Borderline Prospect-Client - WWYD here?

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#1
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Sometimes I have prospects that don't need immediate work, but may soon in the future so I politely tell them that it's okay to circle back.

Example:

Talked to a prospect in January. This prospect did not need my help filing 2020 returns but was proactively seeking guidance as their tax situation was about to get more complicated. One spouse is a high earner, the other spouse had formed a SMLLC and was going to start flipping houses in 2021.

Their question at the time was whether they should elect S Corp right off the bat. I successfully talked them away from that ledge by explaining that an S Corp comes with a significant amount of administrative overhead and compliance burden, and that it won't hurt to start as a DRE and circle back once the LLC has a certain amount of net taxable income. I see way too many prospects who are in S Corps who have no business being in them because they read a half-baked article online.

This prospect recently circled back and told me that they are halfway to the "net profit" target (and will therefore likely exceed it by year-end). The prospect requested that we hop on a phone call same day or "tomorrow" to discuss, as the prospect wants to acquire a vehicle soon and wants "to use S179 on the vehicle".

When I see emails like this, it slightly agitates me. I purposefully wanted until the end of "tomorrow" to respond, to send a gentle hint that I don't take same day calls from prospects, and all calls generally must be scheduled.

There's a lot to unpack in the prospect's email. Namely confirming that we're on the same page regarding net taxable income (and not net cash received at closing) and discussing vehicles and the need for contemporaneous logs. Refreshing on what running an S Corp is going to entail and perhaps running an effective tax rate projection.

I am also clear with prospects that I do not offer consulting services unless I also handle the income tax compliance. e.g. the 1120-S and the 1040. It's just not worth my time without the total package.

What would you do here? I need to be compensated for my time, and I don't think it's going to be cheap. To be honest, I'm thinking about throwing out a $500-1,000 initial consulting fee, given the immediate need for the consult and our position in the filing season, with the understanding that next year I'm handling the compliance work.
 

#2
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I'd probably get them "on retainer" and then bill the consult fee against the retainer.
It would also probably be relatively easy to kick this can down the road 3 weeks to post deadline.
A lot of people don't realize how busy we are in the month leading up to a deadline, and many don't realize the deadline is May 17th.

Also the vehicle Sec 179, would presumably drop them back from the profit target for S corp.
 

#3
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ReckedCPAEA wrote:It would also probably be relatively easy to kick this can down the road 3 weeks to post deadline.
A lot of people don't realize how busy we are in the month leading up to a deadline, and many don't realize the deadline is May 17th.


I think that's the crux of the matter. I'm exhausted and trying to find a polite way to say: "As you're not a client, if you intend to become a client and need me to consult with me within a week, you're going to pay through the nose for it. If this can wait til early June, I'd appreciate it and there won't be a rush delivery premium / aggravation fee (whatever) attached."

I plan to disconnect and disappear one of the two weeks in May post the 17th.
 

#4
ATSMAN  
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This is a prime candidate for a retainer and a consultation only agreement until they sign an engagement agreement for the full ball of wax!
Two years back I had a trucking company whose accountant was getting old and "senile" according to the client. But because they had used that accountant for decades they were NOT quite ready to cut the chord, instead they wanted to consult with me on certain issues that they thought requires a second look. Got them on a retainer and now they are my clients. The previous accountant got win of it and made a little fuss but agreed that it was time for him to retire and only do individual and simple tax returns.

I will NOT provide any tax consultation without an agreement. I don't respond to any specific tax question, other than general responses, often cut and past jobs. Soon prospects realizes that there is no free lunch. You want sound advice, you got to pay for it!
 

#5
MWEA  
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I will often bill 50% of the compliance work estimate for the consulting work, but credit it back towards next year’s return cost if they become a client.
 

#6
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ManVsTax wrote:
When I see emails like this, it slightly agitates me. I purposefully wanted until the end of "tomorrow" to respond, to send a gentle hint that I don't take same day calls from prospects, and all calls generally must be scheduled.




Me too. And I do this, especially for non clients.

In fact, my gatekeepers would tell non-clients like this, "He's not going to call you back until June".


When I get to the calling them back, I would offer a consultation for about an hour for $350. This gives me a chance to interact with them before I take them on. This is good because if I don't like them, I can help them and send them on their way. If I do like them, I have a chance to show them my stuff.

I would not credit the fee toward future work. "Time is time" and if I don't like them, I wouldn't want them to feel like I owe them anything.

I'm very energetic and helpful in a consultation - and no one has complained or felt slighted for paying me for them.

Plus, I'm in no hurry to engage before I can talk and work with them for an hour. No agreement yet. Just answer their questions for an hour and charge them - it's a win win.

In June.
 


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