How do you handle "referral" requests by potential new clients

[Judy rocks]

I'm curious how other tax pros handle an email request from a possible new client who asks you to provide them with "a few referrals" that they can contact to check you out more carefully. The person was referred to me by a bookkeeper who I know.

[Jiggers]

I'm curious how other tax pros handle an email request from a possible new client who asks you to provide them with "a few referrals" that they can contact to check you out more carefully. The person was referred to me by a bookkeeper who I know.

"Sorry, I am not permitted to disclose who my clients are."

I would tell them what type of returns that I prepare, how long I have been in business, etc. And invite them in for a "get-to-gether".

[Judy rocks]

Disclosure

I'm an EA. Are we forbidden from disclosing our clients (and thus giving referrals) by Circular 230? This would be even better if we could use an IRS rule.

[zeros]

Referrals -Non Customer

I'm curious how other tax pros handle an email request from a possible new client who asks you to provide them with "a few referrals" that they can contact to check you out more carefully. The person was referred to me by a bookkeeper who I know.

If they are a non-customer who is giving the referral, they get the referral gift anyway.

[JohnH]

I suppose the confidentiality requirements of Circular 230 might be a possible excuse. However, I don't think a tax preparer needs a cover story for something like this.

I'd tell them I consider everything about my clients (including their names & contact info) to be confidential and thus I don't disclose anything about them. Unless the client tells a friend or acquaintance about me, I have no way to provide references. Then I'd remind them that this same policy would apply to them as a client if they choose to have me prepare their own returns. That should help them get some perspective.

Besides, references are a bit of a straw man anyhow. In any business situation in which references are requested, only the good references are going to be offered. Only those second-and-third-tier references really mean anything, and very few people have the time or the inclination to dig that deeply.

[John of PA]

I would just say I accept new clients by referral only, so I only take a new client who calls me and wants me to be their accountant based on someone's referral. If they are "shopping" and want a competitive sales pitch, or want to talk to some of my clients, I kindly state that I do not accept new client that way and am sorry I cannot help them.

[taxxcpa]

If someone calls and tells me he wants to interview me or check me out, I would tell him to ask his friends who they use.

I would suspect that type of person is going to question everything on his return after I do and annoy me more than doing his return is worth.

When I was an employee, I had to put up with having a boss (some were good, some were bad), but now my clients are not the same as the boss, so I don't have to put up with anyone who is likely to be an annoyance.

[ATSMAN]

I have never been asked to provide references for a 1040 client. However for a few new business engagements (1065, 1120s), I was asked to provide reference.

The way I deal with it is to first tell them of the strict disclosure rules under Cir. 230. Then i tell them that I will need a written request from them, and then I have to ask a client to agree to be a reference subject to waivers of disclosure rules etc. Once they see what is involved usually they back down but in those situations where they still want to speak to one of my clients (I have 2 very good clients who have volunteered to be references). We make sure that the only area of discussion will be my competency and the scope of my engagement. The reference will NOT disclose anything about their income/taxes or fees paid. So far never had any major issue once the requester understood the parameters.

As for success rate of nailing the engagement, I am batting 80% in my favor. The ones that I lose is because the business was looking for a bigger shop with a CPA. I am just as glad because it probably would have been more than I could chew with my limited staff.

[Roberts]

I respect the privacy of my clients and do not disclose their identity. Just as I'm sure you'd appreciate such a consideration.

If you would like to meet and go through what my services entail, I'm more than happy to oblige.

[MAMalody]

I handle it similar to ATSMAN. Works for me. Even though I did returns in 28 states last year, I only get this about once a year.

[Golden Rocket]

New Clients

I am fortunate to have served long enough that I don't have to depend on clients who are window-shopping for a preparer.

I work by myself (and my wife) and prepare about 200 returns a year. Almost all of these are people who really need someone because they have a farm, rental property, investments, small businesses, etc. and virtually none of these (except children) are short forms, so I do stay busy. I also fluctuate between 15-20 "entity" returns of one kind or another.

My retention rate is 93-95%, which I'm told is very good for the industry. So this means I'll lose about 12-14 people a year, and if I don't replace them with new clients, my volume will dwindle over time to an unacceptable level. So I AM very much dependent on new clients, and usually get more than I lose. ALL of us lose clients - out of the 12-14 I lose, most will be due to divorce, death, moving away, no longer need to file, etc. Every now and then I'll lose a customer that I have no idea for the loss, and sometimes I will just get rid of the PITA kind.

We are answering the original post as if we wall off our office like a fortress against new clients, but the reality of the situation is that we all need them.

[Roland Slugg]

I won't repeat what others have said in their replies above. All are good ... in fact they're all pretty similar. I just thought I'd point out that there is a big difference between a stranger asking YOU for references, versus a stranger contacting you and saying that he was referred to you by one of your existing clients. The former is a shopper ... or worse ... whereas the latter is a good prospect and a likely new client already. Word-of-mouth referrals by satisfied existing clients is the best kind of advertising ... as well as the cheapest.

[ATSMAN]

I completely agree with your observation. Word of mouth clients are best!