Professor Elam

Wed Dec 8 2010

H & R Block was started by two brothers when they got out of the Army. Their original idea was a firm to assist small business, everything from store window decorating to, oh who knows, filing taxes. After a few months they discovered business wanted one thing more than any other, help with taxes. The first year was in Kansas City, their home town, then on to NYC. As the saying goes if you can make it in NY you can make it anywhere. 

This was the first national tax preparation service. Decades ago Henry Block would appear on tv with his lengthy list of 20 reasons why you should use Block. Back then they advertised low price. Like MCDs, they wised up on that one and moved to expertise, letting prices rise. Indeed I cut my teeth on taxes doing 1040s for Block at the Sears store on 45th and I 35 in Austin. That is how I  initially learned income tax. 

Block however strayed from the original formula. Refund Anticipation Loans became a big part of the business. One of their regional comptrollers explained to me that their average 'ticket' was $180. And the great part, as he said. was that most of those customers did not pay for it, the fee came out of their refund. This struck me as a terrible business plan. What if, the landscape changed and that was not possible?  And sure enough that is what the IRS has done, throttle back on allowing tax preparers to be in the loan business. Worse, Block got into, are you ready, the mortgage business. You can guess how that turned out. 

Stick to  what you know, that is always the winning strategy.