Top reasons we lose clients

What would you say are the top reasons we may lose a client? Here are mine. 1.) Price 2.) Client decides to try doing return on their own 3.) Client Got married and using spouse's accountant 4.) Unhappy with our service and sometimes this perception is based on client's refund even though we did a good job they relate amount of refund to quality of job we did 5.) Unknown. Also, at what % price fee reduction offered by another accountant will a client leave for?

I think you have to separate out your run of the mill 1040 returns and business returns (1120, 1065, 1040 Sch C).

This is what I have observed over the years in my practice.

For the run of the mill 1040 standard deduction returns the #1 reason is taxpayer self preparing using one of the free online services or a friend who is preparing free. Cost saving is obviously the issue. Most of the taxpayers tend to be younger and computer literate.

For 1040 itemized deductions, it is generally self preparation for simple cases to a preparer that charges less or more convenient location. Sometimes if the taxpayer is single and gets married, there is another preparer with a stronger relationship.

For out of state/city clients who deal by mail/e-mail only, many are constantly shopping around for the best deal and I lose many of them because that is how it is. I can almost tell that I am about to lose one, because price is the main contention.

For 1120, 1065 it is mostly a stronger recommendation or a perceived strength that they can do better elsewhere. Price is not a big factor here. I do ask my clients when they leave me the reason. Roughly 50% want to have an honest discussion, the others politely refuse.

Thank you Altsman, sounds like price is still the most persuasive factor for the majority.

I'd add - Client want's you to Cheat for them and you refuse, so they find another Tax Preparer who agrees - for the fee - to cheat. I lose, a good many returns, because I won't do that.

wks, in this and other threads it seems that you are overly concerned with losing clients. Looking back at my career, rarely have I "lost" a 1040 client that actually felt like a loss. More often than not, it's been a weight off my shoulders...

For 1040-only clients, some turnover of clientele is healthy and normal. It is entirely possible for client turnover to be too low, and it can be an indication of other problems in your firm -- if you're spending your effort running defense against losing a client then your firm is not punching upward. Of course, client turnover can be too high, but that's not the concern here.

If you're not losing some existing or potential clients due to price, it means your price is too low for your area. But beware, while some people who leave saying "price" are unhappy with the price, other people who leave saying "price" actually mean "value" -- they were actually unsatisfied with the service but because the service made them unsatisfied with the price they paid, that's what they will say. The first group are clients who would just drag you down. The second group requires you to look inward and determine if you needed to do something else, or if your firm is just not the right fit.

I lost a long time client last year due to her investments with her son who owns a major restaurant company.

They sold the controlling shares and my client was to receive about $3 million for the transaction.

Her son offered to provide her with his investment advisor who also prepares his taxes.

I learned that the advisor charges him a 1.75% fee on his average portfolio which is about $875,00 based on a $50 million average!

I could have introduced her to an advisor whom I trust implicitly and also use personally for a 1% fee which would save her $22,500 per year bases on a $3 million portfolio, or a bit more that I charged her in the past!!!

The bottom line is that she paid me in full and sent me an additional $1,000 as a parting gift for all the years of service that I provided her.

Live and learn.

Its actually two fold. I want to learn better why most clients leave in order to improve retainment percentage while at the same time learn better how to attract new clients my way

I wouldn't have made the comment were it not a recurring theme. As I said in another thread, you're at the borderline of having too low of client turnover for a 1040 generalist practice so continue to lower that won't help.

That said, the fact that you are paying attention to that is certainly a positive reflection on you as a professional.

I'd add - Client want's you to Cheat for them and you refuse, so they find another Tax Preparer who agrees - for the fee - to cheat. I lose, a good many returns, because I won't do that.

Yeah... id agree with this. Also, I just lost a long time client after a divorce, he made a few very bad decisions, took money out of his IRA and when he owed a TON, he knew it was his fault but deep down I think he wishes I did something about it.
meaning cheat.... I wouldn't, he didnt ask, but I think he thought a good CPA could do that.

I can tell HRB why they lost a client to me this season. They charged a widow with 2 1099-R, SS, 1 1099-Int, 1 1099-Div, MA state $350. I charged less than half of that and I think I got a client for a while.

She was going to HRB for the last 4 or 5 years. Since she moved my office is 2 miles from her house and her new neighbor a client of mine referred her.

I think I got a client for a while.

How many years do you give her?

I can tell HRB why they lost a client to me this season. They charged a widow with 2 1099-R, SS, 1 1099-Int, 1 1099-Div, MA state $350. I charged less than half of that and I think I got a client for a while.

She was going to HRB for the last 4 or 5 years. Since she moved my office is 2 miles from her house and her new neighbor a client of mine referred her.

What does it tell you when H&R Block charges more than double than what you charge, when you've got (based on your profile) 20 years of experience? I'd bet you have a better client experience than H&R offers, too.

This was the first year with a new client so I can't predict how long she will stick with me, but she was going to HRB for several years before so unless I screw up I hope she will hang with me for a while! Her neighbor has been my client since 2007.

I can't charge a widow with fixed income what HRB charges. I wouldn't want one of my aunts (about that age) charged that much by any tax preparer for a relatively straight forward return Yes I do have 20 years experience but I am not going to rob someone blind.

With 20 years experience, you may be OK cruising into your retirement doing easy tax returns for $175 a pop. And maybe thinking about your clients like you would your aunt will accrue you treasures in heaven. To each his own.

But I would not recommend that a newbie try to build their practice with this market in mind. Sure, a few of these will come along now and then, and it's OK to do their work. But this should not be your target market.

With 20 years experience, you may be OK cruising into your retirement doing easy tax returns for $175 a pop. And maybe thinking about your clients like you would your aunt will accrue you treasures in heaven. To each his own.

But I would not recommend that a newbie try to build their practice with this market in mind. Sure, a few of these will come along now and then, and it's OK to do their work. But this should not be your target market.

For a newbie who is not a CPA or EA, getting new clients (business returns only) to support a living may be a challenge at first in my opinion. We all have to start some place and 1040 returns may be the stepping stone. Before I went on my own, I worked part time for another accountant and saw the challenges!

Agreed! We all have to start somewhere. The key is to define where you will see your practice in the future. What will the industry look like in the future? What kind of work will you be doing? What kind of clientele will you be working with? What will your fees be? Make that your target regardless of the work that you are willing to do today to keep yourself busy.

I'm not talking about robbing people blind. I'm just talking about billing what you're worth. H&R Block prepares something like one-in-seven prepared tax returns. They know what they're worth. A big 4 firm would probably charge a lot more than $350 if they would even accept that tax return engagement; they know what they're worth, too.

Roughly speaking, H&R Block franchisees pay franchise royalties of 30% of tax return fees. So let's assume that 30% of what H&R Block charges in all stores, even company-owned ones, is not related to tax prep. That means that the previous year, your new client paid $245 for her tax return and $105 for a massive marketing campaign and Wall Street dividends. Even if you feel that you couldn't charge $350 (or more, because you're better than H&R Block and there's a year of inflation, too), couldn't you have charged at least $245, provided better customer service, and still had a really happy new client?

Just throwing that out there.

For a newbie who is not a CPA or EA, getting new clients (business returns only) to support a living may be a challenge at first in my opinion. We all have to start some place and 1040 returns may be the stepping stone. Before I went on my own, I worked part time for another accountant and saw the challenges!

Sure, but you've got 20 years experience!

If I charged her say $245 (significantly more than what I charge for a similar complexity return), It would be grossly unfair in my opinion. It was bad enough that she overpaid HRB all those years

When I go to get a service done on my car or appliance, I don't want the repairman to overcharge me!

She could always use one of the volunteer (free) tax prep services, VITA or TaxAide(?) One of them does not have a max income limit for service. The AARP web site probably has links.

Unfair to charge her $245? She paid $350 the previous year, and you'd be providing her a better service for 30% less. You're her hero at that price!

There are a couple reasons that I say this. First of all, there is a concept in behavioral economics called imprinting. Once a person hears a price, it shapes how they see other prices. I am higher fee than average in my city for standard 1040s so I've lost potential clients because I'm too expensive, but I've lost clients because I'm too cheap as well. I gave a quote to a prospect from a nearby city with a higher cost of living. I quoted 50% above my standard rate because of that market, but I later learned that she actually paid 2.5x my normal fee the previous year, and I didn't get the business because I was so cheap that she felt that I couldn't possibly know what I was doing!

Secondly, what would happen to her fee if she bought or inherited a rental property or two this year? Either you're going to push through a huge increase in year 2 on this poor widow on a fixed income (bait and switch, bait and switch!) or you're going to discount the more complex return. if you bring in a client at a rate higher than whatever your "normal pricing" is, you give yourself a cookie jar reserve which you can pull from for when your client's situation gets more complicated.

To each his own, of course, but I really think the problem is that your overall fee structure is too low. If you're charging less than half of what H&R Block charges, you're underpricing yourself in the market. You do have 20 years experience; you're worth it!