My name is David Smith. My firm, Business Brokerage, Inc. specializes
in selling accounting and tax practices throughout California.
Since 1978 we have sold over 1,400 practices worth over $210,000,000.
During these eventful years, we have been involved with thousands
of accountants and tax consultants. Most have a typical practice
and make an average amount of money. But, as in every profession
or trade, we occasionally come upon some truly great ideas and
clever people. The owners of these practices experience an above
average income and/or lifestyle.
Here are just some of the ideas we would like to pass on to you...
TIP #1 Audit Insurance. Would you like to add
the equivalent of $130,000 gross to your practice by spending
1 or 2 minutes with each of your clients? Last year a tax practitioner
I know offered each of his clients audit insurance for $45. Thus,
if the the client was audited, the tax practitioner would handle
the audit at no extra charge. Of his 1,680 clients, 755 took him
up on it. That translates into $34,000. Since this owner nets
about 25% (he has 10 tax preparers working for him) he would have
to gross $130K to net $34K. Fact is, he used to handle the audits
for free anyway.
TIP #2 Bill Tax Clients 4 Times per Year. A
CPA I know left a Big-8 firm and started up his own tax practice.
As with most tax practices, almost all of the work and money came
in the first 4 months of the year. It was a killer. So the CPA
offered all of his clients a deal as follows: the CPA would bill
the client 4 times a year, the CPA would visit the client 4 times
a year to review the books of the client's in-house bookkeeper
and then the CPA and client would go to lunch. At lunch, the client
could ask any questions of the CPA that he wanted at no charge.
If the client needed an interim financial report, there would
be no extra charge (the CPA would take the clients data disk on
Quicken back to his office). The result: a CPA practice that grossed
$200,000 with an even monthly cash flow of about $13K to $17K
all year long. All of the CPA's clients bought into the plan and
love it. Effective billing rate has no meaning in this practice,
the CPA never counts the hours: he just wants the steady income
and a good living.
TIP #3 Add Tax Tip of the Month to Outgoing Faxes.
Rather than having some corny picture on your outgoing faxes,
why not place a "Tax Tip of the Month". Since these
faxes will generally be going to business clients, you could offer
handy tips about getting greater deductions, pension plans, etc.
TIP #4 Charge Fees on Retainer and Value Bill.
The most profitable practices that I ever see are those that have
established retainer fees (i.e., clients are charged the same
amount each month unless there are additional services provided).
I once listed and sold a $460,000 CPA practice that claimed a
75+% net profit. I doubted it, but when the buyer's performed
their due diligence, they confirmed the high net. If you set the
fees high and get more and more efficient, the net will go up.
Incidentally, many of this practitioner's clients were chiropractors
(5th highest average income in U.S.).
TIP #5 Do Payrolls and Pay Yourself First. Most
accountants refer payrolls out to one of the major payroll services.
A few years ago, I listed a $200K+ CPA practice that had several
major restaurants as clients. He did the payroll for the clients
and at the same time he wrote a check for his fee. Not only did
he eliminate many of A/R's, but a bi-weekly payment to the accountant
is a lot easier for a client to accept.
TIP #6 Do Your Own Data Inputting and Be "Client
- Wise". A couple of years ago, I listed and sold
a $500K+ CPA practice where the owner performed about 65% of the
data input. He told me a story about when he was a junior accountant
working for a sizeable CPA firm. The owner and the junior were
asked to sit in on a board of directors meeting for one of their
major clients. The president asked the CPA what he thought of
the $50,000 capital expenditure they made last month. The CPA
was dumbfounded. Luckily, the junior was able to speak up on the
matter since he had performed the data entry of the client. Now
that the junior owns his own practice, he still does data entry.
He can recall almost all of the major transactions of his clients
and can tell you how they are doing.
TIP #7 How to Profit from a New Homeowner List.
Many tax consultants have tried to build their practice by sending
out letters to new homeowners. This tip comes from a CPA that
added a twist and made it work! He offered a 2 for 1 special,
i.e., he would prepare the 1st years tax return for his regular
fee and next year's would be free. After spending $3,000 for postcards,
the list of names and the postage, he picked up 75 clients for
a gross of $18,000. After importing the clients names into the
system, the 2nd year's return is a breeze.
TIP #8 Build Your Practice Based on QuickBooks.
Quickbooks, TurboTax (and other software) are here to stay. So,
how are you going to combat these new "user-friendly"
bookkeeping and tax packages. Here's what one savvy CPA recommends:
Call all of your clients and ask them if they have been considering
putting their books on Quicken or QuickBooks. Most likely they
have. Suggest to them that you will do it for them on your computer.
This way it will get set up right. Then suggest to them that they
can have the program and data moved over to their computer when
ever they want it. Some will want you to keep it on your computer.
Some will try it for a while and give it back to you. Lastly,
some will like processing their own books and you would have probably
lost them anyway. However, you should be able to keep them as
clients to consult with on Quicken and as a tax client.
TIP #9. Prepare Your Client during the Tax Interview
for a Fee Increase. This accountant would make mention
of the clients increase in wages/earnings as he went through the
interview. He would also mention the increases in the cost of
living, i.e. how the client's expenses have been going up. Thus,
when the interview was over, the accountant would say that he
would have to raise his fee a little too, due to the fact that
inflation was affecting him as well.
TIP #10. Have a fee schedule form that "high-balls"
the fee and gives everyone a discount. This is a story
of a tax consultant that built his business to 10,000 returns
using this method! He had several interviewers working for him.
As soon as the interviewer finished, he would take the file and
place it in the owner's wall file on the front door of his office
(just like a doctor). The owner would call in the client and review
the return. Then he would go over the fee schedule that was attached
to the file. His form had a subtotal line followed by a discount
line and then the final fee charged. Well, everyone got a discount.
If you were a client for several years, you got a 20% old client
discount. If you were a new client, then you got the 15% new client
discount. As I thought about this technique, I realized the tremendous
impact it had on the clientele. The clients think that all tax
preparers charge about the same fee for similar services (like
a dentist). Thus, these clients "know" they really got
a deal and would certainly come back next year.
TIP #11. Place your clients' company and/or product brochures
in frames around the office. Uses "jump-on-the-bandwagon"
persuasion. Most practitioners have their certificates, diplomas
and awards plastered all over their offices. I know of a million
dollar firm that does just the opposite - they have their clients
brochures, corporate profiles, etc. on the walls. Not only does
this please the individual clients but it offers the persuasion
technique known as "jump-on-the-bandwagon". If so and
so is a client, surely they know what they are doing, so I better
become a client too!
TIP #12. Prepare tax returns interactively.
You won't have any A/R's and clients really won't complain. Most
tax practitioners don't prepare the tax return and give it to
the client right away. They are afraid that if the client saw
that the return was prepared in 45 minutes, they will balk at
the fee. Question: Do you balk at a doctor's fee when he charges
you $200 for 10 minutes work? As one practitioner told me, anyone
can stick a knife into your body, but the doctor knows where to
put it! Anyway, I know of a CPA that has been practicing for over
20 years that started giving the client his return just after
the interview. He has no A/R's and has had very few complaints.
By the way, he does over 300 tax returns.
TIP #13. Preschedule appointments - 95% will keep the
appointment. Many practitioners are now pre-scheduling
appointments and maintaining an extremely high retention rate.
As one practitioner pointed out to me as he showed me his log,
"I know exactly how much money I will make each day of the
week next year." He did over 500 returns and didn't have
the April 1-14 crunch like most tax consultants do.
TIP #14. Pre-invoice the tax clients in December.
A practitioner in Santa Barbara taught me this clever trick. He
sends an invoice to all of his clients in December. He points
out that if they pay in advance they get the deduction in the
year they pay and also it guarantees no increase in the fee schedule.
This $121,000 practice had consistently received $20,000 in December!
TIP #15. How to combat Quicken, Quickbooks, and other
do-it-yourself bookkeeping systems. When you are asked
by a client if he should use Quicken you should determine who
will have access to the computer and program. Remember, one of
the functions of an accountant is to set up systems to prevent
theft, embezzlement, etc. One of the drawbacks of having a simple,
in-house bookkeeping system is the lack of checks and balances
to keep the employees honest. Only a professional accountant has
the skill and knowledge to set up the correct "failsafe"
systems to protect a client from unscrupulous employees.
TIP #16. Offer to "incorporate" your business
clients. Some accountants now offer to incorporate their
clients providing all of the paperwork at a fee substantially
lower than the fees charged by an attorney. All you have to do
is hook-up with one of the attorney services that the attorneys
use to prepare all of the documents, the seal and handle the state
requirements. Most accountants that do this make $500 to $1,000
per incorporation.
TIP #17. Provide monthly or annual corporate minutes
and resolutions for your incorporated clients. Most small
business clients detest paperwork. They also don't understand
most of the paperwork that has to deal with corporations. Yet,
in an IRS audit, one of the first places an auditor investigates
is the corporate books. If he can pierce the corporate veil, then
he has free rein over the entire individuals affairs! We know
of some accountants that periodically peruse the client's general
ledger and with information obtained therein, prepares quarterly
or annual minutes, resolutions and any other paperwork necessary.
For this, they charge from $250 annually to $200 per quarter,
whatever the traffic will bear.
TIP #18. Become a business consultant. Unfortunately,
there are not a lot of million dollar businesses that don't already
have accountant relationships. Thus, why not go to your $250,000/year
clients and help them grow into $1,000,000 businesses.
TIP #19. Hook up with a "Preferred SBA Lender"
and offer to arrange financing for your clients in need of $100,000
or more in funds. Another way to help your clients grow
and offer a valuable service is to arrange financing. Call Keith
McLaurin of CIT at 858-547-0266. He can help you with the SBA
loans.
TIP #20. Develop a Computer Services and Installation
side of your practice. I know of a CPA firm that has
grown quite well with the following process (particularly with
financial institutions): 1. Get in the door by providing certified
audit services; 2. Analyze the clients business from the data
ascertained from the audit and make suggestions as to how an updated
computer installation would give them the daily reports necessary
to grow their business; 3. Install the new computer system and
constantly be aware of how you can help the client improve his
business and grow his business. The process here involves 3 very
important points: 1. The client views an audit as "overhead".
2. Most accountants are primarily concerned with the expense half
of the P & L.; 3. Most clients view computers and software
as "commodities" that are basically available off the
street. The smart CPA in this instance, concentrates on turning
an audit "overhead" engagement into a revenue enhancing
engagement and by installing the computers and software the client
becomes a captive client. This CPA has a very high retention rate
and is truly providing a service to the client.
TIP #21. Pick up and deliver for taxes. Sounds
crazy doesn't it? I recently listed a practice in an area where
many of the clients are wealthy retirees and professionals such
as doctors and nurses. Also, it's very difficult to find a parking
spot near the office, lots of tourists. So, the CPA has a delivery
man to for pick up and delivery of tax returns. After the delivery
man picks up the organizer and the CPA's staff prepares the return,
the CPA calls the client to go over the return and chat a little.
When the delivery man takes out the return, he shows the client
where to sign, which return goes into which envelope, etc. The
clients love it and so does the CPA. His average 1040 fee is $635
and he picks up and delivers about 150 returns.
TIP #22. Develop a tax interview system that provides
for only one meeting and payment in advance. This is
the story of a very successful EA that has created a super efficient
method of interviewing and preparing tax returns (grosses over
$80,000 in cash receipts in March). Here's how it works: 1. at
the interview, the EA fills in the input sheet; 2. then he uses
TaxTools to run an estimate of the clients taxes; 3. next, the
EA checks off the boxes of schedules that he prepared and figures
the fee according to the price list; 4. the price list always
ends up high, so he gives every client a discount ("Gosh,
you've been a client for X years, I can't charge you that much.
How does $XXXX sound.); 5. he then discounts the price and writes
the tax liability amount on the bottom of the form; 6. next he
turns the form over and has the client sign the equivalent of
an "engagement letter"; 7. now he tears apart the 2
part NCR paper in instructs the client to pay the receptionist
on the way out. After the client leaves, he attaches the fee schedule
to the input sheet and passes the file on to data entry for processing.
After the return is processed, the data entry person checks the
tax liability from the tax program to the result that the EA wrote
on the bottom of the form (result from Taxtools). If the results
are the same, the finished tax return is sent out to the client.
If the results don't match, then the tax return goes back to the
EA for review. Just think, only one visit with each client, payment
in advance and no account receivables.
Please call myself, David Smith, or my broker associate Larry
Richardson if you would like to discuss buying or selling a practice.
We look forward to meeting with you and we will answer any questions
you may have.
Yours truly,
BUSINESS BROKERAGE, INC.
David C. Smith, Broker
1-(800)-274-4272
P.S. Call for our free reports "How to Sell Your
Accounting or Tax Practice", "How to Buy an Accounting
or Tax Practice", or our free 8 minute video "How
to Sell Your Practice for Maximum Profit". Both
are excellent reference sources to have on hand.
