Category: Get More Tax Clients

Marketing cost comparison for reaching $1 million

I recently released the 5th edition of my book about building a million dollar taxpayer representation firm, and one of the things I addressed in this edition is the concept of stepping up your marketing expenditures in logical increments.

As I was thinking about this, it dawned on me that many existing IRS representation practitioners probably think that it’s cost prohibitive to build a practice that size by using the kind of marketing that I advocate doing. Due to this line of thinking, they instead do what “tax resolution” firms do: Hire an army of telephone openers and closers to cold call tax liens.

Not only is this practice a violation of Treasury regulations, it’s also one of the practices that gives a black eye to all of us engaged in taxpayer representation. Companies use this boiler room telemarketing approach for an obvious reason, of course: It works.

This leads practitioners to think it’s more cost effective to do business this way. But is it really?

What does it take to hit $1 million in new client fees annually? Grab your calculator, folks…

Assuming an average fee of $3,500 per client (which is actually on the low side, but it never hurts to be conservative), we need 285 clients per year to hit the magic million mark.

Now, you’re going to have to take my word for it on these conversion numbers — but I can assure you they are based on real life experience in real tax firms, not just on conjecture. The average telemarketer (“opener”) must dial 60 tax liens in order to find one interested person, who is transferred to a sales closer in most boiler room operations. This closer will close, on average, 9% of these prospects. So, in order to get ONE new client, a company has to churn through 660 tax lien filings, at a typical cost of 35 cents per record to purchase. So, that’s $231 just in lead costs.

Now, the opener also typically gets a 10% commission at most companies, and the closers receive, on average, 20% to 30%. Lets’s again be conservative, and together give the sales guys 30%. Note here that we are also ignoring minimum wage laws and other costs for this sales staff, which most firms do ignore, believe it or not. So our $3,500 new client also costs us $1,050 in commissions, for a total of $1,281 that we … Continue reading

A Totally New Way To Look At Tax Resolution

Are you looking to completely transform your tax and accounting practice?

Do you want a simple, focused strategy for getting started in tax resolution?

How about this from left field: Stop being an accountant.

When I was building my own firm, centered around the transportation industry, I became more than just a tax problem fixer: I became a business consultant to the trucking firms I worked with.

Many accountants take on a broader advisory role with some of their clients without even thinking about it. Consider the clients that you have an incredibly close relationship with, which goes far beyond just tax and accounting.

For many small business clients, you are there one and only source of tax, accounting, and financial information. Most of these business owners know an attorney, but do not have a close relationship with one. As such, it’s not uncommon for accountants to sometimes become de facto legal advisors on general matters, also (you shouldn’t, obviously, but the reality is that it happens more often than we all care to admit).

When I was working primarily with small trucking companies, here are just a few of the additional services I advised them on, beyond resolving their tax debt problem:

  1. Controlling employee costs
  2. Managing credit
  3. Brokering freight
  4. Factoring accounts receivable
  5. Adapting new technology, such as GPS tracking, electronic log books, and weigh station bypass systems.
  6. Managing tractor/trailer registration in other states
  7. Recruiting drivers (competitive CDL market at the time)
  8. Sales training
  9. Creation of policies and procedures to operate more efficiently

Taken as a whole, these services are typically classified as management advisory services or management consulting. I have never labeled myself as such, but in all reality, this is what I really did for a living. It just so happens that it was all anchored by the 941 representation, with the management consulting usually kicking in as a direct result of the federal tax lien impacting the company’s factoring agreement.

These additional services are precisely what allowed me to easily justify the five-figure fees I would routinely charge these clients. When a small, mom and pop business is paying you $8,000 to $12,000, on average, it ain’t just for the tax work.

Tax Resolution + Advisory Services = Higher Fees + Better Client Relationships + Fewer Clients

I consider myself to be one of the laziest people on Earth. Seriously, I’d rather sleep or play with the dog than … Continue reading

Tax Resolution Marketing: How To Save Yourself $15,000…

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