The amazing Derek Redmond finishing the race after tearing his hamstring in the 1992 Olypmic Games
I've met my fair share of Derek Redmond's in the tax industry. So many that, I've witnessed tax offices close their doors for good. The foremost question and need I receive is "Jason, I've given blood, sweat and tears to no avail...what else can I do to have a successful tax practice?"
With that spirit, I want to share the interesting insights and attributes of the successful tax firms that I have spoken to and observed over the years with you...I want to do everything I can to help you and your firm cross the finish line of "success."
Part One of the Series...
Rediscover the belief that drove you to start your business. Make the belief so compelling that your clients and employees will adopt the belief as their own...if you do they will follow you anywhere and forgive any of your shortcomings...
While working at Intuit, I had a potential customer, Andrew, who worked out of his home. He was doing over 300 returns in Washington State, using a $300 Excel based tax solution. Andrew was just getting by financially and was still working a full time day job. His primary goals consisted of adding more clients and growing his business.
Even though the tax solution performed well, he found himself allocating his time inefficiently. After I showed Andrew our solution, he understood the positive impact it would have on his business. Unfortunately, his biggest challenge was incurring the extra cost. He realized it was going to cost him an extra $10-30+ per return, something he couldn’t afford.
To my surprise, I discovered he was only charging $30 a return!
In order to be profitable with the new system, he would have to double his prices. Andrew’s priority was for each client to get the maximum legal tax avoidance on every return. His pitch was very simple and clear. He had a relentless passion to help and a belief that consisted of being friendly, polite and extremely knowledgeable of tax law. So much that, his clients had a strong loyalty towards him. As far as compensation goes, unfortunately, in his mind, he valued his service at $30 a return; he saw what the competition charged, and did the same to seem competitive. I was not surprised at all when he told me his problem was having too many clients and turning new ones away.
Concerned for his business, I told Andrew to send an email to every client, requesting to have their perspective on a technology upgrade. The email acknowledged a $35+ price increase for his services along with increased productivity and efficiency for his clients. With fear of losing his clients, he also asked if they would leave his practice.
To his piece of mind, every one of his clients replied, "no, I would not leave." Some even said, "you could charge 3-4 times more and I will not leave." It wasn’t until then that he realized that his clients valued the "why", his belief, and "how" he offered tax services. They weren't just purchasing a tax return, but rather buying a belief that drove his practice. He told me he didn't realize how much he was undervaluing himself until he read the customer comments. As a result, he gladly purchased my solution, raised his fees, and is loving life with a full time tax practice to this day.
You won’t imagine how many knowledgeable tax professionals, including CPA's and EA's, would disregard an upgraded tax solution because it was too expensive. It’s the unfortunate truth.
Why? Well, most tax professionals value their work and aspire to grow their business. Still, it all comes to risk vs reward. All things considered, it’s important to value your input and how it reflects your client’s outcome. Having said that, we should focus more on value and experience rather than pricing. If you rely on price in order to remain competitive, then you’ve lost sight of what inspired you to create the service in the first place. Then, it’s only a matter of time before you provide discounts, and consequently, the discount revenue death spiral of your firm...
On the other hand, I also spoke to many thriving practices that wouldn't take returns less than $700 and up to minimums of $2000+. Some even actually turned clients away because they had enough revenue and were enjoying life. These firms told a compelling story about the founders. Their belief and valued work drove them to start a practice that resulted in how they uniquely serve their clients to this day. Once the taxpayer is emotionally sold on the "why", and the firm would show them "how", they explicitly show why they’re different from competitors. This reinforces the taxpayer’s choice of working with them.
Simon Sinek spent years studying why organizations are successes or failures. He understood that organizations that have a compelling belief, adopted by employees and customers, will drive results, regardless of price.