H & R Block and Everyday Financial Services

H & R Block and “Everyday Financial Services”

1) Benefits and costs of the EFS program from the perspective of

Investors: In 2003, Block’s US Tax business saw a decline in the number of clients and tax returns prepared even as the total number of tax returns prepared nationally grew. Analysts used client growth as the primary metric for measuring company success and future profitability. Hence, from the investor’s perspective, client base growth and retention was important. The EFS program achieved just that through various methods. By providing Alternate Financial Services products like check cashing, payday lending, wire transfers, Block was able to increase its offering of services to clients and maintain client loyalty. By cashing only government and refund checks, Block was able to reduce its risk and bad loans, which would be favored by its investors. Revenue projection was between $197,000 and $267,000 with an EBITDA margin of 20% to 32%. These factors in conjunction with the increase in number of clients and profitability would gain a positive reputation among analysts, which would prove beneficial to both individual and institutional investors like Berkshire Hathaway, which has an 8% ownership in H&R Block.

Customers: Alternative Financial Services (AFS) was a rapidly growing industry in the US with annual revenues of $6.4 billion in 2001 and growing at 10% annually. Since the majority of H&R Block’s customer was from the low-income spectrum of the population and low-income customers formed a major portion of the “unbanked” part of the population. They made use of the various services that AFS provided like check cashing, bill payment, payday loans, wire transfers etc. By entering this industry, H&R Block was able to provide these services in addition to their Refund Anticipation Loan (RAL) and tax preparation. This greatly benefits the customer because of the low costs of H&R Block. They had significantly lower costs, as much as 50% of the other AFS providers. Clients also showed interest in many of H&R Blocks pilot programs like ATM services, notary public services. By offering these range of services at a significantly lower cost than their competition, the customers would greatly benefit from the additional products that H&R block had to offer keeping in line with the firms “get more, keep more, save more” mantra.

Existing