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Upstart firm takes aim at industry leaders

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Print this page by Elizabeth Cooper

Liberty Tax Service has refused to participate in the recession. Instead, the Virginia Beach-based tax service continues to grow rapidly due in large part to the expertise of CFO Mark Baumgartner.

Since joining Liberty in 2004, Baumgartner and CEO John Hewitt have focused on making the company the world’s leading tax preparer.  A look at the numbers shows impressive gains.  In the past five years, Liberty has more than doubled the number of offices in the United States and Canada — from 1,200 to 3,200.  In January, Liberty opened 400 new offices, and it expects to add another 500 to 600 offices by January 2010.

Meanwhile, the number of franchisees has grown from 1,000 to 1,900. Revenue from these operations leaped from $49.2 million in 2004 to $229 million in 2008. In fact, franchise growth paved the way for Liberty’s revenues to increase more than 50 percent in fiscal year 2008 to $87.6 million.

A 15 percent increase in the number of tax returns prepared by the company in 2009 and a 22 percent rise in tax preparation revenue contributed to the company’s momentum. Characterizing himself as an entrepreneur who presses ahead at high speed, Hewitt says Baumgartner keeps him grounded. “He’s clearly my right hand man in running this company,” the CEO says.
Hewitt does not expect a late June court decision in California to slow the company’s growth. A San Francisco Superior Court judge ruled that ads promoting Liberty’s refund anticipation loans were misleading and fined the company $1.16 million. The court ordered Liberty to monitor advertising used by California franchisees and to discipline those who do not obtain approval for their ads. Hewitt says the company is disappointed with the ruling and plans to appeal.

While Liberty’s franchise system expands, Baumgartner is overseeing a major expansion of Liberty’s Virginia Beach headquarters. The project will double the firm’s square footage to accommodate more than 300 additional employees.

As credit locked up during the recession, Baumgartner expanded the company’s lending program to franchisees. Liberty loaned more than $20 million dollars to franchisees over the past year. In addition, Baumgartner was influential in setting up a $100 million five-year credit facility with a consortium of 10 banks. “He did 98 percent of that work on his own,” says Hewitt.

In another move, Baumgartner and his team have beefed up the company’s safeguards. They implemented an automated tax preparation system that identifies possible taxpayer or tax preparer fraud and notifies officials in the company and its franchisee base.  In addition, he created and manages Liberty’s Internal Audit Department. Designed to enhance Liberty’s franchise and corporate operations. It includes a long-term forecast model used to make major decisions.

Currently the nation’s third-largest tax preparer, Liberty’s goal is to be the biggest tax service in 2020. “We’re competing against two companies [H&R Block and Jackson-Hewitt] that are much larger than we are, but we believe we’ll be able to beat both of them,” says Baumgartner.


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