Marketing lessons from a 310-million-year-old fossil.
I went to law school because there was no math. Imagine my disappointment when I got out into the real world, and discovered that business success is all math . . . .
Yesterday, I spoke with a longtime member in Atlanta, a thoughtful and deliberate guy who understands he needs to runs his business like an actual business. Among other things, he told me he was spending about $300-400 to generate an appointment – yet the industry “best practices” from assorted “gurus” said not to pay more than $125. What did I think about him paying more?
As with so many questions, it all comes down to the math. What’s an appointment worth? Only you can answer that question, based on how much that client relationship will be worth. If you’re targeting new W-2 residents buying $400,000 houses in an Ohio subdivision, you can’t spend much, simply because the clients aren’t worth much. $125 for an appointment with a guy whose first question is “how much do you charge?” Sure, that sounds plausible.
Now, if you move one subdivision over, where the houses cost $800,000, the prospective clients probably get more valuable. That means you can spend more to get them to raise their hands and say “I’m interested.” Still $125? If the clients are more interested in their lawn or their golf game than they are in shaving a few bucks off their tax-prep fees, maybe more!
(Those of you in California are probably perplexed at hearing me throw around numbers like “$400,000” and “$800,000” in connection with house prices. Just think of it as paying more for an appointment in Tiburon than in Oakland. Work with me, people.)
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And if you move to the strip centers surrounding those subdivisions and target the business owners with full-service tax and accounting packages, you can probably spend even more.
Add family office services and you really blow the lid off of what you can pay for an appointment. Run-of-the-mill financial advisors who could never dream of offering family office services at the level you can offer, will routinely drop thousands of dollars promoting a dinner seminar where they might realistically hope to make a single sale.
Our Atlanta member starts new business owner relationships with a tax plan averaging $5,100, and charges a minimum $6,000 annual fee for accounting and tax services. I’d say that’s well above any “industry average” the “gurus” are targeting. Assuming the average client stays five years, that’s over $35,000 in revenue.
If you’d say “I won’t spend more than $125 for an appointment with a prospective $35,000 client,” then you really don’t belong in business for yourself. Find a nice cubicle in a someone else’s firm where you can sit at a desk all day putting numbers in boxes. (If that statement offends you, feel free to unsubscribe from this email and resume your career of quiet mediocrity already in progress.)
Bottom line: it’s ridiculous to say there’s any sort of “industry average” that you should or shouldn’t spend unless you’re generating “industry average” fees. And there’s an easy way to break free from that limit. Two ways, actually: 1) find clients that are worth more, or 2) take your current clients and make them worth more, either by raising fees or adding services (or both).
Here’s an inescapable conclusion behind every business – not just yours, and not even just tax and accounting businesses. If you can’t charge more for your service, you can’t spend more to get a buyer. That’s not rocket science – it’s just math. And that alone is a great reason to focus away from mom-and-pop 1040s, especially when robotic process automation is already starting to shrink fees in that market.
The Briefs is a weekly column on marketing and business planning for tax professionals and financial advisors looking to better serve clients and grow their business.
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