In other posts on this blog, I’ve covered the topic of client acquisition cost fairly extensively.
I’ve also written extensively about the lucrative nature of this particular service. To give you the short version, there are 12.4 million active IRS collections cases right now, and the average 1040 client pays about $2,500 for full service representation. Business clients are even more lucrative, paying average fees of $3,500 for straight forward 941 cases, and thousands more on top of that for a variety of unique situations, lien work, 6672 representation, etc.
Combining these two factors, something readily apparent should emerge: You need to determine how much you’re willing to spend to acquire a client.
Without a sales staff to pay commissions to (which skyrockets your client acquisition cost, plus introduces a host of other problems, of course), my cost of client acquisition has average around $400 for tax resolution work. That’s a rough average across all my lead generation efforts, both paid and free, as well as my lead follow up costs to convert leads into prospects over time (there’s a HUGE marketing lesson in that sentence, by the way).
I’m more than happy…no, I’m ecstatic to pay $400 to make $3,500. That math works for me. $400 in…$3,500 out. Sure, there are ups and downs. Some cringe-worthy marketing tests sometimes. But all in all, that’s the formula.
How much are you willing to spend to acquire a customer? Seriously, think it over. It’s one of the single most important questions you can ask yourself if your goal is to GROW your tax practice.
My answer to that question is actually much more than my $400 average. In fact, it’s three times as much. Yes, I’m willing to spend up to $1200 to acquire a single client. In fact, given some challenges with conducting tax resolution marketing campaigns in my new home town, that number is probably going to increase. By the end of summer, I expect to be willing to spend $1600 to acquire a high-fee tax resolution client. Mind you, that won’t be my average, just my maximum.
If those kinds of numbers induce a panic attack, I’ve got some good news for you.
Two years ago, while visiting the beautiful city of Tallinn, Estonia for a full month, I conducted an experiment. It was a wildly successful experiment, and over the following 18 months I repeated it twice.… Continue reading