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The threats to the tax prep status quo are real. But there are ways to navigate past these concerns and reach a new career summit.
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The Tax Prep Business: A SWOT Analysis

On our final Wednesday Business Development Call of 2021, we sat down to walk through a SWOT analysis – strengths, weaknesses, opportunities, and threats – of the tax-prep business. The results weren’t pretty – so let’s just “go to the tape” and outline what we found:

Strengths

  • Recurring revenue
  • Client’s trust
  • Easy portability
  • Ability to be as smart/selective as you want
  • Open the door to PLANNING cases
  • Returns are REQUIRED
  • Set your own daily schedule
  • You can outsource

Historically, there’s been a lot to like about tax prep. Clients need to file every year, so there’s ongoing revenue. Clients come back every year, which builds trust. While there’s a lot of work to do during “the season,” you can do it whenever you like and from wherever you like. And there’s no shortage of people you can outsource the work to (although getting qualified people is a different story). Most important, tax preparation opens the door to all sorts of advanced business opportunities, including planning, family office services, and similar businesses.

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Weaknesses

  • Competition
  • Commoditization
  • Pricing in a saturated market
  • No barriers to entry
  • Little to no branding
  • Specialized learning curves/one-offs
  • Tax season
  • Employees
  • Changing laws
  • Cyber security

At the same time, the advantages that drew you to the tax-prep business have drawn a lot of others, too. There’s a ton of competition in the space, and tax-prep has become a commodity. This makes it hard to charge premium fees. There are no barriers to entry – anyone with a laptop and a little knowledge can start challenging you for clients. And there are tax-specific challenges as well: specialized learning curves for clients with new or unusual circumstances (does every tax preparer need to become an expert in crypto?), a pain-in-the-ass tax season that rolls around every single year, hassles with finding and managing employees, changing tax laws, and technological challenges like information security. As the muppet philosopher Kermit once sang, “It’s Not Easy Being Green.”

Opportunities

At least there are plenty of opportunities, right? Well, not so much. You can specialize in specific clients or issues to distinguish yourself from generalist competitors – but even specialists face most of the same weaknesses inherent in the tax-prep arena. The main opportunity is the platform that tax-prep gives you to get out of the tax-prep arena entirely!

  • Opens door to more lucrative services
  • Specialization to distinguish yourself from competition

Threats

  • Technology/Automation
  • Government regulation
  • Cyber/hackers
  • Intuit/Tools are available to anyone
  • Intuit devalues CPAs

Finally, the threats. There’s no shortage! Mainly, the robots are coming for your job. Government regulations are making it harder. Cyberthreats and hackers threaten anyone who incorporates today’s online technology into their business. And finally, there’s Intuit and similar companies spending billions every year to convince your clients that they don’t need you in the first place! (Doctors have it easy – bone saw manufacturers aren’t spending billions to convince us we can do our own surgery.)

That last one really sums up the problem. If you’re like most TMN members, you’ve worked hard to earn a professional designation: CPA, EA, RTP, or the like. That means something. But TurboTax is running commercial right now that offer your services free as part of their software. They’ve taken your hard-earned value and reduced it to the prize in a Cracker Jack box. Do you really want to build a business and a career competing against that?

What’s the answer? Well, the good news is, tax prep isn’t going away tomorrow. Five years, ten years, fifteen years from now, business owners and clients with complicated circumstances will still need more than robots and anonymous voices at the other end of a phone call. There just won’t be enough business to sustain the current number of tax preparers, who will be forced to find other opportunities.

So . . . get a jump on the competition and start looking for those opportunities now. Lock down your clients, take advantage of the relationships and trust you’ve built, and get ahead of the curve. Accounting and tax-prep have traditionally been reactive, rather than proactive – trust us when we say it’s easy to get ahead of the curve!

As for the specific opportunity, many of you will qualify for Financial Gravity’s Multifamily Office program. Becoming a Family Office Director will leverage your current expertise and client relationships while transforming your practice, minimizing and eliminating many of the weaknesses we identified, and protecting you from the threats of technology and Intuit. If you’re interested, you can schedule a call with Dave O’Rourke to see if you qualify: https://calendly.com/daveorourke/fod-initial-call. Why would you let another tax season pass you by without looking for a better way out?

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. 

Edward Lyon

Edward Lyon

Edward A. Lyon is CEO of the Tax Master Network, where he's coached tax professionals to add planning and financial services to their business since 2005. Go here to join the network. Go here to upgrade your membership or discuss opportunities in financial services.
Edward Lyon

Edward Lyon

Edward A. Lyon is CEO of the Tax Master Network, where he's coached tax professionals to add planning and financial services to their business since 2005. Go here to join the network. Go here to upgrade your membership or discuss opportunities in financial services.

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