Owning a Tax Consultancy Business: Insights for Aspiring Professionals

Starting a tax consultancy business is a noble endeavor that requires dedication, attention to detail, and a strong work ethic. Unlike the perception that it's merely a tax business, owning a tax consultancy can be a rewarding and profitable career path for those willing to put in the time and effort to establish professional goodwill and gain the necessary skills.

A Personal Journey

I have ventured into owning a tax consultancy business twice, each time with unique experiences and lessons learned. The first experience was as a franchisee of a national tax/bookkeeping company, while the second was entirely self-employed. Each journey provided valuable insights into the intricacies of running a successful tax consultancy.

First Experience: The Franchisee Model

My first venture into this profession came through being a franchisee of a nationally recognized tax/bookkeeping company. Although I had some accounting coursework from my MBA, I wasn't a CPA and was transitioning careers from aerospace software engineering. The franchise program provided a thorough background, but it placed too much emphasis on bookkeeping, which didn't align well with my profitability goals. Moreover, the franchise fees were substantial and detracted from my profits. Although the program provided good training, the profitability was low, and the franchisor's involvement in my tax preparation added no value.

Second Experience: Breaking Away

My second venture was entirely on my own, which was more rewarding and profitable. Without the franchise fees and the restrictive bookkeeping model, I was free to focus on what I believed best for my clients. After working in a small office for a global accounting/bookkeeping firm, I gained additional experience and confidence in tax returns and managing bookkeeping staff. This experience proved invaluable and prepared me well for working independently. I sold my practice in January and am now working for the buyers for a two-year transition period to ensure a smooth exit.

What's It Like?

Hard Work

Owning a tax consultancy business is undoubtedly hard work. You can expect to put in long, demanding hours, particularly during tax season. Detail-oriented and highly organized, you need to be meticulous in your work. While it's not a get-rich-quick scheme, it’s also not a path to poverty. By working hard and consistently, you can achieve a six-figure income, but the majority of tax preparers fall short of this level of success.

Client Acquisition and Retention

Clients are the lifeblood of any tax consultancy business, but acquiring and retaining them can be challenging. A significant portion of clients comes from referrals, and establishing a strong reputation is key to building a client base. Convincing clients to use your services requires time and effort, as the trust and loyalty of regular clients take years to build. It's a continuous process that requires ongoing marketing, networking, and excellent client service.

Professional and Personal Skills

You'll meet all types of people in this field, and some might seem boring or rigid. Whether an extroverted accountant who fixes their gaze on you or an introverted accountant who avoids eye contact, each interaction can be a learning experience. If you're naturally outgoing, it can be a huge asset in showing clients your bed-side manner and building trust. If you're more introverted, you still have valuable skills, but you might find it more challenging to engage clients in conversation. Developing strong interpersonal skills is crucial in this field.

Challenges and Rewards

While running a tax consultancy can be rewarding, it's not without its challenges. Slow-paying clients who challenge your fee structure can be frustrating, and dealing with IRS and state tax agencies can be a complex and often frustrating experience. Nonetheless, mastering the necessary tax software can save you time and money and contribute to your success.

Future Trends and Opportunities

It’s worth noting that current political trends, such as the goal of simplifying the tax code as spearheaded by Paul Ryan and the Republican House/Senate, pose a potential threat to this industry. However, with a simplified tax code, there could still be a need for tax preparers, especially for those who need professional guidance. In any case, staying ahead of industry trends and continuously enhancing your skills will be key to long-term success in the tax consultancy business.