[IMGCAP(1)]Now that school is out (unless you live in a part of the country still making up for lost “snow days”), it’s easy to get caught up in the general euphoria and take a vacation from thoughts of tax preparation for the summer. But now is precisely the time preparers need to keep communication lines open with their clients, according to Chuck McCabe, president of Peoples Income Tax and The Income Tax School.
“As a tax business owner or preparer, you want to grow your client list,” he explained. “But gaining new clients without retaining current or past clients does not equal growth. In fact, it’s a bad sign when past clients don’t return year after year to have their taxes prepared by you or your firm.”
Current clients are extremely valuable and thus should be a focus as they do not require nearly as much money to retain, he observed. “Acquiring a new client, however, can cost quite a bit,” he added. “The average cost of acquiring a new tax preparation client is very high, possibly equal to or greater than the first year’s fee.”
Here’s the breakdown, according to McCabe:
The lifetime value of an average client is equal to the net present value, NPV, of the net revenue (after expenses) realized from the client for the number of years the client is served.
The NPV of an existing client is many times the net revenue realized from a new client in the first year. Therefore, client retention is extremely important.
“A tax firm or sole tax preparer that has a low client retention rate will have great difficulty in growing the business,” McCabe said. “For example, if your client retention rate is only 75 percent, you must replace 25 percent of your prior clients before you will show any growth. Bringing in that number of new clients can not only be a daunting task, it can be very costly.”
“Provide such exceptional client service that your clients will never consider going anyplace else,” McCabe advised. “Even if a client moves away, let them know you can still serve them, using available technology.”
The value of existing, loyal clients is compounded when they refer new clients to you, McCabe suggested. “Referrals are by far the greatest source of new clients,” he said. “Instituting a referral program to incentivize current clients is one way to leverage their loyalty.”
Areas in which preparers should continue to communicate with clients include emphasizing year-round service for clients who have questions about decisions they need to make or who receive notices from the IRS or state and need a tax preparer’s help. “As a tax professional, your relationship with a client should not start in January and end in April—it should be ongoing,” said McCabe. “Being there for clients year-round is just good customer service.”
“For clients who have filed an extension, reminding them to make an appointment and assisting them with questions is a nice touch,” said McCabe. “It’s crucial to make that October deadline to avoid fees and problems. It’s also advantageous to schedule and manage appointments proactively to avoid a huge rush in October.”
If you provide other services, it’s good to reach out to your tax prep clients and let them know, McCabe indicated. He also recommends monthly newsletters and client satisfaction surveys.
“June is National Do-It-Yourself Marketing Month. Client communication is a part of marketing,” he said. “To be effective at marketing your tax business, you have to hone in on the customer experience. Providing value, insight and customer service year-round is a great way to create raving fans of your business.”