Delivering Value to Your Tax Clients

“Far and away the best prize that life has to offer is the chance to work hard at work worth doing,” said Theodore Roosevelt. Photo credit: izquotes.com
“Far and away the best prize that life has to offer is the chance to work hard at work worth doing.” -- Theodore Roosevelt. Photo credit: izquotes.com

Just now, I rinsed my hands in my sink after feeding the cats and dried my hands on a towel hanging just above the sink. The towel: now there's value. It dries my hands. The sink too has value: for providing a place for cleaning things in the kitchen. There's value in having running water. And my cats certainly perceive the value in being fed. So if we look all around: we can see value everywhere.

What is value? How does one identify value? How can one share or communicate or transfer value to another? And is this transfer of value like pouring water from a jug to a cup, or is it more like sharing a story?

These are age-old questions. At some point in one's life, one pauses to reflect on what is really valuable. That, dear reader, is a task we embark on today.

What is our value as tax accountants?

This was the question raised by Rick Solomon. Rick used to own a tax practice, and today he runs the Center for Enlightened Business. Rick's goal is to help accountants and business owners build thriving business ventures. What stands in the way of building the business of your dreams? "The biggest challenge that I see," Solomon says, "is one of providing value and differentiating yourselves." So let's start to unpack what value means for tax practitioners.

"Tax preparation is viewed as a commodity," Solomon says.

Let's think about that for a minute. If I view all coffee beans as commodities, that means I value this bag of coffee beans just as much as I value that bag of coffee beans. In other words, both bags of coffee beans are equally valuable to me. How do we decide which bag of coffee beans to buy, if we view coffee beans as a commodity?

Whichever one costs less. Listen to the rest of what Solomon has to say, "Tax preparation is viewed as a commodity, so the price is the sole differentiator."

If we view ourselves as a commodity, then the only thing that sets us apart is our price.

As you know yourself, not all coffee beans are equal. Some are roasted better than others. They have different flavors, varying degrees of intensity, and varying degrees of freshness. If you enjoy coffee, you know that coffee isn't a commodity. So in a way coffee is a commodity, and in another way, it's not a commodity. Each bag of beans can be slightly different in its roast, quality, freshness, and taste.

Does this analogy help us see anything interesting about the tax industry? In a way, tax preparation is a commodity. There are lots of tax preparers. And there's lots of software for do-it-yourselfers. At the end of the day, we all deliver the same finished product: a tax return prepared accurately. That speaks to the commodity aspect.

But tax services are not commodities, are they? We have big firms and small firms. We have solo practitioners. We have people who specialize in 1040s, others who specialize with international taxes, and still others who specialize in representation work.

Some people try to do a little of everything, just to keep life interesting. Some people go deep into a niche specialty – like serving dentists or clergy.

Let's start with some facts about running a tax practice. First of all, we are running a business. "There are certain fundamental principles of running a business," Solomon says. "They aren't complicated or difficult, but if you are unaware of them, they are impossible." Many of these principles you already know.

What's our value as business people? Solomon suggests we begin by asking ourselves a straightforward question such as "Why would someone come to me versus someone else?" or "What's different about me?"

The typical answer is given by tax accountants, Solomon says, is this: "Well, I give really good service, I'm knowledgeable, I care, I return calls."

Well, if that is the typical answer, guess what? That means all your competitors also think they provide good service, are knowledgeable, care about their clients, and return phone calls. This is the minimum of what our clients expect out of us. So far, we have revealed just one layer of the answer.

We can also look at value from the perspective of the client. The key is looking for "value that's relevant to the people I serve," Solomon says; "Value is like beauty, it's in the eyes of the beholder." What else can you do to enhance value for your clients?

I have a client – let's call her Hermione. Hermione is in debt to the IRS. And of course, the government is getting a little anxious to be paid. We are helping her set up a payment plan that's going to be sustainable given her current level of income. She doesn't track her income and spending. She did set up one of those online personal financial software a few years ago that downloads and categorizes all of one's bank transactions. But Hermione doesn't log in to check it out very frequently. Anyways, we were chatting about options to her tax situation. I noticed she was doodling in her notebook: a little paper notebook that fit into her pocket. It had notes and reminders and sketches and phone numbers and schematics. Hermione is a designer. She's hands-on. How is she going to get a handle on her finances? "Have you ever tried keeping track on your income and expenses using a notepad?," I asked her. She had heard the suggestion before, but never tried it. "Try it for two weeks," I say, "that might give us enough data to figure out what sort of payment plan will work best for you." Three weeks later, I called Hermione and asked how it was going. "I spend a lot of money on the same things, so it's actually pretty easy to keep track of...." She did it! Hermione actually had a grasp on her finances, for the first time in a long time. Then, two weeks later, I relayed a message to Hermione from the IRS. "They are proposing payments of $250 a month," I said. "Would that be doable?," I asked. "I think so," Hermione said; "if we could make the payments be closer to the middle of the month because the end of the month it gets really tight with rent."

We would never have gotten to this result had I not been observant enough to notice that Hermione enjoyed scribbling in her notepad. As a result of her own efforts to track her finances, Hermione now capable of knowing (1) the details and patterns of her personal finances; (2) how much she can sustainably afford in monthly payments, and (3) which time of the month is better for her to pay a recurring bill. She knows this because we discovered a personal finance tool that actually works well for her: a notepad and a pen.

Now, look at your own clients. What's valuable to them? "Value," Solomon says, "is something that impacts their life or business in a meaningful way."

Like a notepad was for Hermione, "value is always concrete and specific," Solomon says.

Sometimes you discover value just by being open and curious.

Other times, you discover value by adopting a slightly different perspective. Take the perspective, "I'm a tax accountant." What does that mean? It means people drop off their W-2s and 1099s, and some time later pick up a 1040 from you. But that's not all you are. Clients come in and they tell their stories. How they got a new job or had a baby, or someone died, or they just got laid off, or they are moving overseas for a few years. Some of our clients have financial planners and investment advisors. Many clients, however, do not. Sometimes we are the only financial professional they go to during the year. Rick Solomon took the reality of that situation and started to build on it.

"When I was in practice many years ago, I started out as a technician," Solomon says. He built up a big tax and write-up practice, and he talked only about tax matters with his clients. Then one day he started an experiment. He started asking his clients questions about their financial health: did they have a will, how is their retirement savings coming along, do they have a lot of debt, are the beneficiaries on their financial accounts up to date?

"You are their financial advisor," Solomon says. "You know the reality of the fiscal world. Customers share very personal things with you. The intimacy and trust are there, so why not expand on that?"

That doesn't mean you need to become a financial planner or an investment advisor in addition to being a tax professional. Of course, you can offer those services if you want to. Or you can do what Solomon did. Whenever he didn't know the answer to the client's problems, he had a list of other financial and legal professionals to whom he could refer his clients.

People will let you know what they value. So to tap into that, you could open a two-way dialogue with your clients. Strike up a conversation. Solomon suggests that we could try asking our clients, "tell me what concerns you have?"

There seem to be at least two parts to this process of discovering and delivering value. One part is simply being open and creating the opportunity to have a conversation with your clients. The other part is being ready with questions to ask. If you are a general practitioner, maybe you want to develop a list of general questions you could ask clients. If you are a specialist, then maybe you could develop a questionnaire or assessment tailored to the specialized needs of your clients.

At this point, you might be wondering if this "value" thing is just a bunch of hand-waving. There certainly is potential for you to go back to your desk and forget this whole article. But there are accountants out there, real people, who have put into practice value-seeking behaviors.

Solomon told me a story of a tax accountant out in Tempe, Arizona. He "ran a typical heavy tax practice," Solomon said. He made a "decent living," was under constant "pressure from clients," and his practice "wasn't growing a whole lot." Then one day, this practitioner "started to entertain these ideas" of adding value about which we have just been talking. The practitioner "saw that the essence of it was engaging his clients in conversations in a meaningful way." His perspective started to shift. Not only did he prepare tax returns, he also wanted to understand his client's goals, he wanted to help them do some tax planning and hold his clients accountable for reaching their financial goals.

"The challenging part," Solomon said, "was him stepping into this role." Here's how this accountant went about stepping into this new role. The accountant started small, "with just a couple of clients," Solomon said. He told the clients he was conducting a pilot. He discovered that doing this sort of conversational work "went exceedingly well," Solomon said. The accountant was "taking a lot more time" with the clients in the pilot program, and found that the clients were "very happy to pay more." Then he gradually started doing this advisory work with more clients. "Then over a couple of years, [he] started to change [his] website." For this accountant, delivering value meant that he can "help you understand your goals and how to get there." Today, this accountant has a "flourishing business," Solomon said, "he really engages with [his] clients. He's an integral part of their team."

The accountant in this story was able to step into a new role. He still plays the old role too. He still prepares tax returns. But he's also acting as an advisor, as someone who can help his clients figure things out.

"How to get clients to see me as an advisor? ," Solomon asked out loud. "Step one is to see yourself as an advisor. Understand what's important to the client." And just as important is the attitude that comes with being an advisor. Advising requires an attitude of "not having all the answers, but helping the client figure out the answers."

"The challenge for the accountant," Solomon says, "is to break free of the box they put themselves in with their thinking."