Discussion:New Practioner - some questions

I've recently started my own CPA practice in South Florida. I've worked for CPA firms for about a dozen years doing audit and tax work. It has been SO hard to get clients! It is just so competitive. To get clients I've been charging very low fees, and advertising on free classified sites.

The clients just can't believe the service they are getting and the knowledge I have for what they are paying, the thing is I really would like the higher end clients where I can charge decent fees - but how?

I've been doing 1040's for $100, but after seeing what HR Block etc is charging (based on this forum) I am charging way too low. Some should probably be more like $250 at least. I've been doing S Corps for $350, but they were pretty simple ones (for me), but established practioners charge at least $600.

I got a not for profit audit I did for half the price of the prior auditor and did an awesome job...(seriously), the CEO was amazed.

I am worried I might not get enough clients tax season to even make it and have to go back to work for someone else - which is not what I want to do.

I'm very good at what I do - technically, but I'm not such a good salesman.

What if I end up getting more clients and charge them higher prices, what do I do with the clients I have that I am charging really low rates to?

Also I've been looking to purchase an existing accounting practice - but cannot find any for sale near me, I figure that would give me a good start. I am thinking of contacting other local CPA firms and asking if they want to divest of any clientele, I would purchase them based on cash receipts, but not sure how much to pay for them?

What do I do?????

Thanks everyone!

Go to your local library and get a book called "The Referral of a Lifetime" by Tim Templeton; the story is a bit corny but it has a great message- and as a non-salesesperson you will get a lot out of it. To quote a phrase from the book, it sounds like you have been successful but are now "on the shelf". You need to get off the shelf!

Also you need to get into the mindset that you would rather do 50 $250 tax returns instead of 100 $125 tax returns. Don't worry about dropping your less profitable clients as you get busier- hey, you have to put food on the table!

Keep us posted with how it's going!!!

Pete

The best thing you can do is sit down & make a written marketing plan for the next 6-12 months. Create a budget & put the plan in place so you don't have to stop every omnth or slow period & figure out how to market. When you get busier it's easy to let the marketing slip & then by the time you notice the slow down there's a lag between getting busy again. Consistancy, especially in the first year or two, is the key. I'm a terrible "sales person" but have covered that up with a decent marketing plan. Good luck- Barry

Did you offer to purchase any of their clients? I am thinking of offering to purchase clients other CPA firms may no longer want - could be not enough profitability, not in their niche, or just hellish. Thinking 10% a year of cash receipts for these clients so long as I have the client.

Do you offer a referral fee for referred clients?

Thanks

I also do not have a set referral fee. I always send a card if the potential client turns into a real one. I have sent $25 gift cards to a few people that either have sent numerous clients or sent someone that turned into a larger dollar client.

I started my own practice a little less than a year ago. My fees were way too low my first tax season and I got some clients I did not want. I’ve also picked up a couple of monthly clients that require too much work for the fee that I am charging. Only in the last couple of months have I been able to pick up some quality clients. There is nothing worse than giving a quote to someone and hearing “oh, that’s cheap!” And I’ve heard it at least a few times. I have a real problem with always under pricing myself and I’m working hard to change that.

Here is what I have done as far as marketing goes.

-I joined the local chamber of commerce. I attend networking meetings several times a week. The first couple of months it didn’t feel like it was paying off, but once people started getting to know me I started getting some business from the people I met and some gave referrals as well.

-If I meet a financial advisor, commercial banker or a small business attorney, I have lunch with them and tell them about the services I offer. I’ve gotten several referrals from these individuals.

-I write a weekly newsletter and send it to all of my contacts. It’s a short little letter that normally includes a tax or accounting joke to get people interested, then some tax saving tips. I use constant contact for this. It’s pretty cheap and easy to use. I believe you can try it out for free for 60 days.

-I try to give as many referrals as possible.

-I give my clients the best service possible.

-I also met another CPA that’s been in business for a while. He offered to give me some of his 1040 work during the tax season. We haven’t discussed the details yet, but I’m hoping something will come out of that.

I’m thinking about doing some kind of a seminar for small business owners. It will probably be about 3 hours, provide some information that they can benefit from and at the same time I’ll be able to tell them how I can help their business. Has anyone done anything like this?

That's all I can think of right now.

Vanja

Has anyone had any success blogging or writing a column for small local newspapers?

I am not so sure CPA's around here will just give me clients they do not want, but I am sure they will refer them to me for say 10% cash reciepts if they don't want them, some might be nice enough just to do the referral. Entire practices usually sell at 1.15 gross (average) and I have heard of people selling for 25% per year of cash reciepts for 5 years. Maybe I will offer something like 15% for 5 years if any firm wants to divest of current clientele.

I'll write a letter stating I would offer a reasonable price for these clientele, I am sure I'd get some responses.

Vanja: You really have the network thing going on well - I think you will do ok. Do you meet other types of professionals for lunch one by one or do it as a group?

I tried the seminar thing - wrote letters to about 50 not for profits. About 10 came back as undeliverable. None of the others responded. The newspaper article is a good idea, everyone likes personal finance and tax tips, especially the little unknown ones (usually 2% AGI misc ded types).

One approach for tax season I am going to do is postcard direct marketing. There are some internet services that allow you to design or upload a postcard and then mass mail them to a given area/zip code, to residences. I did some reading on direct mail and one tax prep place (I HATE THOSE PLACES - they are idiots, they should be illegal or regulated) put a coupon ($23 off or so) on the postcard and it brough in a lot of clients. I think the typical blue collar client wants a refund ancipation loan - a lot of the tax software now offers this in conjunction with banks...I will do that. Money is money this year.

Just not sure if I should put the CPA firm name or use a DBA. The CPA name may scare this target market, I may need to just use a DBA and call it "Speedy Refund" or some crap - some gimmick, then put it on the door.

The answer probably varies by state but can a CPA open "Speedy Refund" with no mention of CPA and not register the firm name with the state board?

I am not sure what THOSE PLACES are but they can't be complete idiots if you are copying their marketing plan.

Also included in THOSE PLACES are HR Block, Jackson Hewitt, Liberty Tax and other tax franchises.

I do not think they should be allowed to prepare anything except the most trivial of taxes, they are a disservice to the public.

My CPA firm is registered with the State Board, I see no reason why I cannot register it with the State under a DBA.

Simply because I feel they are incompetent theives does not mean they are not marketing correctly.

Got it there Jimbo?

I personally am not a fan of either one, but I did lose a few clients that contacted me this year because I did not offer them. At this point I have a fairly new practice and need to get as many new clients as possible. I have no intention of marketing that I offer these bank products, but if someone really needs it I will have the option available instead of losing a client.

I am set-up to take credit cards and I have a credit card terminal that reads checks as well, so I will always ask clients for a check or credit card before even mentioning the other options. And I have no intention of charging ridiculous fees for these bank products.

I have a friend from college with a 3-4 yeard old practice that did say postcards worked well when he offered a discount. I plan to send out 2,000-3,000 next tax season.

Can you please tell us something about the postcards your friend sends... what size? (4x6cards are cheaper than 8.5x5.5) in general, what is the content? is his picture on the card? how much of a discount is he offering? what is the selection criteria for the mailing lists?

The New Tax Guy

What city are you in (if I may ask)? I am thinking of sending postcards to different areas and see what happens, probably 500 per area (by zip code I guess). If I get good results I'll send a lot. What service do you use for CC & Check processing?

I really don't want to lose potential clients to the crap places either...I mean really, a typical 1040 is 15 minutes at most, easy money, and from what I've read I charge less than the morons at *THOSE PLACES*!! :) I asked an old friend of mine who isn't all that bright who does their taxes, his answer "I got people", I almost smacked him.

Jimi Didn't mean to be harsh on you, I see you're a CPA - you must feel some anger towards these places also, am I incorrect? Also the spelling of your state is California, not Califronia (check your profile) - just helping, I type fast too and make stupid errors.

This profession needs to defend it's best interests. We let the lower end clients go to services where the employees are lucky if they can spell their names, much less understand anything beyond what to input on the computer screen, and give away billions in payroll services to places like Paychex and ADP in exchange for a Master Tax Guide or 2(gee thanks).

We have to pass an exam harder than the bar, we have immense liability for what we do, and accountant-client privledge is no-where near as good as attorney client privledge. We compete with each other on price to the point where no-one makes the living they should - law firms tend to not bend prices like we do.

The other day some deadbeat lawyer told me over some drinks that he thought the average CPA was no better than HR Block and we just give the impression to people that we protect them etc.. What an idiot...if he only knew. Then he got to asking me about distributions from his Roth (should have told him to ask one of the Clowns flagging people at Liberty Tax :) ).

This profession needs a perception makeover, but that is another topic.

Maybe I am a masochist to have gotten into this years ago.

I read your post about a week ago and thought about it. It reminds me of when I lived on Long Island and tried to start a practice. I was 30 years old and had tremendous difficulty building the practice. After 4 years I gave up and moved to NC. When I started my practice in NC I vowed to not make the mistakes I made on LI. I worked for 2 different sole practitioners in this 4 year period. What I learned from them was immeasurable and I use it today and thank them every day in my thoughts. I would , if I were you, find a per diem gig with a small firm where you can surround yourself with good people while you build your firm. Here are some thoughts that I hope are helpful. Just my opinion and of course open for debate and meant to be helpful I would stay away from marketing to those that would use HR Block. You are a CPA, set a minimum rate and market to those that need MORE than BLOCK. In 1997, I set the minimum at $250 and it is now $500. I have more work than I can handle and turn away a lot. Set a minimum at $225 or so. My BEST clients have come from LARGE firms where they got NO service. Take from those above you not those below you. Your thought on “it takes 15 minutes” while it may be correct, will in my view assure that solid clients will not come to you. They will sense this. For example, I use an engagement letter for all clients, we double check all returns, use a control log for E file, etc….. I CAN do them in 15 minutes BUT market to the client that expects more. Let them believe that you spent 2 to 3 hours on it. While difficult, I believe you should have an office and not work from home. I mean NO disrespect to the many excellent practitioners working from home. I advertise blatantly our file security. All PDF’s are password protected, our server is data encrypted, our file cabinets are all locking cabinets etc…. we use a local shredding company and all is on our web site. I market myself to professionals and business owners. My market is a business doing in excess of 500K and generally less than 5 mil. I do no retail. What’s interesting is that many clients ask me if I want a referral because they know I am selective. It has worked to bring more business. I speak annually at the local financial planning conference. I spend about 20 hours working on a topic for investors and financial advisors. The referrals have been tremendous. The average return is $650 to 700 from financial advisors. The trick is , they think I am an expert and I let them. For example, I gave them an example of how a large capital gain at 15 percent increases fed tax by about 19 percent because of its effect on AGI, phaseouts, social security etc…. that alone started a 10 minute discussion that made me look smart. We all know, it’s pretty simple stuff. I like the post card idea, BUT know your market. Your client should/ might be the professional earning between 75K and 300K , possible vacation home, kids, rental property etc…. Try “ The CPA for those who need more than a store front”. “For about $20 to $50 more than BLOCK you can have a year round professional.”

Develop a web site, make it razor sharp in what you do. I personally believe the narrower the better but this is debatable. I like cpa site solutions…. But there are many. On your site, it should state exactly who you are, what you do etc… Get a logo and a “jingle” similar to that above. “Need more than a storefront”

I hope one or two of these are helpful.

I read a book called "Walk like Giant, sell like a madman" It is out of print BUT try amazon. GREAT book, takes an hour to read. Chnaged my life.

The part I have a difficult time with is setting higher prices even though I will be raising them next year. I know last year I did some returns for $120 that even H&R Block would have charged over $200 for. Any my prices for 1120s were too embarrasing to mention. However, because my 1120s and bookkeeping prices were so low, I got 3 clients with S Corps that hadn't cleaned up books or filed corporate/personal taxes in 3 years, which generated a lot of revenue. Around here it seems everyone is losing their house and/or their job (okay not everyone but many people) and price means a lot to them right now. I am afraid to be known as the low price place to go, but at the same time I need the clients.

I was my impression, from discussions in other areas, that CPAs are not allowed to pay or receive "referral fees."

Floridacpa –I usually attend group networking meetings, and then invite individuals to have a one on one meeting (lunch, coffee or just an office visit).

I sent out some postcards last year. I concentrated on new homeowners, offered $20 discount. I sent 1500, about 5% came back and I only got 2 responses. One of those was an older couple who has lived at their home for more than 30 years. I purchased the list from directmail.com.

I wasn’t a CPA yet last tax season. I offered RAL’s. I applied late (sometime in December) and got approved through Chase. I also accept credit cards and checks and give my clients an option to pay upfront instead of using the bank product. Some are not interested at all in waiting for their refund and don’t mind paying the bank fees. I charged $30 extra on my end for completing the RAL application.

Here's just one I found by searching this site for "jokes humor funny". There are more threads (some most probably not suitable for your newsletter !), but you'll find some interesting stuff here; you'll laugh - even if you can't use it for John Q. Public - and you'll get to know some of the characters around here a bit better.

Discussion:Discoveries (Some humor to brighten your day)

PS - Welcome to TA

That is amazing advice. Thank you.

AICPA ET Section 503

Try to pick some offbeat field that's profitable, and it's even better if they have some statewide magazine or circular that you could advertise in.

Whatever you do, don't go after lawyers and doctors. Both are crazy. Stay away from dentists, unless you have good teeth (bad teeth is money to a dentist, you see).

Pick some oddball field that the rich are dabbling in, or are connected with. Let's see, the rich folks live on lakes. You're down in Florida, why don't you go after those people that catch alligators? The Critter Catchers? Keep in mind, when they are needed, they are really needed, and from what I see on TV, a lot of local governments keep them on retainer. That should keep you busy.

From the critter catchers, you find out where they buy their traps and snares, and you go after those people as clients, and take it right up the food chain. What about the people that process gator meat? We all know they don't really release those alligators back to the wild: get them as clients too.

P.S. Of course, it's crossed my mind that these Critter Catchers are picking up a gator at one residential lake, and letting it loose in other residential lake in the middle of the night, only to get paid for picking it up again. Which is a hell of a business if you think about it. You can retire rich with one alligator and a truck.

I've done some investigation on your question regarding the legality of referral fees. It would seem that each state has it's own laws.

This is the Rules for Florida

61H1-21.003 Commission or Referral Fees

(1) A CPA shall not pay or accept a commission or referral fee in connection with the sale of a product or referral of any services as defined in Section 473.302(7)(a), F.S. or prohibited to non-CPAs as listed in Section 473.322, F.S. These services include: (a) Audit, review or compilation services. (b) Services for any prospective financial data including forecasts or projections. (c) Any special procedures engagement resulting in an expression of an opinion when the services fall within the definitions as set forth in Section 473.302(7)(a) and Section 473.322, F.S. (2) The CPA must have an engagement letter signed by the client prior to beginning any engagement for which the CPA will receive a commission. The letter must include complete details of the financial arrangements involving compensation for the services rendered. (3) The CPA must hold appropriate licenses as required. (4) If the CPA is not independent as described in 61H1-21.001, F.A.C., it must be disclosed in the engagement letter. However, if the only reason for not being independent is the fact that the Certified Public Accountant is being compensated by a commission or contingent fee then the lack of independence does not have to be disclosed.

It would seem so long as one does not pay a referral fee for attest, assurance or financial statement preparation work, it is acceptable. I will check with the state board to make sure.

CrowJD - That is excellent advice. Maybe I'll buy a truck and an alligator and move to Florida. By the way, one of my clients is an attorney. Boy, is he an interesting character. He hasn’t paid any taxes or filed returns for three years. He wanted me to come in, clean up his books and get him all caught up. It turns out he had tax returns prepared by his prior CPA ready to be signed and mailed, he never mailed them. I got him up to date and suggested he files his past due tax returns as soon as possible. It’s been a few months, still nothing. At least he paid for my work. I don't have any doctors yet, but I did have a meeting with one the other day. I'm not really sure he knows what he's after but as soon as I walked in he made sure to tell me that he's been doing his own accounting for longer than I've been alive, pretty much implying that I can't possibly know more than he does. I'm not sure why he called me in the first place.

Off topic, does anyone know if there is a way to get notified via email when a reply is posted to a thread? I checked the box on the bottom that says "watch this discussion", but I’m not sure what exactly that does.

One thing about the doctors and lawyers, though.

A lawyer will tell you he knows something he doesn't know a thing about, but HE knows he doesn't know it.

A doctor will tell you something he doesn't know a thing about, but he actually and truly believes he knows it.

Both display a type of psychosis that is highly resistent to treatment! Generally and metaphysically speaking, you can't help them. Concretely, you can advance them a step at a time (which I don't have the patience for).

The best way to handle these mental cases is to make good use of your time and see who they use as vendors. For instance, pay attention to the courier service or court reporting service, etc. that the lawyer uses. These are potential clients. With the doctor, who are his local vendors? Jot those down.

Let's say you come across a court reporter. You call and you say..."Look, I do the books for Joe Lawyer over here, and I can get you paid 15 days earlier if you'll use me as your CPA" And you take it from there. STOP, no that's dishonest, don't do that. Silly me.

But, by looking over the vendors, it does give you an idea of the TYPES of businesses that are doing well that you may never have considered as clients. The key to small business is finding those offbeat, niche areas, and "owning" them.