Why in the world would anyone ever start an income tax preparation business? Taxes have a stigma of being intimidating and confusing. I do not blame you a bit for your initial trepidation, but these tips should help your decision making process when considering starting a tax business.
• You DO NOT have to be a CPA to start an income tax office
If you go into a franchise tax office to have your individual return prepared, I can guarantee that you are not having a CPA or IRS Enrolled Agent prepare your taxes! The fact is the software available to tax retail tax offices does 90% of the work for you. There are a number of programs available to retail tax practices that range from interview based return preparation to assist beginner users to forms based programs for preparers with years of experience. Most tax returns can be completed in modern programs in about 25 minutes, with the preparer simply needing a base level of training and then simply follow the step by step software lead.
• You DO NOT have to own a franchise to offer rapid refunds to your clients
Franchises have their place, but require considerable up front capital investment and typically project new offices to operate at a LOSS for their first 5 years. There are discount options available offering professional retail tax preparation software, training, support, licensing, and marketing programs that allow considerably more flexibility than the franchise options that you should be aware of when considering opening a tax business. Spending a few hundred or thousand dollars for startup costs for a partnership and support program versus spending $50,000 to $100,000 for a franchise startup license, certainly allows for a quicker return on investment.
• Your Business model should fit you business and your goals, NOT the other way around.
Many tax preparers operate profitable tax businesses without conforming to the traditional brick and mortar business model. Bundling income tax services along with other business lines is a turnkey option to increasing revenue with low overhead; the list of complementary businesses is extensive! If you are already in a personal service industry it is hard to find a client that does not have to file a tax return each year! The affordability of tax start-up programs also allows for success and profitability of smaller mobile, home-based, or seasonal tax services. When you don’t have much overhead, you don’t need to do hundreds of return to be profitable.
• One of the biggest mistakes new tax business makes is UNDER MARKETING
More important than any aspect of your business is the ability to get and retain paying customers. Marketing Campaigns do not need to be expensive. You do not have to invest thousands on television or radio campaigns to be successful. If you have more time than money, there are many different methods available to get the word out that your business is here to compete with the franchise options in your area. Coupons, door-hangers, postcards, and specific cross marketing programs are just a few cost effective options available. When starting your business, be sure to have a marketing strategy. If you do nothing, clients WILL NOT show up on their own…You have to invite and entice them!
• The tax industry itself is booming!
One tax business or another is always in the Franchise top 10. Currently it is H&R Block, but Liberty, Jackson Hewitt and Instant Tax have all historically been flirting with the top startup spots since their inception. This shows the appeal of the industry. Even with consumer filing options such as Turbo Tax gaining steam in the marketplace tax filers still want and seek out professional review and preparation of their returns. Who wouldn’t like to make as much money as other start-up business opportunities, while only having to operate your business four or five months out of the year? The IRS tax code grows in complexity each year, and with the addition of health care administration and dispersal being bundled into individual tax returns, this complexity continues to push consumers to seek the services of a professional for their tax preparation needs.
If you are considering starting a tax preparation business do yourself a favor and at least take advantage of Federal Direct’s free target marketing demographic breakdown. Whether you choose us to help get your startup tax business off on the right foot or not, we will at least give you all the information you need to know your market for your surrounding zip code all for FREE!