Live Software & Service Bureau Fee Breakdown

[00:00:00] Baldeep: All right. Welcome to another episode of the Service Bureau Accelerator Podcast. I’m here with Ross, Daddy Ross, Uncle Ross, as the ladies call him.

[00:00:08] Baldeep: And today, we’re going to dive into live software and service bureau for example. We touched on it a bit on our last episode, and I was going to go off and start talking about it, but I’m like, Hey, we have an episode planned where we’re just going to literally break down numbers.

[00:00:26] Ross: And we’ve talked about fees a lot on other episodes. And so let’s actually get some video, literally do a breakdown live. So if you’re listening to this on Spotify or anything, you might want to head over to our YouTube channel.

[00:00:37] Ross: Just go to YouTube, just type in Service Bureau Accelerator, you’ll find us right there. And just go take a look at our podcast episodes. So you can watch this one because you might want to pull up your tax software; and do a little comparison and be like, all right, what my fees actually look like, because we’re going to show what to look for and what line items and how to do some math.

[00:00:56] Ross: We’ve got a calculator tool that we made for our group and stuff to figure that [00:01:00] out. But this will really help you guys just get clarity on the fees, so you know exactly what is your software actually costs like, the cost, and how much money are you leaving on the table.

[00:01:07] Baldeep: Yeah. And I will say it’s like very important not to pick on anybody, but you got to know these numbers. We hop on calls with people all the time and they don’t even know what their numbers are. And sometimes, we have to pull really hard to get it. We have them submit stuff, so that’s the numbers we’re using today, is we’re submitting what we’re taking from the submissions that we’ve received on a few people that signed up this year.

[00:01:27] Baldeep: But if you’re listening and don’t really know what the fees are, how much of that I get, or this or that, or you get nothing, if you don’t know, it’s your business, you need to know.

[00:01:35] Ross: Especially as a service bureau as well, if you’re the actual service bureau, you have to know these numbers because that’s your revenue. It’s even more important to know that. But even as an ERO, you got to know what all these fees are that your customers keep asking; why does it keep costing more every year to do a bank product?

[00:01:49] Baldeep: Yeah. All right. Let me share my screen here. Share screen.

[00:01:53] Ross: And some of these examples actually, so we just went and pulled again, like Baldeep mentioned, these are when people join our webinars and they fill an [00:02:00] application, we ask people to upload it if they have it available. So this is literally our members that have come in, that have joined our program, that have uploaded this, we’re just pulling screenshots and looking at this.

[00:02:09] Ross: And these numbers are, these examples that we have are actually fairly reasonable, I think for the most part. And the funny part is that I say that it’s very reasonable, when, as you’ll see in these numbers, there’s actually a lot of money that’s being left on the table.

[00:02:25] Ross: Now, we can do maybe some examples at the end of some of the worst-case scenarios that we see a lot. So you can see the difference and you’ll understand why I said it’s reasonable, even though there’s still a lot of money left on the table.

[00:02:35] Baldeep: Right. So let’s dive in. I’m not going to mention any names, for privacy. Whatever I have the numbers on my other screen, I’m not going to share that; but we have this one submission. And if you watched the last episode, I’m doing the air quotes service bureau.

[00:02:48] Baldeep: I actually personally jumped on a call just to go over the numbers with this person, cause they had about 1,200 products, they had these offices. They didn’t refer back to the last episode. They didn’t really have the access they needed to [00:03:00] service their service bureau, they had to rely on somebody else to do all that.

[00:03:03] Baldeep: But anyway, let’s just look at the numbers. So what this screen is, just so we’re on the same page; on the left side here, we have whatever the current software deal is that person has. We have a couple of different buckets for us to plug in their numbers. And then we have a line item here to say, Hey, how much of these numbers here do you actually get?

[00:03:22] Baldeep: Sometimes it’s zero, sometimes it’s an amount like we don’t know until we have that conversation. And then what we’re doing on the right side is; if you join SBA, and we end up and we’re going to show this example, let’s plug in the numbers, let’s make the fee to the customer, be the same exact, and let’s see how much more money you make, just on this.

[00:03:41] Baldeep: So I’ll explain it again as I talk through it. Let’s just take this first example. So this one’s actually coming from somebody that had 1,200 products. So we’ll note that here for later. But the technology fee on it was $18. The transmission fee was $22. They paid $2,400 for software and [00:04:00] licenses. We’re not even counting that on this calculator. And this person actually, because they’re an air quote service bureau, they were getting their service bureau fee, and they were also getting a $50 add-on. So out of this 99+50

[00:04:13] Ross: 149.

[00:04:14] Baldeep: goes to them. And that was their deal. They got $149. So what do we get to do over here? How do we compare this deal?

[00:04:22] Baldeep: They were getting $149. That’s fine. There was a $99, $50 add-on, and service bureau fee, but you see the transmission fee was marked up about whatever. So in a scenario like this, what we really focus on is, hey, what was the total cost to the taxpayer?

[00:04:37] Baldeep: Total cost of the taxpayer is $228.95 and you got 149 of that. So in this scenario, all I’m going to do is,

[00:04:45] Ross: You could do 149 in the Service Bureau fee because that’s the Service Bureau in the add-on. Or 99 service bureau fee, and then 50 on the add-on plus 19.

[00:04:53] Baldeep: Yeah, so basically 69, is that it?

[00:04:56] Ross: I’m good at public math.

[00:04:57] Baldeep: You’re good. I’m not good at following. You could do that.

[00:04:59] Ross: You can see further down, [00:05:00] total bank, a private fee to the taxpayer, we’ve matched it so it’s the same.

[00:05:03] Baldeep: Yeah. So these numbers are exactly the same. They were getting 149, like the taxpayer, with no difference to the actual customer. They’re paying the same fee with their old deal.

[00:05:14] Baldeep: And this is actually in this deal, it was the same software. So with their old software deal, they were getting 149. With their new software deal, just off that, they’re getting 168 per product.

[00:05:25] Baldeep: Now, let’s break this down a bit more. They had 1,200 products, we also give them an additional incentive on those 1,200 products, they fall into that tier. So with 1,200 products before, they were doing $178,800, and paying $2,400 annually, by just moving everything over to us, they’re now making $213,600 with the same fees to the same customers. Nothing changed for them in this scenario.

[00:05:54] Ross: And just doing the math real quick, that’s a difference of $34,800 that this [00:06:00] person is now making more with doing literally nothing different. And now she doesn’t have to pay the $2,400 annually.

[00:06:07] Baldeep: So she saves $2,400 a year. She makes an additional what?

[00:06:10] Ross: $34,800.

[00:06:12] Baldeep: Another, an additional 34,000. So effectively, she’s making. If she does nothing different, she’s making $36,000 more a year, just by working with us.

[00:06:20] Ross: Yeah,

[00:06:21] Baldeep: Simple math. Everybody, hope that does make sense. Let’s go on to another example. We’re good on that.

[00:06:26] Ross: Yeah. We have a new calculator next year that everyone will be able to use and play around with it.

[00:06:32] Baldeep: So this one’s another deal that I had in here. This is a pretty straightforward one, as well. It was 18th Tech. It was a $30 transmission. They didn’t do as much volume as the other one. It was a $30 Service Bureau fee. And I’m just going to put their volume here, so I don’t have to go back, and they did 520 bank products.

[00:06:52] Baldeep: In this scenario, customer’s paying $117.95. So we just want to make sure that matches, right? So we’ll do the 30 service fee.

[00:06:59] Ross: Also on the [00:07:00] left on how much goes to you, they weren’t getting any of that. So out of all those fees that Baldeep just put on that left side, they were getting none of it. $0.

[00:07:08] Baldeep: Yeah. So they’re getting none of it. I don’t have a note on how much they paid for software. Maybe it was free. Maybe they paid a couple hundred bucks. I don’t know. What’s the math? 27. Okay. See, public math, Ross. I don’t do public math.

[00:07:21] Baldeep: So for this person, and this is just their tax office, they didn’t weren’t coming as a service bureau, but, Hey, I want to become the service bureau, where I want to sell software.

[00:07:28] Baldeep: All right, let’s make sure the numbers work for your tax office, like how much more money if you don’t sell a single thing, and you just have your own office with us, how much more does that put in your pocket? That was the conversation on this one, right?

[00:07:39] Baldeep: So when we did the math, 520 bank products, that would actually qualify them for an additional eight bucks on volume. They’re now making, doing nothing different. The customer pays the same exact money to the preparer, to the ERO. They’re still making their ERO, their tax prep fees, they’re now putting an extra $33,800 in their pocket.

[00:07:59] Ross: Not [00:08:00] bad.

[00:08:00] Baldeep: Simple, not bad, right? The similar to the other deal, they were making what, 36,000?

[00:08:04] Ross: They also never have to pay for whatever their software license is.

[00:08:07] Baldeep: Yeah, whatever they’re paying, we don’t have a note on that so I don’t want to make that up. But usually when we have these conversations, and we’ll talk and shit about another, like a transmitter or whatever.

[00:08:16] Ross: No, we never do that.

[00:08:16] Baldeep: We never talked shit about anybody else. But usually, when we have these conversations, this conversation is like, Hey, is the place that you’re at worth the $33,800 a year that you could just be making? Usually, it’s enough. So it’s a simple conversation. This one was like a simple, clear. Hey, example.

[00:08:33] Baldeep: Actually, I don’t know if we have other ones that are similar to.

[00:08:36] Ross: And there’s two more there.

[00:08:37] Baldeep: There’s two more? Okay.

[00:08:38] Ross: I don’t know their actual volume,

[00:08:39] Baldeep: we could do examples. What would be?

[00:08:41] Ross: Here’s a hundred products.

[00:08:42] Baldeep: Yeah, we could do that. We don’t know the volume on the next two because the way they submitted it, they didn’t have the volume. But let’s just rock it, let’s just go check it out. So let’s start over again.

[00:08:52] Ross: I just don’t have the filter set up, so I don’t see what they submitted for volume.

[00:08:55] Baldeep: Yeah, that’s fine. We could just go look at their application because they would have a range.

[00:08:59] Baldeep: So [00:09:00] this one was like a bank report. So it’s a bit different on how it is because you’ll see like tech and trans on the software side, but on the bank side, it will only show transmission.

[00:09:07] Baldeep: So in this scenario, the total transmission was 51, that’s the number we have. There was actually no service bureau fees on this one. ERO three fee. That’s an ERO document prep fee or something like that. So that just goes to the tax office. It really doesn’t affect the service bureau. So let’s ignore that. And that was it.

[00:09:24] Baldeep: So in this scenario, we already know that they don’t get any of it. We just don’t know their volume, right?

[00:09:30] Ross: I do know their volume.

[00:09:31] Baldeep: Oh, you do. Okay.

[00:09:31] Ross: Just pull up that application, 2-300 products. So we’ll call it 250, it in the middle.

[00:09:37] Baldeep: Okay. And let’s also do the same thing, right? So we have $90.95 to the taxpayer. So let’s do that. I can do that math. That was 30. That was easy. So what was it, 250?

[00:09:47] Baldeep: So in this scenario, 250 bank products; they wouldn’t qualify for volume incentives as a service bureau. Now, if they were just getting software from us, not as a service bureau, just want to tax software, they would get a smaller incentive because we do have lower [00:10:00] tiers for non-service bureaus.

[00:10:01] Baldeep: But in this scenario, wherever they’re getting their software from same as conversations before, Hey, cool. You pay us, you don’t have to pay us every single year for your service, but you can go and sell and make more money as a service bureau. And literally, your own office will pay for your enrollment to the service bureau accelerator and then some. Like just the money you’re going to make, $7,500 in your pocket, doing nothing different, same fee to the customer. They’re already net positive to signing up with us. Super simple. Any comments on that?

[00:10:31] Baldeep: Okay. I’m going to pull up the other one. And this is the first time I’m looking at this one. Do we have the volume on this one too? Yeah, this one is a straightforward, hey, no volume. They don’t qualify for volume incentives as a servers bureau. They don’t have the volume yet. Once they get offices and they get more to more volume, they will get additional money, but just off their own office, $7,500 bucks right in their pocket without doing anything different.

[00:10:54] Ross: And again, like I said, this one in particular is actually usually from what we typically see on average. Again, by the way, if you’re [00:11:00] interested in having a conversation with us, go to ServiceBureauAccelerator.Com. Register for one of our upcoming webinars, book a call with our team. We can do these numbers with you live on a call if you’d like.

[00:11:08] Ross: But our enrollment team will pretty much always do these calls. And these numbers that we pulled are right in the medium. This one is actually lower fees.

[00:11:16] Ross: I like straight up. This is actually more of a lower-fee deal. There’s not a lot of stuff marked up here. There’s really only an extra 30 added on. And that’s fairly reasonable. There’s nothing too crazy there from what we typically see. So just giving that as an example, or even with something that’s from on average, what we usually see, this is very reasonable. There’s still 7,500 bucks on the table.

[00:11:40] Baldeep: Yeah, they don’t have a bad deal, necessarily. I’m not saying anything wrong with the person that they got it from or whatever. There’s just more money there that they could make. We’ve got one more example for you guys. No, you met the people that like numbers are probably enjoying this episode.

[00:11:54] Baldeep: The people that don’t or not, but we felt it was important to really break this down and just [00:12:00] give some visuals, cause it’s easier to explain visuals.

[00:12:03] Baldeep: All right. So this is the first time I’m looking at this deal. So we got transmission was a transmitter fee 31. So tech and trans will be 31. It looks like a bank fee, ignore that. Service bureau fee 99.

[00:12:14] Baldeep: All right, cool. So what are we doing here? We are doing the 99 service bill fee. And then what’s the difference? So again, we are at the same fee they have to their customer.

[00:12:23] Baldeep: Are they getting anything out of this deal?

[00:12:24] Ross: I didn’t see any notes on that. So I’m not sure. I think the volume was like around 150.

[00:12:30] Baldeep: Oh, one 50? Okay.

[00:12:31] Baldeep: All right. So in this scenario, same fee to the customer, see the customer taxpayers paying the same thing, they are now automatically getting an additional $109 per product on 150 products with no additional incentives. They’re making an extra $16,350, just by working with us.

[00:12:49] Baldeep: These are the conversations we have all the time. We see people come in with so many different deals. And say they decide to go and really sell, and now all of a sudden they have 1,500 [00:13:00] people. And then they get their extra incentives. Now all of a sudden, there are six-figure service bureaus, right? Like 1500 taxpayers, or it could be five EROs that do X amount of products, right? So that’s why this model becomes very scalable.

[00:13:13] Baldeep: But even just on their own business, usually, we talked about in the last episode, people sometimes just want the fees, and they just want to investigate, how does that work? How do I get that?

[00:13:24] Baldeep: If you’re a service bureau and you’re selling them to EROs and you think they want to be a service bureau, they may not. They may just want their fee. We always talk to our group about not being greedy on these numbers, because we see people all the time come to us with fees like this and they’re not getting any of it. And obviously, if there’s a service bureau fee, there’s a service bureau involved, their provider is just slapping the logo on the software, not giving them any extra training, coaching, anything at all to be worth the 99 or the $109 in this case that they could be making themselves. All they’re doing is getting the software from them. These are things you want to look at as you’re exploring, maybe becoming your own service [00:14:00] bureau, or even looking for a service bureau to work with, what are their fees? What are the numbers? Are they giving you any of this money?

[00:14:05] Baldeep: Keep those things in mind as you’re investigating what you’re looking to do with your business in the future.

[00:14:10] Ross: And then let’s do a final scenario. So if you want to start in the top left, we’ll just match it. We’ll do an 18 tech, $3 trans.

[00:14:16] Baldeep: Okay.

[00:14:17] Ross: So 18/3, 99 service bureau, and then 78 add-on.

[00:14:22] Baldeep: Oh, okay.

[00:14:23] Ross: So we’re going to max it. So this is a scenario that we also see a lot, where the service bureau went in and they basically maxed out the fees.

[00:14:32] Ross: They’re like, yeah, I’m in. I just crank everything up. There’s the ancillary fees as well on the back end, but we won’t get into that. This is just straight up because those are not everyone’s using them. But this is, no matter what, every product, every bank product that’s used, this is what the fees look like.

[00:14:45] Ross: So this we see very common; and a lot of times, they’re not getting anything out of it. And this is usually an ERO who’s maybe a little bit newer in the industry. Maybe they’ve been in the industry for two, three years. They’re doing anywhere [00:15:00] from 50-100 products, maybe less, maybe a little bit more.

[00:15:04] Ross: We’ve actually seen people with a couple hundred products with this kind of numbers. But if you want to change the bank product number, let’s start with 50 products. So on someone who is doing 50 bank products, I’m just going to do some back of napkin math.

[00:15:17] Ross: And this is a big reason why we launched this program, to educate the market, and be like, Hey, look, there are a lot of people that are making a ton of money off of your business, when you should be the one getting most of that revenue, at the end of the day. Look, there’s nothing wrong with being a service bureau, providing value, and having a little bit of an extra fee on there. I get it. That’s fine.

[00:15:38] Ross: But a question that I always put out to our group, when I’m talking to our members and stuff, it’s like, if you are selling software to an ERO and you set these fees, flip rolls for a second, imagine you’re that ERO, buying software from your service bureau, would you be okay with those fees? If you found out like the numbers, if you actually realize what those numbers were, would you be [00:16:00] okay with that? Do you feel like the value that you’re going to be getting is worth those fees?

[00:16:03] Ross: And if there’s a disconnect there, if you’re like, no, I wouldn’t be paying that, then why the hell are you charging your customers that? It’s a very easy thing to do. But I see this a lot. And so in this example, so we’ve got basically the service bureau fees maxed out and the add-on fee is maxed out. It’s costing their taxpayers $237.95 for them to use a bank product, on average. I know markets.

[00:16:25] Baldeep: And that’s not even with prep fees too, keep that in mind.

[00:16:27] Ross: Exactly. And so what I’m going to do here is show 50 returns.

[00:16:33] Ross: Let’s say the average prep fee is, I’m going to go $400, I know it differs between markets. But if your average preparation fee is $40, on a business, if you’re doing 50 bank products and you charge $400 for your tax prep fee, your business is making $20,000 a year.

[00:16:50] Ross: When you look at these numbers and you realize that there’s an additional almost $9,000, that’s like 45% of your total revenue, [00:17:00] there’s another 45% that you’re getting none of. You could literally almost 1 1/12 X your business, just by getting these fees yourself.

[00:17:09] Ross: How do you think that ERO is going to feel when they realize these numbers? Were like, I’m only making $20,000 in my business, but there’s another 45% of revenue that I’m missing out on. And I already paid this person a thousand bucks for the software license. Those are the scenarios that, and we see this like very often.

[00:17:26] Ross: And that’s why a big thing that we always teach in our program is that it’s not the game isn’t dollars per product. The game is how many products. That’s what the focus is, it’s a volume of products. Because there’s more money on the back end. There’s rebates and that’s all kinds of stuff that we talked about in our program.

[00:17:43] Ross: But at the end of the day, as a service bureau, your biggest goal is to grow by bank products. And you can do it very easily in this industry because there’s a lot of deals like you guys see on screen here. There are a lot of EROs out there that have these types of deals, where, yeah, maybe it’s only 20, 30, 50 [00:18:00] products. But if you get 100 of those people under your service bureau, now you’re doing thousands of products, and you can put a ton of money back into their business. And when you put a bunch of money back into someone’s pocket, guess what? They’re probably going to stop shopping software because now you’re paying them a lot of money to use your software.

[00:18:15] Ross: So those are some of the things we teach and just how to really reframe the whole approach to this. So I know, Balds, if you want to throw in 200 products, just to give another example of what that looks like. There you go, someone doing 200 bank product returns, where there could be $35,000 left on the table, just on these crazy fees.

[00:18:31] Baldeep: Right. That’s a bunch of examples of numbers. And yeah, took us about the average length of a normal podcast to cover it. Yeah, man, it was interesting to see, cause we’re talking about, how do we just break this down simply and visually and we have this calculator. We might as well use it and just show people like, all right, cool. This is the opportunity. Keep it simple.

[00:18:51] Ross: So if you guys enjoyed this, or if you were listening, again, head on over to our YouTube channel. We’re going to have this video here, so you can actually see us punch those numbers into the calculator. If you want to do it yourself, you can [00:19:00] always pull up your tax return, pull up like any bank product return, just look at the fee summary, and just go and look at the numbers, how we’re calculating it.

[00:19:06] Ross: And if any of you guys are interested in joining our program or just learning a little bit more about what’s included with the service bureau accelerator, how does it all works, feel free to head over to our website. You should have links down in the comments of the episodes. Head on over to our website, book in for one of our webinars.

[00:19:20] Ross: At the end of the webinar, you’ll be able to get the calendar and schedule a call with our team. Very important, you watch the webinar first, cause we break down everything that’s included, our program, the pricing, we go through everything. So you get the full scope, and then book a call, ask as many questions you want.

[00:19:33] Ross: Do a little feed breakdown with our team on the call, as well. And we’ll give you the options for the next steps.

[00:19:37] Baldeep: All right. That’s the pod.

[00:19:38] Ross: Awesome. All right, everyone, have a great rest of the day.