Reading materials for firm development

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#1
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Not a super urgent request...

This first tax season as a solo shop has been a grind.
I knew it would be, and I'm not afraid of work. I've been doing the 7 days a week tax season grind for 20 years now (officially my 20th tax season to be exact).
I'm at max capacity, even working 7 days a week since Jan 1st, and 70-80 hours a week as workflow allowed.
It would be nice to have an admin/staff person, of course.
It would also be nice to eventually hire a junior staff, to hopefully transition to part time eventually, and then have an exit strategy in place.

Just looking for resources (books or websites) that might guide my path on which direction I should take this thing.
I'm currently looking at +50 business extensions that were done, and 150ish personal extensions that will be done for the filing deadline, and I'm having trouble saying no to new callers. (not to get them done by the deadline, that ship sailed a few weeks ago, stated turnaround is 4 weeks during peak tax season, going to 6 weeks next year)

Also happy to hear other experience in this area.
More money is not necessarily the main goal, as I'm on target to cash in my chips and check out in another 8 years at age 50, potentially before depending if my transition strategy works out.
Last edited by ReckedCPAEA on 7-Apr-2022 4:17pm, edited 1 time in total.
 

#2
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Northern MI and Coastal SC
It's really learning to manage expectations, which comes with experience. It is very different trying to do it under an employer vs. having full control under your own business. Don't deviate from standards, first and foremost. Once you do, you'll be going down a rabbit hole you cannot easily escape.

Secondly, very carefully evaluate fee structures vs. services offered. I knew from day one that I did not want to function like a typical CPA firm (had prior experience and knew it was nonsense), from almost every perspective but particularly billing. Focus on high fees, high-level services and you'll earn more money while working far fewer hours. These clients are also generally easier to work with, actually.

Look up Salim Omar, CPA. He sells a bunch of crap from a marketing perspective but his books have a lot of valid points and practices concerning operational matters.
 

#3
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NC
ReckedCPAEA wrote:Not a super urgent request...

This first tax season as a solo shop has been a grind.
I knew it would be, and I'm not afraid of work. I've been doing the 7 days a week tax season grind for 20 years now (officially my 20th tax season to be exact).
I'm at max capacity, even working 7 days a week since Jan 1st, and 70-80 hours a week as workflow allowed.
It would be nice to have an admin/staff person, of course.
It would also be nice to eventually hire a junior staff, to hopefully transition to part time eventually, and then have an exit strategy in place.

Just looking for resources (books or websites) that might guide my path on which direction I should take this thing.
I'm currently looking at +50 business extensions that were done, and 150ish personal extensions that will be done for the filing deadline, and I'm having trouble saying no to new callers. (not to get them done by the deadline, that ship sailed a few weeks ago, stated turnaround is 4 weeks during peak tax season, going to 6 weeks next year)

Also happy to hear other experience in this area.
More money is not necessarily the main goal, as I'm on target to cash in my chips and check out in another 8 years at age 50, potentially before depending if my transition strategy works out.



I would advise you to consider raising your prices 20 percent. 20 percent of your clients will leave…. Same money, less work.

Do it again in a year etc. Hard to do but 7 days a week etc…. Sounds nuts.

The demand you state indicates your fees may be too low???? If money isn’t the goal why are you killing yourself??


Set up a soloK ROTH and max it every year….

I said exactly what you did but used 55 as the date. That was 4 years ago. I found i like the work but I only work 25 hours a week, still make a nice living and I could have retired at 55 no problem. I almost force clients to NOT extend so I have summers free.
 

#4
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845-NY
I have a solo, non Roth, hope to max it this year.

I'm at 320 an hour, up from 300 last year, probably going to 340 next year. Definitely not the cheapest in my area by a long shot.

A lot more clients followed me from my previous firm of 20 years than I expected. Wasn't sure how many would come to start with, so I took whatever came my way.

Also wasn't sure what the workflow and volume would look like this year as my first solo year, so I went hard to try and keep up with it. (I have a slightly addictive personality.)

Definitely not healthy, nor sustainable.

I figured I needed to gross 225 to 250 to save 100 this year. I was hoping to do 60% of that by April 15th and I made it.

Appreciate all comments.

Thinking more value billing for next season in addition to the hourly increase .
 

#5
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ReckedCPAEA wrote:I have a solo, non Roth, hope to max it this year.

I'm at 320 an hour, up from 300 last year, probably going to 340 next year. Definitely not the cheapest in my area by a long shot.

A lot more clients followed me from my previous firm of 20 years than I expected. Wasn't sure how many would come to start with, so I took whatever came my way.

Also wasn't sure what the workflow and volume would look like this year as my first solo year, so I went hard to try and keep up with it. (I have a slightly addictive personality.)

Definitely not healthy, nor sustainable.

I figured I needed to gross 225 to 250 to save 100 this year. I was hoping to do 60% of that by April 15th and I made it.

Appreciate all comments.

Thinking more value billing for next season in addition to the hourly increase .


Something doesn’t reconcile…. At your rate you should be grossing near 400 to 450K….. annually. 2,000 hours a year is a basic full time job. Assume you bill 1500 hours at 300 that’s 450,000.
 

#6
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I'm hoping to play a lot of golf this summer, targeting 20-25 hours a week hopefully. Hoping to stay under 1000 billable hours.

I'm probably losing more than 25% to nonbillable currently, but I'm also doing all admin tasks from assembling, billing, post office, bank etc. Hoping to get closer to 25% loss as we exit tax season.

I did figure a solo cpa would probably do about 400-450 a year, I wonder what the normal April 15th number would be.
 

#7
JAD  
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California
I think Southpark's post in #3 is exactly right.

I'm having trouble saying no to new callers.

For the first decade, I felt like I had to take on anyone who was a reasonable fit. What if everyone else fired me? I still get waves of anxiety on that. My client base is older. What if everyone dies at the same time?

But here is the thing: what you are doing is not sustainable. Say no. Raise your prices. I do the same.

I included a paragraph in my organizer saying that my hourly was going up 7% to keep up with inflation. I didn't go above inflation because I am already at a high rate for a solo. Everyone knows what to expect going forward. I lost one client. The increase in fees that everyone else is paying quite covers the loss.

No guts, no glory. Bill higher and work less and say no until you have a mass exodus.
 

#8
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Value and subscription pricing is really mandatory to progress in the manner a younger or progressive CPA should. Larger firms cannot adapt as quickly, so use that to your advantage--they may have more capital to work with, but they are also often 15+ years behind the times in more cases than not.

I agree with southpark that something is amiss based on your hourly fees vs. revenue. Realistically, I work around 1,000 hours a year but still earn six figures. This past month, I have been working 12-15 hour days and IT SUCKS, but it is also partly my fault with my travel schedule and getting everyone situated to accommodate expanding my company.

My best advice is stop utilizing hourly rates, but pay attention to your effective rate. Clients and firms hate hourly rates and it is just an outdated method of billing for professional services.
 

#9
JAD  
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My best advice is stop utilizing hourly rates, but pay attention to your effective rate. Clients and firms hate hourly rates and it is just an outdated method of billing for professional services.

I think that really depends upon the client base and the complexity of returns being done. If you are quoting a price, then sure, you can say $400 or $600. But if you have clients who pay tens of thousand of dollars for asset management, and have a firm quote as a % of assets, pay substantial attorneys fees, and received detailed hourly itemized bills, then would they accept a $5000 bill from me for a tax return, without backup? They would not, and they should not. They would not be taking care of their own business if they did, and they are too smart to not take care of their own business.
 

#10
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JAD wrote:
I think that really depends upon the client base and the complexity of returns being done. If you are quoting a price, then sure, you can say $400 or $600. But if you have clients who pay tens of thousand of dollars for asset management, and have a firm quote as a % of assets, pay substantial attorneys fees, and received detailed hourly itemized bills, then would they accept a $5000 bill from me for a tax return, without backup? They would not, and they should not. They would not be taking care of their own business if they did, and they are too smart to not take care of their own business.


I believe it depends on how it is communicated and what the client believes they are truly obtaining (or may obtain) from you in exchange for the fees. My success with it is quite remarkable--from low six figure earning clients to those exactly as you described.

The biggest issue with CPAs is their asinine conservativeness in their own business affairs, which drags down the value of the entire industry. Financial advisors and lawyers charge a hell of a lot more, overall, and clients generally get a lot less from them, relatively speaking.
 

#11
JAD  
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I agree that the financial advisors make a killing, and I don't think it is deserved. I disagree about the attorneys, at least the ones I work with. They charge more than I charge, but not obscenely, and at least the ones I work with deserve it. They have more experience, which is why I work with them.

We can agree to disagree about hourly billing. I wouldn't hire an attorney who refused to provide an hourly rate, and I wouldn't expect a client to hire me without me making that disclosure.
 

#12
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WA State
CornerstoneCPA wrote:The biggest issue with CPAs is their asinine conservativeness in their own business affairs, which drags down the value of the entire industry. Financial advisors and lawyers charge a hell of a lot more, overall, and clients generally get a lot less from them, relatively speaking.


THIS!!!!!

The ERC amendments was the one area I finally got buy in from people to truly charge value and completely depart from hourly rates. I had several ERC amendments on which I might spend 10hrs and charged $8-10K because the credit was $200K. I'd communicate the fee before we started, but no one feels bad about that arrangement. Least of all, the client.
~Captcook
 

#13
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I've been averaging about 55 billable hours a week from Feb 15th until now.
Jan and early Feb started very slow.

I wanted to do 225 to 250 as an estimate this first year.
I was hoping not to do more than 300k, but at current pace I will likely exceed that.
I went from 300 to 320 this year because of inflation (I was at 300 for 2018-2021)
Doing the same next year hopefully.
Also planning to trim the D and F grade clients, and then see where the numbers shake out in Dec and evaluate which direction I should go.

Appreciate all the responses. Will have more time to dedicate to reviewing in more detail in a couple weeks.

We didn't track time at my old firm, and 2 CPAs, one working part time essentially and we maxed at $450k a few years back with 2 part time admin staff. I have realized that the aging owner was not keeping up with market prices, so invoices were too low on the value end (as we didn't track time), and we also let too much time escape unbilled for all the calls, emails, questions, etc.

This first tax season has been a real eye opener.
So much of my time was lost at that old firm servicing the clients when the boss wasn't there that my best tax season there I did only $110, but I also lost 5-7 days to corporate extensions, and another week to personal extensions. I was lucky to average $10k a week from Feb to April, when not counting the time lost to extension filings.
I'm already about that 110 number, but I've been working like a dog to get there.
We'll see how the rest of tax season goes, and then make a game plan to move forward and adapt.
 

#14
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JAD wrote:I think Southpark's post in #3 is exactly right.

I'm having trouble saying no to new callers.

For the first decade, I felt like I had to take on anyone who was a reasonable fit. What if everyone else fired me? I still get waves of anxiety on that. My client base is older. What if everyone dies at the same time?

But here is the thing: what you are doing is not sustainable. Say no. Raise your prices. I do the same.

I included a paragraph in my organizer saying that my hourly was going up 7% to keep up with inflation. I didn't go above inflation because I am already at a high rate for a solo. Everyone knows what to expect going forward. I lost one client. The increase in fees that everyone else is paying quite covers the loss.

No guts, no glory. Bill higher and work less and say no until you have a mass exodus.


Thanks for the compliment. I sold about 60 percent of my practice last year and now work with a CFP type firm and only do taxes for clients I manage money for.

To the OP's point... Myself and my assistant (She is degreed and an EA), before the sale, together she and I billed out about 420K a year and then add the CFP revenue to that. 75 percent was earned in tax season. We only worked about 4 Saturdays a year, I always left Friday at 1pm.

I simply stopped taking on work that I couldn't bill at a "Value" billing rate. Most 1040's are $750 to $900.

It was difficult to finally raise prices, say no etc. BUT, I have been able to save 100K a year for last 10 years etc. I highly recommend it.

I met a CPA about 20 years ago who advised me... NEVER work Sundays, never do work that won't generate fees equal to that of a partner in a large firm ($350 an hour today) and be very narrow in what you do. I followed that advise best I could and it made all the difference.
 

#15
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CornerstoneCPA wrote:Value and subscription pricing is really mandatory to progress in the manner a younger or progressive CPA should. Larger firms cannot adapt as quickly, so use that to your advantage--they may have more capital to work with, but they are also often 15+ years behind the times in more cases than not.

I agree with southpark that something is amiss based on your hourly fees vs. revenue. Realistically, I work around 1,000 hours a year but still earn six figures. This past month, I have been working 12-15 hour days and IT SUCKS, but it is also partly my fault with my travel schedule and getting everyone situated to accommodate expanding my company.

My best advice is stop utilizing hourly rates, but pay attention to your effective rate. Clients and firms hate hourly rates and it is just an outdated method of billing for professional services.


If you go to facebook, there are 2-3 "Tax Practitioner" pages. Best I can tell, 50 percent of them are not EA's nor CPA's. They talk about doing 400 to 800 returns a year and the questions they ask are SCARY. They do returns for $200 and $300 and go on volume. The general public doesn't see a difference between them and us.

THAT is our problem and job. I refuse to play in that sandbox. When someone comments "Hey Joe is in your business too". I stop them DEAD mid sentence. "No he is not. I am a CPA, he does tax returns".
 

#16
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845-NY
This article sheds some more light on the typical revenue and profit for a SOLO CPA firm
https://evergreensmallbusiness.com/smal ... itability/
Makes me feel a little better about my targets.

Also has some good links at the end.
I'm a big fan of Ed Mendlowitz (I've emailed him before) and Marc Rosenberg

I always used the $150k fees per person as a metric, but it seems that number is outdated as well.
fees per person are $220,000 in elite firms and $189,000 in non-elite firms.
https://www.thomsonreuters.com/en-us/po ... rm-survey/
elite firms’ average partner billing rate ($382) is 13% higher than non-elite firms’ average ($339).
 

#17
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Cliff notes on reading materials and business consults from professional analyzers:

Specialize
Systemize
Automate
Delegate
Terminate (clients that can't be managed)
Raise prices and value bill
Turn away clients not in your specialty
 


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