I received an interesting question via email yesterday from a Tax Marketing Tips reader.
I have a question regarding the future outlook of tax resolution. If the average client yields roughly $2,000, and the average client for tax preparation is around $275, why are you getting back into tax preparation this season?
I wrote him a lengthy reply, and realized he wasn’t the only person that probably wondered about that. The answer has to do with something I write about a lot: Control your tax practice, don’t let your tax practice control you.
Remember, it’s your business. You dictate how you run your business, and there is also a reason that you’re in private practice or running a growing firm. Your reasons might be different than mine, but ultimately it’s up to you to create a tax practice that lets you live the life you want to life — whatever that might mean for you.
First, let me clarify that I’m not getting out of tax resolution entirely. I will still take on tax resolution cases, but because of my marketing systems I’m in a position to pick and choose the cases that I want to take, and when I want to take a case.
One systemic change that I recently made was that in my engagement letter I now place a 120 day limit on the duration of the flat-fee representation that I offer. Because of this, I’m also choosing to work with clients where I have a reasonable expectation that we can resolve their situation within that timeframe (most cases can, but the client needs to cooperate to make that happen). I’m also not going to take any new cases after December, because I want to make sure to have all my cases wrapped up by the end of tax season (I’ll explain why in a moment).
Second, I’m experimenting with some drastic changes to how I do tax resolution work for clients. It’s a radical experiment in how collections representation is packaged as a service, and sold. Because it’s an experiment, I’m not at a point where I’m going to discuss it, because I don’t know how it’s going to go yet. I’ll let you know the results of the experimental changes in about 6 months.
So, why am I changing gears into seasonal tax work? Simple: It’s a “lifestyle design” decision.
I’m single, no kids, no pets, etc., so I spend a lot of time traveling – because I can. Tax resolution is far more lucrative, and allows me to take my work on the road with me, which I’ve been doing for over 3 years. However tax resolution is always “on” — it’s year-round, and some cases can drag on for a LONG time (I have one client that I’ve now had for over 14 months that keeps pyramiding liabilities quarter to quarter). I cannot simply walk away without phone, without computer, etc. I have to stay connected every day, and if I’m in Europe, Japan, or Australia, the time zone situation back to the US is not pleasant.
Tax preparation, on the other hand, requires me to be here in the States for tax season, but I can walk away when the season is over. When May rolls around, I can drop off the face of the Earth for three weeks, with no contact with the outside world, if I want to… And I plan to. I simply cannot do that with full time tax resolution.
So it’s a trade-off: Tax resolution allows me to be mobile year-round, but I have to stay connected to the grid every day. Tax preparation requires me to physically be in one place for 5 months per year, but after that I can unplug and disappear.
Recent changes in my personal life that happened over the summer made me decide that I wanted to have a “home base” here in the U.S., and I now want to spent my summers sailing the south Pacific, which requires me to have two to three weeks at a time where I’m completely off-line. While satellite Internet does exist at sea, it’s not very reliable, and running VOIP phones over it would make for a terrible phone call. Also, FedEx does not deliver when you’re 1,300 miles from land. While it’s extremely easy to do collections representation from foreign countries with no drop in customer service (and without your clients even knowing, by the way), it’s simply impractical to do the same thing on a multi-week transit between islands.
This is the sort of thing that I mean when I talk about controlling your practice, rather than letting your practice control you. The interesting part of it, since I have systems for running the tax resolution side, is that if I decide that I want to take on a few cases and make some extra money for something, I can flip a switch and turn it all back on at a moment’s notice.
We’re in a profession that affords us a fairly unique opportunity to create the kind of lifestyle that we want. You can remain a solo practitioner and make $500,000 per year working out of your home office if you want to put in the the hours. You can also make good money working long hours, but for only 12 weeks per year, and then go play the rest of the year. You can also create a business where you make decent money, but only work two or three hours per day, and spend the rest of the day playing with your kids.
What’s even more amazing is that if things in your life change, and your priorities and desires change, then you can transform the type of business you have extremely rapidly. You can change from any of the example “modes” mentioned above to any other mode within a few months, at most.
What I want out of life, and the way in which I want my time off bundled, has changed. Formerly, the business model that supported my ability to permanently travel the world is what I wanted, but required me to be “tethered” — it was impossible for me to take a one or two week vacation without phone and email. Now, my priorities have changed, and I want to be able to take that two week break, so therefore I’m clustering my work time into the winter and spring so that I have the ability to take long periods of time off.
What kind of tax practice do you want? How do you want your time off bundled? What changes do you want to make to be free at certain times of the year?
As tax professionals, we have an amazing level of control over how our work-life balance is structured. It’s up to you, however, to exercise that control.