How a service bureau works
Initially, the service bureau model may be confusing to grasp. However, its simple if you compare it to a franchise ownership system.
A tax service bureau (also interchangeably referred to as a reseller) is a business model, whereby a tax professional enters a contract with an established tax preparation software company (parent vendor) to resell (as their own) the company’s tax software to other tax professionals, under a white-labeled name. Same software, different name, and different service arrangement.
In this arrangement, the tax professional enters a contract to buy the software licenses (from the parent vendor) at a significantly discounted price, which he or she can then resell at a higher mark-up price for a profit. This same professional also has the flexibility to offer and sell additional software service benefits (at an upcharge fee) in connection with the tax compliance software itself.
Same software, different name: What makes a service bureau different?
One may ask the question: “If a tax service bureau is simply a business that repackages and resells an existing tax software solution, what is it that makes it different?” The answer is in the name: service!
For the record, when a tax preparer makes the decision to start the journey as a successful tax service bureau, the individual must be ready to provide the customers (of their white-label tax packages) with exemplary services and support. Successful tax service bureaus strive to provide hands-on, personalized service to their software customers.
Storied and renowned American businessman and motivational speaker, Zig Ziglar wraps up the attitude for achieving success in the tax service bureau arena with his famous quote, “You can have everything you want in life if you just help enough people get what they want in life.” Translated to the tax service bureau business, success is realized when one provides a sound and well-priced tax prep software to customers, and additionally provides those customers with hands-on, benefit rich tax services that in-turn help them succeed in their business.
If one makes this service commitment to tax preparer customers, a future of growth and impressive profitability awaits.
What are the benefits of owning a service bureau business?
The increased interest and rapid uptick of newly formed tax service bureau businesses are not an aberration, given the many benefits that await tax professionals.
Opening and operating a successful service bureau offers the following benefits:
- The tax preparer owns their own business.
- Revenue generated from a tax service bureau business can be highly profitable
- Revenue is generated from multiple sources, making for a more sustainable business
- Brand recognition is achieved by white labeling the software and reselling it to other tax preparers
- Service bureau owners can grow as big and as fast as they wish
In summary, operating a tax service bureau offers the ideal benefit mix attractive to entrepreneurial-minded individuals: Ownership, money, and freedom.
Is the service bureau model right for me?
For those interested in considering the service bureau model as an alternative to simply running a tax preparation business, one should consider the experience needed as well as what is expected in the all-important relationship between parent software vendor and software customers.
Experience:
- Direct tax preparation experience is necessary
- A working knowledge of the tax software you intend to resell is important, but not required
- Prior tax season history of funding approximately 350+ bank products (given bank products are the chief revenue generator for the service bureau model)
Expectations in tax software vendor relationship:
- Service bureau contract agreement may require an initial capital outlay
- Owner must be prepared to provide customer support and training for their white-label software customers (either directly or indirectly)
- Owner must be prepared to invest in future growth to market, sell and support their white-label tax software
As with any true business, one must go into the tax service bureau business clear-eyed and motivated. For those that are a fit for such an arrangement the future is indeed bright.
