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Is a Private Label Tax Solution Right For My CPA Firm?

Posted by Don Warrant on 4/7/14 9:19 AM

Ideal candidates will be growth-oriented with property owning clients.

private_labelAs with anything in life, a private label tax solution isn’t right for everyone. In general, we find that firms with aggressive growth goals and a client base made up of certain types of commercial property owners are more likely to reap the benefits of private labeling and a strategic partnership with a firm specializing in tax strategies based on an engineering foundation.

Here are several characteristics that indicate that a private-label engineered tax solution will be right for your firm:

1. Key industries

Certain industries and property types lend themselves to benefiting from engineered tax solutions. For example:

  • Restaurants, hotels, resorts, hospitals, and many other types of facilities typically have a high proportion of nonstructural components that can be identified for accelerated depreciation in a cost segregation study.
  • Retail businesses, manufacturers and medical facilities regularly invest in property improvements that can qualify for the Section 179D tax deduction.
  • Contractors and architects who design public buildings also can take advantage of 179D tax deductions.
  • Software developers, biotech and other research-heavy industries can typically generate significant tax savings from research and development (R&D) tax credit studies.

A CPA firm with a high proportion of these types of clients—or with aspirations to target these clients—is a better candidate to establish a private-label strategic partnership. By contrast, a CPA firm that focuses on not-for-profit entities or employee benefit plans most likely would not be a good fit for such a relationship.

2. Top Line Growth

Are you looking for a new way to grow your firm’s top line? Perhaps you’ve been considering launching a specialty tax service line, but you lack the in-house technical expertise and marketing muscle to do so.

By aligning with the right strategic partner, your firm has instant access to all the infrastructure you need to build a revenue-generation machine, including:

  • Deep tax and engineering expertise backed by extensive research into constantly evolving case law, tax code and other legislative developments
  • Private-label marketing materials and sales support
  • Technical seminars and training for your team members and your clients
  • Project and client management support

New revenue from marketing a private-label tax solution can accelerate your firm’s growth, give you a broader mix of products and services, and help grow your firm’s market share.

3. Need to Retain Clients After an Acquisition

Is your accounting firm currently pursuing a growth strategy that involves acquisitions of other CPA firms? One of the greatest risks to the acquirer in such a transaction is that key client relationships of the acquisition target company can become tenuous. After all, their firm’s clients don’t know your firm or feel any loyalty to you or your partners.

Tax strategies based on an engineering foundation and tax incentive and credit discovery can be just the “feel good” service offerings you need to show those clients the value your firm can offer. A single cost segregation study for a client could identify tens or even hundreds of thousands of dollars in tax savings. The goodwill generated by those tax savings can help your firm hold on to those key clients that made the acquisition attractive in the first place.

Think your firm could benefit from a private label tax solution? Contact us or call (800) 591.0148 to schedule a consultation.

Tags: private label, Don Warrant

What Is a “Private Label” Tax Solution?

Posted by Don Warrant on 3/17/14 9:13 AM

Consider the risks and benefits before choosing a strategic partner.

private_labelingImagine if your CPA firm could offer tax-minimizing services such as cost segregation and R&D studies without investing the time and money that would be required to build in-house expertise in these complex areas.

Hundreds of CPA firms of all sizes have done just that by establishing strategic alliances with experienced providers of those specialty tax services, and then offering those services to clients under the CPA firm’s own brand—what is known as a “private label” solution.

In the product world, private labeling is a time-tested a way to diversify a retailer’s product offering without the capital investment that would be required to develop that product line from scratch. The same concept applies to CPA firms.

Establishing a strategic partnership with a specialty provider of engineered tax solutions can bring a local or regional accounting firm a number of benefits, such as:

  • Generate a new revenue stream and leverage that incremental revenue to move upstream to a market-dominant position.
  • Diversify your toolset of tax-minimizing strategies and maintain your competitive edge in the battle to win and retain clients.
  • Generate a consistent profit margin that is equal to or greater than standard accounting firm offerings—with no capital investment.
  • Mitigate the risk involved in advising clients on these complicated areas of tax law by working only with qualified specialists. Unlike in a referral relationship, offering private-label tax solutions requires signing a contract—and the extensive due diligence that typically goes along with such a formal agreement.
  • Maintain control of the client relationship. In most referral situations, you are essentially handing off the client relationship to another provider who may circumvent you or even damage your relationship. In a private label strategic partnership, you remain in the driver’s seat as the primary client contact.

Watch out for private-label pitfalls

Of course, every opportunity comes with its share of risks, CPA firms that establish private-label relationships should proceed with caution. Consider the following risks:

  • You could face liability if the provider has a quality or service issue. As was shown in the AmeriSouth case, the IRS is scrutinizing cost segregation studies and other engineered tax strategies. You need to be assured that your strategic partner has the experience and extensive research to back up those studies in case of an IRS audit.
  • Your strategic partner could start competing with you. Several national accounting and consulting firms offer high-quality specialty tax services on a private label basis. But CPA firms that partner with these national players should keep in mind a different danger: These highly acquisitive firms could merge in another firm in your marketplace, and that competitor could potentially have access to your client list and other proprietary information.
  • Margins won’t increase. Over the course of a typical client relationship, the CPA benefits from increased efficiency derived from a better understanding of the client and the issues at hand. With private-label tax solutions, your firm’s margin typically will remain consistent from year to year.

CSP360 Deep Dive Program To mitigate these risks and maximize the benefits of private label tax solution, you need to seek out battle-tested, qualified CPAs and engineers who can help you reduce the tax burden for your commercial real estate clients and who won’t compete with you.

Backed by the resources and reputation of Buffalo, N.Y.-based Top 100 firm Freed Maxick, CSP 360 partners with CPA firms to offer private-label tax solutions that withstand IRS scrutiny. Contact us or call (800) 591.0148 to learn more about our exclusive strategic partnership program.

Tags: private label, Don Warrant

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