Are You Moving Your Tax Practice Upstream?

Over the past year I have noticed an increasing number of low service tax providers popping up. The most recent comes from Taxaroo, a new startup company that hopes to become the “Uber for Taxes” by matching CPAs and EAs with people who want their taxes done online. 1-800Accountant is another outfit that partnered with Sam’s Club in 2015 to offer tax and accounting services to small business owners. While both of these companies are primarily competing for the do-it-yourself tax preparer, I believe their service offering will slowly disrupt the marketplace for many CPA firms by challenging the price point for these services and their value.


When I speak with CPA firms, most of them will tell me that they prefer and enjoy working on more complex and sophisticated tax work, especially the tax planning and consulting component. However, when you take a closer look at the work being done, there is often a disparity between the tax work CPAs want to do and the tax work they actually do. Most CPAs serve clients that don’t have a ton of complexity. When asked why, most will give a long list of exceptions; the most common being that they think these non-complex clients could eventually turn into ideal clients. Here is the problem with this approach; in most cases these clients don’t turn into ideal clients and instead wind up occupying valuable space on a client roster. Furthermore, these types of clients often end up being high maintenance and slow to pay.


Services like Taxaroo and 1-800Accountant are poised to disrupt the marketplace. Both groups are using technology to significantly streamline operations and are providing basic compliance services to small business owners, not just individuals. The price points alone may start to create even stronger pressures on pricing.


CPA firms should be taking a serious look at their requirements for new tax clients and aim to move upstream with the types of clients and services they are providing. A few things firms should be doing to move their practices upstream include:


  1. Increase the price point for tax returns to help weed out people that don’t value the service. Sticking to this minimum is a great place to start.
  2. Be more selective with your new client criteria. The CPA profession is supposed to be a low-volume, high-price point business model. However, I think that over the years many firms have unintentionally gotten away from this. Firms need to move back to this model and set selective and enforceable criteria for becoming a new client of the firm.
  3. Offer more non-compliance driven services. Consulting and tax planning are key services that most clients are looking for yet don’t often receive. For sophisticated firms, I believe this will become a differentiator from lower service tax providers.
  4. Streamline your tax preparation workflow. For tax services you can offer more value for the money if you are free to spend your time on the things that matter, not just filling out tax forms and plugging numbers into your tax software.


Streamlining your tax practice and moving upstream will not only be a lot more profitable, but it will likely solve some of the staffing challenges that affect everyone in the profession by decreasing the workload and increasing employee engagement.





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