“I not only use all the brains that I have, but all that I can borrow.”
– Woodrow Wilson
I wanted to step back from the “mechanics” of getting new (and old) clients in the door, and speak to you this week about the one key number which will determine how much you spend, and how you make your plans for ALL of your marketing (not just in tax season).
28 Days until January 1…and you best should get clear on this, before you commit with advertising reps, etc…
How To Determine How Much You Can Market & Advertise This Tax Season
What is getting a new client worth to you? Would you spend $5 to get a new client? How about spending $30 to get a new client? Suppose you are averaging about $200 per return and you had a guy on the street come up to you and say, “I’ll bring you five new clients a day for 30 days if you will give me $150 a piece for each of them.”
Would you give someone $150 bucks for every new client they brought you so you could then turn around and net an additional $50 on the deal the next day? (Well, I should hope so.) That’s like saying, “Hey buddy, you bring me a $100 bill and I’ll give you $75 bucks back and let’s do it at least ten times a day for the next month!”
This sounds like an easy question to answer, but I run into tax business owners all the time who refuse to give out money for referrals. (Greed? Stupidity?) Look, I know some people are going to refer your tax business to other people whether you reward someone with cash or not. That’s not the point.
The BIGGER ISSUE is understanding what one particular client is worth to you over the “lifetime” he or she does business with your tax service.
[Incidentally, this is why investing in client retention and stimulating referrals is, perhaps, the best investment a service professional could make.]
You see, if you had enough money to “bank roll” yourself for a couple of tax seasons and not take any money out of the business, you could afford to “BUY” more market share and broaden your client base to be the most dominant tax business in your area. What do I mean by “buying” clients? Well, if you understand the LIFETIME VALUE of your typical client, you can estimate the revenue he or she will generate over the next five or 10 years.
You could go through your database right now and see on average how long a typical client continues to return and do business with you. (Three years, six years, maybe more.) Let’s say, after you average all your clients from the last 10 years, considering those that stay only one year, you estimate that your typical clients will stick with you about five years. (That’s five years multiplied by $200 per return or a $1,000 lifetime value!)
Now let’s go back to the example of the man on the street. It’s the next tax season and you now have a better understanding of your clients’ lifetime value. Let’s say he comes up to you and says, I can bring you 10 new clients per day for a month, are you interested in giving me $225 a piece for each of them? (Your fees staying the same.)
Knowing what you know now, would you sacrifice some (or maybe all) of this year’s tax season profits and put it towards “bank rolling” 300 new clients into your business?
How you answer this question will determine your overall marketing strategy.