How To Compile Your Client Reactivation Lists

One of the most labor intensive components of gearing up your tax season marketing is compiling your list of inactive clients, cancellations, and no-shows from prior years. Today, we’re going to delve into why you want to do this, what information you want to compile, and the mechanics of putting it together.

The first question you’re likely to have about this process is a simple one: Why? What’s so important about this, compared to doing new lead generation?

While the exact number varies by marketing media, the Direct Marketing Association tells us that on average it costs six times more money to acquire a new prospect than to work with one that we already have. When you have a “house list” of people that you already know are interested in your services, no matter how much or how little that level of interest, you are in a far better position to market to that list and achieve a good conversion rate of prospect to client.

The other benefit of working with such a list, rather than a cold list, is that these prospects already have some sort of relationship with you. They know who you are and what you do. If you haven’t kept in touch with them, which is my assumption here, then their might not be a very strong affinity, but at least they’re not a complete stranger. As we’ve discussed many times before, marketing to a list of people that know you is far more cost effective and yields better return on investment than marketing to cold lists.

Granted, you have to do cold marketing in order to build your warm list, but if you have an in-house list of old prospects and past year clients, you should always invest more time and money into marketing to that group than in doing new lead generation. This applies to any service you are offering, not just tax return preparation.

So now that you understand why you need to compile this list, where are we going to gather the data from? Since you’re running a tax practice, you’re probably used to keeping records around for a while. We’re going to scour those records in order to compile the necessary lists.

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If you’ve been using a computerized appointment scheduling system for any length of time, then you already have a good base to start from. Your tax preparation software may also have a function that allows you to export a client list. Your tax software won’t include people that cancelled appointments or simply didn’t show up, however, so you’ll need to look through appointment books or the scheduling system in order to find those names.

If you only recently switched to using tax software, you have a much more daunting task ahead of you. It is worth going through your old paper files in order to obtain information regarding clients that may not be in any of your electronic records, if those computer files are only a couple years old due to the e-file mandate.

How far back should you go? The honest answer is to go as far back as you have paper files. If you’ve been in practice for a while, there are probably old tax returns in your archives that you prepared a decade ago, and haven’t seen the person since. While it might sound like overkill to go back that far, the fact is that you want as comprehensive of a list as possible.

If nothing else, I would suggest going back at least three years. Somebody that came to you three years ago, and didn’t come back for the following tax season, is more likely to still be in your area than somebody from 10 years ago. They are also more likely to remember you, and you’re also going to be within the 1040-X window in case you need to amend a return prepared by whomever they went to after you. The amended return strategy is a great way to win back customers (it’s been a major customer driver for H&R Block the last two years).

In the past, if you used any sort of lead tracking card or referral cards, consider pulling those out again and match them up against returns actually completed. Those that you did returns for will go on your inactive client list, and those that were referred to you but that did not have a return done will go on your warm prospect list.

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As you can see, the general idea is that you want to use any source available to compile your house list. This can be a time consuming endeavor if you are new to electronic filing in particular, but if you were ever going to go through this exercise, right now is the time to do it. The current calm before the first peak storm is the perfect time of year to be doing this, especially if you have added seasonal tax staff that are sitting idle right now.

Remember, the goal is create multiple lists. They can all be in the same CRM database or Excel spreadsheet, but you need to segregate the names using some field flag or indicator in a column as follows:

  • Clients for whom you prepared a 2011 return.
  • Clients for whom you prepared a 2010 or earlier return, but not 2011. Go back as far as you reasonably can.
  • Cancelled appointments, no call/no shows, and leads/referrals that did not book appointments.

These three categories are your minimum categories. You can obviously separate them further, and you should keep information on hand in order to do so, but these are the three core categories. This is your house list, and it is the single most important key to a successful tax season.

In the future, I will refer to these three categories as follows: active clients, inactive clients, and warm prospects. These three categories form the base of all tax season marketing for established tax preparation practices.

Tip: If you’re just getting started in private practice and therefore don’t have past leads, referrals, and clients to work through, then you need to be in full on new lead generation mode in order to start building your house list. This is a topic I cover extensively in the weekly TMT Premium emails, since it’s a process I’m working through right now myself since I recently moved to a new region of the country.

In our next issue, I’ll go into what specific information you want to compile across these three categories, and what you can do with that information to accelerate the growth of your tax practice.