TaxCoach Briefs:    February 11, 2010

Volume 5, Number 6

• Marketing Minute: How Much Is That Camel in the Window?
• Testimonial of the Week: Reinvent My Practice
• Member Call-In: You Ask. We Tell.

=====================================================
MARKETING MINUTE (EAL)
=====================================================

HOW MUCH IS THAT CAMEL IN THE WINDOW?

Last July, Keith and I started hosting member call-ins on Wednesday afternoons. Since then, it's become a favorite part of our week. We always get at least one question we could discuss for the entire hour, and as the calls have grown more popular we're getting more . . . In fact, the calls have turned into a bit of a mini-mastermind meeting.

Yesterday, one of our Certified Tax Coach™ members from the New York City area posed the following question:

"Ok, here it is real-time: client just emailed me, originally quoted him $2,000 for a tax plan but said I would do it for $1,750. Now he is asking if there is any other flexibility on the fee. I am also charging a monthly fee of $250 plus corporate return for $600 plus personal return for $400. This guy is an optician, saving about $12,000 in the tax plan."

His question is especially relevant as we enter the "season" with the economy still struggling. We can all anticipate clients approaching us for discounts. And it generated several responses, which I'll reproduce below before I add my own two cents worth:

• "Consider financing the $1,750 over a few months instead of reducing it if he's paying monthly, so that you keep the annuity and lifetime value and don't lose that over a couple hundred bucks."

• "Tell the optometrist the price is $2,000. But then use that opportunity to tell him about your referral program which pays $x per referral who signs up for a tax plan."

• (From the original questioner) "I like the idea of spreading it out. This is New York, everyone negotiates, but I will stand firm on the fee."

• "Does not Dan Kennedy state 'never negotiate your fee'?"

• "If negotiation is part of the region then you need to raise your fee."

• "It will also preserve your self-esteem!"

• "I used to negotiate my fee and realized that they were the type of clients that never referred clients so why negotiate the fee?"

• "Troublesome clients are risky. They tend to complain and litigate. However, clients who are simply challenging can help me grow professionally."

I know everyone likes a bargain. I'm not immune to them myself. Last month I was shopping in San Francisco's Chinatown when I found a patterned silk duvet cover I wanted for my apartment. The price was clearly marked at $298, but when the sales clerk asked if I liked it, I told her I wanted to pay $250 for it. She said she couldn't go that low, but wound up giving me 10% off. I saved $30 with a single question and now I sleep like a baby. (It doesn't hurt to ask - at least the first time.)

But - I like bargains that favor me, not the other guy. So here, in no particular order, are my thoughts on the caller's dilemma:

1. This Fee is a Steal

For starters, $1,750 (or $2,000, or $3,000, or even $5,000) is hardly too much to ask for saving a client $12,000 (just in Year One). We can't let ourselves forget how much value we deliver to clients. We are worth what we charge. In fact, most of us are worth far more than what we charge. (That's why the upcoming SuperTable in New Orleans this May is dedicated mainly to pricing. Lucror Vestri Dignitas!)

So, this knucklehead balks at paying $1,750 to save $12,000? Are you kidding? Where else can you get that kind of ROI in this economy? We can offer clients returns that would make Bernard Madoff gulp in disbelief - then sleep well at night knowing we can deliver. Hell, if I could take $1,750 to the Argosy Casino 30 minutes down the Ohio River from the office - and know I would come back with 12 grand - I would do it every single day. Some days I would do it in the morning, grab a nice lunch, and do it again in the afternoon!

2. So What If New Yorkers Are Cheap?

At one point in yesterday's call, I likened the scenario to shopping in a camel bazaar. Picture yourself walking through the souk, searching for a camel that's healthy enough to carry your load and doesn't smell too bad. Down at Crazy Ali's ("His prices are insaaaaaane!"), you find one you like. You smack it on the nose a couple times to see how far it can spit. Then you talk fast, raise your voice, and try to save a few dinar. If the seller doesn't give you the price you want, no big deal. You just go on to the next camel down the line.

That's price-shopping, plain and simple. And price-shopping sucks for you if you can't answer the shopper's objection.

The key to stopping price shoppers is to show clients how you're different from whomever they're citing to beat down your price. If your client thinks that you, the CPA down the street, the EA around the corner, and the H&R Block across town all offer the same value, then you're all camels. Now you're vulnerable to price comparisons. But if you can show that client you're worth more than the competition, now you're not just another camel. Now you're an ostrich (or whatever it is that costs more than a camel). And now it doesn't matter how much the other sellers want for their camels - because now you don't have any competition.

We've said before that the when clients says "your fee is too high," your best response is almost always "compared to what?"

In this case, though, I'd work up some righteous New York indignation. I'd hit the client with something like this:

"You gotta be *&^%$#ing me - I'm saving you twelve grand a year, and you're crying about my fee? Fuhgeddaboudit!"

3. "I'll Pay Your Price If You Meet My Terms"

So your client still wants to bargain. Price isn't the only part of the engagement to negotiate. As one member suggested, you can always "consider financing the $1,750 over a few months instead of reducing it."

On the plus side, this lets the client walk away feeling like a winner - like he took you on and won a meaningful concession. (Yes, it also reduces the risk of the client taking their $4,000 in annual billings somewhere else - but if you can show him you're not a camel, you should be able to avoid that risk entirely.)

On the minus side - well, this lets the client walk away feeling like a winner - like he took you on and won a meaningful concession. Do you really want to train clients to treat you like that?

Psychologists call this "positive reinforcement." And any parent who's ever given in to a whiney child knows it sets the stage for a lifetime of problems. It's tolerable when your four-year-old begs for candy walking out the store. It's annoying when your twelve-year-old throws a fit because he wants the same Nikes his classmates wear. But it really comes back to bite you in the ass when the cops call with your 17-year-old in custody after he left the house to "study" with his classmates.

If you do wimp out and give your client a concession, make sure you give him a credible, one-time reason for doing so. At the very least, you'll signal to your client that he needs to come up with a good excuse the next time he wants to chisel you out of the reward you deserve.

The bottom line here is that bargains can be fun - if you're on the right side of the transaction. Be ready when clients come asking for bargains and you'll be far happier in the long run!

=====================================================
MEMBER TESTIMONIAL OF THE WEEK (KAV)
=====================================================

"I just signed up for CTC and will also sign up for Press Club. I really want to reinvent my practice and not look back."

Mike Mitchem, CPA, CTC™,
Tuscaloosa, AL

=====================================================
MEMBER RESOURCE (KAV)
=====================================================

MEMBER CALL-IN WITH ED AND KEITH

This week: "The Goodness" again, as usual. Although — we had a record number of callers onboard yesterday, 72, and the discussion was almost mastermind-like, as Ed alluded to in the Marketing Minute.

Here's an excerpt of other questions and comments raised by callers this week, straight from the call log.

• Taxpayer is a single shareholder S corp. with no other employees. After he draws reasonable salary there will not be much left if company pays for his health benefits under a 105 plan. Does it make sense to convert to C corp. so he can get benefits tax free and without the hassles and limits of S corp.?
• I have a client who hasn't filed in 13 years. How would you proceed? Would you do the current year return and see how many returns they request. He isn't going to be able to pay any of the taxes, so in 3 years he will file bankruptcy.
  • Call IRS and find out what they want first. usually go back 6 years. No statute of limitation on unfiled returns.
  • Retainer is key, start on oldest year first
  • There is no statute of limitations without tax returns filed.
  • It is illegal not to file, it is not illegal not to pay.
• I have heard you mention Dan Kennedy. Do you have an opinion about his marketing methods? Is it worth spending time with his materials?
• Did my first tax plan this week will save the client 12000 per year, however he doesnt have the money to pay my fee of $3,000.00 (HELP) any suggestions are greatly appreciated.
• When we reduce the FICA taxes via an S corp. the taxpayer is paying less into Social Security and will be hence entitled to less benefit when he retires. Do you think there is a figure for annual salary, say $40,000, which kind of optimizes the social security benefits for a taxpayer after retiring?
• Considering hiring a sales person to help identify tax planning prospects while I'm buried during tax season. Any thoughts on this?
  • Find staff to do the work. It sounds like you are your best marketer.
• Do you have taxcoach verbiage that you recommend for business cards?
• I use a spreadsheet for tax projections (which I developed). What is a reasonable-priced, simple-to-use, up-to-date program for tax projections?
• Have client and new to your service. He is thinking about going into business with relative and wondering LLC or S. His lawyer has suggested LLC and tend to agree on surface.
  • Single owner LLC is an easy place to begin since it does not require a separate tax return. When company is becomes profitable then it can be incorporated if desired.
• Could you share some ideas about tax saving opportunities after 2009 has ended and the client has not done any planning.
  • What do you say to these people who come in NOW and think they shoudl get retroactive tax planning?
• On developing a strategy on fees for the tax coach plan what is your suggested rule of thumb, (1/3 of first savings)? I remember your make them flinch suggestions from last weeks call on fees
• Have you seen anything in the new homeowner regs for a case where the taxpayer is building a house for himself - what counts as a contract? Could it be the construction loan he takes out?
• Speaking of marketing help. I was interested in hiring a VA to help me generate speaking engagements. I wanted a person who would get lists of RE agent, send out the 1-page and then follow up with calls, etc. Do you have any suggestions that I should keep in mind when doing so?
• Client has a c corp. sole employee. He works out of his home. The office would qualify for an office i home if he were a sch C filer. Can he pay himself a housing and auto allowance?
  • Office in home is something I've seen debated often. I simply determine how much of the home would be deductible based on the 8829 (I think) and then use that as rent. Do you think that's dangerous?
• ED ,I HAVE A CLIENT WHO OWNS CORP STOCK IN A FAMILY BUSINESS. HER BROTHER WANTS TO BUY HER STOCKS GROM HER AND GIVE HER A PROMISSORY NOTE PAYABLE OVER 5 YEARS. IF SHE DOES SELL TO HER BROTHER HOW WILL HER 2010 # 1040 BE AFFECTED ?
• Once a client commits to a tax plan, how much "after plan" support do you recommend be included in the initial fee? I don't want to give away unlimited information.
• Any suggestions about how to demonstrate that the taxpayer's current tax preparer is not "looking out for them" when they prepare their tax return?

If you're looking for clarification on TaxCoach strategies or additional ways to profit from TaxCoach too, join us for the next call, on Wednesday February 17, at 1pm Eastern. Enter a question or just listen in on the repartee. Check the "Contact Us" button within TaxCoach for registration instructions.

While our elite members (All-Stars, Press Club, and Hall of Fame) can still schedule time directly with Ed as part of their coaching programs, we simply cannot answer marketing and tax-strategy questions via email or unscheduled calls.

=====================================================

We can answer questions on using TaxCoach system features anytime. (Save marketing and tax strategy questions for Member Call-Ins.) For best response, email support@taxcoachsoftware.com. If we think the answer will be useful to all of our members, we'll publish it (anonymously) here in the 'Member Q & A' section of TaxCoach Briefs.

Regards,

TaxCoach Briefs Archives...
Certified Tax Coach™
TaxCoach All-Stars
TaxCoach Press Club
TaxCoach Closely-Held Insurance Company
TaxCoach Cost Segregation