How Long To Turn A "Profit" In Your Tax Business

[clay]

Just wondering how the rest of you are doing in working toward a profit.

My income from my tax business after 3 weeks has been enough to cover major operating costs of rent (luckily I am able to rent an office for just 2.5 months); tax software; continuing education; postage; electric (heat is included in the rent); office supplies; and cell phone. So the rest of my fees for the remainder of the tax season will go toward variable costs of the business; taxes; and to pay me. I have no staff and I operate what I would call a small business, although I generally work 7 days a week for 10 weeks, about an average of 9-10 hours per day. I had no major equipment costs this year...yet!

How long is it taking into the tax season for other preparers to turn a "profit"?

[JohnH]

Well, technically you won't be making a profit until you get past "Tax Freedom Day", but that's another subject entirely.

[Pacun]

Wow, I think tax preparation is one that shows profit the very same year of inception.

I doubt I will spend three years of pressure of dealing with people without remuneration. If I do, I would check my business plan or my hobby plan.

[joanmcq]

I had a loss the first year. But I only had 3 clients that year!

[Jack from Ohio]

2012 my net profit % was 75%. Biggest year in my 17 years. So I guess that I "broke even" on or about Feb 22, 2013 for tax year 2012. I expect it will be about the same this year.

[Pacun]

I had a loss the first year. But I only had 3 clients that year!

But if you were able to get only 3 clients, were you really in business? How about the second year, how did you do?

[Richcpaman]

This could be an interesting discussion....

And we would have to start with defining "Profit".

As set up by Clay, he has collected enough already to pay all his operating expenses to April 15th. And everything after this is gravy.

That gravy is his salary for working 10 hour days for 90 days.

Well, that is 900 hours, and if you wanted to make $20 an hour that would be a "salary" of $18,000. I would not consider anything a "profit" until after that theoretical number. And we could all define what our own personal hourly rate should be.

The first 5 years I operated, I would have a similar day. I called it "Liquidity" day. The day during tax season that the collections into the bank account finally overcame the shortfalls due to the low collection months from July to December. It started out close to Feb 28th, and moved forward in the calendar to about Feb 3 or 4th. I don't need to track it much now, as the monthly revenue all year now covers most of the operating and required personal expenses...

Rich

[mcb39]

I started keeping records in 1992 and, of course, had a loss. There are so many factors such as the cost of a computer then as compared to now. Also, like Joan, building clientele from family and friends to paying clients. Each successive year has been better and those days were so different that it is like apples and oranges. 2012 was my best year ever, with a slight drop in 2013. I haven't yet taken the time to figure out why. My business has always paid for itself as I never got a new piece of equipment unless my business could pay for it. That includes the 2012 addition to my OIH.

Things are so different today. Do the best job you can do and word of mouth will grow your business to as much as you want it to be.