How Being Homeless Made Me a Better Business Owner
Business lessons sometimes come from the strangest places.
During the Great Recession of 2007-2009, I ended up in Chapter 7 bankruptcy and living in a van, down by the river (cue my bad Chris Farley impression).
When the economy first started falling apart in the summer of 2007, I was a real estate agent at Keller Williams. Less than a year later, I was homeless and working full time in a totally new career field. When I was desperately in need of a job, I randomly stumbled into the tax profession.
I had no idea where that would take me over the ensuing years.
When you're trying not to freeze to death on a cold winter night in Colorado, the time horizon that you base decisions on becomes much shorter. It narrows your focus and realigns your priorities overnight. As a result of this experience, I learned many valuable lessons.
Four lessons in particular would, in time, help make me a better business owner and a better taxpayer representative:
1). Get paid for anything and everything that you. Every dime counts. When you're homeless, broke, and hungry, you can't afford to do free work.
2). To get ahead, you have to do things you may not want to do. "Successful people do the things that unsuccessful people are unwilling to do." -John C. Maxwell.
3). Always be grateful for what you do have. Sleeping in a van in the dead of winter sure beats sleeping on a park bench in the dead of winter, because at least you stay dry.
4). Bad things happen to good people. Just because somebody owes money to the IRS, for example, doesn't mean they're a crook or a deadbeat. While I had no tax debt, my bankruptcy helped me empathize with my clients.
In the future, I'll talk a bit more about items 2-4. But today I want to delve deeper on the first one.
In my consulting work with other tax professionals over the years, I've noticed that many of them do a lot of free work.
Have you ever done any of these?
Not charged a client for an amended return.
Conducted a free transcript analysis on a tax debt case.
Taken that "one quick question" phone call, and never billed for that hour.
Responded to an IRS notice for a tax prep or payroll client, and not billed for it.
Conducted tax planning sessions in the fall, and not charged for them because you "just weren't that busy".
Entered additional bookkeeping transactions beyond the monthly service allotment without charging the client.
When you fail to charge clients for work that you do for them, you are doing two things, neither of which is good.
First, you're training your client that it's acceptable to not pay you for what you do. They quickly become accustomed to getting freebies, and it can cascade. It makes it harder to raise your fees every year as you should. They start taking advantage of your time, and not respecting you as a professional and as a business. It's just human nature for most people to do this.
What you may think is just good customer service, being nice, or avoiding the hassle of billing on your part is, in actuality, a bad thing.
Second, once that billable time is gone, it's gone forever. You can never get it back. Informal surveys I've conducted of tax pros indicate that it's not uncommon to lose 20% of your billable time in a year to such things. If you're currently making $100,000 a year, what would change in your life if you added just 20%? That extra $20k of gross each year might translate into a better college education for your kids... A more secure retirement for you... The difference between supporting your favorite charity or not.
If your business is relatively new, then every billable dime is even more important. You can't afford to do free work when you're starting out. You have expenses to pay, like software, continuing education, marketing, and staff. Not to mention putting food on your own table.
Bottom line: Don't work for free.