A wacky economy, A.I. advances, new IRS programs, and a continued talent shortage combine to deliver another wallop for next year.
You can’t create a profit margin in your tax practice in this environment if you don’t price your services right.
If you don’t have a profit margin…
- You can’t pay yourself what you deserve
- Afford to hire the best staff
- Or invest in the tech you need
This leads to being burnt out, working hard without making the revenue you deserve, and taking on all the stress as the owner of your firm without any benefit.
Once you get your pricing right:
- You can feel good about helping your clients again.
- You can afford to take more profit out of your practice for your personal goals
- And you can make it to December without stressing about cash flow.
Over the last 14 years, we’ve helped 1,000’s of tax and accounting firms across the US perfect their pricing and increase their margins.
We put together a Complete Pricing Guide for 2024 so you can nail your fees and pay yourself what you deserve for all the help you give your clients.
Follow this guide, and you can perfectly price any client in 3 simple steps:
- Define
- Calculate
- Customize
- Define
No one wants to pay more for the exact same thing.
Clients will only be willing to pay you a higher fee if they feel the increased fee will help them progress more or faster toward their goals than their current engagement.
If you can show them your new will help them make better or faster progress toward the things they care about in their life and business, they will pay a higher fee, and you can get fairly paid for all the help you have probably already been giving them, except you’ve been giving it away for free.
So, Step 1 in this guide is to have the client define for you (in their words) what they want to progress on in the next 12 months so you can give them a proposal that matches their unique needs.
We say “progress” instead of what they want to “achieve” because what they want may not be possible in the next year, but everyone can make progress, even if it’s just a tiny increment.
How to Execute This Step
Ask the client two simple questions:
- What do you want to make progress on in the next 12 months? Or what are your top priorities this year?
- What impact will that have on your life and/or business?
We must also ask the impact question because if the progress they want to make won’t have a large enough impact, they won’t be willing to pay for your help.
Best Practices
- Schedule a call, Zoom, or meet the client for coffee. Do whatever allows you to have this conversation as soon as possible.
- You don’t have to do this with 500 clients at once.
- Just pick 5 clients that you know would appreciate more time with you, have enough complexity in their lives they could use more help, or you simply enjoy talking to and working with.
If you want to automate this step, use our Magic Client Pricing Link™ feature to let clients tell you what progress they want to make.
- Calculate
Once you know what progress a client is willing to pay for, the “right price” will almost present itself.
You still must account for the correct elements in your calculation.
Here are the things you should be including in your tax & accounting pricing for 2024 and beyond:
- Setup Help
Help to get a client set up on QuickBooks, getting their payroll active and functioning, 2553 & EIN filings for new businesses. Anything the client needs help with to begin making progress the right way, but you traditionally didn’t charge separately for.
- Expert Historic Work
This is the traditional “compliance” work clients need. Tax Preparation, Accounting Reconciliation, etc. It’s historic (and of limited value) because you’re simply “reporting” what has already happened in the past. So, you can only impact outcomes for the client in limited ways.
- Done-For-You Management
This is taking something off the client’s plate that they don’t want to do or don’t have the skill set to do – Monthly bookkeeping, payroll, IRS correspondence, etc. The right clients will happily pay for these services because it allows them to spend more time on what they care about.
- Tax Reduction Planning
Year-round tax planning, reasonable comp analysis, proactive tax strategies – this is what clients want to pay for, but too many firms give away throughout the year for free.
- Better Results Planning
These are the things you do, the advice you give, or the strategies you help implement that lead to the client having a better outcome in the future. This is the most valuable work you can do and what most firms never quantify on their proposals or invoices.
9 out of 10 tax firms going into 2024 only bill for their help with one or two of these categories.
Firms that bill for all five value categories moving forward will be able to significantly increase their margins and create a tangible competitive advantage over firms that only bill by the hour or by the form.
How to Execute This Step
Review a client’s needs once they define the progress they want to make and list out the specific services in all 5 categories of value to make sure you’re not giving away revenue unnecessarily.
Ask yourself about:
- Hard Costs | Do I need specific software or third-party services to help this client?
- Time | How much time will I or my staff need to provide all of these services?
- Services | What services must be delivered to not miss any necessary categories of client value?
- Value Margin | How much profit do I want to make on this engagement (above and beyond the costs involved)?
All these questions should lead you to a “Total Contract Value or TCV.”
Once you have your “Total Contract Value,” you can customize their options and payment terms in the last step.
- Customize
The last step to perfectly pricing your tax services for 2024 and beyond, is making sure that clients feel like they are being given a custom option.
Build your own pizza, build your own burger, custom order your car, custom order your couch or laptop – your clients live in a world where they can customize anything they want.
Today’s consumers don’t want to feel like they’re being offered a generic service because they know their needs and desires are unique, and they want an engagement that will match.
- Paying less tax to buy investment properties
- Help to grow their business revenue by hiring more staff or expanding locations
- Finding more savings to build retirement
- Having a better budget to get out of debt
What one client values can be utterly worthless to another client.
Your menu of pricing and services can be standardized, but you need to follow a pricing process that allows you to combine those prices and services in custom ways to match a client’s unique needs.
When you do that, your margins increase, and the ratio of clients saying “yes” to your proposals skyrockets.
How to Execute This Step
Take your Total Contract Value from your list above and create up to 3 options for the client.
Option A = The highest and most profitable engagement that includes help with all categories of client value this client may need.
Option B = Remove 10-50% of the value-added services for a “lighter” option that covers what they need (with still at least one or a few extras) but doesn’t match the highest price option.
Option C = Create a bare-bones option that covers just the necessities so they have an “entry-level” option but, no matter what, is still priced high enough to create a margin for you.
Next Steps
If you follow these three steps outlined in this guide, you will automatically increase your margins and take the first step to build a genuinely profitable and scalable firm.
90% of tax firm owners will never implement the proven strategies in this guide. People hate change and will continue doing what they’ve always done – even if it creates poor results.
So, by utilizing this pricing guide, you will also give yourself a massive advantage over the competition.
Humans will always value having another human being in their corner to help them achieve their goals and work with them to get where they want to go.
The tax advisor will be around for a long time.
If you would like to dive deeper into pricing strategies for your tax firm, check out two other free resources:
Make the needed changes to your pricing so you can protect your profits and thrive.