You don’t get paid until you close a tax service sale

None of us want to think about it, let alone admit it, but each and every one of us is a salesperson. If you are professional service provider, then you must first sell your services to a new client before you can ever put on your CPA, EA, or attorney hat.

This is why I always say that that most successful tax professionals study marketing and sales just as much, if not more, than they study their actual profession. Your Masters in Taxation or your LLM Tax is all and good, but to be quite honest, it doesn’t matter one bit if you’re in private practice and a high school dropout is outmarketing and outselling you. And yes, this happens. In fact, it could be happening to you without you realizing this.

This week I’m going to be talking about sales every day. We talk a lot about marketing to generate leads, and marketing to those leads over time to build a relationship with your prospects. But this week we’re going to delve into what happens after they actually come to visit you or they contact you on the phone.

Due to the fact that I consider tax resolution services to be the most difficult thing to sell within the tax and accounting sphere, I’ll be using that as the example.

There are dozens of different selling schools of thought that exist and that are taught via courses, books, and seminars. Personally, I am a firm believer in the “needs analysis” method of selling. This method has recently started to fall out of vogue in the guru universe, with a move back towards 1970’s style methods of selling in some respects, which tend to push the prospect in one particular direction and is based on creating agreement to options of the widget as you move towards making the big sales decision. For professionals services, I believe this method to be overly pushy, and would leave a prospect feeling as if they didn’t make the buying decision themselves (because they didn’t, we did). So for now, I am remaining a firm believer in needs based selling.

Needs analysis based selling also fits in perfectly with your existing … Continue reading

Six Sigma application to accounting processes

Yesterday, we took a look at applying the Six Sigma-style process improvement model to a specific marketing example. Today, we’re going to do the same thing, except we’re going to do it to an accounting example.

Remember, the steps are as follows:

1. Define the problem.
2. Identify how to measure.
3. Analyze your data.
4. Implement experimental improvements.
5. Measure the outcome of the new methods.

Let’s start with a common problem among tax and accounting professionals: The Return on Investment (ROI) of doing 1040 returns. Let’s go through each step one by one.

1. Define the problem: It is not uncommon for the equivalent hourly fee for 1040 preparation to be far less than your regular hourly billing rate. If you bill out at $175 per hour, then you should also be getting that amount from your tax preparation activities. For the sake of this example, let’s say that it turns out that you gained $80,000 in revenue from 1040 preparation this last tax season, and logged 640 work hours in the progress, including your time meeting with clients, preparing returns, and delivering client clients. That works out to $125 per hour, a full $50 per hour less than your target.

2. Identify what to measure: We’ve already pegged that, actually: Dollars per hour. This introduces three ways to look at our data, for the next step.

3. Analyze your data: In order to increase equivalent hourly rate for this example, we can either increase revenue, decrease our time, or leverage ourselves with a tax preparation assistant at a lower hourly rate.

4. Implement new methods: For the next tax season, you decide to hire a tax preparation assistant to help you with returns. For $20 per hour, including payroll taxes, worker’s compensation insurance, and other employee costs, you have a full time assistant for 8 weeks, at a cost of $6,400.

5. Measure results: With an assistant, you’re able to handle more new client interviews, including more time to spend on complex returns that your assistant can’t handle. In the end, you end up with $96,000 in revenue for this tax season, with 520 hours of your own work. Subtracting the $6,400 you paid your assistant, and dividing by the 520 hours, you end up at $172 dollars per hour of your time. At only a few dollars shy of your target hourly rate, this tax season experiment can be called … Continue reading

Six Sigma systemization: A marketing example

Yesterday, we discussed the value and process of creating systematic processes and checklists for running your practice. Performance analysis and procedural improvement systems themselves, such as Six Sigma, exist in order to provide a framework for guiding the improvement process.

Today, we’re going to apply this type of process to a specific marketing problem. Let’s start with step one from the step-by-step process we discussed yesterday, which is to define the problem.

Let’s say that you’re looking at the various marketing methods that you use, and you realize that you are getting dismal results from your direct mail campaign. Moving on to step two in our improvement process, you are able to quantitatively measure your results. In our example, let’s assume you’re getting one new lead for every 5,000 mail pieces you send.

In general, if you’re getting less than 5 inquiries out of every 1,000 direct mail pieces you send, then you have significant room for improvement. The problem is that you don’t automatically know what needs to be improved. Here is just a short list of things that can impact the effectiveness of a direct mail campaign:

  • Your mailing list criteria
  • The type of mailing piece you use
  • How frequently you mail to the same list
  • Your headline
  • Your sales copy
  • Your offer
  • Your call to action

…and this is just the tip of the iceberg when it comes to direct mail.

So, part of the process over evaluating your current system is to make sure that you are fully educated in regards to the subject matter. This is why it helps to bring in experts to assess the situation sometimes (it’s why people hire you, don’t forget).

After some additional education, and perhaps consulting with a direct mail expert, you temporarily rule out your mailing list and several other factors, because it is brought to your attention that most people on your list won’t respond until they’ve heard from you several times. Thus, you implement step four in our improvement process, and create a series of mailers that will be mailed out to the same people, once a week for eight weeks.

After sending out 1,000 mail pieces every week for eight weeks to the same list, you find yourself at step five, and evaluate your results. You now have 35 new leads in place from this series of mailings, representing tens of thousands, if not six figures worth, of new client … Continue reading