According to a US Bank Study, 82% of small businesses fail due to cash flow problems, and some of the hardest hit entrepreneurs run seasonal businesses. As a tax preparer, you’ve already felt the pinch of the offseason on your pocketbook despite following all the guides and coursework.
Follow these tips about accounting, marketing, research, and growth you were never taught in tax preparation courses to get your business running smoothly.
1. Know the Peak Season
Look at your sales history and track the months with the highest revenues and lowest expenses. It is easy to approximate that as a tax preparer you should be busiest between January and April. You need to know the facts behind how busy you are, how many clients you see each month, and calculate the corresponding cash flow.
Cash flow is not only money in and money out, but it also takes into account the timing of payment. Cash flow includes buying or selling with credit, your collection process, the costs of running your business (salaries, rent, marketing, etc.) and, of course, when you get paid.
2. Pay Attention to the Fiscal Forecast
Knowing when money will be coming in and going out is critical to the success of your business. Creating cash flow projections is a necessary step. Use the spreadsheet templates provided by SCORE to make a cash flow projection. It will help you see when money comes in, when it goes out, and how much is left at the end of each month after you’ve paid all the necessary expenses and recorded your income.
A forecast is not an accounting tool. It should remain active through the lifetime of your business to give you a resource to know when money will be tight or plentiful.
3. Hire the Right People
You are an expert at tax preparation. What about marketing, human resources, the law, and business bookkeeping? To stay focused on the real aim of your business--tax preparation--it is a smart decision to hire other experts when you are stretched too thin.
It is well worth the money in your busiest times to count on a team of people so you have extra hours to spend with clients instead of designing new fliers or sitting on hold with a call from the bank. Review these 10 tips from Experts to learn more.
4. Research the Market
Tax preparation courses ready you to understand the tax code, but don’t give you information on the market you will be working with. Market research helps find your target market, set realistic expectations about your service inside the market, and can reduce business risks.
Follow the SBA Market Research Course for more information on best practices to gather the market data you need.
Is there a special niche of small business owners who need help with filing tax returns that you haven’t interacted with yet? Knowing for whom, when, and how to best offer your services will make your business more profitable. Tax preparers do work that people can’t do on their own. Credit repair is a natural fit for tax preparer’s business adding to the valuable services that consumers can’t do on their own.
5. A Business Plan is a Must
Planning to make money is not a business plan! A business plan is an active document that acts as a roadmap for where your tax preparation business is going. Writing a business plan requires you to stop and consider the many moving parts of your operation. Beginning with a description of your company, who it serves, what services it provides, the structure, marketing plan, and financial projections, the business plan will grow alongside your tax preparer business.
Do you plan to take on new clients, hire staff, or offer additional services? Try this SBA business plan toolkit to get started.
6. Cover Extra Costs with New Revenue Streams
Improve cash flow year round instead of depending on your savings from the tax return season. Finding the right complementary offering is key. You already spend hours looking at how clients spend money and use that data to file taxes. Give your current clients what they need throughout the year by offering help with their big-picture finances by becoming a consultant or providing credit repair services.
7. Market Smarter, Not Harder
Your existing clients are 12 times more likely ask you to manage their taxes than someone new. Time to consult your database of past clients and send a personalized reminder postcard or email about the coming filing season and how you are looking forward to working with them. Don’t have a database of past clients? Now is the time to make one and keep it updated. With a client list ready to go, your marketing campaigns will take half the time.
Read about working with the right customer who is ready to work with you here.
8. Word of Mouth
Make your clients your biggest fans who can’t wait to tell their friends and family about you. According to Nielsen, people are 92% more likely to believe in a recommendation from friends or family. Stay in touch with clients through social media by posting about local events and offering advice before the tax season arrives to stay fresh in people’s minds.
Tax preparation businesses are growing at a rate of 10% per year, and that leaves many bootstrapping operations competing for client business. A tax preparer who offers additional financial services year round will be of long-term value to clients and attract more business.
Adding credit repair services to your tax preparer business is a win-win. It is designed to provide a stable income year round and is a natural fit for financially savvy tax preparers who want to stay competitive and grow their existing business. Does this sound like you? Read more on the Tax Preparer Page.