5 Reasons Your Tax Practice Isn’t Giving You The Lifestyle You Want

Originally posted yesterday on LinkedIn.

Today is Saturday Sunday. If you’re at the office working on extended 1040 returns, then you’re doing it wrong. (Edit: Even more wrong!).

CPAs, EAs, and attorneys go into private practice for many reasons, but for most of us, those reasons can be boiled down to one word: Lifestyle.

While that word has become overused, hyped up, trampled on, and beaten to death in recent years, the pure intent of going off on your own in the tax, accounting, or legal world is generally lifestyle driven. Whether that means you’re looking for a more relaxed lifestyle, outside the pressures of a corporate firm or the bureaucracy of working in industry, or you’re after the financial rewards that come from being your own boss, we generally go into private practice in order to achieve a certain lifestyle.

Unfortunately, most of the accounting and legal professionals I work with on a coaching basis are simply not achieving the lifestyle goals that they set out to for. As somebody that literally lived the Four Hour Workweek life for over three years while traveling around the world two and a half times, I can attest to you that it’s possible. And it’s awesome.

So what holds practitioners back from achieving the lifestyle goals that being in business for ourselves is supposed to bring? Here are the five most common reasons I see on a regular basis.

1. Failure to focus. There are many things you need to focus on in order build the type of practice that will drive a lifestyle. Two specific arenas where I see lack of focus is in service offerings and client selectivity.

The most successful practitioners are those that are specialists, not generalists. Specialization can exist in both the services you offer, and to whom you offer them. For example, while traveling full time, I offered one service, and one service only: IRS collections representation (more commonly referred to as “tax resolution”). I didn’t do anything else: No tax prep, no bookkeeping, no payroll, not even examination representation (audit defense). I was, and largely still am, a one-trick pony.

When you try to be all things to all people, you’re spread thin. You’re unable to build high-value expertise in any one specific area. This means you can’t charge premium fees for your services, and you end up being stuck with clients that want everything.

For most of my coaching clients, I suggest that they pick a core suite of services that are important to a highly targeted client market, and focus 100% on that, and nothing else. This enables you to laser-focus your marketing efforts, the CPE you take, creates a stronger referral pool, etc. Focusing your practice is liberating, and powerful.

2. Working with crappy clients. Let’s face it: Some clients just straight up suck. There are the time vampires that think you should be available 24/7. There are the accounts receivable nightmares that always need just one more week to pay you. There are the grating, annoying, or boring people that you simply dread taking calls from.

I believe that life is too short to put up with people that annoy you, don’t pay you, and take up too much of your time. Fire these clients. Immediately.

Every single practitioner reading this article has at least a few clients that come to mind right off the bat when this subject is brought up. On Monday morning, send them all a letter explaining that you’re taking your practice in a different direction and will no longer be able to service them. Provide them with references to two or three of your competitors, and cut them loose.

Even better, make an evaluation of your own A/R aging, and your time tracking logs. If you’re still servicing clients with obvious A/R issues… WHY? Same with the time leeches. Cut ’em loose.

Then, applying the focus tips above, engage in marketing to replace those clients with better ones. Clients that fit your IDEAL Client Profile, and rebuild your practice around better clients.

3. Lack of systems. Systems, processes, procedures, checklists. Whatever label you choose to apply, systems accomplish many things for your small business:

  • Increased efficiency
  • Improved customer service
  • Reduced waste
  • Fewer errors and omissions
  • Increased client capacity (which equals more revenue)
  • Reduced work hours

The application of written processes to just about everything in your office will make everything in your office run smoother, and eliminate much of the time-wasting “fires” that creep up.

My rule of thumb is that anything I do more than three times in a year within the business should have a written checklist attached. Everything from how the telephone gets answered to the timing and structure of marketing campaigns has a checklist. Many of these checklists for operating a tax resolution practice can be found in my Tax Resolution Systems manual.

4. Fear of hiring staff. Much like systems, adding staff to your practice liberates you from many tasks. Staff provide leverage, allowing you to expand your business beyond your own billable time. Staff are also key to stepping away from the business for any length of time (or even all the time).

The first staff person you hire is arguably the most difficult hiring decision you’ll ever make. It’s also the most stress-inducing.

Your first staff person will most likely where many hats, ranging from receptionist to office manager to return preparer.

If you’re a solo practitioner right now, and your aim is to grow your firm or work fewer hours, you must start hiring. The old adage of hire slow, fire fast definitely applies. Get the right person for the job you need to fill, and make sure you spend time clearly defining the role(s) you’re actually trying to fill.

5. Fear of change. Letting go of anything is hard. Practitioners are fearful of eliminating services, due to the immediate revenue loss. Same with cutting bad clients loose.

What must be understood is that in order for a hot air balloon to lift off, the dead weight holding it down must be cut loose. Be it clients, services, staff, or your own self-imposed limitations, you must be willing to cut the cord sometimes if you really want to grow your practice.

I’ve had many coaching clients that were incredibly resistant to change. Be it radical changes in fees, elimination or addition of services, abandonment and adoption of new marketing tactics, these practitioners were simply getting in their own way — and didn’t even realize it.

This is probably the most difficult of the five to change, but it’s definitely possible. Start with small steps, such as moving a potted plant to the other corner of the lobby (yes, I’m serious). If you can’t swallow a 30% immediate fee increase (usually the best way to raise fees), then do 5% per month until you get there. As you make small, incremental changes in your practice, it becomes easier to do so, and eventually makes rapid, drastic changes possible.

If you genuinely desire to build a practice that meets your lifestyle-based objectives, then start with these five common elements that often hold back practitioners.

Now, put aside that return that’s on extension and go play. It’s nice out.