Fee increases, less returns higher fees

Hi all, hope everyone is doing well. This upcoming tax season I'm looking to do less returns for a higher premium fee and will be sending out fee increase letters starting next week. I'm wrestling with whether I do an across the board fee raise or do I analyze each and every client on an individual basis. My initial thoughts are as an example lets say I have 350 clients I would like to try to raise all 350 clients on average $250 each. Assuming due to this increase I lose 50 clients at an average fee of $500 I lose $25k of business while at the same time an increase fee of $250 for the 300 retained clients increases revenue $75k resulting in a net revenue increase of $50k while doing 50 less returns freeing up time to take on more ideal and profitable clients. I understand it won't be as easy as this however I would love to get feedback. I'm thinking to send out about 20 to 30 initial increase letters and see what the feedback is which will help guide me in the next batch of letters as to how many will accept increase, how many will leave and how many will try to accept a renegotiated fee increase. I'm really trying to fine tune my practice into all returns that are clean and profitable. I've taken on too many either low fee , headache and/or pita of a Tax return over the years and i want to improve my quality of life and want almost all returns to be smooth good paying clients. Less volume and higher quality. As always your opinions are greatly appreciated and respected! Even if at the end of the day my net profit is the same however I am doing less returns that would also be a successful outcome.

I'm thinking to send out about 20 to 30 initial increase letters and see what the feedback is which will help guide me in the next batch of letters as to how many will accept increase, how many will leave and how many will try to accept a renegotiated fee increase.

I like your goals, but depending on your demographic this could backfire. Do many of your clients know each other? Will clients who haven't received letters yet hear about the increases before you tell them?

I think this is an exercise we should all perform on a regular basis. Good for you for being ready to carry it out.

The studies I've read suggest actual client losses are less than 10% when these increases are implemented, but most people prepare for 30-50%.
I would perform a review of all my clients and start with those clients you wouldn't mind seeing leave (i.e. not your target demographic). To Webster's point, be sensitive to the relational aspect of these returns as well.

This approach may be more labor intensive than a broad brush approach, but look at it this way...if you're intending to increase all fees roughly $250/client. A time investment of 1hr/client would still provide you an effective billing rate of $214/hr if 14% chose to leave. My guess is that some of these folks need not have more than 10 minutes invested, but you get my point.

I think everyone should be going up each and every year and always have the mindset to bill as much as possible for each job.

But I would like to hear how you see your current rates vs the market. If you are getting $500 for a basic return ie husband and wife each with a w-2, no itemize, maybe child care credits for 2 kids and $1,200 credit with AGI of say $190k then I say you are already charging premium $$$ compared to most. To ask for $750 might be a big ask

But if most of your $500 returns are underpriced and the competition is already getting $750 or more than I say go for it

I do not think most people care about a 5% or 10% bump each year but 50% will get their attention


I was going to reply to another thread that I really never question anyone’s bill whether the mechanic, plumber or painter. But we just received a quote for painting one room including trim and ceiling. In my mind i was thinking $1,500 would be high but worth it. The quote was for $3,000;plus paint costs. I never bother with getting multiple quotes if somebody was referred by a friend but I think in this case we will. A bit too aggressive with the pricing

I agree with BerkshireCPA. If your goal is to simply get more revenue regardless of other factors then go ahead and price what you feel like. But if you want a long term viable business model, then your charges have to be in line with the marketplace. You can easily create a situation, especially in a small community where word spreads faster than fire and if your clients sort of know each other, it may become a problem.

It was years ago now, but I started way too cheap and I became way too busy.

Over the years, I would politely raise prices in advance on an individual basis.

I think it is important to analyze them individually. I still have some $300 clients because I like them and because they are so easy to serve, that it's like printing money.

I found that, even with drastic price increases, that I would make much more than in the previous year, even with losing some clients.

I would encourage you to go with your plan and not to be afraid (assuming you can get clients if you needed to). I found that I lost much fewer clients that I expected and that my only mistake was not to raise prices aggressively enough - even though I did it quite aggressively and more and more so each year.

Hi all, hope everyone is doing well. This upcoming tax season I'm looking to do less returns for a higher premium fee and will be sending out fee increase letters starting next week. I'm wrestling with whether I do an across the board fee raise or do I analyze each and every client on an individual basis. My initial thoughts are as an example lets say I have 350 clients I would like to try to raise all 350 clients on average $250 each. Assuming due to this increase I lose 50 clients at an average fee of $500 I lose $25k of business while at the same time an increase fee of $250 for the 300 retained clients increases revenue $75k resulting in a net revenue increase of $50k while doing 50 less returns freeing up time to take on more ideal and profitable clients. I understand it won't be as easy as this however I would love to get feedback. I'm thinking to send out about 20 to 30 initial increase letters and see what the feedback is which will help guide me in the next batch of letters as to how many will accept increase, how many will leave and how many will try to accept a renegotiated fee increase. I'm really trying to fine tune my practice into all returns that are clean and profitable. I've taken on too many either low fee , headache and/or pita of a Tax return over the years and i want to improve my quality of life and want almost all returns to be smooth good paying clients. Less volume and higher quality. As always your opinions are greatly appreciated and respected! Even if at the end of the day my net profit is the same however I am doing less returns that would also be a successful outcome.

Just fire the bottom 35 clients…. Have a 10 percent increase across the board. Do this 2 years in a row and you’ll have 20 percent less work, same revenue. $250 per client is a big jump.

You have to know your clients well enough to do this. If i know certain client is price sensitive, i wouldn't even bring it up. In your case, just drop them. For the rest, I usually just increase 5% to 10%, every 1 to 2 years, they don't even notice it or they did but don't bother bringing it up. $250 seems like a a big bump, not sure how you can justify that to the client.

That's a HUGE increase. Now, if you're middle of the market, it's ok....you don't want the price-sensitive folks anyway. I do like SouthPark, dump the worst clients or better, sell them! I did that for 15% of my clients last year and about half of them went to the new guy...I'll get 1/2 of what he collected. Win win.

When I've done global increases, it's been $50 per year and no one complains. And yes, review each one to see who needs a big boost, new biz or rental, more brokerage statements, multi-states, etc.

I always try to encourage "time and resource huggers" to go elsewhere if they balk at paying my fees. Approx. 50% of them end up calling me after one or two tax seasons to come back and I suspect they got the boot where ever they landed the last time!

One fellow showed up at my office uninvited with a $100 bill in his hand as a gift if I would reconsider! No thanks!

I chuckle at the number of fired clients who call and hope I'll relent. I've only done it once. My wife tells me to be happy that they still want me, it's a good thing. But I'm sad that they just didn't get the message: GO AWAY! lol

^^ Ha ha - I know right.

It's flattering, and it also makes me feel a little guilty.

It is also quite satisfying in a job security emotion sort of way.

But please go away.

My wife tells me to be happy that they still want me, it's a good thing.

Your wife and mine must think alike! I get grief from her when I refuse to take them back! She thinks I am mean

I categorize clients by A, B, C, D.

The A clients get superior service for paying a higher fee and not being a PITA.

The D clients, sot so much. I don't bend over backwards for them and see them when it's convenient for me. Eventually, they end up going somewhere else. I don't worry about them since D clients refer D clients.

As always thank you for these wonderful replies! With the help of everyone's input I think I'm leaning towards reviewing each client individually and perhaps lowering the $250 average increase goal to a more conservative $150/$175 increase. And not raise long time clients and/or clients who consistently send referrals etc. Thanks again!

Right on WKS, I am quite grateful for the members on the board as well.

Best wishes with this and please, if you don't mind, keep us posted or provide a report next year.

How many clients did you lose? How much did your gross receipts increase? Etc.

Hi ItDepends,will do, for sure!

Have any of you considered subscription pricing models for tax returns? Provide all-inclusive services to clients willing to pay it, start weeding out lesser clients. Over time, idea is to eliminate all clients not willing to onboard under subscription fees. The firms I have seen utilizing it are thriving.

I am going to begin offering it in 2022 to determine level of interest vs. my other pricing structures, which are NOT hourly. I view it as a fantastic way of maintaining client quality while hedging against the few clients that would consume a lot of while (vs majority that would not).

Have any of you considered subscription pricing models for tax returns? Provide all-inclusive services to clients willing to pay it, start weeding out lesser clients. Over time, idea is to eliminate all clients not willing to onboard under subscription fees. The firms I have seen utilizing it are thriving.

I am going to begin offering it in 2022 to determine level of interest vs. my other pricing structures, which are now hourly. I view it as a fantastic way of maintaining client quality while hedging against the few clients that would consume a lot of while (vs majority that would not).

I have done exactly this since last July.

The price was so high as compared to my regular prices and I thought I wouldn't get any clients - but about a dozen new clients have signed up already.

Inclusive services offer things like amended tax returns, tax planning, help with bookkeeping questions, representation, etc. Our scope is thoroughly written out and defined in an agreement.

Some of these things I found myself doing for free (I mostly charge by the job, and not by the hour) - OR - if I sent a bill I could sense resentment in many cases.

Now I get paid for it up front.

Abusers are managed by carefully written out scope - and if I get a PITA - I can always raise or disengage in advance.

I've stopped taking "tax-return-only" clients this summer. I will be paring down my client list, moving more clients to tax prep during the summer, and taking on clients who need regular tax planning, business advisory, and - next year - personal financial planning and investment management.

Have any of you considered subscription pricing models for tax returns? Provide all-inclusive services to clients willing to pay it, start weeding out lesser clients. Over time, idea is to eliminate all clients not willing to onboard under subscription fees. The firms I have seen utilizing it are thriving.

I am going to begin offering it in 2022 to determine level of interest vs. my other pricing structures, which are now hourly. I view it as a fantastic way of maintaining client quality while hedging against the few clients that would consume a lot of while (vs majority that would not).