Economists generally define a recession as two or more consecutive quarters of GDP contraction.
We won’t know for six months, and I’m not a gambling man, but I feel pretty certain that later this year we’ll be saying, “Yes, that was a recession.”
The prospect of a recession seems to be causing some fear within the ranks of tax professionals.
Fear that they won’t be able to collect from existing clients, thus impacting their own ability to pay the rent, make payroll, or feed their families.
Fear that their own tax practice may go the way of the dodo bird.
Some tax pros are, as a result, heavily discounting their tax prep fees in order to keep people coming in the door. Some are waiving up front fee requirements on representation engagements. Some accountants are intentionally delaying invoicing their clients for work performed, on the misguided assumption that those clients just can’t pay all of a sudden.
These reactions to the pandemic and pending recession are based on fear, and they are the absolute wrong reaction. I’m not going to mince words: If these are the types of actions you’re taking with your fees right now, STOP IT.
Instead of viewing the recession from a perspective of fear, I want to encourage you to view this as an opportunity. Yes, opportunity.
Back in 2008, I was in Chapter 7 bankruptcy and homeless as a result of the Great Recession. By sheer dumb luck (or maybe divine intent, depending on what you believe), I ended up taking a job at a tax resolution firm because I needed a job, and they needed a Jassen.
I had never even heard of “tax resolution”, and I didn’t previously come from a tax or accounting background.
But entering the tax profession turned out to be the best financial move of my entire life.
See, during the Great Recession, the number of people with a tax debt spiked. This is common during a recession, and I guarantee it’s going to happen again this summer.
This created a Golden Age of tax resolution from 2008 through 2010, one that I never thought would be repeated.
But in all honesty, this one, in 2020, is going to be even better, for a wide variety of reasons that are beyond the scope of this email.
Heck, it’s not just representation. Tax planning, advisory, ERC, payroll… All of it. This is the business-building opportunity of a lifetime.
This is the opportunity to finally move your firm into the cloud and operate remotely.
This is the opportunity to finally ditch unprofitable services, and focus your firm on the two or three most profitable services you want to offer.
This is the marketing opportunity to finally niche down your practice to serve one or two industries or occupations.
And yes, this is finally the opportunity to create Fee Freedom in your firm.
Been waiting 20 years to switch from hourly to value pricing? Do it now.
Ever wanted to test experimental fee models, such as subscription-based services? Do it now.
Been wanting to switch to the split sales model for tax resolution and incorporate that as an inherent component of your marketing and sales process? Do it now.
Are your rates stuck in 2002? It’s time to update them now.
This is an amazing time to free yourself from the shackles of outdated fee models, absurdly low pricing, and so many other paradigms.
It is NOT the time to slash your fees or throw your invoices in the trash. You still have a business to run, and Congress just threw $2.2 trillion of cash out the helicopter door, so there is plenty of money floating around. Individuals and businesses can pay you.
So free yourself from fee fear, and embrace fee freedom.
Now, that doesn’t mean price gouging.
If you become a d-bag about your fees, that will come back around to bite you in the rear after the dust settles on the current situation.
Heck, a couple days ago, I was told that one popular trainer in our industry, a CPA that shall go unnamed, was encouraging practitioners to charge over two grand for completing just the short-form SBA online disaster loan application. That is straight up highway robbery, and I would anticipate practitioners doing that will eventually get a knock on the door from a Special Agent in the SBA OIG Investigations Division. Did you know that SBA has Special Agents? Yes, yes they do.
So, no price gouging.
When it comes to fees, I believe in being fair but reasonable. The work you do provides tremendous value to your clients, and you should be paid commensurate with that value. In fact, I believe in being paid handsomely for said value. But there are reasonable limits.
Summary: Reasonable fees. Fair fees. Fees commensurate with the value you deliver to the client. This right here…this is Fee Freedom.
(hmmm…the proverbial marketer within me sez I should trademark that….so here we go: Fee Freedom™)
For example, we have a Tax Resolution Academy® member that charged a fee of well over $100,000 for an Offer in Compromise case last year. Without context, that fee sounds like a blatant Circular 230 Section 10.27 violation, right? But no, far from it. This was an incredibly complex case, with multiple entities, many moving parts, a tremendous amount of “reconstructive accounting”, and more. Tracey, I raise my glass of Scotch (hey, we’re all working from home now, right?) and congratulate you for having embraced this challenging client, and charging a fair and reasonable fee that accurately reflected the shear work your firm put into it and the value you delivered to the client.
Now, are $100k OIC clients the norm? Absolutely not. Far from it. Heck, OIC’s aren’t even the norm in the Collections neighborhood of Taxlandia. They are very, very, very rare.
But sometimes, that’s what it takes. And the fee is fair, reasonable, and provides tremendous value to the client.
During this pending recession, embrace Fee Freedom™. Lean in to your fee structure, experiment with it, improve it…instead of running away from it in fear.