As part of my series about the “5 Things You Need To Know To Create a Successful Service Business”, I had the pleasure of interviewing George Birrell, CPA Founder of Taxhub. After earning his masters degree in taxation and scoring in the top 10% of his class on his CPA exam, George began his career in public accounting. Twelve years in, he transitioned to controllership for an engineering firm in New York City. As his career evolved, it was never far from George’s mind that, when it came to consumer tax prep, there had to be a better way. As an innovator, he found that way and the idea behind Taxhub took shape. Determined to bring customers a better tax experience, George began discussing his ideas with skilled professionals he knew he’d need to move forward. He began assembling a team that could help bring his idea to fruition to serve a broad segment of the private tax-payer market. When not enthusiastically pursuing his dream, George enjoys spending time with his family and friends, working out at his local CrossFit gym, and keeping up with his Morkie, Wuzzy.
Thank you so much for joining us George! Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
I grew up in both Utah and Indiana as my parents divorced when I was young and one lived in each state. I am the second youngest in a family of five sisters. I’ll let you draw your own conclusions about why I ended up leaving home early and found myself spending my high school years at a boarding school: Culver Military Academy in Indiana. I attended college at Loyola University Chicago. Not sure of my future plans, I decided to major in Economics and Psychology hoping those areas of study would give me a solid academic foundation. My early life experiences taught me self-sufficiency, independent decision-making and confidence.
After college, I started my career in public accounting while fulfilling the academic requirements to get my CPA. I then worked in the audit department of a large regional accounting firm and, following the traditional public accountant career path, left soon after I got a management position. Knowing that the working environment in Utah lacked significant exposure to the corporate world, I left Utah and took a position as an assistant Controller in New York City.
Working and living in the dynamic and creative city of New York, the idea of Taxhub was born. I knew the Web 2.0 movement was beginning to change the way service industries such as financial planning and medicine interacted with clients and patients. But this movement had not yet hit the individual income tax sector. I saw this idea as my next big opportunity to offer an improvement to the way individuals worked with tax accountants to meet their needs.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
Aside from the standard mistakes that most founders make — like not fully understanding consumer psychology and behavior and completely underestimating the time and funds required to launch a web-based service business — I have a long and embarrassing list of mistakes. One mistake that stands out occurred when I was on a call with a group of executives at TaxAct a few years ago. They had seen that other big online DIY tax sites were trying to offer full-service tax preparation online and wanted to discuss a potential partnership, so they could keep up with them. I knew this could be a game changer for Taxhub, if I partnered with them. We had a great looking website with media attention so I don’t think they realized how small we were, at the time. I was actually still working for another company, so I had to take the call in the parking lot on a lunch break. I was excited and very prepared for the call but not prepared for the garbage truck that pulled in behind me 10 minutes into the conversation, honked and then knocked on my window and asked me to move (as I was partially blocking their access.) I am pretty sure the executives a TaxAct heard what was going on, but neither of us acknowledged it. However, it didn’t take long for one of them to ask me how many tax returns we actually filed in the previous year and the conversation went downhill from there. Needless to say, we didn’t get the partnership.
As you know, today’s taxpayer has many software options for doing taxes at home and saving money. In your opinion what innovation distinguishes TaxHub?
Currently the market is at the beginning of a rapid shift in service offerings. In the past there were the two traditional methods of getting your taxes done: the DIY route with a SAAS product like Turbotax or bite the bullet and go the face-to-face route at a mom-and-pop CPA shop or franchise like H&R Block. In just the last few years the big players, like Turbotax and H&R Block, now offer the online hybrid method that is the core of our business model.
We know, as a primarily bootstrapped startup, that we cannot compete with the deep pockets of these publicly-held companies. Consequently, we are using the one advantage they don’t have. We are laser focused on a small market segment and plan to grow from there. These established companies are so big they can’t focus on one market segment. This is our advantage and how we are distinguishing ourselves. Our customer niche right now is an offer of a superior customer experience and, quite frankly, a much higher level of tax savings for most of our customers. We actually get customers who have tried to file with the bigger companies and were not pleased with the service, so they came to us. Another way we distinguish our service is, as a small group, we allow our preparers to develop relationships with the clients — year after year — which creates a much more efficient tax filing process and a better experience for the customer.
Do TaxHub’s CPAs play an advisory role of any nature?
Yes. We do this in two ways. First our filing process includes a tax interview via phone or video conference just like an H&R Block except our interview is with a CPA, instead of seasonal tax preparers used by tax prep franchises. The second difference is our tax prep package includes a year-long retainer that provides advice to clients on tax strategies throughout the year.
If a small business client gets picked out of the hat and is audited, does Taxhub get involved?
Yes, definitely. In the last four years of tax seasons we have only had one client get a mail audit. We fully supported the audit and it ended up resulting in no adjustment. Right now the IRS audit rate for individual income tax returns, signed by reputable tax preparers, is so low the chances of having to support multiple audits for clients is significantly less than one percent.
Thank you for that. Let’s now pivot to the main focus of our interview. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When you started your company what was your vision, your purpose?
Yes, I agree. I’ve always been obsessed with process efficiency which is why I gravitated to Economics in college. When I first began my career in public accounting, I was shocked to see how much busy work was required to get a tax return filed and how little actual tax knowledge was used. The whole business model of Taxhub is based on the most efficient way to deliver a quality tax return to a client. By creating our super-efficient process, we can cut costs and deliver CPA-level tax advice to a segment of the market that could previously not afford it. I just read an article showing how the TCJA reduced the actual corporate tax burden to below 15% for large corporations. Many of our smaller “solo-preneur” clients have been paying a much higher marginal tax rate; but they don’t need to be. Our core purpose is to level the playing field in the tax world by giving small businesses access to the same tax expertise that has only been available to large corporations.
What do you do to articulate or demonstrate your company’s values to your employees and to your customers?
As a startup firm with a relatively small team, firmwide communication is straight-forward. Our ongoing, informal interaction keeps all of us involved in delivering the highest quality service to our clients. It’s easy to know when one of our people falls short in meeting our client service commitment. These situations are discussed across the team and addressed quickly and effectively.
When speaking to our current or future clients, I think our overall brand presence is a large contributing factor. Because during the tax filing process clients share personal information about themselves, a tax service brand is only as good as its reputation. We rely heavily on social media validation. Our commitment to keep every customer happy can be seen in our positive public reviews on platforms like Facebook and Google. In our marketing we try to keep our message very simple, which is “you as a small business owner are overpaying taxes and Taxhub is here to change that.”
Do you have a “number one principle” that guides you through the ups and downs of running a business?
As someone who worked in public accounting, I was exposed to a lot of successful business owners. When I visited a client location to audit a new client, I would always make it a point to get as much history and exposure to the founder or founders, either by talking directly to them or by talking to employees close to them. I would try to identify what personality characteristics made them successful. I was obsessed with this. I even dug into their backgrounds to see if I could find out what set them apart. I looked at this as my version of Harvard Business School’s case method of learning. I figured they were just smarter, more personable, better leaders or better at selling. Don’t get me wrong, some of them had a significant amount of natural talent in one or more of these characteristics and all had a minimum level of proficiency in each category. But a surprising number were not really that remarkable, at least on the surface. Eventually I identified the only common characteristic: I found that they all had the grit to stay focused on their vision and the ability to see a task through to completion. I know that sounds cliché but it’s really what I observed; so I’m banking on that one ideal. So far it is working out.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
Our first tax season was very rough. We couldn’t give tax returns away. We launched the same year that Turbotax had the big Identity theft hack, so having an unknown brand do your taxes was not on the top of everyone’s wish list. We also made a lot of mistakes with our marketing budget. I really began to question the viability of our business model. I knew I had a more efficient way of delivering a quality service but, due to lack of demand, I started to question product/ (or service in our case) market fit. The only reason I remained committed was that customers really loved what we were providing them. I remember some customers saying, “Is this it? My taxes are filed?” They were amazed at how pain-free and easy it was.
I kept my full-time job, during the slow season, and thought I would give it one more year. The following tax season customers came back and some told their friends and families about us. At this point I knew I had viable business model and the beginnings of something with a lot of potential. The grind of working a full-time job, coupled with a highly-seasonal tax business, was exhausting the first two years. During tax season I was averaging 90–100 hours work each week but I knew, without funding, quitting my full-time job was not a luxury I could afford. We have evolved a lot since then. We now have our tax filing process almost fully refined and we are changing our focus to branding and growing our CPA network in a way that doesn’t sacrifice quality.
So, how are things going today? How did your values lead to your eventual success?
Things are going well. We are solid on two very important metrics. The first is growth. Since inception, we have been averaging more than 150%, year over year growth. This may not seem like a big number for an internet-based startup, but scalability of a service company does not happen at the same trajectory seen by successful tech firms who have physical or SAAS-based products. We plan on initially growing at a controlled pace while building a strong foundation and quality brand.
I have seen other startup competitors, with our same business model that launched the same year Taxhub did and had raised very large rounds thinking they would be able to scale like a traditional SAAS company. They have stumbled hard, damaged their brand, and wasted a lot of advertising money. You can see it in their product reviews. We will not make that same mistake. Our growth philosophy can best be summarized in the book titled “Building on Bedrock” by Derek Lidlow. He talks about how scalability and value creation come naturally when certain fundamental structures and principals are first established in an organization. I know this philosophy does not fit into the modern pump and dump mentality that attracts big venture capital investors but we are okay with that for now. Building a solid brand, with a sustainable customer acquisition stream and, most importantly, a quality supply side stream of qualified tax prep providers, is our focus in the immediate future. Once that is accomplished scalability will happen naturally.
The second metric and a metric that is just as important for long-term scalable growth is customer retention. Our customer retention rate is above 70% which is significantly above the industry average for individual tax prep. This metric is what keeps me going because it shows that we have found a better way to serve tax prep clients.
Based on your experience and success, what are the five most important things a founder or CEO should know in order to create a very successful service based business? Please share a story or an example for each.
Creating a successful service-based business is about building the right foundation to support growth. In our experience this is usually accomplished in several steps.
First, find the right market for your service. Doing this initially involves casting a wide net to identify customers that make you money and then focusing on them. This takes real discipline, especially when you are a young startup that is trying to capture market share. The 80/20 rule applies here. Most firms make 80% of their profits from 20% of their client base. For example, we made the mistake of trying to jump on the crypto band-wagon and get a piece of the thousands of crypto traders who made ridiculous returns in 2017 when the crypto market peaked. We found that working with these newly-rich clients was not as easy as our core market. A lot of them were less organized and much harder to get accurate data from to complete their tax returns. We quickly pivoted away from this market and re-focused on our core target market.
Once this is accomplished the second stage of a service-based business looks to create scalability. Dependent on professional resources, one must recognize that the labor market is a market and just like any other market. The laws of supply and demand rule. Pricing strategy is very important at this stage. Paying close attention to the cost of labor and the market’s willingness to pay for that labor is a very delicate balancing act. Learning the intricacies of your market and then utilizing your labor force in the most efficient way possible is where you will create real value for your brand.
An important part of creating a scalable labor force is setting up a good system for onboarding and training your service providers. The majority of our workforce operates remotely and this creates another challenge. Last year, we flew in some of our tax preparers for a few days of software set-up and training. We learned that, before investing in an employee, you should make sure they are in for the long haul. If they don’t work out, the investment is lost. This year we addressed this issue by using Video Conferences and screen shares.
Tiering your labor force to match specific customer’s need is also an important component in the service industry. This involves matching the right service provider to the right customer. You should factor in, not only matching the skill level of the service provider to the needs of the customer, but also the skill set of the service provider. Some tax preparers are great at doing small business tax returns but struggle with multi-state income allocations. Technology can be used effectively to automate this process.
Finally, and possibly most importantly, you must create a culture of impeccable client service from the beginning. It is important to do this from the get-go because, once this is established, it is naturally spread to all new employees and becomes almost effortless. Creating high standards of customer service may be more expensive at first but in the long run the investment always pays off. For example, doing things like admitting mistakes, updating clients on progress even if you are behind on your promised delivery dates. We have found clients are usually very understanding if you keep them in the loop. If you ignore them, or go silent, they become irate very quickly.
No one is able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
I have had many mentors throughout the years that have taught me different lessons. One person who has provided a lot of insight and also believed in this business is Stephen Gregorio. He is an advisor to Taxhub and shareholder as well. He is a big believer in this business model and will also be a key connection as we enter our scaling phase. He got involved a couple years ago and has provided a lot of high-level guidance, as well as encouragement to stay the course.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
Thank you for the compliment but I’m just a guy from Utah/Indiana who wants to help people who haven’t been served well by the profession I belong to. I don’t know if there’s a message in the cause I’m committed to, but if we all tried to improve the practices of the professions we work in — it could help a lot of clients and improve all of our lives overall.
How can our readers follow you on social media?
@gettaxhub
