I have been consistently open about talking about my own successes and failures, strengths and weaknesses, within my small businesses and career over time and this story is meant to share a recent weakness. I understand this level of openness is considered outdated in the current business climate. Yet I still believe that it serves a higher best interest.
I left a powerful Wall Street firm 35 years ago so that I could help ‘regular’ people achieve their financial and business goals rather than help the ultra-rich get even richer. Yes, I was too young and too idealistic. There was not then, and still might not be today, a proven business model to deliver that intended service. Yet I still believe that small businesses are the core strength of the world and that inspiring others to higher achievement is the greatest occupational calling. I established a virtual financial planning office by the late 1990s because I wanted to spend more time at the Jersey shore. I worked out pretty well and at one point was a leading national producer for some financial service firms in those years. I sold a related dot com spinoffs business and decided that I wanted to return to one-on-one financial coaching.
Fast forward to today: My current revenue model is based on charging roughly 2% of a client’s gross income for a maximum of 50 clients so that, based on this simple math, my gross income would eventually approach the average gross income of my clients. My model of handling all client services myself limits me to a maximum of 50 clients. It’s just a mathematical thing based on the number of work hours available. Obviously, some clients were larger, and some were smaller. It does not use leverage or scaling but does provide an excellent level of service as evidenced by strong client reviews.
That revenue model worked for years but was destroyed during the Covid years when I had many clients die, become disabled, or close their businesses. Virtually all of the larger clients I had three years ago are gone now.
I adapted a client replacement strategy that was working decently well. In 2022 Google changed its Google business listing algorithm to show my listing to people within a limited number of miles of my rural location. We have mostly crabs and oysters within 10 miles of my rural bayfront location and very few people, so that was a problem. Then in January 2023 Google inactivated my business listing altogether and apparently deleted the five-star reviews. This was triggered by my planned change in trademarked business names and planned opening two new office locations in 2023. I was unaware that the Google business listing with so many strong reviews was responsible for most incoming new business calls. Those calls have stopped completely.
I decided to continue providing individual tax preparation services in 2023 while I work on rebuilding the Google listing and replacing the larger clients lost. This was intended to provide immediate replacement revenue while I added business clients who need ongoing service. Some of these clients might only want me to file their paperwork for the government once a year and would have no need for help with financial help, tax planning or growth throughout the year. I see a growing need for occasional help for people who prepare their own tax returns. Very few CPAs offer that support. I understand that $1,000 is the minimum tax prep fee charged by other CPA firms in this area that do tax prep as a solo service, so I simply copied that. If paid on a monthly basis, with transaction fees, that works out to $92 per month. I offered the choice of pre-payment for past year’s work or monthly payment for future work. A new automated account management system allows clients to enroll and stop service on their own schedule. I figured that even in the worst case 50 clients at $1,000 each would keep me in business through 2023.
I was unprepared for the second wave of client objections at the start of the tax season. It’s not their fault that outside forces forced me to change fee schedule. It’s not their fault if they missed earlier announcements of the change. But I lost about half of last year’s paying individual tax prep clients so far.
This week I proposed to my practice advisers and peers that I would be willing to handle individual tax returns for 2022 based on last year’s fee plus 10%. My advisers and peers unanimously object, saying that is a compromise that, they believe, is a poor decision. So as of today, three weeks into 2023, I am still undecided on how to handle returning tax prep clients who paid less than $1,000 and what to do for replacement revenue while I continue to rebuild a new business generation system.