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Archetypes of clients who "don't work out"

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4-Mar-2018 9:03pm
The Office
Not ones with skinny arms, the ones who fall out of your practice after a year or two.

We all know that the most profitable clients are those who return year-after-year and who also allow you to provide stable value or increasing value each year.

What in your experience are some archetypes of prospects/clients who just are more likely than not to be unprofitable or not worth the effort?

I'll go first. The prospect who comes to you with a very complex tax situation in year 1. There will be a substantial drop in complexity after year 1 (and presumably their fee too). These prospects may or may not be represented by a practitioner. In my experience I either fire these clients in year 2 or 3, or they leave of their own volition. I've come to the conclusion that they're not worth the headache, even if they year 1 fees are attractive and have good realization unless one is starving for revenue.

What have you noticed?

28-Apr-2014 1:16pm
Arlington, Virginia
New Prospects who open the introductory conversation with, "what do you charge for"?
They are price shoppers - their main object - get the lowest fee quote.
I reply with a long range "$300 to $3,000, gotta see what's involved".
The other kind of Prospect is the one who says, "I did my own return on Turbo Tax - will
you proof it for errors and suggestions, and what will that cost me"?
That question gets a "I don't do that". (Response - Because of the liability and cheapness of the client).
Another type of bad prospect is the one who starts off with "I've got a simple tax situation" - goes on and an on
and its not a set of simple tax returns - and he/she ends by saying "can you do it for $200". That gets a good long laugh and a "I gotta go have a Senator calling".

31-May-2014 8:34pm
Agree! It took me a while to get over the "loss" because I thought I had done just a wonderful job with their complex tax situation and then when it got easier I thought they will hang around. I overlooked the fact that they just wanted their problem fixed and when that is done they may go back to someone else or DIY.

Just this tax season lost a client (over 12 years). They did not have the decency to call/e-mail me on their own. They had complex tax issues (sale of business and rentals).When I called them if I should file an extension now for 2020 tax year, they break the news to me :cry: Reason, their son's friend is a new accountant and she did them for free!

1-Dec-2016 8:47am
Wheeler-dealer types. They've always got an angle or a shortcut that will definitely avoid taxes and how could you not agree with his interpretation of tax law.

21-Apr-2014 9:42am
Bay Area – CA
Early in my career, I would see turnover in new clients who were attempting to do their own return and were paying a lot of tax due to stock compensation. They would come to me thinking I had a magic wand. After a year or two of me giving them the same awful results they could achieve on their own, they would leave.

I generally do not take these as new clients anymore. If they are in their 20s or early 30s and their is just nothing I can do for them other than prepare their return, I don't bother. I have little tolerance for clients with sophistication issues - either they can't understand or more than likely they just refuse to understand because they do not like the results.
Last edited by Wiles on 11-May-2021 10:15am, edited 1 time in total.

16-Jan-2020 3:15pm
When they do MFS to avoid having to make payments on a school loan. I used to do them, stopped around 2012 because it always turned around to being my fault when it didn't work out as they had planned.

24-Jan-2019 2:16pm
Great topic - and I already agree with all of the answers. MFS is often a red flag.

Split dependent benefits for divorced clients have also brought me bad "luck".

Bankrupt clients = bad.

Under-withholders - with the exception of some who don't pay ES tax but have it put aside due to the low interest rate environment.

Those who start by complaining about their previous preparer (unless it was for unresponsiveness) or admit they were fired.

"I usually use turbo tax but this year I am showing a large balance." This is the worst.

Those who want free(!) tax advice or your time when they are not yet clients. These never work out well.

Normally, I would agree that any mention of the words "turbo tax" has not worked out well on many, many, many levels.

But let me play devil's advocate on that one for a moment. I have had self-preparing new inquiries come to me because they sold a rental, or installed solar (form is complicated in Hawaii) and I charged them a ton, knowing it would be one and done.

But some of these clients have stayed with me saying, "it's just so convenient and I sleep better, I just assume you do it every year even if it's simple".

Not that I would ever discriminate based on gross income - but it seems like the higher earners fall into that category or just make better clients in general. I'm just mentioning this point for a friend - I would never make that a determining factor.

It's often the middle earners that turn out to be non-compliant or "schemers". Though I have seen plenty of rich and non-compliant filers too.

Let me turn the topic a bit into who makes good clients....

I've had good luck with military clients, such as physicians, and those who become DOD contractors. Sure, the "states" are a PITA, but they retire from service and many become s corps, etc, and they are great to deal with. Military pilots are good too and they leave the military and become airline pilots and property owners.

I also like new business clients who have no problem paying for a consultation.

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