You Have My Permission to Raise Your Fees in 2021

A CPA that purchased Martin Bissett’s pricing course this morning sent me an email stating that his now-former partner hadn’t raised his fees in 15 years.

Fifteen years.

Wow!

And now that his partner has retired, this CPA now has the super-fun task of balancing fee increases with client retention concerns.

I was going to reply to him personally, but this really is a message that ALL accountants need to hear. So here we go…

First, inflation over the last fifteen years has been 37% in total, per CPI data. That means that a dollar today has over one third less purchasing power than it did in 2005. Understand that everybody’s cost of living goes up  The price of all goods and services go up. Heck, Federal Reserve monetary policy is intentionally focused on averaging 2% inflation per year. The past 15 years has averaged 1.98% per year, so they’re hitting their goal. To maintain your own standard of living, you need to raise your prices by at least the rate of inflation.

Second, it’s been my experience that fears of losing clients when you start raising fees are generally overblown. If this CPA were to raise fees by 37%, the fear might be that NONE of them would stay — but that’s just not likely. It’s obviously impossible to provide an estimate of retention without much further data, but in my experience, raising fees by small percentages each year usually results in almost zero client loss. Even raising fees by low double-digit percentages in a single year, such as 10-15 percent, will only result in the loss of couple percent of clients. These numbers are based on recurring compliance services, such tax prep and bookkeeping.

Will a 37% immediate fee increase cause more consternation amongst clients? Yes, of course. How many will leave? Impossible to predict, but I’ve personally never seen a situation where a large fee increase resulted in a client loss of more than one-half of the equivalent fee increase percentage. Meaning, if one were to raise tax prep or bookkeeping fees 30%, I would expect the client loss to be less than 15%. That’s a very gross rule of thumb, so don’t base your life on it, but in most markets it’s applicable for recurring compliance services.

Third, when it comes to less-routine, non-recurring services, such as work that you do on a project basis… That previous rule of thumb goes … Continue reading

For most tax professionals, the price is WRONG

This week, we’re going to discuss fees.

In my past direct consulting work with tax and accounting firms, and still today when I present the occasional fee model webinar, one common them always emerges: Small tax firms don’t price their services correctly.

Frequent comments that I receive:

1). “I keep my fees low in order to attract more volume.”
2). “It’s just me here — I can’t charge the same rates as larger firms.”
3). “I live in a rural area; I can’t get away with charging big city fees.”
4). “I’m a woman, so clients expect my fees to be lower than what a man would charge.”
5). “I’m just an EA. There’s no way clients will pay me the same rates they would pay a CPA or attorney.”

WRONG.

Every single one of them.

Absolutely, matter of factly, with zero caveats… Wrong.

I don’t care about your geography, population density, gender, race, license type, or any other factor. Equal pay for equal work.

Whoa, whoa, wait a second… Is a man co-opting the rallying cry of an entire pay equality movement for his own commercial purposes???

Yes, yes he is. Gleefully, and without remorse. It’s a wonderful and accurate phrase.

Seriously, the vast majority of tax professionals that are solo practitioners or own small firms don’t charge enough. This has never made sense to me. If you’re doing the exact same work, delivering the exact same work product, creating the exact same outcomes for a client, why should you charge less than, say, an IPA 300 firm? Seriously, why? If you have a really good, honest explanation, reply to this email, because I’d love to hear it.

In fact, I go so far as to say that for many services, you should actually charge more than a giant firm. Why? Because you are able to deliver much better client service. Client don’t get bogged down in the bureaucracy of a giant firm when they work with you. You have flexibility and can provide the kind of direct attention that bigger firms just can’t deliver. In some types of engagements, that reduction in client frustration is worth them paying a premium for.

I could rant on and on about this, but doing so wouldn’t answer the question that you really want answered: What should my fees be, then?

To answer that question in great detail, I’d like to bring in my … Continue reading

Podcast Episode #9: Exploring Payroll Tax Options During COVID-19 with Chrisa Anderson, CPA

Chrisa Anderson is a CPA in private practice in Avon, Illinois. She holds a Master of Accountancy from Western Illinois University and a Bachelor of Arts Degree in Accounting from Saint Martin’s University. She serves as an adjunct instructor at Western Illinois University, and is active in the Illinois CPA Society, AICPA, National Association of Tax Professionals, and her local Rotary Club. Learn more about her firm at https://cpawesternillinois.com/.

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For more ideas to help you build a more profitable tax or accounting practice, be sure to check out our newsletter at https://profitableaccountant.com/newsletter.… Continue reading