How to market a new tax practice

This is not one of those “how to” posts that provides advice by a person presuming to have some expertise. This post is about me asking questions about how to market my new tax practice.

I face the challenge of relaunching my solo tax preparer practice over the next few weeks. I was drawn back to this field after a long eight years of recovery from an injury that kept me out of work for most of that time. While tax return preparation is not a highly profitable occupation, I really enjoy it especially when coupled with tax planning services. Apparently I am not alone: sole practitioner CPAs who prepare income tax returns tend to report a high level of satisfaction with their work life. Yet the stakes of this business plan are huge for me and my family. If successful, I will be well on my way to rebuilding the professional business that I loved. Fail and I risk severe financial stress and the possibility of losing our other small family business. Success vs. failure is fairly easy to quantify and measure in this situation. After some number crunching, I was able to set the break-even mark at 100 tax clients. More than 100 means success. Less means financial struggle and an uncertain future.

A unique situation

The unique and most critical aspect is that I need to go from zero clients to more than a hundred clients in a matter of only a few weeks so this means that marketing must be well planned. In contrast, most sole practitioner CPA tax practices already have a core of clients and simple add or replace a portion each tax season. Existing clients often form the primary source of referrals. This will not be the case here. In my case, I had been out of the business for 8 years so this plan requires a complete rebuilding of my professional practice. All my former clients were repositioned with other firms where it would be inappropriate to solicit them.

The advice

While planning the business relaunch I sought advice from peers as well as marketing professionals. This mostly helped clarify what I intrinsically knew to be true, but had not verbalized or clarified to the extent that others were able to do. It helped to gain clarity on “what works” vs. “what doesn’t work”. Not surprisingly, there are a range of opinions on any individual marketing strategy and this made the process of evaluating advice more challenging. I focused on gathering a consensus opinion. In this end, this is the advice I took away:

What works – personal referrals from people you know.

What does not work – print advertising, online advertising, and third party CPA marketing firms.

Unresolved effectiveness – I did not find any consensus on the effectiveness of in-person marketing efforts

The challenges

1. Up-front investment – The tax preparation has changed dramatically over the past eight years. I had to invest thousands of dollars of up-front costs and perhaps 500 hours retraining for operation in a new e-file environment. It took a disciplined approach over eight months to make it happen. So far I’ve run about two thousand dollars over budget for setup and marketing for things that I did not have originally anticipate. These things wouldn’t be such a big deal if I wasn’t starting from zero revenue.

2. BBB – I was involved in an awkward argument with the Better Business Bureau about a year ago that had nothing to do with my tax service or my business history. In fact I’ve never had a consumer complaint or an issue with the BBB in decades of operation. I accused the BBB of misinterpreting parts of the Affordable Care Act and taking inappropriate action to sabotage my A+ accredited business reputation right before I gave a national presentation on Affordable Care Act planning for small businesses in late 2013. Their concern was sparked by an interview I gave to Yahoo Finance. They questioned my business licenses and my right to use a trademarked business name. I realize that the public could care less about any of this squabble, all they want is to see the A+ business rating. It now appears that the whole problem will be favorably resolved within the next few days.

3. Duel role – The inherent challenge of a CPA sole practitioner is that every hour spent in any marketing activity is an hour less spent performing a paid service. In the heat of tax season, this time balance will become a critical issue.

Strengths, Weaknesses and Irrelevant factors

A good marketing plan should start with a consideration of strengths and weaknesses. During this process I also came to understand that there was a third category of items that I had to consider and eventually conclude are just irrelevant. Things that I initially thought to be a strength or weakness often turn out to be irrelevant in this regard on closer inspection.

Strengths include my reputation in tax planning, the many articles I’ve published over decades that show up in Google searches about tax topics, citations in major publications like Money Magazine, support of the state CPA association, and plenty of potential referral relationships. I have the right credentials and training, strong software system support and a solid understanding of the technical issues.

Weaknesses include the weakened quality of my personal and professional relationships due to the long absence from work, no current client base, the lack of a commercial office location, my focus of work on an economically depressed and lower income region of the Delaware Valley, the need to devote so much time to my ongoing physical recovery, the added financial stress caused by debt accumulated since hurricane Sandy, and lack of local CPA peer relationships. I am also concerned about my natural tendency to offer pro bono services to help out the “little guy”.

Irrelevant factors include my prior print or hard media publications, teaching experience, peer group leadership positions, Anything 8 years old is ancient history in today’s business world. Also I came to the conclusion that third-party credentials like QuickBooks certification and certain ACA-related professional certifications – while that may have influence elsewhere – mean little to potential clients when selecting a tax preparer. My well-developed privacy and data security systems are not likely to influence anyone in the selection decision since these are presumed to be equivalent across all tax service provider choices.

The ideal client

Most marketing plans define an ideal target client and presume to set about finding more of these. This is not necessarily the case in a sole practitioner tax practice. Diversity of client base actually helps distribute the work load and flow more evenly overt the tax season. For example, having a group of individual clients with simple tax returns who want fast refunds will help launch the practice in January. At the opposite end of the tax filing season, business clients who need to make substantial contribution to retirement accounts are typically put on extension so that the calculations and tax preparation work can be completed next summer.

Aside from this it still makes sense to define an ideal client. In my case the best success stories are self-employed people, typically contractors for larger companies, who had a better year in business than they anticipated and now face larger tax bill, Their new increased motivation to focus on income tax planning makes them ideal clients.

Most people presume that it makes sense to focus geographically on your home town where you make your daily trek and know the most people. For me that means the neighborhoods just west of Philadelphia: Bala Cynwyd, Manayunk and Ardmore. The reality is that in the past I’ve had clients in every state and I’m not convinced that physical proximity should even be a consideration in the selection of a tax preparer. Of course, it doesn’t matter what I think about geography; only what clients want in a tax preparer.

Pricing, Revenue and Budgeted Expenses

I chose to focus solely on building the number of clients first and then work on improving revenue per client and fine-tuning pricing later. I elected to shadow the pricing of the nation’s largest tax preparer (H&r Block) that reports tax preparation revenue of just under $200 per client. That means that if I do 100 tax returns my gross revenue for tax preparation under this plan would be $20,000.  Expenses are expected to be about $5,000. I understand this is overly simplistic approach but it is useful to me in that it leads to a basis for a break-even analysis.

The marketing plan

1. An initial professionally written press release will announce the launch of the business

2, Use a soft launch of marketing efforts with a test group and use the early feedback to help fine-tune the later steps

3. Build a list of about 100 potential referral sources of people I know. Write to and speak with each one to request referrals.

4. Distribute professionally designed color flyers, over-sized post cards and specially designed business cards in local public places. Ask people I know to help distribute these. Hire some part-time help with the physical distribution task.

5. Establish a physical and online community “meetup group” where people can come at a designated time to meet and ask questions without obligation.

6. Follow-up with potential referral sources

7. Track results and  immediately call* to thank every person who refers a new client

8. Use social media to report progress with the business launch. I will be open about how it is going, ask for ongoing advice and discuss what’s working and what is not.

The results

I will post follow-ups later to report results.

*It may be old-fashioned but I still use telephone as the primary business contact method. More often than not I reach a voice message service and receive no call-back to my message so e-mail and physical mail note cards are used as secondary follow-up methods of communication.


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