Tax software targets frugal niche

Triangle business offers low-cost alternative

dranii@newsobserver.comJanuary 29, 2012 

  • You can find out more or get started on your taxes here.

    The software is available only online.

    Is it safe?: "We use the exact same encryption that banks use when you do online banking," said Jason Cale, the company's chief technology officer. "The data is encrypted from you to us and, also, we encrypt it before we store it in our database."

Practically everybody has heard of TurboTax. Hardly anyone has heard of OnePriceTaxes.

That's the daunting challenge facing the two Triangle entrepreneurs behind OnePriceTaxes, which aims to create a market niche for itself as the low-cost alternative in the do-it-yourself tax software arena. OnePriceTaxes' cost: $14.95 for software that includes a federal and state tax return.

But after several years of trying the build-it-and-they-will-come approach, the software painstakingly developed by Robbie Edwards and Jason Cale hasn't managed to grab a significant piece of the growing tax software market. Consequently, Edwards, 31, of Morrisville, and Cale, 28, of Holly Springs, continue to hold down full-time jobs as software developers and haven't taken a dime out of the business since they launched their software five years ago.

This year, however, they hope to turn the corner. They've brought on some staffers with marketing expertise to raise their visibility on a shoestring budget. They're also seeking their first outside funding so they can do even more in the future.

Edwards, the company's CEO, said thousands of taxpayers used their software last year but declined to be more specific "for competitive reasons." This year's goal for the software, available online at OnePriceTaxes.com , is to hit the 25,000 mark.

Even that would be a tiny piece of the market. Last year, according to the Internal Revenue Service, 39.8 million individuals and businesses used do-it-yourself tax software to e-file their returns, an increase of 14.2 percent. Tax professionals e-filed another 72.4 million returns.

Still, 25,000 would be a quantum leap from the company's initial sales. When OnePriceTaxes hit the market in 2007, the company snared 20 customers. The next year sales soared, relatively speaking, to 400.

"This table knows more about marketing than we do," Edwards quipped over scrambled eggs during an interview at a Cracker Barrel restaurant.

Despite the paltry early returns, Edwards and Cale have persevered.

"We put so much work into it, there was no going back," Edwards said.

Bill Spruill, who has mentored Edwards through a program offered by local entrepreneurial support group CED, is convinced the company has the right product that can appeal to first-time income tax filers and young, "under-employed" workers.

"They are much more attuned to using a Web-based, lowest-cost product," he said. "Why pay $50 or $100 when you can pay ($14.95 for OnePriceTaxes)?"

Spruill said he would invest in OnePriceTaxes himself except for CED rules that prohibit mentors from having a financial stake in the companies they work with.

"The technology is baked and done. ... They have created a great user experience," he said. "It's a machine that just needs to have a little marketing behind it."

Spruill is a former director of programs at CED and is managing partner of Global Data Consortium, a Raleigh data brokerage firm.

The beginning

The genesis for OnePriceTaxes goes back to 2005, when Edwards used TurboTax for his income tax and was appalled at the extra fees for services that weren't included in the basic package. A friend bankrolled him with a $20,000 investment to develop an alternative.

"We felt we could do it easier and cheaper," Edwards said. "We wanted to introduce a new price model."

Hence the name OnePriceTaxes, which implies what the company delivers: One price fits all.

Edwards knew nothing about taxes, but that didn't faze him. After taking a class at H&R Block to learn the basics - the same class that H&R uses to train its own staffers - he figured he could develop the software himself. He was wrong.

"All developers have arrogance," Edwards said.

After realizing he needed help, Edwards recruited the best software developer he knew - Cale - to join the company as chief technology officer. It took them two years and countless hours to cobble the software together by working long nights and weekends while they held full-time jobs.

The software also had to pass muster with the IRS and state tax agencies.

"They don't allow you to just throw anything out there and make it available to the public," Edwards said.

The hours they devote to OnePriceTaxes haven't abated, given that the software has to be updated every year to accommodate changes in state and federal tax law. OnePriceTaxes offers state returns for 35 of the 41 states that have an income tax.

Cale is a night owl who typically gets down to working on OnePriceTaxes around 10 p.m. or so on a weeknight. "I probably don't end until 3, 4, some nights all night long," he said. "I can work on very little sleep."

Until now, the company's marketing plan has been about as minimalist as you can get - relying on the exposure it gets from state tax agencies. When OnePriceTaxes gets approved by a state, the tax agency posts a link to OnePriceTaxes.com on its website.

"Most of our traffic up until this point has come from those links," Edward said.

Guerrilla marketing

For years, OnePriceTaxes consisted solely of Edwards and Cale plus two part-time accountants, one of whom is Edwards' wife, Sarah. But in September, it began building up its staff, which now consists of eight part-timers.

The extra staffers have devised a guerrilla marketing plan.

"When we sat down with the marketing people that joined our team, they thought of in ... five minutes what we couldn't figure out in four years," Edwards said. "Kind of embarrassing."

That includes blogging and reaching out to people via social media.

The company's Twitter following has grown from 80 in the fall to about 19,000 as a result. It also recently held a contest on Facebook for a company slogan. The contest deadline was last week, but the winner - who will receive an iPad - hasn't been selected. Among the entries:"Many happy returns" and "We don't suck."

The company also recently announced a promotion: Free tax software for unemployed households with an adjusted gross income of less than $50,000.

Looking ahead, the company has just embarked on seeking funding from outside investors. Its goal: $1 million.

"We understand that with $1 million, we're not going to take down TurboTax," Edwards said. "With $100 million, we couldn't take down TurboTax. But we want to start carving out our share of the market."

Ranii: 919-829-4877

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