Category: Operate A More Efficient Tax Firm

The Single Best Thing You Can Do This Week To End Tax Season Stress

With the filing deadline just two weeks away, most tax professionals are gasping for air right now, barely able to keep their heads above the mountain of 1040 work that they’re drowning in.

Some practitioners, however, have made a choice not to live that way for the next couple weeks. You can make that choice, too, and all it takes are a couple very simple procedural changes in your business.

At our tax resolution boot camp last September, Chrisa Anderson, CPA shared a brilliant strategy for attenuating the April madness: Just stop taking on new returns. Anybody that doesn’t have their documents in by this week simply goes on extension. Problem solved.

Another Premium member, Dan Henn, CPA, has taken it a step further. Not only does he have a document cutoff, he also imposes a Rush Service fee for any returns that an individual absolutely insists on being completed between now and the filing deadline. And it’s not a small priority service fee, either. In fact, he charges the client an extra 50% of their regular tax prep fee.

So if you are normally scrambling like a crazy person to complete returns for the next two weeks, it’s time to make some policy changes. And this doesn’t need to be a “we’ll do that next year” sort of thing. No. Do it now. Today.

Anybody that calls in today or later… Anybody that sends you an email… They simply get told that they’re going on extension or need to pay a priority service surcharge. It’s as simple as that.

Have a nice, relaxing rest of your filing season!

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Marketing: Cheap vs Done For You

One of the more interesting preliminary results coming from the summer survey is that a lot of practitioners indicate that they want marketing solutions to grow their tax firms that don’t cost much money, but also want direct mail and digital marketing done for them.

There’s a serious disconnect there, and I thought it was worth addressing really quick.

You know the old joke…

Fast, good, or cheap. Pick two.

That’s what we’re really talking about here. “Fast” and “cheap” in particular don’t live well together when it comes to marketing, so you must set realistic expectations. If you want it all done for you, it’s not going to be cheap.

For example, if you want to hire me to create a 100% custom, self-contained, turnkey, multi-media, multi-channel tax resolution sales and marketing funnel for your firm, you’re going to pay me between $75,000 and $100,000 to build it all, and it’s going to take 3 to 6 months. On top of that, I won’t even entertain the idea of doing it unless you’re willing to commit no less than $5,000 per month for two solid years in order to implement the system. (Just for the record, I no longer offer this service).

Contrast that with the “poor marketing” model, where you have more time on your hands than money to invest into growing your tax firm.

Under that model, you can, just as an example, invest just $67 into my detailed, step-by-step ebook for Creating Online Tax Client Lead Funnels and start with at least the digital marketing component yourself. It’s going to take you a lot longer. You’re going to spend a lot more time testing different headlines and offers to find what works for your firm and your target clients. You’re going to have periods of frustration. You’re going to end up with lots of questions along the way, and have to spend time seeking answers.


You can get it done within the confines of a tight budget.

I know this might sound a bit discouraging. But I think it’s important for all tax firm partners and owners to run their practices from a solid foundation of reality in order to properly managed limited resources.

Managing limited resources appears to be a topic of interest, so expect to see more of that on the blog going forward.

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How To Stop Working For Free

Are you working for free?

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:

  1. Admit that you have a problem, and that you’re losing massive revenues because of it.
  2. Believe that you can implement change in your business, despite personal fears about client or staff reactions to change.
  3. Make the decision to change how you do business, and commit to a plan to “re-educate” clients.
  4. Create a list of all the Janets in your clientele, and start to inventory the use of your time.
  5. Have a serious conversation with your staff and your worst offender clients about the changes that are coming.
  6. Accept the fact that there will be some fallout, and some challenges, but that it’s worth it in the long run.
  7. Remove the inherent operational shortcoming via rigorous timeblocking and “interruption protocols” for staff.
  8. 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.
  9. Notify all clients of the change, and begin to implement it.
  10. Continue to closely monitor how you use your time and how the new procedures are working.
  11. Commit time each week to reviewing the operational efficiency in your business, and always seek new areas of time and operational improvement.
  12. Spend your new-found time and profits
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21 Things You Should Start Working On NOW In Order To Have Your Best Tax Season Ever In 2016

A quick question for self-employed tax professionals and firm owners: Did you have a crappy tax season in 2015?

If you answered, “Yes”, then I have a disturbing piece of news for you: It’s 100% your own fault.

“The nerve!” I hear you saying.

But think about it. If you got stiffed by any tax prep clients this year, that’s on you for not getting paid prior to filing. If you failed to hit revenue targets, that’s on you for not raising fees, engaging in client retention efforts, or attracting new clients. If you had too many returns that you hated doing, that’s on you for not being selective in your clientele. I could keep going, but I think you get the idea.

As small business owners, we are 100% responsible for the types of clients we work with, when we work, how we work, and even how much revenue we generate.

If you’d like to reduce stress, improve profit margins, and just have an overall better personal experience for yourself, your staff, and your clients in 2016, here are 21 things you can start working on right now in order make it all happen. You don’t have to do all 21, of course, but even if you just do a few, I guarantee you’ll have a better tax season.

1. Go paperless. You’ll save time, money, and headache. Before you say it’s not possible, understand that tens of thousands of us already do it, and have been as paperless as legally possible for years. Technology is your friend. Scan and return paper client documents if you can’t import digital copies. Charge a premium for paper copies of returns; $35 is not uncommon. Deliver client copies on USB flash drives or via secure client portals. Yes, people will resist change, but they’ll get over it.

2. Pick a niche, and OWN it. Are you actively engaged in a particular hobby? Are you active in a fraternal organization? Do you have two dozen existing clients all at the same employer? Then you have an affinity within a niche group. Every single person in that niche group in your local area should know who you are and what you do. Proactively engage with fellow group members right now. Make special offers to them for your services during each of the various tax seasons: Tax prep season, tax planning season, representation season, etc. No other tax professional should even have a toe in the door to this niche group.

3. Schedule a February or March vacation. Do this now. Schedule a week off for yourself in the middle of tax season. Yes, I’m serious. Yes, many of us do it. In 2015, I took off the first week of March to attend baseball spring training in Arizona. Doing this not only gives you a break, but it forces you to put systems and staff in place to run your practice like a real business.

4. Contact your existing clients monthly. Starting now. And going on forever. The number one reason that clients cite for switching to another service provider is that they simply didn’t feel valued. Make your clients know you value them, and are available to them year-round. The cost of doing monthly contacts via direct mail is less than $1 per client. It’s the best client retention money you’ll ever spend, and far more effective than just giving out some little tchotchke at tax prep time.

5. Cross-sell tax planning services now. For the average Joe or Jane Accountant that offers a standard menu of services, there are three distinct “tax seasons” throughout the year on the 1040 side: Tax preparation, taxpayer representation, and tax planning. Right now you should be actively marketing those tax planning services, as most folks will be looking to your for guidance on how to save on their 2015 tax bill after it’s already too late. Communicate that to them now, and get paid for this valuable service.

6. Plan out your new client marketing calendar. If your goal is to grow your clientele, you need to put your 2015-16 marketing campaigns on an editorial calendar, just like a magazine editor does. You need to know when various ads are being placed, what mail pieces are going out, what online lead generation campaigns are running and when they start and end, etc. When it comes to marketing, the old adage of “failing to plan is planning to fail” definitely holds true.

7. Fire your worst clients immediately. You know who they are. The people that waste your time, don’t pay on time, gripe about your fees, expect you to complete rush work when they’re the ones that are coming to you late. Not everybody deserves to be your client. If you allow these people into your world, then any of the headache involved with servicing them is on you. Write them letters with referrals to other firms, stating that you can no longer continue to serve them due to changes in your own business model. Never look back.

8. Raise your fees. The average practitioner I work with hasn’t raised their fees in years. Meanwhile, their cost of doing business has gone up. Their personal living expenses have gone up. Never forget that federal economic policy is to always be pushing for one or two percent inflation per year. If you don’t at least keep your pricing ahead of inflation, … Continue reading

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What the Tax and Accounting Firm of the Future Looks Like

Lately, I’ve been immersed in helping to actually create the future of continuing education for our profession. This has led me into a fascinating exploration of recent discoveries in the world of K-12 education, the rapidly growing segmentation of higher education, and the changing landscape of interactive learning modalities.

Through it all, I have noticed two key elements upon which the entire conversation hinges:

  1. Changing attitudes about human interaction.
  2. Integration of technology advancements into the learning process.

This particular blog isn’t really the place for me to discuss changes in education. What I will discuss here, however, is that these same two key elements are going to have significant impact on how all professional service businesses are operated. Let’s take a look at some specifics.

Certain shifts in technology, such as the tornado cloud, are already quite pervasive in our profession, and impossible to ignore. Cloud accounting, cloud CRM, cloud tax return preparation, and even cloud word processing are now all parts of our professional lexicon. For better or worse, these technologies are here to stay.

Several of the companies upon which we rely for our software needs have flat out told us that desktop versions of their software will some day not be available anymore. Some specialty services, such as Canopy’s tax resolution case management software, have never had desktop software equivalents, and have only existed in the cloud.

Technology is also driving significant changes in staffing. We are solidly locked in the era of knowledge workers, of which all tax and accounting professionals are a part, by definition. But on top of that, we have also entered the eras of the mobile workforce and the flexible workforce.

According to PGi, which provides collaboration tools for distributed workforces, a 2014 survey of executives and managers indicates that 80% of surveyed companies offer some sort of telecommuting option for knowledge workers. Not surprisingly, 70% of those taking the survey indicated that they themselves telecommute at least occasionally. Telecommuting also isn’t what it used to be, which was often “all or nothing”. Now, it may be any blend of 100% to only occasional, and it may be from home or from a beach in Bali. These trends are what make up the mobile workforce.

The flexible workforce collectively refers to a number of distinct societal changes. First is the fact that, since the 2008 economic decline, more and more knowledge workers are self-employed, freelancing themselves out to several different companies that need their skills, but either can’t afford to hire staff or are risk-averse to doing so.

Second, there is the growth of temporary employment, more appropriately called term employment. This is actually nothing new to those of us in the tax world, as seasonal employment has been normal in the tax preparation industry for decades. Due to both economic realities and generational attitudes, term employment has become mainstream in all areas of the knowledge economy. Older workers that do not have sufficient retirement resources now take on short-term employment as an economic necessity. Even if they do have sufficient retirement resources, many baby boomers hitting retirement age simply don’t want to retire, and thus change the nature of their work schedule to prevent boredom.

The Millennial generation, on the other hand, has been faced with two compounding factors that lead to term employment. One has been the difficulty of finding full-time work in recent years. It is estimated that 40% of those included in the official unemployment number in the US are millennials, making the unemployment rate for that generation about 15%. It’s even worse in some parts of Europe, where young adult unemployment exceeds 50% in several EU countries. The other factor impacting millennials has to do with attitude. Some may argue that it’s an issue of work ethic, but whatever it is, millennials appear to be less ambitious as a whole than previous generations. I realize that stereotypes aren’t necessarily fair, but data indicates that as a group millennials are OK with living at home with their parents even into their late 20’s, which actually makes term employment an attractive option to them in a tight job market.

The flexible and mobile workforces can be a wonderful thing for professional service businesses like ours. Imagine being able to expand your tax prep capacity on any given day with only about four hours notice. Or consider a short-term need for that in-house telemarketer you’ve been wanting to hire, but can’t justify an FTE for. If you don’t regularly engage in tax debt resolution work, and a large case suddenly falls in your lap that you aren’t equipped to handle, you can take the case anyway. Every one of these scenarios is made possible by the flexible workforce.

Consider the benefits of a mobile workforce. In other words, staff people (full time or otherwise) that aren’t physically present in your office. Ever. Imagine the savings on office space and IT support. Lower electric bills. Reduced overhead in almost every way conceivable, to be honest.

The mobile workforce allows you to run what we used to call a virtual office. That phrase has long since been displaced, because it’s already the new normal.

Just as an example, let’s consider a multi-million dollar per year, locally-oriented firm that specializes in 941 tax debt resolution on the front end, but also provides ongoing tax preparation, payroll service, and bookkeeping on the back … Continue reading

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Why You Should Become An Enrolled Agent

Note: If you’re already an EA, CPA, or attorney, then this post will be of zero interest to you. If you’re an unenrolled preparer, however, keep reading…

It’s becoming increasingly common for me to receive emails like this one from a return preparer in Sacramento, CA:

I would like to pursue this opportunity. I am currently not an EA. What ways have others moved ahead until they became an EA.? Can I hire one? What do you suggest?

Here was my verbatim reply to this particular email:

By “this opportunity”, I presume you’re referring to collections
representation services?

While hiring an EA, CPA, or attorney is definitely an option, I would still encourage you to obtain your Enrolled Agent license yourself. Honestly, the test isn’t that difficult for an experienced tax preparer that puts in a couple weeks of study. The Gleim test prep books are the ones I used, and they were pretty good.

The reason I would encourage you to get your license yourself, even if you hire a licensed person to do the work, is because by IRS regulation, you must be licensed in order to solicit representation services. In other words, it’s a violation for an unlicensed person, even an experienced preparer, to sell licensed representation services.

A couple weeks of study and a few hundred dollars for the tests is a tiny price to pay to be able to sell something as lucrative as tax resolution, in my biased opinion. 🙂

Since this comes up frequently, I figured it was finally worth it’s own blog post, so here we go.

Let’s start with the one thing that I feel I’ve become a broken record about over the past few years:

In order to sell tax resolution services, you MUST be licensed. This is non-negotiable.

I’m starting with this, instead of “why you should be licensed”, because I feel like it’s the most salient point for anybody reading this blog. Most folks end up here because of the information I provide on marketing and selling tax resolution services.

In case you’re not familiar with Revenue Procedure 81-38, this was the original Revenue Procedure covering limited practice without enrollment. Section 8 of this Revenue Procedure explicitly bars individuals that are NOT an EA, CPA, or attorney from soliciting representation services (which is what “tax resolution”) is.

Many folks erroneously believe that every provision of 81-38 was replaced by Revenue Procedure 2014-42, but that’s not true. 2014-42 modifies and supersedes 81-38 in the relevant sections, but doesn’t entirely replace it. 2014-42 was issued as a direct result of the Loving court decision, which struck down the IRS RTRP program (which I’ll discuss more in a moment). 2014-42 created the voluntary Annual Filing Season Program, and place further restrictions on limited practice by unenrolled preparers.

Here’s the single biggest change: Under the old 81-38, you had limited representation rights for a client if you prepared the tax return in question. Under 2014-42, this right was removed — unless you’re an Annual Filing Season Program participant.

This is obviously being challenged in court as of this writing, but no decision has yet been issued. Also, Congress has taken no action to authorize the Service to regulate preparers under Circular 230 (which I’ll also discuss more of in a moment).

So here’s the bottom line on 2014-42 and what’s still in effect from 81-38:

  1. You can no longer represent a client in an examination if you prepared the return, unless you’re an AFSP participant.
  2. You still can’t solicit representation services without being licensed. This means you can’t conduct tax resolution sales consultations or send personalized, situation-specific mailers, faxes, emails, phone calls, etc.

For these two reasons alone, I believe that every unenrolled preparer should either become an Enrolled Agent or accept the fact that your career will ONLY involve return preparation.

Return preparation is obviously a lucrative market. And unenrolled preparers that conduct tax resolution-style marketing to service the unfiled return market are doing quite well. So I’m not in any way trying to construe tax prep-only business models as a bad thing. In fact, executed properly, it’s an awesome thing — especially if you choose the 6-month vacation option.

But if you have grander ambitions for your business… If you want to be of greater service to your clients… If you want to get it on the “big bucks” in the tax world… Then you should become an EA.

Caveat: If you’re currently in the tax/accounting industry, and you already possess an accounting or law degree, but just never took the CPA exam or the bar exam, then I’d encourage you to do so. Why? Because the general public knows what attorneys and CPAs are. The “brand” recognition is immense, and you can bypass some of the marketing obstacles faced by those of us that are Enrolled Agents.

Assuming you don’t already have an accounting or law degree, however, I’d highly encourage you to register for the Special Enrollment Exam (SEE). That’s the formal name of the EA test.

It used to be that the EA exam consisted of four parts, given over the course of two days — once per year! That hasn’t been the case for a number of years. Now, you can take the SEE at any Prometric testing center, any day that they’re open for business. There are also only three parts – individuals, businesses, and representation/procedures.… Continue reading

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Making money *after* tax season

It’s been a hard push the past few months.

There’s one day left to go in a jam packed tax season. You’ve made plenty of cash to last for a while. You’re exhausted, and you’re just ready for it to all be over.

Sure, you’ll have some extensions to work on. But it’ll be the life of leisure after this week, right?

For most tax professionals, that statement couldn’t be further from the truth.

Now, if you’ve configured your life in such a manner that you can live on your tax season revenue for the remainder of the year, then I applaud you.

For most tax pros, however, it couldn’t be farther from the truth. The stark reality for most of our colleagues is that tax season is the time when you have enough money to finally catch up on bills, pay your own taxes, pay off the Christmas credit cards, catch up on the mortgage they were two months behind on, pay the kid’s next tuition bill, and on, and on.

Even though we make good money during tax season, it’s not that hard for it to suddenly all vanish, and then we’re struggling again for the rest of the year.

Here’s how you break out of that boom and bust cycle: Have multiple revenue sources within your practice to even out the peaks and valleys of seasonal business. Specifically, I suggest having three solid revenue sources within any practice, and my favorite happens to be IRS collections representation.

There are a number of issues impacting all professional service providers, including CPAs, attorneys, and EAs alike. Consider the following info from the legal world, while bearing in mind that similar trends exist in the accounting space:

  1. Smaller Pie – As the New York Times recently pointed out, “Legal forms are now available online and require training well below a lawyer’s to fill them out.” In other words, the Internet is decreasing the public’s reliance on attorneys for simple matters. The same phenomenon has been see for CPAs and EAs with the rise of QuickBooks, consumer tax software, and IRS Free File.
  2. More Mouths to Feed – The number of attorneys continues to grow: We saw 6,694 new attorneys passing the bar last year in California alone. Worse, a lot of the larger firms are laying off, and when those layed off attorneys can’t find work, they start their own practices, creating more competition. Business schools have been pumping out larger numbers of accounting graduates for the past decade, swelling the CPA ranks as well.
  3. Shallower Pie – People can’t afford to pay as much as before. The recent economic downturn has caused the demand for legal and accounting services to drop. According to US News and World Report, demand for legal services in the US contracted nine percent during the recession. While I couldn’t find any similar data for accounting services, we’re all aware that the used of paid tax preparers has been slowly declining each year for nearly a decade (although I have predicted that we’ll see a reversal of this trend when 2015 numbers come out).

The question quickly becomes: How do you stay ahead under these conditions?

It’s a well known fact that there are only three ways to increase revenue:

  1. Raise your fees.
  2. Get more clients.
  3. Do more business with existing clients.

Here’s the beauty of offering tax controversy representation: It’s an elegant way to implement all three at the same time.

Collections and audit representation yield high fees for the amount of work involved. It is a simple and elegant way for you to significantly increase your per hour rate.

Offering this service gives you something new to offer your existing clients. The first thing that any tax professional should do on April 16, 2015 is look through all your 2014 client returns and look for clients that had a liability that you’re not sure they can afford to pay. Then call them, and see if they need help with the issue.

Taxpayer representation is, in my mind, one of the most awesome ways to make money year round. But out of that comes all these new people that suddenly know, like, and trust you, because you solved their problem with the IRS. In fact, these people should be singing your praises from the rooftops.

That leads to two conclusions. First, you’d better be asking them for referrals. If you’re not, you’re flushing money down the toilet. Second, you should be doing their tax returns, and even their books, from now until the day you retire. These clients are gold, and will stick with you forever.

Offering IRS problem resolution is the best way I know of to make good money year round, grow your tax prep and accounting business, and eliminate the seasonal nature of being a tax professional. But how to get started?

Of course, I offer my own tax training courses to help you get started in this lucrative market niche. However, I fully recognize the fact that many people prefer to learn in a live format, with real people around. Learning via printed words or online video isn’t the easiest thing, and for some people that just doesn’t work. I totally get that: I did most of my undergraduate general education classes online, and it wasn’t easy.

If you’re the type of person that prefers to learn in person, you now have the perfect opportunity … Continue reading

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Why Your Tax Season Business Model Is Probably Flawed

One of the beautiful things about being in the tax industry is that we have the flexibility of choosing any number of business models we’d like in order to create the lifestyle we desire. Very few professions permit this level of work/life balance.

For example, there is the business model upon which nearly the entire retail tax preparation industry is based: The purely seasonal model. In this model, the business is literally only functional, with the doors open and staff and clients in the office, for a few months each year. For 2015, this means generating nearly every dollar of revenue between Jan. 20 and Apr. 15. This business model allows even the solo practitioner to earn a comfortable six figure annual income with only a few months of work.

The greatest thing about this business model, in my mind, is that it allows the tax professional to spend the rest of the year (e.g., 6 to 8 months) doing something completely different, and far more awesome, such as sailing the south Pacific.

A variation on this business model involves a small year-round business, with a significant seasonal swelling of staff, clients, and revenue. This business model is great for the practitioner that wants to work year-round, but doesn’t want to work full time year-round. This is the business model that the majority of tax professionals I speak with actually desire. This model allows the practitioner significant flexibility for multiple, short vacations nearly any time of the year, and allows one to set their own working hours nearly at will. Revenues in the off season can be dialed up or down as desired simply by turning marketing campaigns on or off.

You’ll notice that a key element of these business models is choice. As a business, it’s completely up to you to select how you want your business to operate, and how much time you want to spend operating in it and when.

For most of the past four years that I’ve been in private practice, with the exception of the first few months of startup, I’ve operated largely part-time, but year-round, with no tax season, offering only one service (tax resolution). This business model worked well for me, as it allowed me to travel the world while still representing my clients and making a good living. This business model also has some flaws, particularly the lack of client retention, but I accepted those flaws in trade for having the ability to be forever traveling.

For most tax professionals, however, especially solo practitioners, a significant flaw exists in their business model, and they don’t even know it.

Here’s the flaw: Tax season represents the bulk of annual revenues, despite working full-time, year-round by choice.

I’d like you to think carefully about this, because it’s important. Notice that I’m not referring to the second business model mentioned earlier, where a large swelling of temporary, seasonal staff is brought in. I’m referring to the full-time, year-round solo practitioner, or near solo. This is the small business that might have a single part-time or full-time assistant or receptionist, and maybe brings in one additional seasonal tax preparer to help out (but mainly busts through tax season by working an insane number of hours).

This is the business model for the bulk of independent tax professionals in the United States, Canada, and Australia. From anecdotal evidence, I also presume it represents the bulk of this blog’s readers. I figure that there’s about a 70% chance that I’m talking about YOU.

If you want to work full-time, year-round, then great. That’s your choice. But here’s what’s wrong with this equation for the vast majority of independent tax practices: When 1/4 of your work year represents 3/4 of your annual revenue. If this is what your business looks like, then you have a fundamental flaw in your business model.

From the perspective of an 80/20 analysis, if your business looks like this, then you’re doing something wrong during the other 3/4 of the year.

Are you in the office 40 hours per week during the “off season” (tax work is only seasonal if you choose to make it so), but don’t have any billable hours? If this is the case, then you have serious problems on your hands, I’m not going to sugar coat this. If you’re just doing busy work or hanging out on Facebook all day during the rest of the year, then you have significant time management and marketing issues that you need to address.

Do you have plenty of billable hours during the rest of the year, but your revenues are still incomparable to tax preparation season? Then you need to re-evaluate your pricing for your other services, such as bookkeeping, payroll processing, tax resolution, audit representation, etc.

Many tax professionals tell me that they’re thrilled during tax season because they’re hourly rate skyrockets. Don’t they realize how ridiculous that sounds? The value of your time shouldn’t be based on the time of year. If you average $175 per hour during tax season, but only charge $50 per hour for taxpayer representation during the rest of the year, then all you’re doing is shafting yourself and devaluing your services. If this is what you’re doing, take a moment to recognize the fact that it’s your own fault, and then fix it.

I could keep going on an endless diatribe about this, but I … Continue reading

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Four years later, it’s the end of an era

Today marks a special anniversary for me: It was four years worth of Mondays ago today that I made a life-altering decision. I walked out on my day job to enter the world of private practice and become a nomad.

Six weeks later, I was traversing a still-slick Vail Pass on a heavily overloaded motorcycle, threading the needle between two major snow storms. I remember stopping for gas along I-70, and people looking at me like I was nuts. I was also freezing my butt off.

But it was all worth it. I managed to rapidly build myself a successful, “stereotypical” tax resolution practice, and then just as quickly scaled it down to “boutique” size. While doing that, I’ve literally circled the globe, spent a decent amount of time in 13 foreign countries, met wonderful people, and experienced amazing cultures.

I wouldn’t trade that experience for anything in the world.

I’m a firm believer in living the life that you want to live right now. The whole fantasy of working your tail off for 40 years so that you can retire at 40% of your previous earnings and then going off to travel the world is exactly that: Very few people accomplish it.

Either they don’t have enough money, or they’re in poor health, or they’re simply dead. Yes, that’s right: It’s amazing how many stories are out there of people that wanted to travel the world “when they were able to”, but then kicked the bucket before everything was “perfect” for them to do it.

Not this guy.

Maybe I’m an odd duck. OK, I’m definitely an odd duck. But I’m OK with that. My life has had it’s ups and downs, just like anybody else, but I’ve made the best of it, I think, and it’s worked out well. But the single best decision I’ve ever made was to live life on my own terms, rather than what’s expected of me.

Fortunately, I’m not alone in this. There is an entire world of lifestyle design and location independence enthusiasts out there. The other nomadic types that I have met in my travels, and the “famous” ones I’ve chatted with online, all say that eventually they get burned out on being a nomad.

I’ve always been incredibly conflicted between the nomadic life, and having a home. It drives me nuts at times, because after a few months on the go, I’m ready to settle down. But inevitably, after a few months in one place, I’m itching to go again. My incessant indecision on this matter has been particularly frustrating to my mentor and my family.

Recent relationship events have made me examine this even more closely, which I actually didn’t think was possible. In case you weren’t already aware, I got married a month ago. We were ready to settle down, start a family, start two new brick and mortar businesses — everything that was the antithesis of the life I’ve been leading for the past four years (some analysts would say even longer, in some regards).

I’ll spare you the details, but the fantasy didn’t last long. I had found somebody that met every criteria on my 37-point checklist. What I never considered was that such a person might have itchy feet syndrome, too. We’re both traveling in from out of the area to file our annulment petition in what is legally my home state on Thursday.

Am I done being a nomad?

Alas, the answer is no. I don’t think I ever will be. When I look back on my very early childhood, my nomadic ways make a LOT of sense.

But at the same time, I want the best of both worlds. It’s nice to be in one place for a few weeks or a couple months. It’s nice to sleep in your own bed now and then. It’s nice to have a sense of community somewhere — to belong to something. Being a solo permanent traveler can be a lonely life.

As most people know, I’ve recently set up shop in Port Orchard, WA. This was going to be where I planned on being for three solid years. We had grand designs, but they just weren’t meant to be. My original business plan (available in the members area for Platinum Inner Circle members) called for extensive, personal one-on-one relationship building between myself and local high-end clients.

I sent an exhaustive explanation to Platinum members about this last week, but the bottom line is this: The business plan is changing, but the market area is not. In fact, I’m also giving consideration to adding one or more market areas.

At the same time.

For the same first tax season.

In different states.

Plus maybe Japan.

What on Earth am I jabbering on about?

I want to have my cake, and eat it, too. I want the best of both worlds. I want a home base, a place to call my own, but I want to keep traveling, also. And I’m recognizing the fact that I wouldn’t be happy with my original business plan, which essentially allowed me to take 2 or 3 trips per year of about two weeks each. That just ain’t enough, folks. Not for this guy.

This whole train of thought had a mid-air collision with one of those light bulb idea bubbles: What if I remove myself from face time with clients?

Kind of … Continue reading

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Maximizing tax office efficiency

When your tax practice operates at maximum efficiency, you are leveraging your strategic assets to produce maximum profits.

Most of us are in this business for the sake of creating profits. Otherwise, what would be the point of driving ourselves crazy with tax code and clients, right?

In my experience, when you are operating at maximum efficiency, you are able to enter an interesting world: Choice. I have long stated that your business should exist at your whim, not the other way around. Efficiency allows you to reach a state of being able to control certain variables — hold them steady — while allowing others to change.

For example, if you want to hold your weekly workload steady to around 10 hours per week (as I’ve done for the past two years, more or less), then you have to operate at peak efficiency in order to keep profits up.

Similarly, you can change gears at will. I am in the process of exchanging my fixed workweek for a geometric increase in profitability. Since I’ll be working with efficiency in mind throughout the entire process of growth over the next few months, my profits will multiply beyond the 4x increase in my tax workweek to 40 hours.

So how do you achieve this level of efficiency. It’s pretty easy, really: Systems. You might prefer to use a different word: Protocols, processes, procedures. Whatever the nomenclature, the bottom line result is the same: A collection of written steps for accomplishing well-defined tasks.

Right now, I am in the process of finishing up a joint project with Chauncey Hutter, Jr. to create such a set of tools for running a seasonal tax preparation office. I welcome your feedback on this process, so if you happen to have two or three minutes to complete this brief survey regarding what you would value most in such a set of systems, please complete the survey here:

Also for you today is a follow up regarding last week’s article. In order to focus on the elements of your business that are actually worth maximizing efficiency in, you have to spend some time working ON your business, like I did at Burning Man. I promised a webinar on the topic, and that will be happening tomorrow at 11am Pacific (2pm Eastern). This webinar, 7 Big “Ahas” For Working ON Your Tax Practice, will cover the areas of your tax business that I believe are important to work on regularly. To register for this webinar (which will include a Q&A period), please go here:

I appreciate your feedback on the tax preparation office systems, and look forward to seeing you on tomorrow’s webinar!

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