511 Accounting Firm Service Breakdown: Tax Advisory

Today we're talking tax advisory, whatever you want to call it, being a tax strategist, selling like the proactive tax work and how that functionally breaks down inside of your firm, but also a little more into the nitty gritty of like there's a lot of people that still think that like selling tax advisory work is like this grift. Because tax advisory works trades at like 5 to 10x. The race, the, the rates of tax preparation work. It. Is that wrong? Is that like kind of messed up and then some. I've actually got some practical resources for you as well. If this is something you want to get into yourself, some coaches, some software platforms for doing it. Let's talk about it. Tax advisory. So this series that we're kind of wrapping up around better systematizing work that this all kind of flows from the service library template that we have for our accounting firms. Breaking down sort of all the, the variables to systematizing the most common services in accounting firms. Link to that down in the show notes if you don't have it yet inside of my firm. My recommended approach for tracking specifically tax advisory work, which is different from tax preparation. The completion of the firms, the firms, the forms, the tax forms, the different variables in service delivery here for me for one frequency, so the least frequent is something you're just doing at year end. The other option here is summer and year end, besides that quarterly. So these are different levels, presum presumably of like, you know, a tax planning one service versus a tax planning three service that I'm selling to my client. One of the variables of that service is going to be how frequently are we having touch points? And a trick here is you may think like, what am I going to do every single quarter for someone if I'm doing tax planning, like am I really going to get to March and be like, okay, let's do some tax planning for the current year. Reality is these are just your touch points where you're updating things. So when you have a conversation, when you send them a report, something like that, it doesn't mean that behind the scenes you're going in and doing a bunch of deep technical work every single time. We're just talking about delivery of some sort of product and even updates count as delivery. And I had a lot of blockers here where we had historically done year end tax planning for clients. And then we offered this quarterly plan where really the only difference was we would still like a couple times a year run a calculation behind the scenes. And then the quarterly thing really it was just, is their business, is everything trending with what we projected? Is it above or below that? And so we were actually more looking at the business income than we were the tax plan, just to double check everything, was still kind of in place. Also, once you have the tax plan set up, it's very simple to change a couple of numbers, right? So we thought quarterly was going to be four times as much work as selling year end work. It was not. It was, I don't know, maybe all in all, twice as much work as year end. But we're doing four touch points and we could charge a good amount more for it. And that's kind of the goal here is how to get to a more premium service delivery where what they will pay, like the incremental amount of what they will pay goes beyond the incremental effort that has to go into serving that client. So first variable in service delivery that I would track is frequency. The next two are more practical. What is the intake expectation? How does the project get kicked off? Is it prompted from the client? Are we going to tell them? Does it just happen? Most basic example of this is someone that maybe you do year end tax planning for and you just do that when they reach out to you or something like that doesn't mean I recommend recommend doing it that way. But inside of our practice management system we have to have a language for what is the expectation for this engagement? How does this project get kicked off? Third variable here, intake method. How do we get the information? Does the firm have access to the accounting file, for example? And that like all of these things matter because we've all had a situation where for example, you thought the client was going to send you something to do that work, but they never did. So you never did the work. But they were like, what do you mean I gave you access to this, why did this not happen? And then two months later they follow up and they're like, I thought you were going to do this. You're like, oh, I was waiting for you to send the thing. Like this is why nailing these things down are important. The biggest thing you don't want to have happen at the end of the year is go to renew a client and realize, crap, we didn't do a bunch of the stuff that we had on that engagement. Now what do you do? I mean, you can't increase prices really, can you? Because you didn't deliver on what you said you would do last year. And so like we need to be proactive to ensure that we are delivering to every one of these engagements. So first variable frequency. Second intake expectation. Third intake method, how we actually exchange the information. Fourth here is the deliverable format. So the deliverable could be an email. But I would recommend you escape from simply delivering this stuff via email is a big trap when it comes to selling tax advisory works. You do all this work behind the scenes and the deliverable is like two bullet points in an email. And then you wonder why the client doesn't value what you did more. And it's like no, like we didn't show them the tax deferrals that just got them the tax savings. Like we're not presenting the, the strategies that are relevant to them and the ones that we looked into that were not. And I mean this is what I did for a decade plus. But for goodness sakes, I'm not going to give them the report that BNHS generated. I'm not going to give them the, the printout from Planner cs. But that's what, that's what most people are stuck between. Do I give them a super low left email that tells them kind of nothing or do I give them the report out of the software which simultaneously tells them almost Nothing because it's 60 pages of something that they're just not going to understand. So this fourth variable in service delivery, deliverable format. One option is email, though I don't recommend it. Another option is discussion. So you're going to hop in and have a meeting. I think the best option is a report from a dedicated platform that does this reporting. Well another option here is, is an app like if you use a portal and the expectation is you're just going to deliver that work to them via the portal. Worth nailing those items down. Other potential variables you may want to track. One potentially average savings and where this matters is you can have a client that you do tax planning for that just has a W2 and you know some other weird thing that may make the withholdings be off. But you could also have a client that's got like a $10 million business and if they're clearing 3 million in profit a year, tax planning, any sort of like inroads you can make, dollars and cents wise are moving the needle in a big way internally that may be worth you tracking because it could impact who that work gets assigned to because those are, those are very different engagements. Right. Another variable here is, is who's on first when you say we need to implement this strategy and this is a real headache in this type of work as you say now Go do xyz. And they never do it like put money in an hsa, setting up an HSA for the first time, doing a, you know, a solo 401k or something like that. Who then executes on that stuff? Because there's increasingly, there's actually pretty good advisor platforms to help us DIY a lot of that responsibly where we can help clients set that up rather than throwing it over the fence and it never happening. So that is a variable because there's a concierge option here where if we do that stuff for clients and we do 100 of those things a year, it's very, very easy for us and they'll probably pay us pretty well to just do that for them. Last potential service item worth tracking here. Payments. Who makes tax payments? Some will let their clients do it. Increasingly other firms, they will do that themselves. They will initiate the payments from, for the client, say they're bad at saving money quarterly. And the client's like, it's easier for me to just do this stuff monthly than you initiate a quarterly tax payment for them every single month. These little things, when they're rolled into a package that you're offering the client can make a very big difference on the perceived value of it because all it takes is them like forgetting to make a payment one time last year and they're like, no, I do need you to make those payments for me, don't I? And that just got them from the $800 a month to the $1,100 a month package or something like that. Now that's actually the next thing we'll talk about is in the context of selling tax advisory work in a three tier proposal, how can we make a more premium version of this? Because the bronze version of this proposal, it's always going to be the bare minimum doing of the work for probably the most fee sensitive clients are going to go to bronze. But then the gold version of this work, if it costs three times as much, it's only worth doing if it is not three times the work. The gold, the gold version of this, it is not an opportunity to just do more work for the same money. It's an opportunity to capture folks that want a more premium experience. It is for the Mercedes driver, while the bronze is for the Camry driver. And I think the biggest self limiting belief here for accountants is most of us are Camry drivers. So we won't even give them the option of buying the Mercedes version when, when they're choosing to buy it. It's their money, but because we're not wired that way, we don't give them the option to then by extension they don't actually feel like they're a fit for your firm because there isn't a premium path. But ways we can make tax strategy work feel more premium stuff. You can layer in here transcript verification. So double checking any sort of reporting against transcripts, transcript monitoring and you know, most states now have websites where you can get advisor access and you'll be notified if there's ever a notice or something like that. It seems dumb because most of us are on top of this for ourselves, but to remove some of the fear of what if there is a notice and I just don't see see it or get sent to a, you know, bad mailing address or something like that. There is something valuable about their tax professional monitoring as much as we can because it's not possible with every single jurisdiction. But monitoring, you know, the IRS and the big ones to make sure that there isn't anything they're missing. W4/ estimate updates throughout the year. Maybe bronze includes two updates and gold is updating every quarter or something. Notification of new legislation that could have an impact on them. A dashboard showing whether they are trending in line with their planning. So a dashboard they could hop into any time, maybe even a widget they could have on their phone showing the income of the business and how it is trending with our current tax plan. And then you know, running their thing through like a tax analysis program that is like potentially an upsell where you've got some apps that will, you know, check it against, you know, 1200 tax saving strategies or something like that. And maybe on the Gold plan you do that for them and you do have to pay to like run that scenario through the software. But if the client appreciates that as sort of a double check, that's potentially something you could have on there. More general things around service delivery that aren't as specific to tax strategy that could be reserved for a more premium plan. Working with a specific person on the team rather than like a pooled sort of collective team. The expertise level of the person that they work with. Are they a CPA and ea? Do they not have a credential, A VIP calendar link? Maybe they can book something faster. A VIP phone line that just goes to like higher level people. This is just a stupid easy thing to do that so many people will opt into. Just have another phone line. It has to be real, it has to ring to like, you know, more senior people. Or something like that. And you got to put some boundaries around this so we don't want our big bosses always getting distracted by it. But people will see VIP support and a lot of our clients who are snowflake entrepreneurs will be like, well I need VIP support, I'm a vip. Like I identify as a vip and they'll just pay for that and oftentimes never even use it. Today's episode is brought to you in part by Carbon, the practice management system. Couple big announcements from Carbon over the summer if you've missed them. One, a totally brand new client facing portal like a beefed up client experience called Carbon for Clients. You can push tasks to it documents, E signatures, all that stuff. For clients with multiple like entities and they're 1040, it's easy for them to quick switch between those accounts because that, I mean any business owner client we have, that's a problem, right? They've got their business, they've got the 1040, they've got eight other LLCs. Carbon for clients makes that easy to access. But then another big announcement was a first of its kind. Super deep integration with Stanford for tax. Another tool we really like on this podcast because you got these really cool tax workflow tools but then none of them talk to your practice management system, right? Carbon wants to change that. Carbon's like an ecosystem first player. If you want the PM that's going to integrate with best of breed, take a look at carbon. PMs right now are kind of like separating into we're going to build our own versus we're going to integrate. Carbon's going hard down the integration path. The whole Stanford taxing is a good example of that. Got some videos on the YouTube channel about carbon if you haven't seen it in the wild before. I know folks down to like solo firms clear up to like some of these PE roll up platforms are using Carbon one of the most mature options in the game in a, in a good way I would say. More information about Carbon down the show notes. Today's episode is brought to you in part by Mercury. Mercury is the FinTech that over 200,000 companies now trust for banking and running their finances. I'm a happy user myself long before they sponsor this podcast. My money is spend with Mercury because it's just like man traditional banks, they don't really seem to be going anywhere or getting any better. And you know all too well that struggle in fact and it's dumb to even say out loud but the greatest upside of your clients using better banking solutions might Just be access. Not having to do two factor authentication Olympics. Not having to have clients like forward you codes, you know, the codes they get over text, the texts that say never share this code with anyone. And then the process that we communicate to our clients is hey, when you get this, send this to me. Just the janky things we gotta do to get access to things. Because traditional banks, they don't let you handle like micro user stuff. Did I say micro user, multi user stuff. Granular permissions for the different people in your team. And even in the scenario where a client does give you your own login, then your entire team is like sharing your login buddy. There's like so many problems with that and so much risk in that where if you're just a little more opinionated and we're like, hey, hey, just so you know, all this fuss and headache around like getting access to this thing, there's a better way that we recommend come over here and check out Mercury. Sometimes we're like apologetic about what a pain it is to do this banking stuff. Stop apologizing, say client, go use this better alternative. There's a solution to this and it is your fault that you're not on the right platform. I'd encourage you to give Mercury a look. It is, it's genuinely really good. More information about Mercury down in the show now. A lot of people struggle with tax strategy work and it kind of feeling like a grift because oftentimes in the course of tax prep, what we're doing is also quite a bit of tax strategy. We're just not calling it that, not, not selling it as that. Very, very common in bookkeeping work as well. You have a monthly meeting with the client to deliver the financial statements. Think of all the different ways that that could be sold from. The worst possible way being this is a bookkeeping engagement. When it's like, dude, bookkeeping is just classifying of transactions and reconciling a bank account or a credit card. What we are doing is so much more comprehensive than that, like signing off on a month end close, but then hopping on a call and helping them to understand it and make it actionable. So the bad version of selling that work is calling it bookkeeping. The better version of that is like we're doing like some monthly advisory here. Right. And so if you just do that for clients and you don't acknowledge it for what it is. Yes, tons of people do that work as part of bookkeeping, undersell it as a result. This is very similar in my mind to Doing tax prep but not calling it what it is. Like, if you're actually doing advisory stuff, we need to sort of striate what is like, which is. Which. Because tax prep is what you can go to TurboTax and get done for you. Is that what you do? If it isn't, then, then what are we calling it? So it could be tax strategy, could be like, you know, proactive tax planning. But, but it's, it's different. And a lot of the folks that I think don't, like, I don't know, like there's just such a huge spectrum of what people charge for this now where, like, and we, we've done roast of firms on the podcast with, you know, brand new firms with two or three people where they won't touch a tax planning engagement for less than 10k. And there's other people that have been doing this for 40 years and they can't imagine doing that. And so because it feels out of reach to them, they, they, they think it's wrong. And it's not to say there aren't wrong versions or to do it, you could certainly do that in unethical ways. But at the end of the day, if clients have good information and they are getting their checkbooks out and they're willing to pay for it, this is where their perception of the experience and what you're doing matters so much. When the client doesn't understand what we do, perception is reality. And if we go back to how we deliver the tax planning work, if all we do is send them an email, we could put in weeks of work to this and we send them an email with two bullet points thinking we're doing them a favor simplifying this so much for them. When we've looked into all this different stuff and done all this work, and then it goes out the door with those two bullet points, what do you think the client thinks you did for that work? Probably not much. And hear me when I say, man, I don't like this either. Like, I wish it was totally down to, you know, the technical stuff, which is what we sort of compare ourselves against. Like when we look at other pros, we want to be the ones doing the higher quality work, the better work. That's what we benchmark ourselves on. But the clients don't understand that. So the way they make buying decisions is on something completely different, just their perception of the experience. And so if somebody else says, I'm going to not only prepare your tax return, but let me tell you, in November, we are going to, we are going to do a deep dive, comprehensive. We're going to look at 1200 different tax strategies. Because, listen, you know, you pay 200 grand in tax last year. What would it be worth to you to knock that down a bit, to defer some tax, to make sure we're not leaving anything on the table? What would that be worth? You pay 200 grand in tax last year with 10. 10 grand. $10,000. Tax strategy session. Great. They're probably going to say yes to that as opposed to what most of us and what I did for all. But maybe the last year in firm running, which is to say we'll do your tax prep once a year and we'll take a look at year end to make sure we're not missing anything. And sometimes we would take a look and not even send them an email if we didn't recommend them doing anything. And so I can, I can totally understand the people who are like, well, if the client would just trust me to do my job and look out for them, like, I don't need to do. I don't need to go around peacocking. And I can also understand the people who are like, why do all of that work but not for $10,000? So that. That seems wrong that someone else is paying 10,000 bucks for it. You want to talk about right and wrong when it comes to pricing, buddy? I mean, we have all inherited clients from bigger firms that get incredibly shoddy work at 10x the prices that we charge. Like, I always come back to, like, you're standing in line at the grocery store and you got all these different candy options and magazines and all that stuff, and you got a Hershey's Bar that's $1 and a Toblerone that's $3, and they're the exact same size. Do I want to be the guy that can charge $1 for his chocolate or the guy that can charge $3 for his chocolate? I want to be the Toblerone man. That Toblerone guy, he's playing a lot of golf. He is. And, you know, if you listen to this podcast, you know, I don't like golf. Show me a golfer, and I will show you a marriage that is in tatters. But, you know what I mean, there's this element of, like, we see these two different situations and we see the big firm getting paid so much more, more than us for doing worse work. And we're like, man, that client's a sucker. And it took me 10 minutes to realize, no, I'm the sucker because the client chose to pay that happily. And the reason they left was because they couldn't get that person to return their calls. It wasn't because the work wasn't even worth it. So they come to me and you know what goes through their mind? When I quote them a price that's 1/10 what they just paid, they're like, oh, not this is a great deal. Thanks. It's more likely, oh, this isn't a firm for us. Right. Like, isn't that now why, like, that is what they're going to think. And so we just got to acknowledge everything is made up. The points don't matter. Value is what people assign to it. And a guaranteed way to ensure that they don't value what you do is to not charge them very much. Because so much of the value, value we assign to things comes from what did we just pay for it. And it's why you see like little folks with very simple tax situations going to like big four firms or regional firms because they identify as the type of people that shop there even though their return is, is stupid simple. And so where I think we can block ourselves sometimes is, is we are not those people. We don't make buying decisions that way and so we won't let other people make buying decisions that way with us. Does that make the other guy a grifter? I don't know. I think we've dug into the nuance on that. You can decide for yourself. A few resources if you want to get more into this stuff. A couple coaching resources. One certified tax coach. It is a, it is a group. I don't know if it's an actual certification or not. I'll link it down in the show notes. But it's basically they get, they do like a live event every year. They get folks together who just, they want to crank on this stuff. More tax coaching than just the tax work. Also solo tax coach. We'll link that in the show notes as well. Josie Pro, we've had her on the podcast before. She's a tax firm owner that has pivoted into doing some coaching for folks that just want to get into higher paying advisory work. Just very meat and potatoes. Like let me just show you how to do it. Here's how I do it on my firm. Like you can run if you want to keep your firm small. Tax advisory work. It is the highest margin work that you can sell and it's not even close. Definitely a skill worth learning and gang. It is, it is. Oftentimes we block ourselves on the Technical stuff. We think we're not technically capable of doing that stuff. It totally comes down to how you sell the engagement. Like, yes, you have to have the chops to be able to do this work. Right. But the bigger, biggest blocker for most is how to talk about this stuff confidently. People get hung up on like contingent fees. Like, no, this is not contingent fees. It's the fact that guy is going to pay 10 million in tax. Well, the other guy pays 100 bucks in tax. No, the, the fee for each of those, each of those people's work will not be the same because they assign different values to it. And for sure, if you're like, well, you're going to charge us, we're going to charge you a 5% of your tax bill. Like, no, that is contingent fees. Don't do that. That's not what we're talking about here. That is a lot of like getting our head around how to sell that work in a more profitable way. A few tech solutions. Because I do think you want a tech platform that will make this easier for you. One tax plan IQ and links for all this stuff in the show notes. Tax plan iq, they've got, they've got a plan where a coach will actually work with you. Also, because it's not just about the software, it's about kind of getting your head around how to sell it instead. From the team at Corvey. So I'll just say both those. Corvey was kind of the original, like tax planning platform that did reporting really, really well. And I actually think the reports and them being human readable by clients is a really big part of this. So the reports will have like, you know, a presentation of the ROI of the work that you did and all the strategies. It'll. It'll roll up the work across, you know, six entities and a 1040 into a single report. Like, it is the alternative to the email. It is the solution to the email problem because it's like, I'm probably still going to send in the report via email or client portal or something like that. But it is a vastly more impressive deliverable. So Corby that really did that really well the first time. Now they're moving to a new platform called Indeed, that does some other cool new stuff. I'll link both those below. Last Holista plan. I know some firms that use HolistaPlan. It's really more built as a tool for financial advisors who are getting into some tax planning and I don't think goes quite as deep on the Tax stuff, but they do the reports very well. Also, like, the whole goal of this thing is like, how do we output a work product that can be understood by a client that visualizes all the stuff that we just did? If you do tax work, man, like, there's no reason not to do tax advisory work. It can be systematized. Software makes it easier than ever before. I don't see it quite like CFO work where you run the risk of consuming the time of your most scarce team members. Again, like we talked about with the bronze, silver, gold package thing, if you're going to get into a more premium type of work like tax advisory, the trap is like running the numbers of how many hours it's going to take in your head and saying it's twice as much work. So we have to charge twice as much for it. Like, no, it's only worth doing that if we're charging twice as much and it takes, you know, 50% more time or something like that. We don't want to do more, want to do better. And this is where surrounding yourself with people who are actively doing this successfully because a ton of, like a ton of firms are. This is not a pie in the sky sort of thing. I could point you to 50 people in my accountant community who very comfortably charged 20 to 40 grand for tax planning work. And so a big part of the equation here is how can I actually just get connected with folks who are very comfortable with this already and are doing it because I want to see, are they all grifters? Maybe they are. You can decide that for yourself. I'm not going to tell you they're not. Maybe you think I'm a grifter, I don't know. But if you want to normalize this for yourself, surround yourself with the people who are doing that. That has always been my trick. That's why we've got, you know, realize the accountant community. 600 firms I run that. So many talented firms sharing what they're doing. The number of emails I get every single week with questions from people that are like, what about this system or that system, like very inside baseball stuff where you want the story past the landing page. Honestly, what I've started doing, when I get those questions from people and I, I probably send a hundred emails a week just to people giving me random questions. What I've started doing, I'll literally go to realize search for what they're talking about. And I could see like 12 people who are like, yeah, no, virtual office sucked. Here, use this alternative. Yes, these Are limitations of practice. Yes. Here's how we did the same thing in this other platform. Like the answers are out there and the best place to get them is from your peers. Like it's why I don't do coaching. I put out all this content which is a product of learning from a whole ton of other firm owners. And what I don't want is for people to think that I'm the ultimate guru. Because the vastly more powerful thing for you is to have a whole ton of peers. So you always have someone that you can go to for this stuff. Do a little mastermind with a bunch of other people that sell tax advisory work, Figure it out together, get some folks ahead of you on the journey, some folks behind you on the journey. They're like that is how you learn, man. That's so much better than listening to software vendors or, or any individ individual thought leader. Like I would rather be your gateway drug to finding a bunch of cool people who like, you know. Also this content kind of kind of resonates for that's the real superpower. Then you're not making buying decision based on what sales reps tell you and buying reporting software because that will help you sell advisory. Like no, yeah, learn how to sell advisory software. Maybe reporting software can help you, but not until you figure out how to like talk confidently about this stuff with clients and that self belief for me the fastest way to hack that and to grow it and get me to a new place which is mean a bunch of other people that have done the same thing anyways. You've heard me talk about realize enough. Tax planning perhaps the single greatest example of where there's just a huge spectrum of different ways that firms are doing it and there's, there's inherent controversy there because the bigger the gap is, the more your mind is like well they're cheating. There's something up there that'll never work for my clients. But the fact remains there's people doing it very profitably, very ethically. And the fact that there are people doing it unethically does not mean that there are not ethical and great ways to do it that people will be really excited about. But if you do tax work of any kind, man, give this stuff some serious thoughts. Some more work before year end is obviously the best time to get into selling more profitable tax advisory work. Any wisdom you got here? Favorite tools, resources, coaches, anything like that, Pop that stuff down in the comments. There's always something that folks are very curious about. It's kind of the thing that you want to get into but struggle to make the time for. Right. This definitely falls into that, that sort category. So any tips, drop that stuff in the comments. Gang, thanks for being here today. Catch you in the next one.