12 Reasons Why You Should Niche Your Tax Firm

In order to run a more profitable tax firm, I’ve always advised tax professionals to specialize.

That means niche down into one or two specific target markets and narrow your service offerings.

We’ve all heard the old cliche: You can’t be all things to all people. And if you try, you’re simply going to spin your wheels and go nowhere fast.

I’ve clearly seen this in myself over the years. A clear lack of focus, changing directions too often, trying to do too many different things. It all results in, well… Zero results. Put another way, he who chases two rabbits catches none.

Unfortunately, I see a lot of accountants effectively doing the same thing. They try offering preparation of every type of tax return, while also doing bookkeeping, while also doing attestation, while also doing tax resolution, while also doing advisory in twenty different industries. They try to offer every possible tax and accounting service under the sun, to every profession, industry, and walk of life, without ever developing deep competency in any particular area. While they might make a living, they never actually build a real firm.

While there are rare exceptions, the majority of highly profitable companies have a narrow focus. They know what they do, and they focus on doing it well. Salesforce doesn’t build cars, and Ford doesn’t build CRM software. Outside of the absolute largest public accounting firms, most of the remainder of the IPA 300 run specialized firms. These firms typically choose to specialize in one or both of the following manners:

1). By offering a very narrow range of services.
2). By servicing a very narrow range of industries or professions.

For example, I know one large accounting firm that specializes in tax, accounting, and auditing for car dealerships. That’s it — nobody else. If you’re a engineering firm, they won’t help you.  If you’re a magazine publisher, they won’t help you. If you’re a manufacturing company, they won’t help you.

Car dealerships. Nothing else.

When I operated my tax firm, I offered one service: IRS and state DOR Collection representation. That was it, nothing else. I didn’t prepare tax returns, I didn’t offer bookkeeping. Nope, just tax resolution. On top of that, I had two very well defined niches that I served: Independent trucking companies in five western states, and large TFRP cases post-assessment. That was my universe.

Early last year, during a … Continue reading

Rise of the 1120S Practice

As we hurtle towards the 9/15 business return deadline, it seems like a good time to remind you of how much gooder this market segment is than the 1040 side of things.

In case you’re new to these missives, verily, I say unto thee:

1). The 1040 prep middle market is rapidly dying due to consumer software and RPA.
2). If >50% of your annual revenues are from the 1040 middle market, your business is totally screwed in the long term unless you pivot.
3). 2020 marks the second year in a row in which 1040 returns prepared by paid preparers has declined — and this decline will accelerate, whether you like it or not.

I could drone on and on about the impact of the two existing AI tax prep companies… How Block’s adoption of the Watson AI is just the beginning of the end… How applications like PwC’s internal K-1/W-2/1099 OCR engine will trickle down to our level in 3-5 years… How nearly 2/3 of IPA 400 public accounting firms already use either RPA or offshoring to complete their 1040 prep… Blah blah blah.

Yes, I’m telling you bluntly and unapologetically that if your tax firm’s revenue are primarily rooted in seasonal 1040 return preparation, your business will be DEAD within a decade. Yes, dead.

OOB, if you want me to use official IRM parlance.

I’ve been singing this song for about 3 years now, and the signs are all around us.

It’s time for you to either:

a). Adapt.
b). Retire.
c). Suffer the consequences.

I hope that you choose (a).

But how do you adapt?

Some quick, dirty, and broad suggestions:

  1. Pivot to the SMB (small-medium business) space.
  2. Target a specific high-income market (the subject of our December 2020 issue of The Profitable Accountant).
  3. Eliminate tax prep from your firm altogether (a solution I embraced for 5 years).
  4. Go do something entirely different.

In all seriousness, the SMB market is where it’s at. I spent eight years in tax resolution in that space, and if all my other business exploded into oblivion tonight at 8:42pm, it’s exactly where I would go back to.

Businesses will always need YOU.

Heck, do you remember the Great Depression???

Eh? Eh? No? Yeah, me neither. I wasn’t born until about 50 years later.

But when history and economics collide, awesomeness ensues. Back in 1929, when even the CPA credential was routinely scoffed … Continue reading

A new marketing paradigm for your tax firm

Over the course of the next few months, I’m going to be writing and speaking extensively about a topic that may be new to you.

It’s a simplified, holistic way to approach the entire subject of client attraction — from lead generation to prospect follow up to conversion to client to upselling and cross-selling of additional services.

The marketing philosophy, business growth paradigm, or practice growth dogma — whatever the heck you want to call it — is pretty simple. Here’s the basic 3-step formula behind database marketing (yet another term for it):

  1. Choose a specific industry or profession + a geography.
  2. Build a list of people that know, like, and trust you.
  3. Send educational information to that list, along with occasional solicitations for your services.

To put it in shorter marketing parlance for any business school folks in the audience:

  1. Define your target market.
  2. Build a prospect list.
  3. Make offers.

Easy peasy, extra cheesy.

Now, just to be clear, this is no different than how you’ve seen me talk about marketing in the past. All the same concepts apply. I’m just giving you different packaging.

Why?

Because defining a simple paradigm to work from makes all other conversations about growing your tax firm easier. It gives a starting point of reference. A place from which to start conversations, anchor initiatives, narrow our focus, and align our strategic objectives. (Can you tell I’m working on MBA coursework? Hmm.)

In reality, all we’re really talking about is direct response marketing. There’s nothing new about that.

But, I want to give you a new structure from which to view it. A structure that will hopefully make it easier for you to implement and profit from.

Let me give you an example. When I was running my tax resolution firm, about 70-80 percent of my marketing was to small trucking companies, with 5-10 trucks, in five states (e.g., my target market). Through a variety of marketing media, including direct mail, telemarketing, Google ads, Facebook ads, and the like, I generated leads (e.g., a list of people that knew me). Some of those businesses moved from the lead list to the prospect list by having a consultation with me. Some (not all) of those prospects became paying clients. So, I was creating three separate lists within my database: Leads, prospects, clients.

All of my follow up marketing to those leads and prospects was … Continue reading