Website Closers® presents a flourishing Tax Preparation Firm with over 150 individual locations serving individuals and small businesses alike. The company is nationally recognized and well-established and has demonstrated strong and consistent financial performance, with healthy year-over-year bottom-line growth.
The industry is broadly divided into two categories: DIY and Assisted Services. The former assists customers via their websites, enabling them to file their state and federal income taxes unassisted. This group operates in the latter sector and has become an authority in the Assisted niche. The model is based on customers visiting physical locations and seeking professional help to file a tax return. Over the years, the number of individuals filing assisted returns has stabilized, and presently, about 80 million seek assistance in the US annually.
BUSINESS BROKER TAKEAWAYS
Our analysis of this tax preparation business for sale highlights 3 primary valuation propositions:
Multiple Offerings: Various services cater to a vast audience, whatever their requirements. Prices vary based on the complexity of the return and the location of services but generally range from $99 to north of $800 per tax return. A shrewd pricing philosophy for existing customers is maintaining fees similar to those of the previous year. In contrast, new customers are attracted by beating any price they were charged by a competitor the year before.
Proficient Team in Place: A core staff of General Managers and Area Managers handles daily operations expertly. Additionally, a stable of contractors works only during tax season, reducing labor costs significantly. The majority return year after year and the remaining vacancies are easily filled by individuals trained by a long-standing team. All employees, including the full-time staff, have been through an acquisition before and are anticipated to remain with the company.
KSP: The target market for this company differs from competitors in a key area. Beyond completing returns, they concentrate on the segment of people who most need money and have specific products designed to meet that need. For example, an early refund advance product in December estimates a customer’s year-end taxes and refund amount and collaborates with a third-party bank to underwrite a small loan for them to use the money for Christmas. The loan is underwritten by a bank with which the company has a contract, and the approval rate hovers around 90%.
ADDITIONAL REVENUE STREAMS
The core product in December facilitates hooking customers into returning and doing their tax returns once their W2 is released. Currently, the company’s main competitors do not execute this product the same way since their approval rates are too low, and most locations are not open pre-season.
The company has operations inside Walmart stores. This is incredibly valuable during the ERA season because all the customer needs is their latest paystub on a mobile phone and a valid ID. Once presented, the application can be completed immediately, and funds can be delivered to customers within the hour while they shop in or around Walmart.
When W2s come in, those same customers return to complete their taxes, and at that point, a different loan is underwritten. This gives the customer the bulk of their tax refund on the same day rather than waiting weeks for the IRS to process it. This is the cornerstone of the model’s success, as this segment of customers constitutes approximately 50% of the total revenue.
The remainder of the business is regular tax preparation, and the company competes for that segment based on price.
SCALE OPPORTUNITIES
Numerous avenues can be explored to expand this company dramatically. Optimizing the store count is worth considering. Since acquiring the business, the sellers have closed certain unprofitable stores each year. Since their territories are close in proximity, customers can easily be moved to more profitable offices, boosting the bottom line. Additionally, the group has 155 stores in 7 states. More cities, states and regions are available for expansion given the firm’s national notoriety.
Current tax preparers are typically underutilized. The business has approximately a 34% utilization rate throughout the tax season since certain stores are busier than others. Subsequently, virtual tax returns are an enormous opportunity. The technology exists, and with some incremental investments in webcams, computers, and the proper training, a buyer could reduce staffing further to make the operation more profitable. Customers would visit the branches as usual but gain assistance via Zoom from whoever is available, maximizing workforce utilization. A General Manager has been tasked exclusively with setting this up.
Traditional marketing, such as fliers, billboards, and branded merchandise, has been the primary advertising approach. Implementing an aggressive and comprehensive digital marketing strategy is low-hanging fruit to target and convert new customers while being able to track the return on investment accurately.
Given access to capital, the most straightforward growth path is to continue acquiring locations from retiring operators and adding to the existing footprint. The current owners have grown this way since beginning operations.
