As the shift toward tax advisory continues in our accounting profession, it’s important to understand how to price the valuable services you are providing your clients. It’s time to stop billing for tax returns and giving away more valuable services such as tax consultation and advisory. Instead, put a price on your more valuable services (tax advisory) and give away your less valuable service (doing tax returns).
Ultimately, you want to increase your client’s bottom line, and the way we do that is by helping them reduce their taxes. You want to sell that on your first meeting. When shifting your practice to tax advisory, you must first identify patterns. You are then able to discover the formula for reducing your clients’ taxes. Spend 4 hours a week on systems and processes, since they serve as leverage and since using leverage is the key to improving upon and successfully scaling the tax advisory services you offer.
Pricing vs billing
When you buy an iPad, the salesperson will ask you what you plan to use it for. This is an important question since there are different iPads for different needs. This same way of thinking applies to your tax advisory practice. As accountants, we tend to provide different services while believing that each of the different services we provide is the same. It’s important to recognize which services of yours represent an upgrade and to price your services accordingly. It’s also important to pay attention to what the client truly wants. Think about tax returns. A large majority of CPAs charge for tax returns and give away consulting and advisory services. The truth is that your clients don’t care much about tax returns. They only have their tax returns done so they can sleep at night, because it’s required. In reality, your clients prefer more valuable services that help them reduce their taxes and increase their bottom line.
It’s important to start to shift to the mindset of pricing instead of billing. You need to change your mindset by starting to think of your company as an advisory firm where the tax return is part of the advisory service. From the client’s perspective, they see this as a win, since you are completing their advisory services now and since their tax return is free. There is no extra charge for the tax return because you must do it as part of your reporting process, as part of the tax advisory service.
Pricing is the right way to go since it gives your clients a choice. The difference between pricing and billing is that billing doesn’t give your client a choice. You can choose to give your client a bill upfront or at the end, but you can’t price at the end. You must price upfront. Ask yourself this: Why do we as CPAs let our clients walk out the door with free advisory services? Tom’s firm prices and charges upfront. Remember, it’s our job to give our clients a choice and pricing affords them that choice. We must make sure that clients understand and know exactly what they are getting from us. Pricing gives them a clear service and a clear price, whereas a bill at the end leads them to either pay it or argue about it.
Consider your pricing structure. Will you price your services as a fixed fee or on a relationship basis with a monthly fee? With a monthly fee, having your clients pay by ACH will save you on credit card fees. When changing your pricing structure, you might find this change is difficult for your existing clients. We find it’s important to compare the new price with the old price and to explain how improvements in the services you render are reflected in the new price you will be charging. You’ll find it’s easiest to establish the price and the services it covers with new clients from the beginning.
Now is the time to start transitioning your practice to a tax advisory practice and to change your mindset on pricing. When you do, you will have better clients, a better practice, and a better life.
Want to learn more about how to get better clients, a better practice, and a better life? Book a call with us today and see if joining TFW Advisors® is right for you!