Market Analysis Summary
Marcus Accounting, like all businesses, is affected by forces and trends in the market environment. These include economic, competitive, legal/political, technology, and customer issues.
Economic Environment
Positive forces include the generally prosperous economy that is currently in place, full employment, rising wages, and low inflation, leading more people and businesses to be willing and able to hire an accountant to keep financial records and prepare taxes. The strong stock market means people are making more money, primarily in the form of capital gains, which may require more complicated recordkeeping and tax preparation. The new tax laws signed into effect in 1997 "makes filing this year much more complex for many people" says Martin Nissenbaum, national director of personal income-tax planning at Ernst & Young in New York, as quoted in the Friday, February 20, 1998 edition of the Wall Street Journal. The Journal also cited that about half of the nation's filers used an independent tax preparer last year.
Even though corporate downsizing is generally observed as a negative trend, it has positive implications for Marcus Accounting. A growing number of involuntary (and voluntary) corporate cast-offs are starting their own businesses, and unless their background is in a financial field, will need the services of an accountant to get the business recordkeeping set up. In 1996, there were 95 new business start-ups in Market County (County Business Patterns, U.S. Department of Commerce, Bureau of the Census, 1995).
Legal/Political Environment
As stated above, the new tax laws, new IRS forms, and regulations are becoming very complicated for the average person/small business to stay current with and understand. People increasingly need someone knowledgeable about the laws to draw their attention to ways to save money and taxes. Laws have changed regarding individual retirement accounts and small business SEPs and Keogh plans to the extent that people are starting to rely on their accountant to sort it all out for them.
Technology Environment
Computer programs greatly simplify the financial recordkeeping and tax preparation for both individuals and businesses, yet most are beyond the scope of the average person to learn and use. Small business owners/self-employed, in particular, wear many hats; the most important of which is controlling the output of their own business. Developing the expertise necessary to run the financial end of the business, including learning and updating accounting software, is just not a priority with many business owners and individuals. Outsourcing of business functions that a firm does not have the expertise in-house is a significant trend in business today. Better to hire an outside expert than to risk doing an inadequate job in-house, or to spend the resources necessary to develop the expertise in-house. Accounting is certainly one such business function. A variation on this trend is for the business to maintain the financial records in-house, and have the accounting service come on-site to generate the reports or complete the work.
Competitive Competitive Environment Summary
Many firms exist in Market County to assist individuals and businesses with their financial/accounting needs. Firms range from private individuals just preparing taxes to national chains like H&R Block, to accounting firms serving individuals and businesses, to CPA firms. A listing of the businesses offering accounting/tax preparation services in Market County (sourced through Midwest Directories) is as follows:
Tax Return Preparation
Edward Bastian (Deerhorn)
H&R Block (locations in four areas of Market County)
Tonda's Tax Service (Suet Mill)
Deutsch Tax Service (Market)
West Kite Tax Service (West Kite)
Mighty Fine Income Tax Service (Lincoln Heights)
Gerald Thomas (Springwater)
Bookkeeping Service
MET Bookkeeping Service (Venice)
KP Bookkeeping Systems (Swan Lake)
Accountants
AIDA Business Center (Swan Lake)
Penquin Accounting (Market)
Michael Looper & Associates (Overland)
Franklin Accounting Services (Overland)
Kurstz Accounting, Inc. (Overland)
Marion Froeming (West Moose)
DDR & Associates (Clemray)
Best Advisory Service, Inc. (Clemray)
McDougal & Missal Assoc. (Swan Lake)
Preferred Tax Service (King's Mill)
Joseph Betting Bookkeeping (King's Mill)
Irene Hopper (Sugarcreek)
Certified Public Accountants
Andrew Green (Mt. Orab)
Professional Electronic Accounting Services (King's Mill)
Lein & Associates (Swan Lake)
John Hammersmith (Sugarcreek)
Gerald Slinger (Swan Lake)
Mario Robbins & Co. (Clemray)
Michael Hutton (Sugarcreek)
Patrick Spartan & Company (Lake Geneva)
Doug Schaub (Wyoming)
Smith & White CPAs (Mt. Orab)
Theresa Summers (Sugarcreek)
VanDyke, Kroger & Associates (Lincoln)
Kitty Mitchell & Co. (Sugarcreek and Lincoln)
Robert Brown & Associates (Wyoming)
In addition to this list, there are private individuals preparing taxes for family and friends, but who are not in the "business" of doing so. Accounting services in four adjacent counties are listed in local directories, and do advertising in local papers, but are not included in the above list.
Generally, the CPA and accounting firms service business and individual clients and offer full-service monthly accounting and tax reporting services, while the tax preparation services and H&R Block concentrate on preparing individual tax returns. Marcus Accounting is attempting to carve out a third segment in the market; that of self-employed, home-based businesses and small businesses who, like many non-business individuals, currently maintain their own financial records and prepare their own tax returns. For individuals, Marcus Accounting would like to target those who need financial services beyond just tax preparation - for example, seasonal residents who need someone to look after their accounts while they are away, or senior/elderly (especially women) who need someone to help them keep their financial affairs in order.
A review of competitors' marketing strategies reveals no one launching a major attack on the Market County market. Many are advertising through Yellow Pages, and in newspapers during tax season, but the general approach to get new business is through networking, referrals, and personal selling. Accounting is a referral-driven business, according to John Simons (CPA). If new business of a certain type is desired, personal calls are made with targeted accounts. Other strategies used by area firms include telemarketing and encouraging and rewarding present clients to refer future clients. Networking within business groups, civic groups, church groups, etc. is important, even if the business results are not immediately felt. People want to obtain financial/accounting services from someone they trust; and that can be someone they knew from past membership in a group. Groups may also offer the opportunity for the business person to give a talk to the membership—an excellent public relations opportunity.
A threat to be aware of is the emergence of new competitors. The barriers to entry are low, and the local university turns out hundreds of accounting majors every year. The accounting program is very strong there, and offering classes at non-traditional times and locations attracts area adults who may be looking for a second career leading to their own self-employment in an accounting business.
Market Research Summary
A hypothetical behavior sequence model for a new client (individual) using an accounting service for the first time might look something like the following: (based on discussions and interviews with potential clients):
- Individual decides to utilize the services of an accountant to prepare taxes. This may happen as a result of a change in the individual's life situation (marry, divorce, lose a spouse, move, win the lottery) or investment/tax situation (sell house, receive inheritance). The need can arise anytime, but late fall and winter months are when most people are thinking about their tax situation.
- Individual investigates alternative accounting services. In most cases, this means the individual will consider first any accountants he/she is knowledgeable of through prior association (relative, friend, social, civic, or church group). Not knowing any accountants personally, the individual will begin asking his/her friends, family, coworkers, etc., for recommendations. If the individual is new to the area or otherwise has not made any close connections with people, he/she would look in the Yellow Pages for a listing, or would look in a newspaper for advertising.
- Acting on the advice of friends (or own knowledge), the individual will call the recommended accountant(s) to obtain information that will help him/her decide if this person is the best for them. Criteria for selection include: competence (can the accountant do what the client needs done?); reputation (has the accountant done this for other clients?); empathy (does the accountant understand the client's situation?); courtesy (does the accountant seem friendly and nice?); and pricing (is the service affordable?).
- Based on the information received, the individual makes a decision and schedules an appointment with the accountant.
- The individual's satisfaction with his/her decision and with the service itself is largely a function of their interaction with the accountant during the appointment. The accountant should do everything possible to ensure a satisfactory experience for the client, so that future business (and future referrals) are not at risk. This means preparing the client as much as possible for what will happen (what kinds of records and documents to bring, what kinds of questions will be asked, etc.).
Because of the confidential nature of income tax preparation for individuals, and financial recordkeeping for businesses, people do not tend to jump around from accountant to accountant, unless they become significantly dissatisfied with the service they are receiving. An investment is made on behalf of both parties to understand each other, communicate, and retain information from year to year.
Marketing strategies will build on this model—taking advantage of precipitating events, fostering word-of-mouth recommendations, and creating satisfaction through interacting with the client.
Summary of Opportunities and Threats in the Environment
Overall, the environment appears very positive for Marcus Accounting. The forces driving market demand, mainly economic and political/legal, are strong, with new businesses forming, new residents moving into the county, and more complicated tax regulations requiring a knowledgeable accountant to keep records in order. On the negative side, there is significant competition, and it will take a while for Marcus Accounting to get "established."
Appendix a -Appendix a - Appendix a - Resume of Ms. Mary Beth Marcus
Olsten, Manpower, Officeteam, Accountemps Employment Agencies
Appendix B - Example Promotional Materials
Appendix C - Example Fee Schedule
