(CPAlliance) Another tax season is in the books. Was this season any different than any of your prior years? Were you able to overcome the obstacles that drove you absolutely nuts last year? How many of the same clients did you have to automatically extend, or how many balked at your bill without realizing that it’s only half of the actual hours you put in? Change is hard, especially in the deadline-driven and completely inelastic industry we’re in. There’s not enough talent to meet or sustain the growing demand and complexities of clients needing tax compliance and planning work done. So you might be wondering, is there a better way? By expanding your services and offering financial planning, you can prevent another grueling tax season, help become your clients' most trusted advisors, find your ideal work-life balance, and get control over your practice!
Let’s face it, what keeps you working late nights, early mornings, and weekends is the fact that every billable hour you put in means more money in your pocket; however, there are only so many hours you can cram into a single tax season. While it might not seem too bad at first, years of overextending yourself can lead to burnout and frustration. Adding financial planning—specifically investment advisory services—to your practice will result in more revenue while requiring you to work significantly fewer hours. Now, I know we're all numbers people here, so let's break it down:
To generate $1 million in tax prep revenue, let's say we prepare 1,000 individual tax returns at $500 each taking 2 hours to complete. Additionally, we prepare 333 corporate tax returns at $1,500 each taking 10 hours to complete. This means in order to make $1 million in revenue, you would need to work 5,330 hours, which over 52 weeks is 102.5 hours per week.
Now, if you compare that information to a financial planner's revenue using the Registered Investment Advisor model, we could generate $1 million in revenue with as little as 10 clients with $10 million each in investable assets. These types of clients, known as high net worth, can take anywhere from 20 to 80 hours a year to manage. Leaning towards the high estimate – you’d spend roughly 800 hours a year on these clients, or 15 hours per week. Alternatively, looking at the mass affluent population, which is defined as a family with a net worth between $500,000 and $1 million, you’d need to serve 200 clients at the $500,000 level investing 2 to 10 hours in each per year. Again, if we lean towards the higher estimate, you’d spend 2,000 hours, or 38 hours per week, generating $1 million in revenue. These estimates illustrate the massive difference in effort to revenue between a tax practice and a financial planning practice.
The numbers speak for themselves: adding financial planning services can make a huge impact on your practice and work-life balance; however, I’m not advocating for you to stop doing taxes—I’m advocating for you to do them smarter. With the right setup, training, and back-office resources, adding financial planning to your tax practice will allow you to serve your best clients in the best ways to benefit them and their financial growth.
Are you ready to avoid another grueling tax season? Then join us and FICPA for a CPA Personal Financial Planning Boot Camp during the MEGA Conference in Orlando! Click this link to receive $100 off your CPA Boot Camp Registration!
