We built a successful, high volume tax practice from scratch in just three years with minimal starting capital. Check out our methods and results for free.
Why a tax practice?
Tax firms, historically, are a relatively low capital, low risk, and high return on equity business idea. Tax deadlines naturally draw customers to your business.
Perhaps the biggest advantage are the extremely low start-up costs.
To get started, you mostly need a phone, a website, a computer, tax software, desk and chairs, some paper, a printer, and a few inexpensive office supplies. This is much cheaper than starting a restaurant, for example.
Getting started with your own tax practice
The hardest part with starting your own tax practice is the transition from working for someone else to heading out on your own.
This can be especially challenging because in many cases you must abandon your current salary and start again with zero income. There are also issues with non-compete agreements, having no clients, and start-up cost capital.
The challenges of data management
Some of the biggest challenges to owning and managing a tax practice is data management.
You will have hundreds of emails, faxes, calls (containing data given verbally), and drop-offs and most clients will not provide all of the data you need. Going by memory is a bad idea and is setting yourself up for failure. You need systems and controls to effectively organize, store, and process the data so it is useful.
As difficult as it is, the key to a quickly successful tax practice is being able to do this well, and to do it better than much of your competition.
Building clients for your tax practice
If you can serve 800 clients each year at $350 per average tax return, that’s $280,000 in gross revenue.
Do this number spark your interest? Well it’s totally available.
The tax preparation industry is under-saturated world wide and anyone who is moderately smart, polite, and responsive to clients can find and keep them and realize these numbers and higher.
New clients can be found quickly and easily through advertising (especially online), referrals, blogging, online business listings, and local networking.
The best way to build clients is by getting referrals. You do not have to pay clients to get them to refer you. You just have to care enough to do a good job form them and ask them to send you business. Not only are referrals free but they often make the best clients for some reason.
Dealing with issues
In this article we explain how to run through the client interview quickly and efficiently, even with clients who talk too much or are not focused. See our checklist for processing problem clients quickly.
Tax practitioners should be “firing” some clients. I don’t really know the exact number, but perhaps one in ten or one in twenty people are ineffective and totally unreasonable to deal with. You must be willing to let them go – and notify them that you will not be helping them,next year. Please be sure to do this in a very professional way and do not do it for reasons that are illegal or unethical.
Bad clients will sap all of the energy form you and your staff and take away from the great service you could be providing to your reasonable clients.
Good professionals own their mistakes, apologize for them, and take the lesson from the issue – rather than the emotion.
Growing a tax practice
At some point after start-up, and usually by the second year, you are going to need help. There are many different positions for which you can hire depending on the scope of your business.
Social media and reviews
You will need a good presence and you must respond to negative reviews humbly and maturely, with a solution to the issues.
This guide is a work in progress. Please check back often for new content.