Are You A Business Owner Or Just A Sales Rep?

Recent events in the field of tax preparation have caused a lot of folks to do a lot of soul searching. And, there are a lot of tax practitioners that don’t like what they see.

Tax preparation is a hard way to make a living.

Oh yeah, it’s alluring to think of all that money you’re going to make in just three months of hard work, and it’s wonderful to think about being able to take the rest of the year off and lie on the sunny beaches of Bora Bora. But, in addition to the annual rite of tax education, software updates and training, stressful deadlines and clients upset about their tax bill, there’s the question of whose business is it really? Does the tail wag the dog?

This year it is dawning on a lot of preparers that the RAL business is drying up.

In my recent post “Got Ral?” I talked about the problems Jackson-Hewitt and Liberty Tax were having with their RAL funding. H&R Block dodged the bullet by having previously purchased their own bank as a funding source. Liberty Tax has been shopping for a bank for over a year, but can’t seem to get the financing pulled together.

However, last May Congress passed the CARD Act — short for the Credit Card Accountability, Responsibility and Disclosure Act of 2009. Among its provisions, hidden deep in the bowels was language that limited interest rates on loans from Federally regulated depository institutions to 36%. This provision extends to banks funding Refund Anticipation Loans, effectively drying up the market for products that were sold with add-on fees that caused the APR to reach over 100%, a rate banks needed to have in order to pay practitioners to market the product, and to cover loan losses for a very risky product.

Banks are getting out of the RAL business!

I’ll repeat that. Banks are getting out of the RAL business.

Liberty, Jackson-Hewitt and H&R Block all built their businesses on the back of the RAL return. H&R has already started re-positioning itself in the market. The instant return type of marketing is being replaced by ads encouraging taxpayers to ask questions and look to H&R for advice. Liberty and Jackson-Hewitt locations haven’t quite made the change, but I can guarantee you it won’t be long.

There is a big lesson to be learned here.

These guys put all their eggs in one basket. They were essentially sales reps for bank loans, working on commission selling someone else’s product.

Their product was not their tax return preparation business. Their product was the banks RAL that they sold. Their profit came from the commissions they earned on that sale. Are you a tax preparer or a salesman for a bank? What is your business model? Do your clients look at you as an expert, or do they look at you as a representative for someone else?

Maybe it’s time you took a good look at your business model and decided which you were more comfortable at. Being self sufficient and secure offering your own services and products, or getting that commission check by represnting someone else’s products … whether its RALs, Mutual Funds, Cost Seg studies, or whatever.

Decide whether you want to own the product, or be dependent on the ability of your vendor.

I’ve got some cool tools available here on this website. Maybe you should take a look at some of them and see if they can help you break out of the rat race.

See you soon,