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.
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 completely out the window. To raise your fees, your simply do it in one fell swoop for the very next client that engages you for that service. Yesterday, maybe you charged $500 to set up a Streamline Installment Agreement. Tomorrow, like magic, you simply start charging a more appropriate fee, like $2500-$3000, for SIA. Yesterday you charged $150 for doing analyzing a client’s prospective rental property purchase. Boom, today you make it $1500 or whatever you want to charge for it. Instant. Done.
Way too many tax professionals are afraid to charge what they’re worth, including raising fees on existing clients. If you’re waiting on some sort of signal from the universe to raise your prices for all your services, I hope that the inflation info above is enough alone to do that. But if you need some other, external justification, here it is: You have my permission to raise your fees.
Just do it, and never look back.
Now, what should those fees be?
How do you overcome price objections when they come up, either from existing clients or new prospects?
What’s the process for generating fee quotes for project-based work?
And what about this pandemic economy that we’re in? How does that impact fee decisions?
All good questions. And all answered in Martin Bissett’s new pricing course. It’s only $99, and if you order this week, I’ll send you a special bonus:Access to my 2-hour tax resolution training video on tax resolution fee models and a structured approach to closing tax resolution sales.
To get this special bonus, simply forward me a copy of your email receipt from Martin by 11:59pm Pacific time on Friday, January 29, 2021. This is a firm deadline, so don’t delay.
To get the goods, clicky-clicky:
To raising your fees to where they should be,