Old Accountants Below Market Pricing

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#1
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I've faced many of these situations lately where someone's old accountant didn't charge them near enough. I had a prospect in my office today whose "accounting expense" on their 1120-S was $1,195 on their 2021 return. This includes once-a-month payroll runs and an 1120-S return with QuickBooks adjustments.

I really liked these guys, and they were a referral from a financial adviser that I work with. The company is super profitable, with about 343K before the owner's salary.

My pricing will at least double the fees they're used to paying. My question is, how do you go about quoting services to these guys? Do you tell them they've been underpaying for years? Do you confidently quote the prices and move on?

Looking forward to replies
 

#2
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$1,195 to $2,400 isn't a big deal, especially to an entity that nets $343k before payments to owners.

I've convinced prospects to come aboard even though my fee is double, or more than double, their existing tax preparer's. If you dig deep enough, you'll find there's a reason they're talking to you. For example, they can never get a hold of their current tax preparer, it takes weeks for them to respond to an email, they can't provide them with tax advice -- or refuse to, etc.

On your introductory calls, you should explore the value you bring, as well as what differentiates you from other tax pros, including their existing one if you don't already. Start thinking of yourself as a value center, not a cost center. Most reasonable prospects realize they can't spend 10 minutes complaining about what their existing tax pro does wrong, and expect to pay the same fee to you for much better service. It comes down to "you get what you pay for".

Don't spend too much time convincing any one prospect, relative to expected fees. If you feel the back and forth is becoming a time sink, don't be afraid to suggest there's a possibility that you two aren't currently a good fit, and it's fine for them to circle back in a year or two. I find that maybe half of referrals I feel the need to do that with jumped aboard when it becomes apparent the ship is leaving without them. :)

Lastly, something like hundreds of thousands of accountants have left the profession over the last few years. I don't think there's been a better time to pursue quality over quantity, nor sell yourself for a premium.
 

#3
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Drafted before I read MvT's reply...

I'm usually pretty candid with folks and share some industry dynamics to provide them perspective.
Practitioners pricing at this point don't, generally, provide the comprehensive service I provide. They have also done themselves a disservice by underpricing the market. I tell them they are very fortunate to have worked with someone at that price point for so long. The market is higher.
Bottom line...I build value in what I do, which is usually more than their prior provider, and confidently quote and move on. Some folks are so price conscious, it doesn't matter what you do. Don't spend energy that won't benefit you.
~Captcook
 

#4
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ManVsTax did a pretty good summation. I guess I need to type faster :lol:

If I don't know why the new client left their previous preparer, I'm just upfront and confident about it. If I know the reason for the change, I can sometimes couch it in more sympathetic language (i.e. if they feel they don't get attention from their CPA, I play up being a solo practitioner; if they didn't feel like they got tax advice, I stress that aspect of my practice; and so on).

Across the street from me is a volume preparer who does over 3,000 returns a year. I picked up a 1040 client from them who had a brokerage statement and state itemized deductions and was charged $95 last year. I think that helps me because I really don't care if I "lose" a potential client who wants to pay $95 for that return, so I can quote my normal price and not worry. And it's similar to your prospective client: that's a lot of work for not a lot of fees so since you can't be too disappointed in "losing" the prospect, just quote a price that will make you happy and you will win whatever the prospect chooses.
 

#5
CP Hay  
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I think you should stand firm on your fees. It’s good to miss out on clients who are below your price point. If you close 100% of your quotes you’re likely pricing too low.
 

#6
smtcpa  
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Richmond, VA
This says it perfectly. It has been my experience as well.

ManVsTax wrote:$1,195 to $2,400 isn't a big deal, especially to an entity that nets $343k before payments to owners.

I've convinced prospects to come aboard even though my fee is double, or more than double, their existing tax preparer's. If you dig deep enough, you'll find there's a reason they're talking to you. For example, they can never get a hold of their current tax preparer, it takes weeks for them to respond to an email, they can't provide them with tax advice -- or refuse to, etc.

On your introductory calls, you should explore the value you bring, as well as what differentiates you from other tax pros, including their existing one if you don't already. Start thinking of yourself as a value center, not a cost center. Most reasonable prospects realize they can't spend 10 minutes complaining about what their existing tax pro does wrong, and expect to pay the same fee to you for much better service. It comes down to "you get what you pay for".

Don't spend too much time convincing any one prospect, relative to expected fees. If you feel the back and forth is becoming a time sink, don't be afraid to suggest there's a possibility that you two aren't currently a good fit, and it's fine for them to circle back in a year or two. I find that maybe half of referrals I feel the need to do that with jumped aboard when it becomes apparent the ship is leaving without them. :)

Lastly, something like hundreds of thousands of accountants have left the profession over the last few years. I don't think there's been a better time to pursue quality over quantity, nor sell yourself for a premium.
 

#7
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North Shore, Oahu
+1 on MvT and all replies.


I'll be extremely blunt, forgive me...

Do you want to earn a net profit of $150,000 per year? Or would you prefer to net $400,000 per year for the same work (but with better clients)?

Your choice.


Edit: $2400 for 1120s, book adjustments, AND payroll including 941, W2, UI, etc??? Still way too cheap! $3600 minimum. $4800 if it includes tax planning and 1040, other support etc.
 


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