In this episode of Service Bureau Accelerator, hosts Baldeep and Ross share the origin story of their fast-growing service bureau. They discuss their entrepreneurial journeys, highlighting how they identified gaps and opportunities in the tax industry. Learn about their imperfect beginnings, constant improvement, and the journey to building one of the most successful service bureau coaching programs. Whether you’re starting or growing a service bureau, this episode offers valuable insights and transparency into the journey of Service Bureau Accelerator. Tune in to discover how it all began!
In this episode, the hosts dig deep into the actual costs associated with operating a tax service bureau. Baldeep kicks things off by laying out the various direct deal structures available from different tax software providers but warns that many come with inflated licensing and branding fees. The discussion then shifts to hidden fees within tax transmission charges and how service bureaus could be overpaying by thousands per year without realizing it. Then Tia shares her experience saving over $20k by becoming a service bureau without changing any of her processes. The hosts also provide a breakdown of standard fee deductions to look out for.
Other subjects covered on the show:
- The opportunity costs of not starting your own service bureau and the money being left on the table
- Key factors to consider when negotiating with your current software provider, such as volume incentives
- How changing tax software alone could earn an additional $5-15k without increasing client fees
- Common pitfalls that cause tax pros to lose out on savings by not switching software sooner
AND MORE TOPICS COVERED IN THE FULL INTERVIEW!!!
Looking for more Service Bureau Accelerator content? Check out ServiceBureauAccelerator.com/podcast
You may also follow the Service Bureau Accelerator team on these platforms:
[00:00:00] Welcome to the Service Bureau Accelerator Podcast, episode number four. I’m here with Ross, as the ladies call him, Daddy Ross, Uncle Ross.
And Tia, tax goddess.
And today’s topic. And as if you’ve been watching our past couple episodes, you know, our topics start with one thing and we end up talking about a whole bunch of other crap. But today, we’re going to chat a bit about how much does it cost to be a service bureau? So, Ross, if you want to kind of outline what we’re going to cover today and then we’ll just dive right in.
Yeah. So the cost to start a service bureau it’s actually twofold. So first we’re going to dive into like a lot of the numbers, you know, cause look at the end of the day there’s a thousand different ways you can start your service bureau through a bunch of different options and there’s going to be different deal points.
So we’ll kind of [00:01:00] spend some time breaking that down. What are the different deal points that you want to look for or wanting to start a service bureau? Things to be cautious of, we’ve seen a lot of different deals and a lot of service bureau deals structured in different ways that are not so good and then we can talk about a little bit about our structure as well. And how we’ve set it up for anyone who wants to start a service bureau through us but in addition that the second part is, what is the opportunity cost to you, if you don’t start a service bureau?
Because we’ve seen time and time again, and a part of the reason why we started the Service Bureau Accelerator was because there was so many people that we’d be talking to, because we’ve been working in the industry for many years, talked to a bunch of bureaus and we look at their software and they’re just paying ridiculous fee we’re they literally leaving 5, 10, $20,000 on the table.
That they could immediately put back into their own business just by becoming a service bureau. So we’ll break some of that stuff down as well. So why don’t we kick things off then actually, you know what? Tia, on that note, when we’re talking about the opportunity cost when you joined [00:02:00] our program.
So I remember your story, cause you had a pretty decent number. How much money without doing anything different in your tax business, right? Like continue with the same amount of customers you had, if you didn’t change anything, if you just, all those fees that you were currently paying that you didn’t really even realize you were paying as soon as you were able to put that into your own business. What was that like dollar amount? If you want to share with us, kind of like that.
It was a little over 20,000 if I calculate everything. Because I end up lowering some fees, keeping fees in my pocket, doing add on fees just the discount with the software alone, the lifetime investment, I mean, if I count the lifetime investment, it’s a lot.
But just so just on you’re own customer.
Yeah, just of the.
And tax business.
Yeah, just 20, 000 easily.
And then the interesting thing was for you, that was the same exact software that you were using before, except now all the money went to you.
Now it was your logo.
Exact same [00:03:00] software. I mean, and now I’m saving one because I switched softwares because I’m saving more.
Cause that software decides to nickel and dime and do a bunch of bullshit. So we’re like, let’s just start moving people over.
The whole bunch. Yeah. But at the time when I started, I was working, I was by myself. I didn’t even have a team. Now I have a team of four. I was literally like solo dolo. So $20,000, just that’s a lot. That’s a lot when you’re working by yourself.
No, definitely. I mean, especially as you’re trying to grow in scale, that’s, you know, a couple VA’s there,
Yeah. And before that, it was, well, I thought I was going to better deal with my last deal because before that it was like 45,000. I just, again, they just keep bending me over. I’m sorry.
They just keep bending me over. I gotta, yeah, let’s clip that. They just kept bending.
And let’s put a big picture of Tia eating chocolate. They just kept.[00:04:00]
But here’s the thing, there is so many people and I encourage everyone, by the way, first of all, welcome to this episode. But if you guys are, if you are curious, like reach out to us, if you want to know, what you’re paying on your software deals, guarantee you, you’re leaving that, especially if you’re doing decent volume, right?
If you’re doing like 100, 200 plus bank products every season in your tax office. There’s probably a lot of money that’s being left on the table without even realizing.
We do that a lot.
There’s the opportunity cost of not just starting your own service bureau is that someone is making that money right? When you’re doing bank product returns, you see all those line item fees, all those transmission fees, the service bureau fees, and you’re like, where’s all that money going?
It’s going to the service bureau that you’re under. So why don’t you just give it to yourself instead?
So that’s a little bit of the opportunity cost of, you know, joining starting a service bureau. Let’s talk about like, what would be the actual cost? If someone wanted to go and start their own service bureau today, like what kind of options are out there apart from our program?
We’ll talk about that later, but the best deal in the industry. But if someone wanted to go out [00:05:00] and start their own service bureau, like what would that be like.
Yeah. So, I think I gave an example like this a couple of episodes back. I want to say episode two or something like that. We talked about the direct deal. Right? But I mean, there’s multiple direct deals out there. So like.
What do you mean by that direct deals?
Direct being that, Hey, you’re going to go direct to the tax software to get the deal. Oh. And if you were curious about that episode two, I believe is the one where we kind of break down really in detail why you don’t want to do that, but let’s break down some examples of what the deals like that look like.
So, I’m not gonna name softwares just because I don’t want to give them promotion. Anyway, so one software that will remain nameless their pricings along the lines that don’t quote me, but at last I looked, it was $10,000 for like 10 licenses. And then you have to pay extra, like 2,500 for branding. And then if you wanted them to do your tech supporters, an additional 2,500 p lus for [00:06:00] two.
And this is for people to become a service bureau a service.
For 200 phone calls. And then I was thinking it was like $13 for each additional phone call after those 200 if you want more licenses, like a hundred licenses, like 35,000 upfront or something like that each and then if you want.
Like 250 licenses or something that’s like, it goes up to like 75,000. So as you grow, you have to, you’re paying per license essentially, you’re bulk buying it to get a discount. And then all those other different costs other softwares are very similar in that. They’ll have a structure where you’re basically bulk buying licenses.
And that’s really all you’re doing when you’re going direct, right? I mean, if you go with some service bureaus that are bigger they’ll give you discounts on those licenses, right? So you’re maybe paying a lot less per license depending on what software it is. Some software is really no control.
Other softwares, there’s a bit more flexibility, but you’re still paying something per license, right? For the most part, until you have the volume to offer to not have to, or [00:07:00] you’re going through somebody who has a volume and that’s not the revenue source. There’s a couple of ways to look at it, right?
I’m not saying we’re the only people that can offer the unlimited licenses because we’re not, right? There are people that can offer it. But the reason why we do is because I want our service bureaus to make the most money possible. Other service bureaus that sell to customers or sell a service opportunity.
The majority of their income is coming from licenses, add ons service. They may still have add ons that you don’t know about and incentives rebates. Right? So for Service Bureau Accelerator as a business decision, we’re like, well, we’re not here to make money off licenses, so we’re not going to charge you that money. Right? And at the volume we have, we’re not really paying. In some cases we’re not paying a lot for it. So we’re like, hey, our revenue model isn’t licensed. We’re not here to make money off licenses. Like a lot of other softwares and service bureaus are. We’re going to make money off.
We’re doing actually something that most people don’t [00:08:00] do. And in that space is charge up front for all this other stuff, right? So where you have other ways of making revenue to allow us to not have to charge for each license. But I mean, those are essentially the ways that you would go and get a deal, right?
There’s go into a service bureau, getting some type of deal, a couple of things to look out for. Is that what you want to talk about next? A couple of things to look out for.
So what’s, I’m sorry if a person were to go to another software to get the same deals that we’re offering unlimited, what’s like the starting come back?
They wouldn’t. I mean, depending on the software there, you may be able to get a software to do it. But here’s the thing.
And especially if are starting a service bureau, you don’t have volume. Some software companies won’t talk to you. If you’re an ERO and you’re not already doing significant volume in your own office.
I mean, there’s people that come to us and like, you know, a common thing that come on our webinars and ask, say, oh, I spoke to my software, they said, I’m not ready yet. Right? Because they only do 50 bank products or a 100 bank products. Like you’re not going to get a good deal at [00:09:00] 50 or a hundred bank products. You’re not.
If you don’t have any volume, this is not gonna happen. Right? Even a thousand is not a lot. Right? 2000 is not a lot. 3000 is not a lot. Right? So, you know, it’s a lot of it’s gonna come down to volume. Ultimately, that’s how you negotiate in this industry is to show improve, right?
Yeah. And I think not to and I’m pretty sure we covered this in a previous episode. One of the biggest driving points of having a service bureau is to be able to charge a service bureau fee.
So a lot of people say like, oh, well, I do a lot of taxes, but a lot of clients, but if you’re not using the bank product that doesn’t really count. That doesn’t matter to the software company.
Yeah. Most software is like, except for like the one that nickel and dimes, most softwares don’t charge a separate fee for e-file loan, right? So they’re not making money off of those transactions. Only the ERO is, right? So, you know, for us, we’re not making any money on when somebody e-files a return.
Like that’s not where we make our [00:10:00] money. We make our money on the bank product, right? So if there’s a financial product there, then there’s money there. Right? So if you’re going to be a Service Bureau, you want to focus on bank products. That’s where your money is, right? And that’s not saying that you can’t go and invoice people and do all this extra stuff.
You can do what you want, but if you want to make your life simple and easier, just focus on the bank products versus trying to chase people down for e-file fees and this and that, but I mean, that’s completely up to the service bureau, how they want to handle that.
Yeah. And before we get into, like certain things to look out for just, I just want to come back one more time just to the license fees, because I know that, like, that’s something that I want to make sure, like, everyone for you guys who are listening to, like, really grasp that concept is that.
Typically with, you know, if you’re going direct or, I mean, some service bureaus might offer unlimited licenses, but not all that is going to be like year over year, that is going to be your largest expenses of service bureau is paying for license fees. And typically branding fees as well. Branding fees, meaning to keep you with your own branded instance of [00:11:00] that software.
You’ll typically have to pay every year for that, and you have to pay every year for the licenses. Which is again, just want to compare to what, how we structure our deal and how we offer it on our program is that it, everything’s a one-time payment. So it’s a one-time payment to enroll in the program, which includes everything, but then the branding and everything is done.
It’s a part of that one-time payment and you have unlimited licenses. So, year after year, there’s no yearly fees. You do not have to pay for your branding, you don’t have to pay for any licenses. So whether you sell five EROs on your software or 500. There’s no additional cost to you. So that’s a big thing where like that again, like, Baldeep, I think you were saying on one of the episodes, there was someone who was paying like 120,000.
She had like like 200 EROs that she was set up on her software. And she was paying $120,000 every year in license fees that now is just has been completely waived because she’s set up under our program.
Yeah. A lot of it comes down to, well, you know, where you get your software from, right? And that’s one of the scenarios where going direct is not always the best.[00:12:00] It’s just, this is how it works.
Yeah, definitely. So on that topic as well as being a how much does it cost to be a service bureau? We’ve definitely gone through like the licenses, those options. What are some of the most important things that you think, Baldeep for someone to look for when they are looking at buying a service bureau?
Like as far as like the deal structure, like what should they really kind of be asking for if they’re trying to negotiate or maybe their current service bureau and they’re trying to negotiate their contract or something like that. What are some of the key things for them to look out for?
The main thing is just making sure you have volume incentives in place. Right? And you understand what base fees are versus marked up fees, right? Cause there’s a lot of people that come to us and they’re like, oh yeah, my technology transmission fee is $40.
My service bureau only has a $50 fee or a $20 fee, let’s say. So they’re only charging $20, but they give that to me. Like, okay, they give you the $20, so you get all of it. But what about the tech and trans that’s a 40. With us, it’s 21. So where’s that money going? Where’s that $19? Is that the math? Yeah. [00:13:00] $19 who’s getting that?
They’re like, Oh, I don’t know. Yeah. So you need to understand what the base fees are for the transmitter you’re on. Right? And is that person that you’re getting that software from providing you enough value for that $19 times 500 bank products that you have, whatever that is. Right? Is that worth it?
Like, if you’re getting something from them, great. If you’re not, then you may want to revisit that, understanding that, and then aside from that, if you’re going to go and get a deal, you need to understand that to make sure, okay, that’s where that money is. And it’s okay if they make money off you, right?
Like that’s not the end of the world, but you need to understand what it is. Right? But then subsequently, are you getting any volume incentives? So if all things were base and there is no markup anywhere, how much are you making for every 500, a 1,000, 2,000, 3,000, 4,000, 5,000 bank products you do, because there’s more money there, and if you’re not asking for it, you’re leaving it on the table, right?
So that’s one of the [00:14:00] things that we do in our things. We make sure you have it right off the bat without having to ask for it. We used to bring it up on the presentations, right? But what happened was it would just cause too much confusion because so many people don’t even know stuff like that exists that they’re like, Oh wait, yeah.
Yeah. They’re like, well, I’m getting that $20 service bureau fee.
We’re not talking about that. That’s the.
That’s an ad on, we’re talking about money.
So it adds so much confusion because people didn’t even know it existed. Right? So, go ahead Tia, you’re chomping to say something.
No, I was saying, but that’s the double edged sword though, because in order for you to know the breakdown of these different fees. You really only learn it in our program so It’s like you’re kind of telling us to shop, this is how you shop, but you’ll only know these things.
But I don’t know what shop for.
I don’t know what to shop for.
Look, you could go, you, it would.
And you can’t Google this information.
Not on their [00:15:00] website, it’s like, you’d have to go and speak to everybody and try and figure out what the truth is.
Or if you just want to save a ton of time, you can head on over to our website, ServiceBureauAccelerator.com. Book in for a webinar and we’ll break it down.
Yeah, I would say I think, for sure everyone was legit confused. Second year, you kind of had that pre-training, but I will literally people from our community will come into the kickoff calls and I’m breaking down the contract and they’re like, okay, great. So how do I get paid? I’m like that fee right here, this blink part, the part that’s on your other software, that $79 that is your money.
That’s how you get paid. And then again, light bulb, like I get that. Yeah. For every client, it’s like they were already happy with the deal and the training. But now they’re even happier because they’re fully understanding that, okay, as a service bureau, this is how [00:16:00] I make money. And it just kind of goes back to, I know you guys are going to talk about it, taking off the prepare hat, putting on the Bureau hat and understand it, you know, understanding what that looks like.
But it’s easier when you’re saying it, but it’s not always easy to be digested because I’m telling you like, you just don’t know what you’re looking at until someone tells you. And this is like the only program that I’ve seen that really breaks that down.
Yeah, we’ve gotten that feedback a lot from people like they really understand where the money’s going now. I think it’s important, look, like everyone, it’s not a bad thing to be working with a company that’s making money off you. Like everyone’s making money off somebody. Right? But you just need to understand what it is and how much it necessarily needs to know exactly how much, but you need to understand that, Hey, is the value I’m getting worth it from these people?
And am I leaving anything on the table or what the deal is? I mean, there’s just so many different ways to look at it. It’s all depending on what softwares you’re coming from, who you’re working with, all that [00:17:00] stuff. There’s just so many little nuances, but at the end of the day the base fees are typically the base fees from any software. So.
So you’re looking at in, again, can we also kind of revert back to the fees that they should be looking at and the fees they shouldn’t be looking at because I’ve seen people do that too, saying, Hey, I’m getting charged this, but that’s not part of the service bill that may be part of the transmitter fee.
Well, I mean, it depends. Okay. So all right. The bank fee doesn’t really matter in this scenario. Right?
Let’s get in the numbers. We might as well we’re down the revenue.
So, all right, so let’s, I’m going to pull up a calculator so I can do the math in wallop, otherwise I’ll sound stupid on the live here on the podcast.
This is an, and for everyone.
Some people are mad at some people I’ve encountered get mad at something that you can’t control. You can’t control the bank fee.
So let’s just use an example of how it looks like base fee, when somebody gets a service bureau with us, and they’re on Slayer, right? Let’s just use that as an example. [00:18:00] So there’s a 39.95 bank fee. Now that’s the fees that it’s been every year, but again, the banks can change it.
They may raise that price. They may lower that price. I doubt the lower it, but they may raise it. Who knows, right? So…
And again, just again, for context, this is one is never.
A bank products done.
Anyone using the software is doing a bank product return. So that 39.95 is going to.
The service bank , and that’s fixed.
Okay. And then they may charge. If you do a state bank product, they’ll charge an extra 11, 12 or $13. I don’t bring that up typically in the math. Cause not everyone does a state bank products. So let’s just ignore that for now. Then we have the other one you’re going to see is like a technology fee typically, and a transmission fee.
A lot of times when on the software on the screen, it’ll be broken out separately, but on the bank product, like on the printout to the customer, it’ll all be under the transmission fee. So now in our example. The technology and transmission fee collectively for tax layer is $21, right? So at that point, that’s [00:19:00] 60 and 95 cents.
That is the base fee, right? When somebody has a service bureau with us, there’s nothing marked up there. That is the base fee. Now, that’s a 21 transmission, right? If you see, and you’re using a, maybe you’re with a service bureau, that’s using that same software. If your transmission fee is more than that, and you’re not getting it, then that’s going to them.
Is that simple math? Like simple enough, if that technology transmission fee, whether it’s separated or together in a bucket under transmission, like depending on where you’re looking at it, if that’s $40, then there’s $19 added on from the base price that you would have with us. Make sense? So anything above the 60.95 is marked up, whether it’s in whatever, when you add the calculations, if it’s in the service bureau fee, if it’s in the transmission fee, wherever that is, it’s marked up.
Now, there’s a couple of places where the ERO gets the [00:20:00] money. So we’re, and I’m not talking about those, but essentially those are like the doc prep fees, e-file fees, that goes right to the ERO anyway. So that doesn’t really matter. We’re just looking at transmission fee. And technology fee and the bank fee and service bureau fee..
Does that give a good analogy guys? Is that kind of a simple breakdown?
Yeah. I think that was super simple.
And maybe we should have next, maybe in another episode, we’ll break that down and like a whiteboard or something. If you guys want more clarity, comment on the video on YouTube specifically, because we’ll see, I think I will see that right.
Comment on the video, maybe even type in your fees and tell us how much you’re getting, and I’ll just respond back and say. Yeah, you’re paying this much more and let us know how many bank products you do.
Yeah that, I mean, that’s very straightforward. $21 for tech and trans, 39. 95 for the bank. That’s your based price.
Yeah. And then anything above that in those buckets or there’s, or you might even see line items like service bureau fee or SVB fee. I haven’t even seen it. Like the software, like name, like the service bureaus [00:21:00] company name.
That depends on the each transmitter displays it differently, but I’m just giving you that example, but then.
But if you’re not getting.
Yeah, if you’re not.
The point is if you’re not getting it, then that’s the problem.
But then there’s other things want to look at, too, right? So what if you’re using us and other software. Let’s say you’re using, how do I say the name without saying the name? The one that’s.
Say it backwards.
All right. So there’s a lot of softwares that their base fee is 30, 29.95, right? 29.95 is their base tech and trends. So in a lot of scenarios, we can bring somebody over to this other software and look, changing software is a conversation for another day, but it’s not the end of the world.
Cause we’ll talk about that another day, but if all they did was change their software, they would make an extra $9 per product, right? $9. So if you do 500 bank products times nine, that’s an extra $4,500.
Right. And then.
Without marketing, without [00:22:00] changing your client, without doing anything.
There’s money in pocket. Right? And then that specific software charges 5 for every remote signature.
So if you add that, it’s like $14, right? So, you could have a deal with the company, but you need to also look at, Hey, is this company worth, yeah, I may like their software, but is it the end of the world to change the software to make an extra 5 10, 15, 20 grand?
No, that could be a nice bonus for you, right? You could hire more people with that easily. Right? So.
I did that I just kept the 14.95 the same.
Yeah, well, that’s.
Put it as a doc, they don’t know, it was mine.
And That’s the thing, if your customer’s used to paying that, so you just keep that price the same, but now you keep the difference. All right. So it’s not like you’re doing anything different. You just got a better deal, and if your customer’s paying the same price, you didn’t even increase the fees and you’re making an extra five, 10 grand on them. Why not? Why not? All just because you had to learn a different software. [00:23:00] Who cares? Right? It’s not bad to the world.
Again, it goes to emotional attachment with the software and I think of Ross had mentioned it. Oh, no, you mentioned it people like stick with what they start with. And I was like, I’m breaking that tradition.
Well, yeah it’s the whole like waiting until, you know, the first or second week in January to suddenly open up your new software that you haven’t even looked at. And then you go, oh crap, I don’t know how to do return. So you need to go back and use your old software. We’ve, I can’t even tell you how many times we’ve actually seen that where people.
You know, join our program and, you know, honestly, this is stuff like this is areas of our business where we’re always working on. Again, guys, we’re like three years into our program and we’re still constantly making updates and adjustments and how can we improve our program?
How can we ensure more people are getting success? And, but we’ve seen many times where people get like an amazing deal with our software compared to what they’re currently getting, but they didn’t take what a few weeks. Before the [00:24:00] tax season began to just like get familiar with the software and train their people up on it.
And so now they’re paying like 15, $20,000 in those additional fees that they could have just put in their pocket. If they just figured it out like two weeks before the season started. And it’s mind boggling.
It’s a common thing that the tax businesses, right,? You disappear for a long time and you’re trying to get back in gear the first week of January, whenever you start, right? Late last week of December. And if it’s not what you’re used to, you’re just going to fall back to what you’re used to. So yeah, it takes work, right?
And that’s what I know we were kind of going into the end of this, and it would, that’s for me was like the cost of business because Baldeep had told me like, two years ago to switch like it’s, you know, between the other software to the other software like switch and I just had that attachment to it. And then when I went back for the last 2 years and calculated, I’m like, I really could have had that money.
And a [00:25:00] pocket, but I had an emotional attachment and my clients don’t care. My staff didn’t care. They do what I say.
It all starts at the top.
There you go.
It was a me yeah, it was a me issue.
About this on other podcasts, right? You’re going to set the example. You’re the service bureau. You’re going to set the example. Oh, my client’s like this or my preparers.
Set the example, train them, right? Like you have to lead that process, right? If you talk shit about her, you’re not sold on it. You’re not going to get your people to be sold on it. You know.
That’s facts, for real. For me it was like, I’m the queen that starts from the top. It’s only a problem if the kingdom says it’s a problem.
I hope that episode was informative for those of you guys that are out there trying to figure out, do you have a good deal? If you’re not sure, just reach out to us, right? Reach out to us, but go through our webinar, book a call. And if you want, like, we actually ask you guys to upload, like, Hey, upload your fees.
And [00:26:00] on our call, we could break down the numbers for you. Like that’s literally what we do all the time. We’ll just break down the numbers. If it doesn’t make sense, it doesn’t make sense. Right? It doesn’t cost you anything to find out.
And you’re probably losing money if you’re not with us anyway.
Look, I mean, look there.
Yeah. Let’s be real. You probably are losing money.
It’s just a matter of how much.
But yeah, let’s have a conversation. All right. Well, I think there’s been a good episode.
Yeah. Everyone if you guys enjoyed the episode, yeah. Like, Comment, Subscribe, do all those stuff.
All that jazz.
Let us know if you can look at your fees, you can even write them in the comments, we’ll look at it and we jump in and we can tell you how much you’re, where the money’s going and how much you’re overpaying. So throw that in the comments. We’ll kepp on
Be interesting. It’ll be, I will wrap it up there. Thanks.
Lots of comments.
Lots of comments.
All right, cool. Have a good rest of your evening guys.
Awesome. All right.