Tax Preparer Interests   08/16/2022

Growing Your Tax Business with Referrals

By 360 Coverage Pros

Growing Your Tax Business with Referrals

Do you want to grow your business without incurring large marketing expenses? Then ask your current clients to refer you to their friends and family. It’s the most effective—and least costly—way to expand your firm.

Getting referrals from your existing clients is the holy grail of tax-preparer marketing. Why? Because prospects are more inclined to trust referrals to tax providers from people they know. For instance, they’re almost 400% more likely to buy when a friend refers them than if they found the provider on their own. Better yet, when you turn referrals into customers, they’re more apt to become repeat clients, creating higher lifetime value.

Getting and converting referrals is not only the most effective marketing method, it’s the least expensive. Since you don’t have to make large advertising outlays (for Facebook, search-engine and other types of ads), your cost per referred lead will usually be a fraction of the cost of leads generated through digital or conventional means.

If your customer satisfaction numbers are less than optimal—indicated, in part, by having many negative online reviews—work on your business fundamentals and interpersonal skills first. However, if your technical and people skills are in good shape, it’s time to generate more referrals.

How Customer Referrals Grow Your Business

As mentioned earlier, asking for referrals is an excellent way to grow your business. The growth process isn’t hard to understand. When an existing customer recommends you to friends or family members, it decreases friction in the sales process. That means you will make fewer attempts to convert them than normal and spend less money on advertising. It also means your entire marketing/sales process will run more efficiently and effectively. What’s more, your tax-preparation company will grow faster and become more profitable, sooner, than if you had to market yourself by converting cold leads into clients.

And there’s a side benefit: Once you turn referred leads into customers, you’ll be wired into a new network of potential clients. If you satisfy them, you can now ask them to introduce you to people they know. In this fashion, referred-lead marketing represents an infinite cascade of marketing opportunities . . . as long as you keep asking!

An Organic Approach to Referral Marketing

Referral marketing comes in two “flavors.” The first is a casual, organic approach in which you ask as many clients as possible for referrals. The second is more strategic: a formal incentive program in which you give clients something of value each time they provide you with a referral. Both approaches will generate results, but a formal program with strong incentives will usually outpace a casual “ask-my-clients” approach.

For the organic method, start by developing a list of your best clients. These will be people for whom you’ve done taxes for many years and who give you positive reviews. They may have already referred you to friends and family, either encouraged by you or not. Finally, since they’re long-time clients, you’ve probably done good work for them recently. This means now’s a good time to ask for referrals.

If tax season is approaching, you’ll be preparing returns for many of them. So it’s a great time to craft a referral script to deliver at the end of the engagement. If you helped them save money on taxes or got them a larger refund than expected, you stand a good chance of being rewarded with referrals.

If tax season is far off, figure out an alternative way of broaching the topic. Consider r sending them an email or conventional letter. Craft your message carefully, reminding them of the excellent work you’ve done on their behalf. Suggest you’d like to also help their friends or family save money on their taxes. Then simply ask for names. If people hesitate, encourage them by asking probing questions as:

  • “Who do you know at work who might need help with their taxes?”
  • “Do you have any friends or family members who might be in the market for a new tax preparer?”
  • “Do you know any successful small-business owners who might be too busy to do their own taxes?”

When they begin to provide referrals, ask for contact information and get permission from them to use their names when you make your approach.

Also, don’t be the only person in your business asking for referrals. Train your staff (if any) about the need to ask and provide them with a script for doing so. If you and your employees consistently ask all appropriate clients for referrals, it won’t be long before your entire company becomes a high-powered “referral marketing machine.”

Of course, some clients will have difficulty coming up with names, either because no one comes to mind or because they’re not comfortable doing so. In this case, ask them to post an online review instead. As a prompt, give them a card or other document with instructions on how and where to post their review.

A Formal Approach to Referral Marketing

Although the casual approach is a great start, taking your referral marketing to the next level requires building a formal program. It should have a title, provide incentives for referral providers and referred prospects and be an integral part of your firm’s marketing effort, especially your social-media activities.

Here are some things to consider as you begin to design your own referral effort:

How will you gather referrals? One option is to have both referral providers and prospects submit the other party’s name. In other words, clients contact friends or family members and inform them of the possibility of earning an incentive from your company. Then they pass along the names of those who agree to you. Meanwhile, referred prospects contact you with the name of the client who referred them to you. For the referral generator to earn the reward, you must hear from both parties.

Who will receive incentives? Will you reward the referrer only or both the referrer and the referred prospect? For example, you might offer a $75 gift card to existing clients for each referral they give you. Then you’d motivate referred prospects to hire you by offering a $50 discount on their tax-preparation fee. Concerned about the size of these rewards? Don’t worry. When viewed through the lens of projected lifetime revenue, one-time payments of $50 or $75 seem trivial.

What are the best incentives? Not to be crass, but money talks! You’ll achieve the best results by either providing a discount on future services or by giving referrers and prospects gift cards to buy something they value. In lieu of discounts or gift cards, you might provide a gift certificate for a special experience such as a local entertainment event or complimentary dinner for two. In some cases, other gifts might work better. Perhaps you dispense with gifts and just send heartfelt written thank-you notes. Whatever you decide, test the reward with a small group of clients and prospects to see if it works. If it doesn’t, try something else.

Should you impose limitations on the program? Develop a terms and conditions document to make sure the program doesn’t cost too much. For example, based on your budget, you might limit the number of referrals a client can make. The document should also precisely define what each party must do to earn the incentive and what those rewards consist of, among other provisions.

How should you promote your referral program? Promote your referral program using every marketing and communication channel at your disposal. Start with your website. Have your web programmer include a pop-up or other alert to generate maximum visibility for the program. Then include the program name in your email signature, on all your social media pages and on your Facebook ads. Also, consider building it into your telephone on-hold prompts or creating desk cards or wall posters for your office. The point is, promoting your referral initiative should be a multi-barreled, continuous activity. The more you repeat your intention to add new clients through referrals—and reward people for helping you—the more successful your program will be.

The Importance of Tax Preparers Professional Liability Insurance

Not every tax engagement will end on a positive note. Sometimes mistakes happen. And when they do, clients may not be happy. Complaints and threats of litigation might ensue. When this happens, it’s important to have professional liability insurance to protect your business.

In short, with the tax code becoming more complex every year, the risks of making a mistake preparing taxes grows in tandem. Without robust professional liability coverage, doing tax-preparation work may expose your business and personal finances to litigation. Why take this risk when you can easily protect yourself with comprehensive, affordable tax preparers professional liability insurance?

In the market for tax preparers professional liability insurance? Check out the coverage available at 360 Coverage Pros, with premiums starting at $23.33 per month.