Liberty Tax Service: Winning the Numbers Game

By Carrie Brenner

John Hewitt has 40 years of experience in the tax industry, and it's made him the success he is today. Hewitt is the founder and CEO of Liberty Tax Service. Hewitt started his career at H&R Block, where he spent several years learning about the industry. In the early 80s, he and his father became leaders in the computerized tax revolution when they invented a decision-tree tax interview program that generated individual answers to tax interview questions.

The Hewitts tried selling the software to H&R Block, but when the company didn't bite, Hewitt's father urged him to join him in opening a new tax preparation firm. It was a tough decision. Hewitt's first dream was to become an H&R Block regional director, and he'd recently reached his goal, becoming the youngest ever regional director at H&R Block. But he decided to make the leap. "The opportunity to work with my dad was a compelling reason for me to leave," explains Hewitt. The father and son team bought an existing tax service in Hampton Roads, Virginia, and renamed it Jackson Hewitt Tax Service. Hewitt says he had a new dream: To build the No. 1 tax firm in the world.

Hewitt has since parted ways with Jackson Hewitt -- investors opted to sell the company in 1997 -- but he soon started a new company, Liberty Tax Service, and is still pursuing his goal of becoming No. 1. Although Liberty Tax is little more than a decade old, it's already closing in on top competitors H&R Block and Jackson Hewitt. In fact, Liberty Tax is two slots above Jackson Hewitt in the AllBusiness AllStars ranking, coming in at No. 18 overall.

"The fact that it's seasonal is both fantastic news and horrific news," Hewitt says of the pros and cons of operating a tax service center. About one-third of Liberty Tax locations are seasonal. Since those offices expend less money on rent and utilities and don't have to pay benefits like health insurance and sick and holiday pay, the savings really add up. But by offering no benefits and only 14 weeks of pay, it can be difficult to keep the best staff members coming back year after year. And Hewitt says the biggest problem is handling the chaotic tax season. In just a three week period, from the end of January and into February, Liberty Tax sees half of its customers. "You have to market at the exact right time; you have to do a great job with customer service and yet it's a hectic time. You have to do a great job or you don't have a business," says Hewitt.

Sam Thacker, finance and credit expert and blogger for AllBusiness.com, echoes this sentiment. "While there is significant competition amongst the various tax preparation companies, the individual franchisee office and their customer service makes all the difference in growing or [in] closing their doors," he says. Providing high-quality work and operating during customer-friendly hours (evenings and weekends) are other ways tax franchisees can stand out.

Thacker, who estimates that the industry average for buying a tax franchise is between $50,000 and $100,000, says becoming a tax preparation franchisee is even more feasible in today's economy. Investment in a Liberty Tax franchise runs between $53,800 and $66,900, and the company is in the SBA's Franchise Registry, which speeds up the process of getting an SBA loan. Thacker says another positive is that tax preparation software has become so easy to use that franchisees only need average tax knowledge, and won't need to spend as much time training their employees. However, before making a decision to buy, potential franchisees need to make sure that they'll be opening in a prime location. They should also think about how they're going to generate income during the rest of the year. If they're operating a year-round location, they can do other tasks, like notary services and bookkeeping.

Hewitt explains that many franchisees opt to keep their day jobs while they build out their businesses, then take them full time after a few years. One of the reasons Liberty Tax is so successful is the sense of ownership franchisees have. "Franchisees do a better job than company employees," he says. Hewitt plans on Liberty Tax being 100 percent franchised in the future. The franchise currently has more than 2,000 locations, while less than 100 are company-owned.

As for that other goal, Hewitt hasn't lost his concentration even for a minute. When asked about the company's future, he replies, "My fanatical goal is to be No. 1 by 2020. I have laserlike focus on that."

Visit the Liberty Tax Service profile in our Franchise Directory.

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