’t be PT Barnum. Every marketing dollar you spend must be held ruthlessly accountable for results.

Every piece of marketing you send out needs to have an offer that entices people to respond, and you must have a way of measuring that response. This type of marketing is generally referred to as “direct response” marketing, and for the professional practice, I firmly believe that it is the only type of marketing you should be doing. You should be able to track where every consultation, every client walking through your door comes from. Not only that, but you should know a variety of other important statistics regarding your marketing.

After all, we like numbers, right? So it should simply make sense to want to know where our marketing dollars are best applied, based on statistical comparison.

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The Accounting Practice Lifecycle

For the vast majority of practitioners, the accounting profession is incredibly cyclical. Ours is a profession often characterized by a never-ending series of boom-and-bust cycles. Perhaps you have a steady stream of monthly accounting and payroll clients that provides you a “base” of revenue, but the vast majority of tax and accounting professionals (sole practitioners in particular) live a life of doing some large project for a new client, finishing that project, and then having to struggle to find the next big client.

The key to growing a successful practice is to have a steady stream of clients. Instead of living on the boom and bust cycle, or relying on tax season for 80% of your annual income, the successful accounting firm is constantly marketing to strengthen existing client relationships, get referrals, and obtain brand new clients.

Even if you have what you consider to be a successful practice, I have a few questions I’d like you to ask yourself:

Am I earning my desired level of take-home income? Does my practice afford me the free time and lifestyle that I desire? Do I have a real business that could run without me, or have I created a job that I still have to show up for every single day? What is my exit strategy from or for my firm?

If you’re not making the money you’d like to be, don’t have the free time you want, and have no real exit strategy planned, then chances are you don’t have a business, you have a job. A self-employed job, perhaps, but still a job, where other people and other circumstances are your “boss”.

If you would like to transform your practice into a real business that operates systematically and successfully, regardless of your physical presence at the office, then you’re at the right place.

Transforming your practice into a business that supports your desired lifestyle is not only possible, but I personally believe is one of the most important missions in life you can undertake.

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Where do you really want your tax practice to be in ONE year?

Most tax professionals that I speak with aren’t really sure where they want there practice to be. They’re doing this thing that they do, week in and week out, but don’t really have a vision for where they want to take it.

Many motivational speakers will talk about having a 5-year plan for your life. They talk in terms of very long-term goals and planning. But I think on a much shorter scale, and there’s no reason not to. Amazing things can be accomplished in twelve months or less, particularly in a professional services business like tax or accounting. There’s absolutely no reason for us to look on a time horizon longer than a year, especially if you focus heavily on tax services, due to the natural annual cycle of most things in tax.

Have you given any thought to where you want to be a year from now? If not, this is the time to think about it. We’re in the lull between tax seasons, and it’s convention and seminar time, so practice management and planning are probably near the top of your mind right now. In fact, if you haven’t yet registered for one of my live workshops, I’d encourage you to do so. See the workshop schedule here.

It’s completely possible to take an accounting practice from one person and $60,000 per year in revenue to 10 people and $2 million in revenue in one year flat: It’s been done. If your ultimate goal for your practice is to grow to this level, then what are you waiting for?

If your goal is to never have employees and remain a solo practitioner, but want to double your revenue and live full time in a foreign country while serving your American clients, that’s been done, too. There’s nothing stopping you from doing it, and it’s very doable within just a few months.

Go for a walk and give serious consideration to what you want your practice to look like a year from now. If it’s growth, then there is a marketing solution. If it’s location independence, there’s a practice management solution. No matter what you want out of your practice, you can have it.

Remember, you created your business to serve you, not for it to be the master of your life.

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