Ep022: Chad Lowe

Today we're talking with Chad Lowe. Chad is a tax specialist helping companies that do R&D get tax credits from the federal government. This money that's available to them, but in most cases, they probably don't even know about it.

Listen in as we discuss how to bridge the gap from someone being entitled to something they don't know exists, how to get them to raise their hand so they are engaged in a conversation about it, and then how to present the cookies that will move them into having Chad help them get this money they're entitled to.

All in a way that doesn't convince people in the beginning but compels them to raise their hand so we can conversationally work them through the idea of taking action to get something that they want.

There are lots of applications here. If you're in a situation where there's something you can help someone do where if we take just one step back and only talk about the cheese, the benefit, without talking about the mechanics or the logistics, you'll find it's much easier to get people to raise their hands.

We have some really great evil schemes in this episode, I think you're going to enjoy it.


Learn more about Chad at: Practical Tax Incentives


Want to be a guest on the show?  Simply follow the 'Be a Guest' link on the left & I'll be in touch.

Download a free copy of the Breakthrough DNA book all about the 8 Profit Activators we talk about here on More Cheese, Less Whiskers...


Transcript - More Cheese Less Whiskers 022

Dean: Chad Lowe.

Chad: How are you Dean?

Dean: I am fantastic. How are you, sir?

Chad: I'm doing well. Doing well.

Dean: I am excited to have some evil schemes with you today.

Chad: There's some evil schemes to be made here so I'm excited too.

Dean: Perfect. Well, we got the whole hour so let's jump right in and I'll have you explain to me, give me the context of everything and where you think the big opportunity is and then we can take it from there.

Chad: Yeah. I do a really specialized tax consulting with the research and development tax credit. It's different than traditional CPA work. I don't do any tax returns. I don't do any financial statements. I don't do any bookkeeping. The R&D tax credit is all I do. It's complex enough and there's enough gray area that most CPA firms don't have an in-house expert. It's given rise to some boutique firms and to some specialty firms that just focus on doing that.

It's a money found type of service so we come in and are able to save our client's tax, some significant benefit and our fee is small percentage, it's not a contingent fee but it's a small percentage of what the actual savings are. Traditionally this has been something that we've gone out and worked with more mature companies, manufacturers, small manufacturers. I have a lot of companies, clients in the ag industry actually.

Now there's a change in the code and so actually the credit can now be used against payroll tax and so a lot of these startups, these venture-backed startups that have high R&D cost and high payroll cost can now utilize the credit, where before they didn't really care about the credit at all because it's an income tax credit and they're likely never going to pay income tax.

I'm out in Northern California where a lot of those companies are, and I've made a lot of headway with some relationships out there but that I think is the biggest single target market is those venture-backed startups, high R&D intensive startups, and they're all entering the market starting in January. As far as finding a target market that's the area I've bee most focused on getting out to and getting to service.

Dean: What does that mean, R&D, what kind of activities would qualify for R&D and what kind of firms are these?

Chad: Yeah. That's a good question. It's less, the more traditional definition of R&D is new to the world type research and that's not what qualifies, it's really things that are technical, that are new to you, and so a lot of my manufacturers are just like food companies so they make a new beverage or a new food product and the development that they put into that would qualify.

It's much less ... It doesn't have to be something that's patentable, and that's part of the reason that we're ... This boutique niche exist because the standard definition of R&D is not necessarily work on this intended, the bar is much lower. Most of these venture firms.

Dean: Essentially companies can ... because I know R&D in my mind, and it's good that I don't have any background in this or know what you're talking about so I can bring the layman's thought to it here so I can understand it clearly that you're saying that R&D in this broader context is essentially companies that are going to expand their product line or expand their offerings with something new to them, not necessarily new to the world.

So I have one line of product, and I want to now go into, I want to create a beverage, like you said or I want to create a new software program or I want to create a new product that we don't currently offer. All the development that goes into this, that would qualify as R&D?

Chad: Right. Yeah. It doesn't necessarily even have to be just the product we're offering, it can be a new process, so it can be a lot of these softwares and service type companies doing the development of their platform or even just something within their.

Dean: Let's say for me for instance. We started our GoGo clients platform which is all of the landing pages, auto-responders, toll-free voicemail, texting, and a CRM all in one package. All of the, like creating that would be R&D, all the stuff in getting that ready to go to market kind of thing?

Chad: The technical development behind that. Now if there's like, the marketing research, the market research soft science stuff doesn't qualify, but yeah, any other technical aspects in making that work would be something that would qualify.

Dean: Okay. Well, that's pretty exciting. To create new products and stuff, okay. How does the tax credit work? Practically what does that mean? That how would that ... What are the real ramifications of that? Because the tax credit I know is different than a tax deduction.

Chad: Right. It's a direct dollar per dollar savings. When I talk in terms of benefit, like if I say someone has a $100,000 in benefit, I'm talking direct savings of $100,000 in credit that they're able to use to offset tax. There are instances where the credit exceeds the tax liability, and you don't get a refund in those cases for traditional businesses. For these startups they can then use it against their payroll tax, but yeah, they might have some.

Dean: It can carry over to ... You don't use it all this year, but you've got a credit that you can apply to next year?

Chad: Correct.

Dean: Okay. Perfect. That's an interesting thing. I remember hearing years ago about some one tax strategy that some companies would use this buy ... Some buy companies for their tax credit. A company that started up, did some R&D, didn't ultimately take the product to market, but they have these tax credit that have value. Even though they're not creating revenue, somebody would buy that company by the tax credit value of that company. It seemed kind of interesting.

Chad: That is interesting. There have been states that have played around because this has been a problem that you have all these intense R&D cost and companies that don't ever make money. There'd been some that have been investigated like selling tax credits and all that stuff. For the most part, I've only dealt with profitable companies because I'm just really forthright when I talk to people about that we could get you a ton of credit, but if you're never going to utilize it, who cares.

I have talked in some instances two companies that generate large credits and then do go to sell, but the issue is that the venture people are so siloed in their thinking that they only care about exits. They only care about EBITDA which is earnings before interest ... And that's all they care about. They don't care about all these other things and so it ends up going to sell and they just totally bypass this thing, and it's tried to get it more interested in it and that group doesn't really have much in it.

Dean: Got it. Okay. What would be the ... Who would be your ideal client? If we look at ... How much capacity do you have for their selves ... To see if we're looking to expand your situation here. What would be the ideal, who would be your ideal target audience?

Chad: Yes. I really am looking at these startups as going to be where the business transitions to. There's not as many people pushing on them and I'm in a unique geographical area where I can actually service them and be there and have some relationships there, but really I think it'd be a startup that has a couple million in payroll which is not hard to do in Silicon Valley even for a startup.

They can potentially each year generate a credit that would save them, they can save a maximum on the payroll tax credit of $250,000, and so think that startup, their pre-revenue, couple million in payroll development type, high either tech, pharma, there's a ton of software and service companies that are out there. All of those types would be the candidates. I think the ideal candidates going forward for this.

Dean: Okay. Those kind of things then, they can get a maximum of $250,000. Would a company with a couple of million dollars in payroll, they wouldn't have that much payroll tax, do they or would it?

Chad: No, they wouldn't have that much. It's going to be about 6.2% of whatever their domestic payroll is but again they can carry that forward to. They would certainly be able to generate more credit than they could use and they'd be able to carry it forward to a future period, and they'd have payroll for a few years before they either…

Dean: If a company makes it, for instance, that could be a big thing. Is it a maximum of $250,000 cumulative or $250,000 per year? Or is it only ...

Chad: Per year.

Dean: Per year. They could do that.

Chad: That's the amount they can offset payroll tax with. If they have a half a million dollars in credit. They can use 250 against payroll and the other 250 would carry forward on the income tax return. We would have the documentation and support if they were to go to sell that those credits would have real value and be the buyer would feel comfortable knowing that those credits are actual numbers, because the tax credit on these type of companies is very minimal.

It's just basically reading just off the tax returns, you might have a lot of concern that those numbers are actually real or were done properly, but if we have our backup documentation they know what they're looking at.

Dean: Okay. I love that. In 2009 when Obama came in and instituted the stimulus package, one of the things that they did was offer a first time buyer, home-buyer tax credit, and that was you could get up to $8500 to buy a home. I created a whole program around this where I actually had and still have the domain name taxcreditguide.com. We did a program that was for first time buyers.

We'd say having who's get up to $8500 in free money from the federal government to buy a home, and that was the benefit, the all cheese element of this, of how to articulate it to someone and that where it comes down to is you've got something that's very beneficial that they don't even know what they don't know about it. These companies probably don't know that they would qualify for it, or they don't see it as for what it really is which is essentially free money in a way. What would you say the level of awareness that people have about it is?

Chad: Not much. Anytime these programs have a first year. Things are very busy. The good thing for me with CPAs and such is they are so slow to adopt stuff, and so slow to push their clients really so there's a subset of consultants that I've been pushing on and have some really good relationships and they'll be able to send me a ton of clients.

They operate as the interim or as temporary CFOs for these types of companies and they knew, some of them knew about it but had no plans in bringing it to their clients, and as far as financial consultant, they're the number one financial consultant for the client.

Dean: Is it because they don't know how or don't know, they haven't gone through it, so it's not.

Chad: They really didn't know much about it, and so I've been going through and educating them, and they're all saying, they're going "Yeah, we need to get our clients on it." Then we have to actually even go and educate some of the payroll companies on this and say "Hey, you need to make some ... There's some changes you need to make to adopt this. And a lot of your clients are going to be pursuing this and they're behind it."

As far getting it out there, there's information out there but it's not being pushed to the clients, and most of the clients I talk to have no idea how this thing works or because there are a few complications that I've worked through. They don't know much about it. No.

Dean: Okay. If I look at this from zoning in on where your lead and opportunity is. If we were saying breaking this down into the before, during and after units, you're already doing this. You're competent. You know how if I were to deliver you, the ideal client, you could get the result for them, so it's not that we're trying to figure that out. You're doing that.

Now the next step is that we're talking about the before unit here. You seem to be clear on who the target audience is, that you can identify who they are and do you have a predictable way of getting profit activated to compelling people to raise their hand, to start the conversation to generate leads. Do you have a predictable system for that?

Chad: Not really. I don't do a lot of direct marketing. I tried a couple different things but most of my stuff comes from referrals from either CPAs or these interim CFOs are going to be a big source of referrals and clients.

Dean: Okay. Is that because you haven't tried or go direct to the companies or is it that it's going to be better to go to the advisors?

Chad: Both. I actually started by going to the actual funds that finance these ventures. I had actually sent out a marketing package with, it was a lumpy mail, some unique education. Some what I thought were compelling offers. I even offered to work for one of their companies for free, they just don't care, and they don't sit in that seat.

I think eventually they will, once they see it a little bit but they didn't have any interest and so then I started pushing on the interim CFOs, and I didn't even send them anything because I felt like I was behind, I just start calling and making relationships that way and through LinkedIn, people that I was connected, the connections, and I went that route.

I did a little bit of direct marketing but it was email, and then have them setup, and I did get some response that way, but I just got so busy with some of the other stuff that I didn't put a full program around it and getting people to raise their hand and have a real clear face that I was going to take them once they had raised their hand.

Dean: I got you. What are these? What does a new client worth to you? Is there an ongoing revenue or is there a fee, like a one-time fee?

Chad: No, it's both. If they go out of business, they no longer pursue the credit, then obviously they're no longer a client, but for these I think that there'll be clients for at least two or three years before they either go to exit or sale. As far as what their worth, the market for my services is really high, Dean.

Typically companies bill anywhere from 25 to 35% of whatever their credit is, and they have various structures at getting at what that number is. I use a fixed fee model and I know what the credit is going to be before I finish or within a good range, and so I use a fixed fee. Really the worth window that I've had for clients in the traditional area has been about 20 to 25% of whatever the actual benefit is, if the credit is higher then you get a little bit of a scale and so you come down.

These clients could be worth anywhere ... For startups, they're a little bit leaner but is a little bit less work with these startups because I figured out some administratively. Yeah. I figured out administratively how to deliver some of the stuff that I need without actually even getting it from a client.

Really I think we're going to be probably closer to that 10 to 15% of whatever the benefit is going to be, so on a client that's getting the maximum $250,000 I think we're going to be $25,000 to $30,000 in fee. That includes everything, that's audit, support, if there are ever review, and all, everything.

Dean: That's great. That's a one time fee or do you get that next year or two or what?

Chad: Each year, yeah, they reengage and have a need.

Dean: Okay. That could be anywhere from $50,000 to $100,000 potentially depending on the year, because that goes on to credit…

Chad: Yeah. For the most part, I think most of these will be in a $30,000 to $40,000 savings range and so I think they're going to be $7,000 to $10,000 per year clients, but yeah.

Dean: Okay. That's the more normal rate, what you're talking about, that was the top rate, so 7 to 10 is about what you would say a new client is worth. Okay. For an average of two to three years as a length of time with them.

Chad: Correct.

Dean: Okay. I got you.

Chad: The thing is they bounce around. That's not like these people go and die after two or three years, they start another company. The lifetime relationship is probably worth more than that.

Dean: Yeah. Okay. What's your capacity for them? How many could you take on?

Chad: A lot. Part of what I do is I produce this deliverable, and I figured out with these companies that there's enough information on the public domain and between white papers and things that they can provide that the majority of that deliverable can be done by some writers that I've trained.

I actually had one produced a deliverable for an interim CFO that I was never even engaged, and I handed it over and said "Hey, I put some dummy numbers in it, but here's the report for this client", and that kind of won them over to saying "Okay, this guy has a smarter way of going about getting this stuff that's going to be better for clients" and realize, and help them scale.

There is some of this requires my time but I do have as far as data entry collection, all that, I have a lot of people that can come on and work and help increase capacity.

Dean: The process is scalable in that it doesn't necessarily require more of your time. You can create a process for a lot of it.

Chad: Yes. Some of it will require my time. There's judgment and a lot of the client-facing stuff requires my time, but I can always create more if we have more clients that come on.

Dean: Okay. How would you translate that into a number of new clients that you could take on if we could just push a button and got them?

Chad: I'm not 100% sure. Let's see, we could just say 100. Outside of I already have some relationships with these firms that are going to be delivering a mass amount of clients, but let's just say direct to market, I could service another 100 clients next year outside of everything else that I'm doing.

Dean: Okay. Great. How many could you take on? Would that be like 10 a month kind of thing or 8 a month or could you take all 100 at one? You're starting like start out over the course of the ... Yeah, what would be the happy number monthly if I said in January I can bring you as many as you can take.

Chad: The timeline on this is going to be, they're going to want to get it on their ... They have to get it on their 2016 return and then they start taking the credit quarterly against payroll taxes in 2017, and so because of that timeframe, they're not going to be able to amend those payroll tax returns to recapture those payments, so a lot of the tax to be done before April 1st, when they start filing those quarterlies.

Yeah, the vast majority of those would have to be in the first half of the year, first or second quarter. That's when they have to be onboarded, some of the backend work would go all the way through the end of the year, but getting the numbers together would have to be done in the first quarter.

Dean: There's an interesting thing is what's ... It's coinciding of course with the first 100 days of the Trump administration here. What's coming down the pipe? Could they potentially change that? Could he mix it?

Chad: Not really.

Dean: Could he change the way, enhance it? Because it's going to be better, it's going to be better, it's going to be the same.

Chad: Well, they don't have a vast, these changes. This change happened last year when they had all the extenders made permanent and so these type of things don't change quickly and traditionally the R&D tax credit has that bipartisan support. I believe, I'm not 100% sure what Trump has said about the R&D tax credit specifically but it is something that if we change and we make less potent. We leak jobs overseas and we know how Trump feels about that.

Dean: He's on track.

Chad: Yeah. It's been nice because traditionally we've had bipartisan support and the credit is permanent. Now it's not one of those extenders where it's every two years, it had been kind of a two year extension.

Dean: The home-buyer tax credit was temporary, and it went away, yeah.

Chad: Right. Yeah, I don't see it going way. It's not like it has a finite ends like the solar energy stuff does. At certain points, they have to re-up or it dies. I don't see any major changes at least in the next 12 months.

Dean: Okay. What would you cheerfully pay for a new client? If we were creating a vending machine, and I could put on the button that the product button would deliver us a SaaS company or a tech startup with a $2 million payroll, we've defined who we want and that's worth $7,000 to $10,000 per year for the next two or three years. If we were putting a price beside that to activate that button what would you cheerfully pay for a client like that?

Chad: I guess you'd pay. I'd pay somewhere between I guess half the first year fee. There's some uncertainty as to whether or not they're going to be a two or three year client and all that, but yeah.

Dean: Yeah. If you could do it for $3,000 to $5,000, that would be your happy number for that. If you could do that.

Chad: Obviously. Less would be even…

Dean: I always ask people the cheerful number just to set a benchmark, because we're essentially the way that I look at this for the breaking it down before, during, and after. You've got the during unit capacity and you've got the capability. If I've sent you 10 people next month, you'd be able to handle them.

Chad: Yeah.

Dean: Now the before unit is really if we imagine it, the ideal scenario is that we imagine it as a supplier to the during unit. If we could just go to the supplier or create this vending machine that when you see a real vending machine, it's got the product buttons, you got Pepsi and you got Mountain Dew, and you got Diet Pepsi and whatever else and you'd see the picture of what it is, and then there's a price beside it, $1, and so you'd put the money in, and push the Pepsi, and out comes the Pepsi. That's a happy exchange. That's what I try and get people to visualize or to create a context for it. We're looking to create a vending machine before unit that pumps out exactly who you're looking for in a predictable way.

Now what that means is that we want to now go inside the machine and we need to connect all the wiring that starts with identifying the target market, then profit activator two gets them to raise their hands so they identify themselves. Profit activator three is about educating and motivating those people, so we're engaging with them. Profit activator four, making offers so that they say "Yes, I'd like to do this." That's the circuitry that has to be all connected in order for that vending machine to work. At the end of the day, that we've only spent $3,000 or less to get that result called a new startup client.

We look at those ideal clients, that we're looking for here, how many of them are there would you guess? Are they visible prospects? Could you say can you get information on a company that have a $2 million payroll or how much access to that kind of information do we have?

Chad: There's a lot of them especially out where I'm at, was amazed at how much money and how many venture capital firms there are that pump money into these companies in Silicon Valley and out here. There is a way to identify this. I had a guy in the Philippines that was data mining this website for me that has information on these basically.

When they go for venture funding, they have to file government forms that are public, and so he was data mining and producing a ton on this list. It doesn't give you their payroll numbers, but it gives you the account that they are seeking for funding, how long they've been around, the name of the company and all that.

It's better than, it was actually I felt more accurate than Hoovers or Dun and Bradstreet or any of that stuff that I had worked out before when I was trying to get into more mature companies, but yeah, there is a way to identity them and there is a lot of them. It doesn't have to be over in this area, for the most part even if they're in the Bay Area, they're going to be ... I may never meet them in person in working with them. It's just some people for whatever reason feel better about someone that has a California address.

Dean: Yeah. Okay. That's fair enough. With the data that you're getting, who's the person that would be the best person to talk to about this? Who would this show up on their radar as something that, "Oh this could be a benefit." 

Chad: Usually it's the CFO or controller, but some of these companies don't have one so it'd be even just the CEO owner that would make this decision.

Dean: Okay. The CEO. Okay. Now we've got that and we know who they are, and we know in a band of likelihood what their ... That they meet our requirements here, that they're probably likely have ... Like you said, it may not be a couple of million dollars in payroll but certainly several hundred thousand or a million or so.

Chad: Mm-hmm.

Dean: Now that's on one end. Then on the other hand, we have this pot of gold called how much free money for them. Is there a way to get revenue numbers that they have or is there a way to predict or say what kind of ... To get a sense of how much they could save kind of thing?

Chad: Yeah. Most of these companies are pre-revenue and so there's no revenue, but the credit is wage-based for the most part, wage and contractor-based, and so if they have 10 employees, you can guess that they're going to have a certain amount of payroll and then the nice thing too is the payroll tax is what we're saving and so it all lines up pretty easily.

Dean: Would they get that money back or are they getting a check or are they getting a ... How does it manifest itself? Let's say this year they've been narrowly going along on the coming up on the year here, and they're filing in April and this year they spent $1 million on payroll and that means they spent 62,000 in payroll taxes roughly, 62,000 or 65,000 in payroll taxes.

Chad: Yeah. Now you're at it. If you're looking, Dean, we may need help. The credit for the current year will be based on 2016 numbers. Their savings will be taken in 2017 against payroll tax, so let's say they have $100,000 in 2016 tax credit and in 2017, they're now going to include that credit on their payroll tax filing each quarter and the check that they have to write will be reduced by that 6.2%. If they had $1 million in 2017 payroll, that's when the savings would come and they would save that $62,000.

Dean: Okay. It comes in the form of $62,000 that I don't have to pay this year. Doesn't come that I get a refund for the tax that I paid in 2016?

Chad: Right.

Dean: Right, I'm not getting a check. Whereas the home-buyer credit was that was essentially the I could do it on the 2016. They got the money back basically.

Chad: Right.

Dean: Okay. But it's not that, they're not going to get money in the mail, it's just money that they don't have to pay.

Chad: Correct.

Dean: Okay, which is a little less sexy, but still it is money and I get it, that you're right. It's money they're having to pay anyway. That could be another, yeah, it could be additional hires or whatever, they could do with that savings. The savings start right away with the first quarter for 2017.

Chad: Yeah. That's correct.

Dean: Okay. It is an immediate sense of it, and that sounds like to think that can create specific scenarios for people. Right now if they're paying their quarterly payroll taxes and let's just use those round numbers, that they're paying 60,000 or if they've got $2 million payroll, they're paying $120,000 or more, they're paying $10,000 a month in payroll taxes. $90,000 a quarter. If I elect this, I find out about it now, we're at the end of 2016, I'd get this on my books for my 2017 tax return. Are they filing those returns typically early or waiting until April to do it? When would I get realized my first savings?

Chad: If you filed by March 15th or by April 1st, you would realized it on the very first quarters. Technically starting January 1, you would be getting the savings because of the way these are paid. You remit them quarterly and so as long as you can get the tax return done and credit is. Now if you wait and extend and file in September, you don't get to go back and amend the first two quarters, and so there is a little bit of hustle to getting that done for these companies this year.

Dean: I got you. Okay. They could have a real cash savings of $10,000 a month or whatever it is right away or $30,000 a quarter or so.

Chad: Yeah.

Dean: Okay. I think that part of that. Now we get this idea of how do you compel people to just raise their hand out of being compelled to do so. Part of the danger is trying to convince people that they should do this as the first engagement with them, because we got a complex thing. If you're looking it that these, it requires some explaining.

I looked at your website and you're doing all of those education things, and the way it's working are very convincing language in that you're trying to do all of this before they've ever educated themselves or before they've ever identified themselves as interested. What I would look at is thinking about how could we say something that would compel people about the benefit, the cheese or it?

Like how to get free money from the federal government to develop new software or for developing new technologies or new products or whatever it is, or how to get, if you're talking about these specific people their payroll credit. Essentially that's something that would be compelling to these companies where it's easy to understand and easy to get someone excited about, because that was the thing where I mentioned I had that website, taxcreditguide.com.

It's almost like we were making it like a information guide. Part of theme that makes things like this work are making it seem like an entitlement in a way. I could be getting this and I'm not or I don't know about this. I wonder if this works out for me. If we were to say, like if statements, like if I were thinking about how to get somebody like that to raise their hand, I might do a public notice, because anything with the government or anything with entitlement type of stuff is fits in that tone.

I might do something like that's what we did with the real estate stuff, public notice and then have a if your company has 10 or more employees and you're developing software or whatever the thing is to read this and then talk about the tax credit that you may be able to get free money from the federal government, or is there any specific title for what the category is or what program it is that allows this money, is there some act or some?

Chad: Yes. Yeah. There is a specific name.

Dean: It's a federal program, right?

Chad: Yeah.

Dean: It might be evil to make America great again and their kind of thing. We may be able to get free money from the federal government to make America great.

Chad: Yeah. It's the Path Act is what it was.

Dean: How do you spell that?

Chad: Path. P-A-T-H, so it's Protecting Americans From Tax Hikes Act.

Dean: Okay. Okay. Path Act. Okay.

Chad: Path Act. Yeah.

Dean: I've used that tone for several things. I've used it for social security using a thing where it would say public notice or social security benefits as the pre-head, and then if you and your spouse plan on collecting social security after January 2017, read this and so it looks, it's yellow postcard with black lettering, and we have a guide, a social security benefits guide that's available.

If were looking at this as the kind of thing I might say if your company employed 10 or more people in 2016 and you develop software or you're something that would be a qualifier there. It takes a while to get the copy on this, but I want you to get the tone of it, that all we want is somebody to say that's me, and then to introduce this idea that this new Path Act entitles US companies that are involved in software and technology development to get money from this program to offset payroll taxes and income taxes or whatever, however we would say something like that.

Chad: To simplify, would you say something like to save 6% of your payroll, annual payroll burden or something like that?

Dean: I would make it sound more neutral and factual, less convincing, more compelling. That this money is available, you're entitled to it, you're either going to get it or you're not, I don't care. That's really that tone that we want to have is like listen, it's here, you may be entitled to it. It's almost like we're required to put this public notice out to let people know about it but we're not going to chase you to convince you to get it. It's almost like you may be qualified for this. You may be entitled to this.

I would register PathActguide.com or something like that that is neutral, like seems for all the world like ... This is the tone that I'll state, whatever it's a government program is what would the government do if they were doing it. The government is not trying to convince anybody of anything. It's like they're just getting the information out there. Nobody is emotionally involved in it.

They don't care whether you get it or not, it's just a neutral announcement of the fact that this program is available. That's the tone that we would want to take here. That's all that I would focus on in profit activator two is just getting them to raise their hand.

When somebody asks for this guide, when somebody asks for the Path Act guide which I think would be a pretty good thing. Let's see if that's available, just while we're ... Because I would like you to get that before we put it out here in the world. They were not recording live, but that's the path ... I wonder if somebody else has already thought this way.

Chad: CPAs and tax, they're not getting ...

Dean: No, it's available, so you're perfect. There it is. Get that I would say as a right away.

Chad: Okay.

Dean: If you're listening, it's already taken. Good for you.

Chad: That's right.

Dean: Okay. Yeah. You are the official Path Act guide purveyor here, so we got all that information, anybody who wants to know about that, they're going to be able to get it right from you. Now that way we're getting people who are leaning in to this as if it's money that they're interested in knowing if they are entitled. Now when somebody raises their hand, now we can just engage with them and find out what their situation is to put together this report. What would be the cookie that would lead towards them making a decision to engage you to do this for them?

Chad: This is part of where I struggled in everything. Is it knowing what the benefit is?

Dean: It could be, yeah, your path act benefit calculator. Yeah, your path act entitlement calculator. Your credit calculator. That kind of a thing where if you had, is there a way that somebody could fill out ... What pieces of information would you want to know? I always look at this as minimum viable stuff here as we go. Thinking the lean approach to this.

Okay. Let's pause and see where we are right now. We've identified the people who would fit. We've got them to raise their hand to ask for this path act guide. Okay. Now that's like we've reached base camp one here. Now to get to the summit here, to make the summit run which is that they are signed up with you and they're going to file and take advantage of this.

What's the shortest, the minimum path to that? What level of information would you need to know to prepare a proposal for somebody and repurpose the proposal as their how much they qualify for or their entitlement?

Chad: Yeah. Prior year payroll. A total either revenue or if they're pre-revenue, just knowing if they have zero dollars in pre-revenue, I know they're a startup, they qualify. If they have more than five million in sales, I can't get them into this program.

Dean: Okay. Maybe that's the thing is if you're going this data that you are getting scraping. The majority of these companies are pre-revenue.

Chad: Yeah.

Dean: Okay, so even if you say that in the thing. If we say that pre-revenue in there, because that's going to be an amplifier for them. They might think "Oh, we don't have a new revenue, we're don't need that. We're not going to qualify." If you know that it's pre-revenue on their and qualifies for payroll taxes, that's a ... We may even call it that, a payroll tax credit. Okay.

Chad: Okay.

Dean: These are all amplifier language. This is like "Oh, that is us." because everything that we say in that kind of initial phase is either a amplifier or a filter. We want to look at what the amplifiers are because otherwise they're going to filter themselves out, but if these people, which we already have pre-selected because we have a higher likelihood that they're pre-revenue or below $5 million revenue, and have 10 or more employees, that's the kind of data you can get from the scraping that you're doing?

Chad: Yeah. It's a real low amount of information compared to what I traditionally would have to do to scope something.

Dean: Yeah. The scoping is part of what you do as part of the service that you're doing, but if you can just get the bare minimum information, meaning the payroll because that's just a straight up calculation, the 6.5 or 6.25 or whatever you said percent, 6.5% of the amount that they paid in payroll.

Chad: Would you list like industry, like softwares, and list like five or six key industries so that that again amplifying over that to us, click the box.

Dean: Yeah. Yeah. I think so, absolutely, but it will be good if that's in there, yes. That that's, that's us.

Chad: Okay.

Dean: Payroll amount, the industry. I have a reverse mortgage client and one of the things we do for that is just turning the things into this is what you have to do. I have to do is continue to own the home and live in it. That's really the baseline thing. They don't have to do anything differently than they're already doing in order to qualify. They just start continuing to employ the people in this capacity and they get that credit plus that can be up to $250,000 a year.

Chad: Yeah. Yeah.

Dean: I think that's great. The interesting thing is that then they are going to, some of them, grow into the other services that you offer. They're going to grow to the point where now they qualify for some of the other, for the actual income tax.

Chad: Maybe, maybe not. Usually they're headed toward exit and then they would go to a bigger company that wouldn't consider using anyone outside of the big four for their study. If they just continue to hold and grow for sure, but yeah, and some of them can hang on for a long time. Yeah, no.

Dean: All they would need to know do they, or be able to know, do they qualify? And that yes, they qualify and then what's the next step? How do they become a client?

Chad: Yeah. What would that next step be?

Dean: First thing, so we get the data. We're sending them a postcard offering the tax credit or the Path Act guide and the cover looks very official like a government document and they ask for that, which gives them then all of the types of information that are on your website right now, but without the convincing elements.

You're going to put those things in the guide but you're not trying to ... Your offer was five mistakes and these are things that are assuming that people are moving forward.

Chad: That was a different time and a different target. Anyway, there are reasons for that but we don't need to talk about that right now.

Dean: Okay. Perfect, so but that same level of thinking here. It's just that they could be qualified and here's how to find out and then when they raise their hand, the next offer then is to find out how much they qualify for. That's that simple thing. I always like to have like a couple of things. Whenever you're ready, here are two ways we can help you, or here are three ways we can help you, or here's what to do next is basically the thing that we're looking to fill out here.

If it's that, the report would be the output. Get your entitlement report or whatever it is, and that's the, we could tell you how much you are entitled to as a tax credit because it's historical. It's based on what you've already done this year. You've already paid that money and that's what's going to determine. It's nothing that you have to do, and this money is here, you're either going to get it or you're not. It's just sitting there, it's free money that's filing. You're either throwing it away basically.

Chad: Yeah. Where do you make the jump from the here's the entitlement report, here's the money.

Dean: Yeah. That's the next step then. Here's how we can do this for you. Now you're making your presentation to somebody who they already know that they're entitled to and they want this money. I think this sounds real exciting. That's something that's a pretty easy to see function there.

I think that will be the kind of thing where you could do postcards to the CEO of that. You could even do, I think you could do ads in the Silicon Valley, the Business Journal or whatever those companies are located or any trade publications or something like that. I think you could get that out there that way too.

Chad: No, that's great. You wouldn't suggest even taking it. Because we're trying to remain neutral, you wouldn't suggest doing a more expensive mailer, where you're sending something.

Dean: I think where your expensive mailer comes is when somebody raises their hand. Now you have their attention that that package, we're going to include the guide, you're going to include the cover letter, and then whatever things that might, case studies or things that are, now our job is to convince them that this is for them and that they should. That you're there to help them.

Chad: Okay.

Dean: Yeah. The first job, we're separating the profit activator two and profit activator three. You look at this, the only thing I'm focused on with the postcard is just to get them to raise their hand. Say "Do you want this money?" It gets there and you may be qualified for it. You may be entitled to it, and here it is. I would make those postcards look as much like a, there's no logos and glowing app-looking stuff, it looks very official. I think that's the opportunity there.

Chad: This has been super helpful. Not that I didn't expect it to be. Of course, Just to hear "Hey, you need to take a step back from convincing people now." and I think that's been an issue.

Dean: Yeah.

Chad: Yeah. No. Okay.

Dean: I think that's the thing. My immediate action sets for you are to register that path act guide, because this is going to go up this weekend so you want to get that handled for you, and then start to get to work on what would be included in that guide. You've got a lot of that information there but basically just telling the whole thing, and here's what to do next. Find out how much you're entitled to. Get your path act entitlement calculator or something. Your path act entitlement report.

That's the whole job of that is to get them then to say "Oh, yeah, I want to find out how much I'm entitled to." Of course when people, excuse me, respond for the guide, that opens up a whole opportunity for them to now you can engage with them on a nine-word email. After they've opted in. Now you can reach out to them. "Hey, welcome aboard." Then ask them how much payroll did you have last year.

Having some kind of an engaging question, that or what business are you in or what do you develop or something that's starting the conversation and then leading them towards would you like me to do your entitlement report?

Chad: That's awesome. Do you have time for a nine-word email story.

Dean: Of course, always.

Chad: I worked for a really big company and we're doing the business development on this type of stuff and we have these webinars. We registered for it, and we would send these email blast out. I always thought that our marketing was just garbage, but no one would listen to me. It was just a traditional branding and all that.

I actually went to our marketing person who sends out the email blast and I was like "Here's what I want. I want you just to send this nine-word email of are you planning on registering for the big webinar next week?" It can't have any of our normal marketing stuff. It's just got to say dash Chad and that's it. That's all I want, she was just dumbfounded. She was upset. I was like "No, you need to send this out."

I even sent out web blast every week and gotten zero response from all these web blasts. We sent it out and my list was like it's probably like a thousand CPAs. I got 20 responses from that nine-word email.

Dean: Yeah. Right.

Chad: People have never heard of us. She was just dumbfounded. Still no one else would use it, because they're like "Well, this doesn't fit what we normally do." Who cares, I got people to raise their hand and I started the conversation with them.

Dean: Doesn't even have our logo on it.

Chad: Yeah. I don't even know who any of these people are and having been able to get them to respond, and then this got a respond, it was just funny.

Dean: That's so awesome. Congratulations. I love to hear stuff like that. Thanks for sharing.

Chad: Yeah. Yeah, no, this is great. I'm going to get off the phone once we're done and call my web gang and get everything going.

Dean: Okay. Cool, and then let me know.

Chad: Yes. Yes. Thank you so much, Dean.

Dean: Thanks for playing. Talk to you soon. Bye bye.

Chad: Good bye.


Dean: There we have it. Another great episode of More Cheese Less Whiskers. If you'd like to continue the conversation, you can go to morecheeselesswhiskers.com. You can download a copy of the More Cheese Less Whiskers book, and if you'd like to be a guest on the show, click on the Be a Guest link and that will allow you to come on and we can hatch some evil schemes for your business.

Couple of takeaways from this episodes are the important of separating the compelling from the convincing. Whenever possible, the thing that we want to focus on is to just get people to raise their hand and say "Yes, I'm interested in that." When we talked about preparing this pathactguide.com which is completely neutral, completely just information. That anybody who when they think they might qualify for this would like to gather more information.

It seems like it's facts, it seems like it's market or data that they're going to have access to. Not that somebody is trying to convince them to do something. Now the great thing about when you get somebody to raise their hand like that. When you just focus on compelling them, then we immediately move into profit activator three and four where we get to conversationally engage with those people by email to advance it to the point where they're ready to work with you in the during unit.

I mentioned to Chad that once somebody asks for the guide, once somebody raises their hand, they're engaged in this process now, it's going to be important to reach out to them with a short nine-word email or just an engaging email to start the conversation but to skillfully know how to be a chess master and take that conversation from the point where you start to the point where he's able to help them get this tax savings.

I talked a lot about this in our email mastery program. If you go to emailmastery.com, you can download a copy of the email mastery book and it talks about this nine-word email and the conversational conversion process. That would be a good resource for you to think through how when people raise their hand for your compelling offering, profit activator two. You'll be able to engage with them and conversationally move them to a point where you can collaborate with them.

That's the three step process we talked about. Compel your prospects to raise their hand. Convince, meaning you give them all the facts, all the things that they need to convince themselves to be convinced and then offer to collaborate with them to get the benefit. That's it for this week. Tune in next time and we'll have another great episode of More Cheese Less Whiskers for you.