Welcome to our exploration of a topic that many tax professionals and licensed practitioners often grapple with: raising fees. Despite the ever-present dynamics of inflation and market forces, numerous professionals find it incredibly challenging to increase their rates. In this post, we’ll dive into several key reasons behind this hesitation and examine how it affects your clients, profits, and overall psyche.
**Existing Clients vs. New Prospects**
One major distinction to keep in mind is the difference between existing clients and new prospects. Generally, it’s easier to raise fees for new clients than for those who have been with you for some time. Let’s start by discussing why increasing fees for existing clients can be so daunting.
**Fear of Losing Long-Term Clients**
The primary concern here is the fear of losing clients. Many professionals worry that a fee increase will drive away loyal long-term clients. This concern, while valid, is often overblown. Most clients understand that fees need to increase over time due to rising costs such as software upgrades, memberships, and staff salaries.
**Practicality and Perspective**
In practical terms, a reasonable fee increase of 3-10% is often barely noticeable to most clients. For example, raising fees by 3-5% annually allowed me to retain 98% of my clients during my 14 years of practice. More importantly, the clients who stayed valued the quality of service even with the increased fees.
**Client Loyalty and Economic Sensitivity**
Another factor is client loyalty. Long-term clients might feel unfairly treated with a fee hike, but the reality is that loyalty is not easily broken by marginal increases. Economic sensitivity is another concern; professionals hesitate to raise fees for fear that clients can’t afford them. However, economic conditions on tax returns don’t always represent the clients’ full financial scenario.
**Valuing Your Services**
Not raising your fees may inadvertently undervalue your services. Lack of confidence in the value you bring can make fee increases seem daunting. Yet, charging higher fees often enhances the perceived value and worth of your services.
**Consistency and Predictability**
While maintaining steady fees provides a predictable experience for clients, small, gradual increases can condition them to expect and accept changes. This method helps avoid larger, more shocking increases down the line.
**Fear of Negative Feedback**
The fear of negative feedback also plays a role. While some clients may complain, the impact is generally minimal if you provide excellent service. Occasionally, you might lose a few clients, but those … Continue reading