CPAs: Manage your firm and fees for more profit
You seldom hear people say, “I wish I hadn’t made so much money last year.” On the other hand, we are often asked by accountants how to increase their net profit.
Unless you want to work longer hours, you will need to make more money per hour to improve your annual take-home pay. Most of us are happiest in our work if we put in about a 40-hour week. So, if you want to double your net profit, you’ll need to increase your fees since you don’t intend to double your hours.
The first element to greater fees is an annual price adjustment – at the very least equal to inflation. Keep in mind, if you don’t increase fees every year, the fee increase, when it does come, will seem just that much larger to your clients.
Maybe you want more than an inflation adjustment. Just how much of an increase will depend on the makeup of your clients and how effective your marketing has been. Your clients are probably the first to realize that you are worth more to them as each year passes. After all, you know more each year than you did the year before. You can complete client engagements more efficiently than in the past. You deserve to be paid accordingly.
Be ready to discuss fee adjustments before your client brings up the topic. If your client wants to know why a certain engagement is “so expensive,” try telling them something like this: “Bob, I understand why you are concerned about the fee; it’s your money and you should be concerned. Let me just say that I need to charge enough to attend tax update seminars, pay for an adequate professional library, and hire qualified staff. In addition, I need to make a reasonable profit, or I won’t be here next year to do anyone’s work.”
The more specific you can be, the better. Most people want to know the benefits they received for the money paid. “Bob, we’ve completed your tax-deferred exchange of the ranch property. The tax savings due to the exchange will amount to a little over $200,000. Our fee of $10,750 represents the time and expertise it takes to complete such an exchange.”
Most people are just looking for a reasonable explanation. Be prepared with your answer before the client asks the question.