Do you ever work for free?
No? Are you sure about that?
Most tax professionals I know do, at various points in time, work for free. Most of the time, they call this free work “good customer service”. But what they don’t understand is that working for free erodes the value that your client perceives from working with you, and can spawn some very unhealthy client behavior.
Let’s take a look at a typical 1040 client. Let’s call her Janet.
Janet calls you out of the blue about 4 times per year to ask that “…one quick question, it should only take two minutes.” Unfortunately, Janet’s single quick questions always turn into 30 minute conversations. Also, the human brain requires time to re-engage to a productive task. So, if you were intently focused on putting together your new marketing campaign, but you chose to accept Janet’s call, then you actually just lost about an hour of productive time.
So that’s four hours per year right there, for one client.
Let’s not forget that Janet is buying a house, and needs you to fax copies of her last two 1040’s to a mortgage broker. And let’s not forget that CP-2000 that showed up in the mail because she forgot to give you that K-1 with $20 of income on it. So we’re now at about six hours of extra time on Janet’s behalf.
Six hours that you provided at no charge because you thought it was “good customer service”.
How many Janet’s do you have in your business?
And here’s the thing about people in general: It’s human nature to take a kilometer when given a centimeter.
(Yes, cliches work in metric, also.)
We all do it. I do it. You do it. Children do it. Poor people do it. Wealthy people do it. Americans, Russians, Chileans, Martians… We all do it, even though it’s mostly subconscious.
Here’s the problem: When you give clients too much rope, it’s YOU they’re hanging with it.
Yes, you need to provide good customer service. But good customer service does NOT equal free work. If you think it does, go try it with your doctor and see how far you get (“Hi, could I speak to Dr. Smith for two minutes, I just have one quick question…”).
I don’t know what your hourly rate is. I use $175 per hour as a nationwide, average billable rate for independent CPAs, EAs, and attorneys doing work beyond tax prep. For six hours, that’s $1,050!
Let’s say you have 300 tax prep clients, and 40 of them are Janets. Not only is that 240 hours per year of time (12% of the work year!), but it’s also $42,000! I don’t know about you, but I sure can’t afford to not get paid for 12% of my annual work hours!
Here’s a fun fact for you: In my neck of the woods, an extra $42,000 per year would cover the down payment and closing costs on a duplex rental property with nice, positive cash flow.
That’s what I’m doing with my money these days. Real estate investing not your style? That wad of cheddar would also cover a year’s tuition at Stanford University, pay for a round-the-world trip for two in reasonable luxury for six months, and pay off the entire credit card debt of three average American households.
My point is that forty-two grand ain’t nothing to sneeze at. Yet thousands upon thousands of tax professionals literally sidestep this amount of money, and more, each and every year.
If you’re willing to accept this financial drain on your business, then that’s your perogative. But most tax professionals are NOT happy about this situation, and they’ve told me so. Otherwise I wouldn’t be typing this right now.
How do you fix this nightmare?
To answer this question, we’re going to take a cue from 12-step programs. After all, changing your behaviour is difficult, because we get so accustomed to living the way we do. So perhaps, just perhaps, we can consider this an addiction of some sort.
Here’s my riff on a 12-step program to stop doing free work:
- Admit that you have a problem, and that you’re losing massive revenues because of it.
- Believe that you can implement change in your business, despite personal fears about client or staff reactions to change.
- Make the decision to change how you do business, and commit to a plan to “re-educate” clients.
- Create a list of all the Janets in your clientele, and start to inventory the use of your time.
- Have a serious conversation with your staff and your worst offender clients about the changes that are coming.
- Accept the fact that there will be some fallout, and some challenges, but that it’s worth it in the long run.
- Remove the inherent operational shortcoming via rigorous timeblocking and “interruption protocols” for staff.
- Create new billing tiers for clients based upon their needs and the services they use. This is a good time to shift 1040 customers to an annual or monthly subscription billing model.
- Notify all clients of the change, and begin to implement it.
- Continue to closely monitor how you use your time and how the new procedures are working.
- Commit time each week to reviewing the operational efficiency in your business, and always seek new areas of time and operational improvement.
- Spend your new-found time and profits on what’s really important.
I’m the type of person that prefers to rip the Band-Aid off of problems like this, but I realize that doesn’t fit most people’s style. For example, if I were looking to correct this problem in my own practice, I would simply IMMEDIATELY stop taking calls from clients, and have the receptionist tell them that they need to schedule an appointment (OK, that is actually is how I did it years ago).
Getting paid what you’re worth, and for the time you give people, isn’t that hard. Step #1 of the 12 steps is always the hardest. But once you recognize it, and accept that it’s an issue, and that you’re really on screwing yourself over, then I think everything else becomes easier. It becomes easy to stop giving out your cell number, to not accept other people’s “emergencies” as your own, etc.
As tax season gets rolling, and you see clients face to face, let them know about changes in billing procedures, scheduling procedures, availability, NOT to call your cell, etc. Setting expectations about acceptable client behaviour is 100% on you.
Take charge of your client relationships, and reclaim your billable time. Time is your one non-renewable resource, don’t squander it working for free.