Big Mistakes Tax Pros Make – Not charging enough for your services
Here is one mistake that most all small office tax pros make. The problem is when we first started our practices, we wanted to generate revenue to offset the costs we were incurring. Even though we bought cheap software (ATX or Drake for example), we had a small office in our home or nearby and still had office supplies, a laptop or desktop computer, and color inkjet printer, these things still cost money. Plus we still had to generate enough cash to help pay personal bills.
So, what do we do? We sell our services very low to get people in the door. I have seen many people prepare a Form 1040 for $100-250 (and including their state return, if applicable). Then couple this with Mistake #3 (Not Raising Fees Annually), and then you can see why most tax pros don’t make a lot of money and are too cheap to spend/invest on new things.
One thing that I did well was always increase my client’s fees 5-10% every year. The first few years, I did not increase my base fee. Back in 2014, I set my base 1040 fee at $300. I then proceeded to increase that base fee $50 each year through the 2020 tax return season.
Then in the 2021 tax return season, I decided to do a dramatic increase of $150 for 1040 and $500 for business returns. I think this was the biggest reason that my gross revenue increased 20% that year. I did this by not greatly increasing the overall number of clients.
By the way, when I increase my base fee each year, this is for NEW clients. Existing clients get an annual increase (which was around 10% this past year for just about everyone)!
Oh, yes, some of you think that I don’t get that many new clients with fees that high. And you would be correct. I don’t need to. If I charge $2,000 for a business return and if I was charging $1,500 previously, I can get 3 clients at $2,000 vs 4 clients at $1,500 to make the same money. Would you rather have fewer clients making the same money than more clients and more work?
Plus, it is amazing that the higher you charge for your services, you get more respectful and better quality clients. I triple dog dare you to greatly increase your fees for NEW clients this upcoming tax season. I am talking about $150-250 or more. Finally, this concept applies to every service you provide, bookkeeping, tax resolution, IRS audit representation, etc.
All the best,