The following is a weekly email series describing a real-life Practice Management Success story about an ASTPS member who had a vision of where he wanted to be in life and in his practice. If you have a vision of where you want be in both aspects but haven't reached your pinnacle yet, this is a series you'll definitely want to keep up with.
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PART 1
Where would you like to be?
Where are you headed?
Is the answer to both questions the same?
Hopefully, it is.
Many practitioners are just working away with a vague notion that with enough hard work and dedication their business will grow, they will prosper, and things will come out okay. Truth is, with enough effort and dedication things probably will turn out okay. Question is, do you want to settle for okay? What’s wrong with great, or terrific, or fantastic, or even stupendous? That’s how I want things to turn out.
Here’s an idea to try. For the next three days, break your routine, stop what you normally do, and spend an hour each day daydreaming, staring out the window, or fantasizing about how you would really like to be living. I’ll bet the vision you come up with is different than where you are headed with your hard work and dedication routine. If not, then keep at it and now you are sure you are on the right track. If, as I suspect, your vision and your routine are not in sync, it’s time to make some changes.
About a year ago, Robert, a new ASTPS member took my advice. He went to one of his favorite places to think about his plan: the local bookstore. He felt that he was earning a good living, but that maintaining it was a constant struggle. Every bump in the road meant putting in a few more hours to meet the need. After reflecting on his “plan” for a couple of mornings, Robert realized he had no plan. Every problem was answered with Robert needed work more. He realized that he was just marking time. On top of that, the good living wasn’t nearly as good as what he wanted and honestly believed he was worth.
If any of this sounds familiar, you may find some inspiration in Robert’s process to shape his personal definition of success and his plan to make it a reality. Let’s look at Robert’s wish list and his action plan – in the next email.
PART 2
In the last email , we ended with our friend Robert's commitment to define his personal vision of success and create a plan to make it reality.
Let's take a look at Robert' s list of druther s that came from staring out the w indow of his favorite bookstore:
I want my practice to provide a comfortable living for me and my family .
My family and I can live comfortably and enjoy life on $150,000 per year .I want to work no more than 50 hours per week, except i n the summer , I want to work only 40 hours for July and August.
I want to play golf once or twice a week in the summer, I want to get my handicap down from 22 to 15 .
I want to vacation 2 weeks in the summer and 1 week late in April each year.
I want to exercise more and lose 15 pounds.
Any of this sound familiar? Take a little time to daydream and come up with your own list between now and the next email.
In PART 3 we will compare Robert's list to reality - that should be revealing!
PART 3
In the first email, we examined Robert's commitment to define his personal vision of success and create a plan to make it reality. After that, we looked at what he came up with as his personal definition of success. Today, we will look at his assessment of where he was as he began answering the question, "Where are you headed?"
First, Robert had to compare his present position to his wish list. The hardest part was being entirely honest with himself. Here's what he came up with:
Last year my income was $80,000 plus some perks (health insurance and car use) that were worth about $15,000 more. All-in-all way short of what I would like.
In the last twelve months, I have worked between 60 and 70 hours a week. The only exceptions were holiday weeks when my family virtually demanded my presence.
I played golf three times in the last year. I'd love to believe my handicap was still 22!
In the last three years, my only "vacation" was a couple of long weekends. These "vacations" were spent visiting my wife's family.
If I were to exercise one hour three times a week, it would be three hours more than I have done in the last few years. I have blown several resolutions to "get back to it." I keep telling myself I have work to get done and I'll start next week.
Robert and I discussed his introspective list, we concluded that it was currently nothing more than a regrets list. If he wanted to make the regrets list into reality, he had to make a plan take action. We'll start that process in the next email.
PART 4
In the last three emails we followed our friend Robert as he moved along the path to awareness of his then-present status to his contemplation of his" druthers." Today, we will begin looking at the plan he and I formulated to transform his regrets list into a goals list.
The first topic Robert and I discussed was his practice income. He believed that it would be nearly impossible earn enough to close the gap between the current and desired earnings. After all, he was already working way more than he wanted. I could see that this one is going to be a tough one to answer.
I asked him if he was willing to try a different approach to his practice and even tolerate some additional risk along the way to making the changes. He agreed to do his best, but worried that old habits and old ways of doing things might be hard to give up. He also worried that he might actually do worse instead of better. Slipping backward would make the regrets list grow longer. Like the good soldier, he bravely committed to making and implementing a plan to achieve his goals.
We started with his client list and the annual billing to each client. I asked him to select the ten percent of the clients that he enjoyed working with the least. You will be amazed at the results of this exercise. We will describe it in the next installment.
PART 5
This is part five of a series on practice growth and management. Recall that we have been following the progress of Robert who requested support to improve his practice. He committed to devote the resources, implement a plan, and assume the risk involved in change.
Robert assembled a list of ten clients - of his nearly 100 - that he least enjoyed working with. We then discussed each one with the following breakdown:
Four were difficult, unappreciative, demanding, fee phobic, and regularly under billed because Robert attempted to avoid conflict with them.
Two were clients who Robert felt were marginal in their business ethics. He found himself devoting extra time non-billable time to assure his work could not be faulted.
The six clients were immediately advised that Robert was specializing in tax problem resolution services and would no longer have time to do their work. In other words, he fired them: albeit tactfully. Despite the loss of revenue, Robert was truly relieved once they were gone. He had never realized how much stress they caused him. It was difficult to keep Robert from trying to fill the hours saved with other client work.
The other two clients? Robert really enjoyed working with them, but they were on the list because they required a lot of time, but as old friends their fees started too low several years ago. Now, Robert knew their fees would have to more than double to make them profitable clients. He assumed they would never accept an increase of that magnitude. Surprise! When he explained that he was withdrawing his services and honestly explained why; they thanked him for all his past efforts, and then asked what their new fees would be! They both stayed with him.
Considerably less work and overall only slightly less income not a bad result so far. Robert continued the review over the rest of the client list on his own. He was getting into it! Increased fees and disengaged clients allowed Robert to start to work less hours and nearly maintain his income.
As good as it looks, we had a long way to go. Robert's profits still projected at $80k with the same perks. Profits still needed to increase by $55k.
PART 6
This is part six of a series on practice growth and management. We are still following the progress of Robert who requested support to improve his practice. He committed to devote the resources, implement a plan, and assume the risk involved in change.
Last email we left Robert with a much-improved practice. He was able to reduce working hours and maintain his income. The next task was growing profits by $55,000 per year. This is where tax problem resolution services (TAPeR) became important. Robert had already started offering tax problem resolution services over a year earlier. He considered it an added revenue source to everything he was already doing. My goal was to change his perspective and convince him to grow this into his specialty. To achieve his objective, he needed an additional stream of income and it had to be highly profitable. We agreed that Robert would strive to become recognized for tax problem resolution in his market area.
My experience is that tax problem cases average $4,500 in fee revenue. Robert is new to tax problem resolution, therefore we agreed to use $3,000 per case in our planning. Robert didn't know exactly why, but I convinced him that he would only realize about $2,000 in profit from the $3,000. I had some other things in mind that we will get to soon. I did not want to spring too much on him at once. He did not see any meaningful change in his costs by doing tax problem resolution work.
He was about to learn where the money would be going and that initially it was coming out of his present income. This next step was tough for Robert, but he had agreed to commit the resources and, as instructed, contacted the daily newspaper and one community newspaper.
Robert ordered insertions in the sports section of the daily paper every other Sunday and Monday. Experience has shown these are two of the best-read days for sports. The primary audience of the sports section includes our high profile prospects: males, aged 30-70, with income. Making the insertions every other week keeps the cost down. He ordered insertions in the community paper weekly with the only placement requirement being upper left corner. He was able to negotiate the placement because he allowed the paper to place his ad on any page and he committed to a six-month run. The ads were one column wide and two inches long bearing the "Tax Problems?" headline.
This was Robert's first lesson in where the money from his new profits would be going. He still didn't see where a thousand dollars of each case would be invested in the marketing, but he went along with the assumptions.
Some simple math told us that he would hit the $55,000 profit target by gaining about 28 cases per year. Seeing as holiday months like December and vacation months like July do not usually see as many new cases as top-of-mind months like February, March, and April we decided to count only 40 weeks per year. Robert's yardstick was thereby set as 1 new case every ten days on average.
In the next installment, I will discuss the management tools that apply to this stage of the plan to reach Robert's goals, the results of his efforts, and where he might incur the rest of his costs.
PART 7
This is part seven of a series on practice growth and management. We are still following the progress of Robert who requested support to improve his practice. He has commenced investing the resources and implementing a plan to reach his goals.
Okay to recap - our assumptions were that Robert would gross an average of $3,000 per case and net $2,000 per case. Based on these figures, 28 cases per year would net the additional profit of $55,000 needed to hit his goal. Counting 40 weeks per year means we have 280 days to get the 28 cases and 10 days to get each case to hit our target.
One case every 10 days doesn't sound too bad considering that we have committed to a marketing budget. Robert's marketing had to return no less than $5 for every $1 invested. If the return was less than 5:1 we would have to change the ads, the media, or both.
Remember we are to average $3,000 gross and $2,000 net giving a 67% gross profit. Following the logic of our plan, the marketing budget would be based on gross sales of $82,500. This is the target increase in income divided by the gross profit ratio, or $55,000 divided by 67%. The increase in gross income will be achieved by investing $16,500 in marketing. This calculation is the target gross of $82,500 divided by 5. The 5 is from the return of $5 for each $1 invested in marketing. At this point Robert started to see why we were counting only $2,000 of the $3,000 average fee per case. The other $1,000 per case paid the new marketing bill. The old adage of "spend money to make money" comes to mind.
Robert wants 28 new cases, each with an average of $1,000 of direct costs. $16,500 is used to do the marketing leaving $11,500 to account for. We will do that in the next installment.
PART 8
We are still following the progress of Robert who requested support to improve his practice. He has commenced investing the resources and implementing a plan to reach his goals.
Are you wondering how Robert's progress in the remaking of his practice? Recall that he culled his client list to free up some time, committed resources to marketing, and defined what success would look like. Well, the good news is that after a few weeks the ads brought in new clients, but the fees were south of those needed to reach the benchmark Robert set for himself. A little discussion and self-examination put the spotlight on the problem. Robert was guilty of the same thing that affects many practitioners who are new to tax problem resolution work. In fact, he was guilty of the same thing here that depressed his earnings in his "old practice." Previously Robert assumed some clients that he really liked would not pay higher fees. Well, here he goes again! The fee phobia has again nested in his subconscious. In the interest of getting to the root of the problem, we decided that together we would look at six cases that Robert had engaged in the last 30 days.
The good thing to note is that he had six cases booked in 30 days. This is double the number he had planned for in the marketing projection. Our approach was to very briefly discuss each case and then I would write the fee I would have quoted on each case. After going through all six cases - in 3 separate phone calls and over 3 weeks - I was to fax Robert my list of fees. This made sure we looked at each case independently and the fee on one didn't influence either of us on another. In the next installment I'll tell you how our numbers compared and what we would do about it.
PART 9
Robert and I have just finished our lightning round run through of six cases he had engaged recently and it was time for me to email him my list of fees. That done, Robert listed his actual fee quotes alongside mine. He said he felt punched in the gut! He was convinced that he would have lost some of these hard-earned leads had he used my list instead of his. To his surprise, I agreed with him 100%!
His initial reaction was a little defensive, but he agreed that even if half of the prospects had bolted out the door, he would have the same money and half the work. Bottom line: Robert committed to revise his billing mind set.
After that, we discussed how he really doesn't want half of his prospects to walk, and what he needed to do to maintain his closing ratio, even with the new fee schedule. Robert was quoting fees in advance, but he was not using the approach I teach in the Marketing, Sales, and Management Boot Camp. Next up, the "tree of wealth" approach to quoting fees and closing sales.
PART 10
New clients were coming in from the ads and Robert was prepared to sell his services. Robert said he is not a "salesman-type," in fact; for as long as he has been in practice this has always been an area of discomfort. It may be true that there are people who, like any other talent, excel at sales, but selling is a skill and can be learned and improved upon. What Robert needed was a routine that he could learn and become comfortable presenting in initial interviews with prospects. This is where the Tree of Wealth approach came to the rescue. Using this approach Robert learned how to explain the tax problem resolution process and quote a fee in advance. The Tree of Wealth allowed him to demonstrate his, knowledge, win the prospects confidence, and clearly state his fee requirements in a concise, professional manner. Click HERE to go to the link for the Tree of Wealth presentation posted on the ASTPS website.
With a little practice, Robert doubled his fees and not one prospect bolted for the door. Some left to work on raising the needed retainer, but Robert tracked his closing ratio and found it was better than ever, yet he did not have to resort to lower fees to get the engagements. Of course, like the Patrick Sky album title, Two Steps Forward, One Step Back - Robert's new success comes with it's own problems. He may be making more money, but the work hours are once again expanding. You guessed it, there is a solution and we will get to it in the next installment.
PART 11
Over the last nine months, Robert has put his practice and his life on a new path. A remaining goal is the ability to spend more family and personal time while maintaining his new income and the quality of his professional services. At this point Robert could see his income was on track to achieve his goal (increase of $55K/year) and he was closing cases closer to a $4,000 average, rather than the $3,000 we had used as an initial target. However, the world wasn't quite a bed of roses because he was back to working more and starting to worry that some of the cases were not being addressed promptly. This is when I broke the news to him about one more commitment he was going to have to make.
I reminded him of our discussion (see installment 6) about how he would only realize $2,000 out of a $3,000 case and how he couldn't see where the new marketing would consume that much out of each case. Back then, I told him there would be more to consider than the marketing and now was the time. The good news is that his higher than planned gross per case made this next step easier for him to swallow.
I asked Robert to post an employment opportunity ad for an accounting assistant in his local paper and on Craig's List. I also asked him to contact the local business schools and community colleges advising them of the opportunity. I told him to be prepared to pay from $12 - $16 per hour for this position. His original plan would have provided funds to hire the assistant half-time, but the higher than planned income allowed us to offer full-time, which made it easier to get a skilled and talented person.
He was amazed that he received nearly 30 responses. He scheduled and completed interviews with the 10 that appeared most promising and ended up hiring his new assistant at $12 per hour. Robert promised her a raise in 3 months if all went well.
Robert's next challenge was to train her, but even harder, to learn to trust her with things he had always done himself. As advised, he viewed the time spent explaining the work to her as an investment that would ultimately free up a lot of his time. As soon as possible, he sent her to ASTPS' Perfect Tax Associate program to get her up to speed quickly and reduce the hours of on-the-job training. Within 45 days, Robert was working less and realizing how beneficial a good support person can be.
His assistant's time per case averaged about 12 hours and her pay rate - because she got that promised raise early - is $14 per hour. Therefore, her cost per case is a whopping $168! Add 20% for administrative (un-billable) time and the cost is $202. Add another 20% for payroll related taxes and benefits and the grand total cost is $242 cost per case.
Robert averaged just under $4,000 per case in fees. If you subtract marketing that presently averages $800 per case and the $242 per case for his assistant that leaves $2,958. Because of his assistant's support, Robert's average time per case is 7 hours, that means he is billing at a rate of $423 per hour.
Robert's story is a great turn around in just under one year. Both Robert and his assistant will get better and reduce their time on cases even further. He will attract enough business to raise his fees and as his practice becomes recognized as the go-to place for tax problem resolution services in his community, he will hire additional staff and see continued success.
The Recap:
1. Robert determined how he would like his life and practice to look.
2. He cleaned up his present practice by eliminating work that did not further his goals.
3. He invested time and money in marketing to increase taxpayer representation work.
4. He learned the selling skills to support growth into the future.
5. As his marketing and sales skilled began to work, he realized the time he had gained in step 2 above was being eroded.
6. He hired and trained an assistant to solve the time challenges.
Robert is now well on his way to the practice and life he wants. Walk in his footsteps if you want similar results.
I hope you all benefited from Robert's story.
