Starting in January 2015, after preparing over 10,000 tax returns during my first 13 years in the business, I took a “cold turkey” hiatus from tax preparation, in order to focus on building out our online tax school, which has been a ludicrous amount of work (and really fun, too).
In January of 2015, I sent a letter to all my tax clients and said, to summarize, “I love you, I wish you all the best, and I won’t be doing your taxes this year, and we have some great other tax preparers to choose from…here’s a list of tax preparers available to assist you this year, take your pick, and I’ll let you know if and when I start doing taxes again.”
Over the past three tax seasons, as I’ve focused on building up the tax school and done little to no tax preparation myself, I’ve had the chance to view the tax preparation business from a completely different perspective.
Here are a few things I learned about doing taxes from not doing taxes:
Doing Taxes Is the 20%
Part of the reason why I stopped doing tax preparation is because of this concept of 80/20.
Meaning, one should focus one’s efforts on the 20% of one’s efforts that give one 80% of one’s results. Right? Isn’t that what “successful people” do?
I thought tax preparation was the 80%. I thought that training others to do tax preparation was the 20%. You know, the whole “you need to replace yourself” thing, so that you can build an “e-myth” type of business that “runs on its own.”
What I’ve learned, over the past three years, is that expert tax preparation is the 20%.
That is to say, doing high-level, high-quality work for tax clients is the most profitable part of the tax business, by far. It is the 20%. Most of the other “business management” and even the employee training stuff can be done by a variety of other people, with varying degrees of quality, but only you can handle your top clients the way your clients want to be handled.
Working directly, in a personal, hands-on way, with the highest-value 20% of your client database is a ridiculously profitable activity in both the short and long term. It’s so, so incredibly easy to make $500 per hour or more doing tax prep & consulting for the right kind of clients. I never knew how easy it is until I stopped doing it!
Really Good Tax Preparers Are Really Valuable
The second big thing I’ve learned goes right along with the first:
Top-shelf tax professionals are so valuable!
As tax professionals, we undervalue ourselves quite often and quite severely.
But trust me, if you were to ever suddenly stop doing taxes, as I did, you would realize how much your clients depend on you, and how valuable to them you really are.
Nowadays, as I ease back into doing client work, I never feel bad about charging to the higher end of the spectrum.
I don’t say this to sound immodest, but I charge more because I know I’m worth more. I have put more time in to build my expertise, I care more about my clients, and I’m just flat-out better at my job than 99% of other tax professionals. If someone doesn’t want to pay me accordingly, all good, not a problem, and it sounds like it’s not a fit.
I tried to replace myself by training others to be like me and I learned that there is no replacement for me.
There’s no replacement for you, either, for the clients that love you most.
Have you realized that yet?
The Tax Business Is Changing Rapidly
When you’re working “in the trenches” doing hundreds of tax returns every year, it’s tough to see the big picture changes sweeping through the industry.
Once you’re not as much in the day-to-day, you see the huge shifts that are taking place in this industry:
- The growing demand from entrepreneur / business owner tax clients who want to work with tax experts who understand business entity taxes
- Technology disrupting the industry in every conceivable way (DIY online tax software, automation of data entry, artificial intelligence)
- The aging and eventual retirement of “The Greatest Generation of Tax Pros,” the super-experienced “vets” who currently dominate the industry
- The Trump Tax Reform Law, which significantly simplifies the tax code for the majority of “ordinary people”
- The way that “get your tax refund in 24 hours or less” bank products are creeping back into the industry
So many changes.
And yet, despite all the technology changes, this business remains exactly the same as it’s always been: a PEOPLE business that depends first and foremost upon the trust that we build with our clients.
At any rate, these are three big things I learned about the tax preparation business, from not personally performing tax preparation services for the past three years.
As always, we hope this blog post makes your life at least a little easier and more profitable as you progress through your own tax career.
If we can ever be of service, always feel free to get in touch.
And now, I gotta get back to work–I have some tax returns to work on… 🙂