One of the most common problems I’ve observed with CPA firms is the issue of undercharging fees. Most practices have this hidden goldmine equating to tens of thousands of dollars (or more!) sitting right there waiting to be uncovered.
One thing that gets in the way of practitioners charging the right fees is that they believe most people buy based on price. That is simply not true. Here are two important facts you should know:
1. Only 14% of customers buy on price alone. That means 6 out of 7 people choose a product or service based on factors other than price.
2. In any corporate transaction, price discussions account for only 20% of the decision process.
So, if your clients aren’t buying on price alone, what factors are they looking at?
• They need to feel confident in you and your firm.
• They need to be convinced of the difference you will make for them.
• They’re looking for a higher level of personalized service.
Yes, they’re thinking of all of these things before price.
So, suppose you raise your fees and you lose some clients as a result. Sure, that can happen. But it’s seldom catastrophic, for the reasons I explained above. Most people aren’t buying based on price alone. Even so, if that doesn’t assuage your fear of increasing your fees, take a look at this hypothetical example:
1040 preparation (500 x $200) = $100K
Business tax preparation (200 x $375) = $75K
Accounting work (75 x $2,000) = $150K
TOTAL REVENUES: $325K
AFTER (Pricing Correctly)
1040 preparation (500 x $250) = $125K
Business tax preparation (200 x $500) = $100K
Accounting work (75 x $2,500) = $187.5K
TOTAL REVENUES: $412.50K
Even if you lose 10% of your clients due to your fee increase, that would still generate revenues of $370K+ -- a whopping $50K increase!
Keep in mind, too, that most people understand that prices go up over time. The majority expect it and won’t be shocked when you increase yours.
See you again soon!