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5 Reasons Your Tax Practice Isn’t Giving You The Lifestyle You Want

Originally posted yesterday on LinkedIn.

Today is Saturday Sunday. If you’re at the office working on extended 1040 returns, then you’re doing it wrong. (Edit: Even more wrong!).

CPAs, EAs, and attorneys go into private practice for many reasons, but for most of us, those reasons can be boiled down to one word: Lifestyle.

While that word has become overused, hyped up, trampled on, and beaten to death in recent years, the pure intent of going off on your own in the tax, accounting, or legal world is generally lifestyle driven. Whether that means you’re looking for a more relaxed lifestyle, outside the pressures of a corporate firm or the bureaucracy of working in industry, or you’re after the financial rewards that come from being your own boss, we generally go into private practice in order to achieve a certain lifestyle.

Unfortunately, most of the accounting and legal professionals I work with on a coaching basis are simply not achieving the lifestyle goals that they set out to for. As somebody that literally lived the Four Hour Workweek life for over three years while traveling around the world two and a half times, I can attest to you that it’s possible. And it’s awesome.

So what holds practitioners back from achieving the lifestyle goals that being in business for ourselves is supposed to bring? Here are the five most common reasons I see on a regular basis.

1. Failure to focus. There are many things you need to focus on in order build the type of practice that will drive a lifestyle. Two specific arenas where I see lack of focus is in service offerings and client selectivity.

The most successful practitioners are those that are specialists, not generalists. Specialization can exist in both the services you offer, and to whom you offer them. For example, while traveling full time, I offered one service, and one service only: IRS collections representation (more commonly referred to as “tax resolution”). I didn’t do anything else: No tax prep, no bookkeeping, no payroll, not even examination representation (audit defense). I was, and largely still am, a one-trick pony.

When you try to be all things to all people, you’re spread thin. You’re unable to build high-value expertise in any one specific area. This means you can’t charge premium fees for your services, and you end up being stuck with clients that want everything.

For most of my coaching clients, I suggest that they pick a core suite of services that are important to a highly targeted client market, and focus 100% on that, and nothing else. This enables you to laser-focus your marketing efforts, the CPE you take, creates a stronger referral pool, etc. Focusing your practice is liberating, and powerful.

2. Working with crappy clients. Let’s face it: Some clients just straight up suck. There are the time vampires that think you should be available 24/7. There are the accounts receivable nightmares that always need just one more week to pay you. There are the grating, annoying, or boring people that you simply dread taking calls from.

I believe that life is too short to put up with people that annoy you, don’t pay you, and take up too much of your time. Fire these clients. Immediately.

Every single practitioner reading this article has at least a few clients that come to mind right off the bat when this subject is brought up. On Monday morning, send them all a letter explaining that you’re taking your practice in a different direction and will no longer be able to service them. Provide them with references to two or three of your competitors, and cut them loose.

Even better, make an evaluation of your own A/R aging, and your time tracking logs. If you’re still servicing clients with obvious A/R issues… WHY? Same with the time leeches. Cut ’em loose.

Then, applying the focus tips above, engage in marketing to replace those clients with better ones. Clients that fit your IDEAL Client Profile, and rebuild your practice around better clients.

3. Lack of systems. Systems, processes, procedures, checklists. Whatever label you choose to apply, systems accomplish many things for your small business:

  • Increased efficiency
  • Improved customer service
  • Reduced waste
  • Fewer errors and omissions
  • Increased client capacity (which equals more revenue)
  • Reduced work hours

The application of written processes to just about everything in your office will make everything in your office run smoother, and eliminate much of the time-wasting “fires” that creep up.

My rule of thumb is that anything I do more than three times in a year within the business should have a written checklist attached. Everything from how the telephone gets answered to the timing and structure of marketing campaigns has a checklist. Many of these checklists for operating a tax resolution practice can be found in my Tax Resolution Systems manual.

4. Fear of hiring staff. Much like systems, adding staff to your practice liberates you from many tasks. Staff provide leverage, allowing you to expand your business beyond your own billable time. Staff are also key to stepping away from the business for any length of time (or even all the time).

The first staff person you hire is arguably the most difficult hiring decision you’ll ever make. It’s also the most stress-inducing.

Your first staff person will most likely where many hats, ranging from receptionist to office manager to return preparer.

If you’re a solo practitioner right now, and your aim is to grow your firm or work fewer hours, you must start hiring. The old adage of hire slow, fire fast definitely applies. Get the right person for the job you need to fill, and make sure you spend time clearly defining the role(s) you’re actually trying to fill.

5. Fear of change. Letting go of anything is hard. Practitioners are fearful of eliminating services, due to the immediate revenue loss. Same with cutting bad clients loose.

What must be understood is that in order for a hot air balloon to lift off, the dead weight holding it down must be cut loose. Be it clients, services, staff, or your own self-imposed limitations, you must be willing to cut the cord sometimes if you really want to grow your practice.

I’ve had many coaching clients that were incredibly resistant to change. Be it radical changes in fees, elimination or addition of services, abandonment and adoption of new marketing tactics, these practitioners were simply getting in their own way — and didn’t even realize it.

This is probably the most difficult of the five to change, but it’s definitely possible. Start with small steps, such as moving a potted plant to the other corner of the lobby (yes, I’m serious). If you can’t swallow a 30% immediate fee increase (usually the best way to raise fees), then do 5% per month until you get there. As you make small, incremental changes in your practice, it becomes easier to do so, and eventually makes rapid, drastic changes possible.

If you genuinely desire to build a practice that meets your lifestyle-based objectives, then start with these five common elements that often hold back practitioners.

Now, put aside that return that’s on extension and go play. It’s nice out.

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Cloud-based Tax Platform Canopy Raises $8 million In Series A Funding

My friends over at Canopy Tax are on fire, and have some big plans in place to change the very landscape of tax practice software. Take a look at what they just announced. I’d like to extend a hearty congratulations to them, and I’m excited to see what they come out with next!


SALT LAKE CITY, UT – June 23, 2015 – Canopy (formerly Beanstalk), a SaaS tax and practice management platform for small-to-medium sized accounting and tax practices, announced today that it has raised $8 million in Series A funding led by leading venture capital firm New Enterprise Associates (NEA), with participation from returning investors EPIC Ventures and Deep Fork Capital. The new funds will allow Canopy to accelerate hiring and product development.

Canopy is currently focused on automation tools for the tax resolution market. Their offerings improve the interaction between tax advisors and their clients and automate much of the tax practitioner’s workflow by utilizing web-based client intake surveys, robust tax analytics, auto-populated IRS forms, and a dynamic portal that allows the client to effortlessly exchange information and documents with their advisor. Tax advisors can manage their practice and clients more efficiently with Canopy by having files, notes, dates, and invoicing all in one place.

Founder and CEO Kurt Avarell, a former tax attorney turned tech entrepreneur, aims to transform the entire experience of paying and resolving taxes for tax professionals and their clients. Prior to launching Canopy, Avarell implemented the initial version of the product within his own tax practice and observed that not only did the platform minimize paperwork and streamline tax resolution—it also improved the client-advisor relationship by increasing communication and comfort throughout a process that is notorious for being stressful and cumbersome. “We are fundamentally rethinking how taxpayers currently interact with their advisors and how we can improve that experience for both parties,” said Avarell. “Traditionally tax advisors send their clients a bunch of paperwork to fill out and then they manually key that client’s written responses into their tax software. That’s not a great experience for either person. Canopy moves the experience online and eliminates the inefficiencies. It’s a win-win for all parties involved.”

“Taxes aren’t going away anytime soon; it’s a $100 billion market riddled with inefficiencies and eager for disruption,” said Chetan Puttagunta, Partner at NEA. “Canopy provides an extensive aggregate of tools for client management that benefit both tax pros and their clients. We were extremely impressed by their organic customer traction, and look forward to partnering with them to amplify their existing success.”

Since launching a limited beta in March 2014, Canopy has been growing rapidly among tax professionals who are eager to modernize their practice and automate their workflow. By using Canopy, tax advisors can provide their clients with a better customer experience while eliminating inefficiencies in their own practice—a winning combination.

Connect with Canopy
Twitter: https://twitter.com/canopytax
LinkedIn: https://www.linkedin.com/company/canopy-inc
Facebook: https://www.facebook.com/canopyHQ

About NEA
New Enterprise Associates, Inc. (NEA) is a leading venture capital firm focused on helping entrepreneurs build transformational businesses across multiple stages, sectors and geographies. With approximately $17 billion in committed capital, NEA invests in information technology, healthcare and energy technology companies at all stages in a company’s lifecycle, from seed stage through IPO. The firm’s long track record of successful investing includes more than 200 portfolio company IPOs and more than 320 acquisitions. For additional information, visit www.nea.com.

About EPIC Ventures
For over 20 years, EPIC Ventures has partnered with entrepreneurs to build lasting, category-defining information technology businesses. The firm focuses on early-stage opportunities throughout the western states, and works actively alongside a broad network of advisors to help its portfolio companies succeed. www.epicvc.com.
About Deep Fork Capital

Deep Fork Capital is a San Francisco- and New York City-based early-stage venture capital firm focused on investing globally in entrepreneurs who are building disruptive, technology-driven companies in the Consumerized Internet. Founded, funded and operated by entrepreneurs, Deep Fork Capital partners are familiar with the challenges and opportunities of launching and building a new business; as such, the firm seeks to collaborate actively with the entrepreneur throughout the lifecycle of their business. For additional information, visit www.deepforkcapital.com.

Media Contact: Jordan Ray, Canopy Tax, Inc., 801-215-9990, press@canopytax.com

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If I was broke and homeless, here is what I would do to start over (again)

It was April 24, 2001, and I had just shut down a tax prep office with 15 preparers that completed a five-figure 1040 volume, and that hadn’t even existed five months earlier.

It was my last day on active duty in the U.S. Navy, and I was heading back home to Oregon. I only made it to Colorado, but that’s a totally different story.

As I left Norfolk, VA that day, I was obviously thinking about my future. Given my nuclear training, I assumed that the legacy of my Navy experience would be a career in nuclear power. The strange task of building a tax prep office from scratch to service the largest concentration of military personnel in the world was something I viewed as nothing more than the grunt work I had to do because I was on the short end of my enlistment.

I never thought it would become my career.

And that’s one of the great things about life: You just never know where it’s going to take you.

If I had had a crystal ball at the time, I would have treated that tax season differently. I would have actually learned how to prepare a return, rather than just treating it as an IT problem, among other things. It could have been a tremendous learning experience, if I had allowed it to be, and it would have put me several years ahead in life.

As I started civilian life, tax or accounting never even crossed my mind. And later in 2001, I chose a woman over a nuclear power job in New York. Then I somehow ended up in real estate. Then I ended up divorced, bankrupt, and homeless.

So seven years after my first tax season, I ended up having my second, entirely out of necessity. I consider it somewhat humorous that this period of my life was bookended with tax work. Some people might even say that my return to the tax field was inevitable.

In retrospect, I sometimes wish that I had gone into tax or accounting straight out of the gate when I left the Navy. But at the time, I didn’t respect it as an occupation, and I didn’t understand the value of the skill set.

But now I do. And I hope that you do, too.

Tax preparation is a skill. Tax resolution is a skill. Marketing is a skill. Your skill set is your livelihood, and that livelihood gives you a lifestyle.

A commercial fisherman knows the right bait to use, how to find the best fishing spots, and the best time of year to fish. Those are his skills, and those skills produce a livelihood and a lifestyle.

Living in a car is also a skill, one that I happen to possess. It’s also a lifestyle, one that I know all too well.

The bank can take the house, and the bankruptcy court can take everything else. But your skills belong to you for life.

Short of major health problems, major cataclysmic disaster, or war, the only thing you ever need to get back on your feet when you’re down are your skills.

And let’s face it, the IRS ain’t going nowhere, and business owners are always going to need to know their numbers. Our profession has been around since the dawn of civilization, and it’s not going away anytime soon. Your skills are your Golden Ticket.

If my life suddenly became a real-life episode of Naked & Afraid, I know that I can rely on my skills to get me back on my feet.

I’ll skip the water, fire, food, shelter, and clothing portion of this recovery operation. Let’s also assume that I manage to trek back to civilization, and that I’m in the United States. All games need a set of starting conditions, so these will be mine. Yes, I’ll be using a game analogy, because I have come to view economic life as an artificial game not unlike Monopoly, because, well it is a game, and it’s completely artificial. But that also is a story for another post.

So our game is Economics, and we use money to keep score. In our game, we have various ways to obtain money, and then we use money to obtain other goods and services. Some of these goods, which would be free if we didn’t play Economics, are necessary just to survive. Others just make life much more comfortable.

To get started, I would do whatever was necessary to obtain a tiny amount of money. Seed money is necessary to start the whole process. Playing Economics doesn’t work at all without some startup money. I would walk into every business I could find, offering to do whatever grunt work they needed done, for whatever they were willing to pay me.

Whether this work was pulling weeds, patching the roof, changing oil, reconciling accounts, doing outbound telemarketing, or representing them in an examination, I would do it. That first bit of seed cash is necessary to play Economics.

I will point out that many homeless people are capable of reaching this stage, but simply don’t. Those with mental or physical disabilities may not be able to do it on their own, but I see many homeless people that could definitely reach this stage.

With a little bit of seed money, I would work on making myself more presentable. It’s amazing how cheap a shower, haircut, and fresh clothes from a thrift store can be. It’s even more amazing what that can ll do for your self-esteem, confidence, and ability to be taken seriously.

From here, even though I might be living in a cardboard box in an alley, and dumpster diving for food, the process of building a high score in a game of Economics becomes the same for everybody: Use your resources wisely, combined with your skills, to multiply your money.

I would do “seed money” work as necessary until I could obtain a pre-paid cell phone. A phone is an incredible force multiplier in terms of economic productivity. Think of it as a power-up in our game of Economics.

With a phone, and a trip to the library, I can obtain various basic telemarketing lists, then call those lists. I simply direct solicit my tax and accounting skills.

This one marketing method, using the telephone, is sufficient to get me into a much, much more comfortable lifestyle. Like, a van. Vans are great, compared to a cardboard box. In fact, if I’m on the phone selling tax resolution services locally, I could most likely get enough cash to buy a van with just one paying client. This is an example of a higher value skill, which brings tremendous advantage in a game of Economics.

Once I’ve upgraded to a van, my next goal is to get an executive/virtual office that I can work from. This will require several hundred dollars per month, but having a clean, quiet place to work from (instead of the library or the homeless shelter) will help my business tremendously. I can still get to this point strictly via the phone.

In short order, I’ll have enough points, errr, money, to get online. Online tools provide me tremendous business growth leverage, even if I’m doing all the work myself. Using both free and paid online marketing, as well as some very affordable marketing automation tools (such as email autoresponders), I can leverage myself.

With some more capital coming in, now I can leverage other marketing media, such as broadcast media, direct mail, etc. The multiplication from these sources quickly makes me too busy to do everything myself, and soon I become an employer.

The process of financial recovery isn’t really that complex. It just takes the will to do it, to take action. The most important thing to never forget is that you possess a financially valued skill, and the skill set for marketing and selling your tax/accounting skills is itself a skill set, one that can be learned.

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