Six Ways To Boost Your Tax Season Margins.

By William Hamilton


Does this feeling resonate with you?

You want to increase your fees as tax season. You just really don’t know where to start…  🤔

  • You feel like you’re working harder than you’ve ever worked, but you don’t have enough profit to show for it at the end of the year.

  • You feel like you’re busier. You feel like you’re working harder. But by the time you get to December and January, you just don’t feel there’s enough left over in the practice to make that work worth it.

If you’re feeling that way, I want to let you know you’re not alone. We work with many small firm owners all across the US, and many firms are feeling that right now and that’s why we put together today’s workshop because we want to talk about margins!

Margins are the number one strategy you can use to guarantee your firm is profitable well into the future.

The reason why margins are so important is that if you can get your price right for every client, that’s going to boost those margins automatically.

Once you have enough healthy margins for most of the engagements in your practice, it creates what we call the domino effect. 

Now, you can pay yourself more, hire the right staff, invest in the marketing and technology you want, and, most importantly, build the firm you love because you have a really important skill set.

If you wanted to go out and get a job and work for another firm, you could. But the reason why you’re applying your value to your own practice is because you want to see a profit. Eventually, you want to sell it, you want to be able to pay yourself what you want to make, You’re going through that process so that you can benefit yourself.

Margins are the number one thing that will get you there.

What we’re going to do is share six simple ideas for quickly boosting your margins this tax season. We’ll provide you with step-by-step instructions on how to implement these ideas based on the data we’ve collected.

There are six elements that you can use individually, or you can work them in tandem to really create a flywheel for your margins.

Number one, we’re gonna talk about “why”. You need to have a reason why you’re increasing your fees and what that “why” should be.

Number two, we need to be able to give clients new options for working with your firm so that you can increase that margin.

Number three, we need to give the clients visuals to help them see the value.

Number four, we need to offer an upgrade to clients during tax season to make sure we’re maximizing each relationship that we can.

Number five, we need to ensure that we’re getting paid and compensated appropriately for any IRS help you’re giving.

Number six, we need to make sure that we’re asking for precise referrals.

Everything that we’re teaching in the margin wheel has been tested by small tax firms across the US. We have firms that have generated a lot of revenue in a concise amount of time by using these strategies.

Number one: “Why”

  • Why would we potentially increase our fees?
  • Why is this the first step of the wheel?

If you wanna increase fees with the clients, you need to have a compelling reason, and it needs to be something other than “my costs are going up.” 😏

People hate paying more for the same thing. We feel that way as consumers. Right?

So we have to have a compelling reason why we’re gonna increase fees.

Now what happens if we don’t have a good reason why we want to increase fees?

Well, this is where we see firms get stuck with those two percent annual increases. You’re just barely keeping up with inflation with your fees. You’re not really able to increase enough to to move the needle on your profit side.

Also, clients are gonna push back on your fee increase because they don’t see how this new engagement is gonna help them accomplish what they specifically want. Our clients are are all great people, but at the end of the day, they’re worried about what’s in it for them just like we are when we buy a a product or a service.

They’re gonna push back if they don’t understand how your products and services are really giving them what they want and this creates a a stressful environment because you don’t know if the client’s gonna value the proposal or the option that you’re gonna give them, So now you’re feeling a lot of stress and anxiety when you wanna increase a fee.

So the good news is this why this concept of why your fees need to increase, this is really simple. First, what you need to do when you talk to a client about increasing fees, You need to acknowledge that the business and financial world is harder, It’s more complex, there’s tax law changes that have happened over the last years that continue to happen.

Then you need to position yourself in the client’s life or in their business. This can be applied to an individual client or a business client, you need to position yourself as a credit and not a debit, meaning, you want to show the client that you’re trying to focus on their needs, not your needs. If you’re focused on your needs, meaning “I need you to buy this tax engagement” or “I need you to sign up for these services, you become a debit client’s mind. There’s not a lot of value there. They’re getting something done off of their to do list. But the engagement isn’t really helping them.

So the language that you would use around this is something like, “hey, we’re gonna adjust your engagement this year.” So that we can help you make more progress on the things that you care about. The idea has to stem from this concept that “we’re gonna work with you more this year to help you accomplish the things that you care about.” As soon as you do that, you position yourself as a credit, meaning the client knows they’re gonna get a return on their investment with you versus a debit where they’re just paying a fee and they’re they might not get what they want from it.

The final step in explaining a fee increase is to instill a sense of urgency. Communicate the desire to assist and engage with clients more deeply in the upcoming year, but emphasize that due to capacity limitations, not everyone can be accommodated. This transparency ensures clients understand the value of the service and the practical constraints involved.

There’s data behind this, We we work with thousands of tax firms, and on average, We see that thirty percent of a of a firm’s client base would say yes to an adjusted engagement if it meant making progress towards their goals. On average, five to fifteen percent of your client base experiences a significant life event that impacts their priorities each year.

If you need assistance with this process, we offer templates specifically designed for communicating fee increases. As we specialize in this area, we can guide you through scripting and defining the conversation precisely. Our templates include scripted content for in-person discussions and emails to initiate the conversation. If you’re looking to streamline and automate this step, we are here to provide support and guidance.

Number Two ” New Options”

we need to be able to give clients new options for working with your firm so that you can increase that margin.

If we’re gonna update a client’s engagement, we need to know what the new engagement options are. We need to give the client the right options if we really wanna increase our fees this tax season, and the way that you give the client the right options is by acknowledging that different clients value different things.

(Ex: Some clients wanna pay less tax so they can buy investment properties. Some clients wanna grow their business revenues. They can hire staff or expand locations.)

But whatever the client values that can always point back to strategies for how you can approach their taxes, their accounting, their payroll, all the services that you’re already delivering.

So here are the top five categories of client value:

1. setup help:

  • Set up with their QuickBooks.
  • Set up their new S Corporation.
  • Set up your business bank account.

2. Expert historic work.

  •  Tax prep and accounting reconciliation.

And we call it historic work because once you’re doing this work, the time has already passed.

The year is already over. The money has already been spent in the client’s accounts, and now we’re just reconciling reporting something that has already happened in the past.

3.Done for your management.

  • You help them managing Payrool 
  • You helping the with an active IRS issue

4. Tax Reduction Planning.

  • You help clients to get better results in their tax filing

5.Better Results Planning

  • You help the client budging their cash flow
  • You help making recommendations for how to depreciate an asset You help client consulting on a business sale 
  • helping them with debt restructuring

Here’s the problem most tax and accounting engagements that we see, they’re only calculating help with one or two of those categories.

In Reality, your new price should include options for help with all five categories, if you’re gonna give a client new option, the new price should align with what ideal clients want and what they’re willing to pay, and this is a significant step that we’ll will increase your margins that most firms are missing. 😲

What happens if you don’t do this? If you’re not giving the client the new option, you’re probably giving away too much free work.

Now what happens if we do this the right way? Well, when you structure your options to include all five categories of value, Now we can match any client with an engagement they’re happy to pay for. Clients are gonna stop pushing back on their fees because they’ll be able to see and feel exactly how paying your fee will lead to the results that, that you care about.

If you want help with this, if you want to automate your pricing, thi is in our engage pricing software, The Engage pricing software offers assistance and automation for pricing. Users can answer client-related questions, drag and drop services into packages, and let the software calculate the precise fee based on the client’s unique needs, providing an efficient way to automate the pricing process.

Number Three “Visuals”

we need to give the clients visuals to help them see the value.

Why are visuals important? Well, as human beings, when we can see it, we can understand it. If you want your clients to understand your value, they must be able to physically see it.

Now what happens when we don’t give clients the visuals that they need? 

Well, they could ignore your new options, they just don’t even pay attention to it because They can’t see it, or they could agree in principle when you have the conversation, but they’re not gonna take action and actually pay you more money again because they can’t see the value.

Now when you start giving clients visuals, it keeps you on the same team as the client.

They can finally see and understand your value so they can pick the best options for themselves. You don’t have to hard sell them, and one of your options can be close to the previous engagement that they had with you. So they have a way to keep things close to what they were used to, but now we’re increasing our margin and they can see the value of this new engagement so they’re willing to pay it.

How to do it?

  1.  think about the medium that you wanna use to visualize your services to your clients.

  • Website
  • Short Video you record
  • Slide Deck
  • A PDF

Think about your ideal client, what type of media are they most likely to assume, then to maximize your margins, there’s specific things that you wanna visualize.

  • Number one, you want to show clients what options they have for working with you.

    • Is it only historical reporting?
    • Is it set up help? Is it a year of tax planning?
    • What are the options you need to be able to visualize what those options are?

  • Number two,

    • How can they know which option is right for them?

You need to give them a framework and a methodology for how they can determine that.

  • Number three, when should they select the option?

  • Number four, why should they choose you over any other firm?

    • They should choose you over any other firm because you offer help in all five categories of value where most firms do not. 
    • They only offer help in one or two.

  • Number five, we need to give them a price range for what your services are.

    • You need to give them a range. Because if they’re not comfortable paying a range, you don’t wanna waste time talking to them. So you need to give them a price range for individual clients and business clients.

  • Number six, you need to visualize for them through icons, through letters, through numbers, how can they get started, and what’s the actual next step when they are ready to get started with their new fee.

  • Number seven, what to expect once they’re a client. 

    • What’s your workflow gonna be like?
    • How often are they gonna be able to meet? 
    • Are they gonna have access to you and your team or just your team?

You need to let them know what to expect!

If you want help, if you want help automating step. We have a customizable client guide, and we have a roadmap tool where the client guide can educate them about your different offerings. Your roadmap is gonna show them the specific three options that you can create through our software to price them and visualize their options so they can really see the value of working with you.

Number Four ” Offer an Upgrade”

we need to offer an upgrade to clients during tax season to ensure we’re maximizing each relationship that we can.

Data shows that a percentage of your clients will say yes to an offer simply because you offered it. You offer clients an option to upgrade their services each tax season, that’s the easiest way to collect revenue that’s lying dormant in the practice.

So how to set up your Upgrade offer?

Here are some best practices

  1. Keep your upgrade offers simple so that clients can understand it, and they can see the value with very little extra effort, and extra time from you.
  2. Make it very clear that here’s what’s in option a, and here’s what’s in option b.

Number Five “IRS Help”

we need to ensure that we’re getting paid and compensated appropriately for any IRS help you’re giving.

The real reason why clients are choosing to work with a lot of tax professionals is that they fear the IRS.

Now what happens if we don’t offer clients help with IRS issues? 

We’re losing revenue to firms that do offer this level of service, and you could be giving away one of your most valuable skill sets as a tax professional for free.

We don’t wanna do that. That’s where we lose thousands of dollars in profit. That’s literally on the table, we just gotta collect it.

So there are basically three different ways that we see firms structure their IRS help.

  • Number one is help with correspondence.
  • Number two is help with an active IRS issue
  • Number three is what we call discounted prepayment for help with an IRS issue.

To implement an offer like this, here are the things that you would need.

You would need a marketing piece that shows the client the value of why you would wanna do this.

  • You need a one-page agreement that outlines the terms of what they can get and what type of help that you’re gonna offer.
  • You need a way to collect signatures from clients who opt out who do not wanna add this to the return.  (You need to sign that you are opting out we’re not gonna include it in return. In that way, if you do have an issue, you know that it’s gonna be a separate fee)

If you want help with this, if you don’t wanna do this on your own, We have an IRS help offer template. We also have IRS, rapid relief, workflow, and marketing fliers to really help you with your workflow to visualize this to make it easy for the client, so that you can send out one email and start getting clients to enroll. So we can help you with this if you need the help.

Number Six “Referrals”

we need to make sure that we’re asking for precise referrals.

Your existing client base can be a valuable source for expanding your business, as most adults in your clientele likely know others who require tax assistance. This presents a vast pool of potential clients who might need your services for various reasons, such as starting a business, seeking a more suitable tax advisor, or facing unmet needs with their current provider. Leveraging these opportunities can help you grow your client base each tax season.

Not asking for referrals or doing it ineffectively can result in missed profit opportunities. Ineffective approaches may annoy clients or fail to target the ideal clientele.

 This oversight could lead to substantial unrealized profits.

 To enhance margins through referrals, address key factors.

  1. Firstly, ask for a specific person rather than generic referrals to capture the client’s attention.
  2. Secondly, make it easier for the client by doing some of the work for them, considering their busy and overwhelmed nature. 
  3. These strategies can unlock potential profits that might otherwise be left untapped without a well-established referral system.

To boost referral percentages effectively, you must not only ask clients for referrals but also take proactive steps.

  1.  Firstly, compose the referral email or text message for them, making it easy for clients to initiate the process with a single click.
  2. Secondly, provide a one-page referral guide, a simple document detailing what happens after a referral is made.
  3. Third, show them the process.

By implementing these steps, you can significantly increase your referral rates, ensuring you don’t miss out on potential earnings.

If you need assistance, there are ready-to-use templates available for both the referral request and the one-page referral guide.

And remember, you deserve to be paid fairly for your work!