If your CPA practice is undercharging for its services, you could be sacrificing tens of thousands of dollars each year.
But maybe you’re feeling timid about raising your fees. Maybe you’re afraid your clients will walk away.
Keep in mind that if a client is shopping around based solely on fees, then as soon as someone cheaper comes along, they’ll be gone anyway – there’s nothing you can do about that (unless you want to get stuck in a trap of slaving away for pennies).
There’s another way. Establish and reinforce a close relationship with your clients. Go above and beyond doing just the technical compliance work. Deliver exceptional value for which your clients will gladly pay a higher fee.
Still feeling awkward about it? Listen – your clients’ businesses change over time. They might add more bank accounts, have more transactions in each account, add more employees, have new loans, etc. All of these changes mean more work for you, their accounting firm. You might be undercharging your clients and not even know it.
If you’re not routinely reviewing your clients’ circumstances, the services you provide and the fees they’re paying, I encourage you to begin ASAP. The first time it occurred to me to review and “right-size” my clients’ fees, I discovered I would generate an additional $38,000 a year – with just a price adjustment!
Too many CPA firms lose valuable revenue because they’re underpricing and are afraid to do anything about it. If you’re ready to make a change, here are four straightforward steps:
Step 1: Create a standardized pricing sheet.
Step 2: Go through all your clients and complete the pricing sheet for each.
Step 3: Divide your clients into three categories:
- clients who need a big fee increase to get them from their current fee to the new fee;
- clients who need a moderate fee increase; and
- clients who need a minor fee adjustment.
Step 4: Decide how you’re going to communicate the fee increase to the client.
What are your options?
Option 1: Meet with the client to discuss the fee increase.
Option 2: Mail the client a letter informing them of the fee increase.
Option 3: A hybrid of options 1 and 2: mail the client a letter letting them know you’ll be available to answer any questions during your forthcoming meeting.
The key to your success will be holding your ground. If the client argues that the fee increase is too much, reiterate the value you provide. Clients like to know they can rely on you, and that’s where having a history and a relationship come in.
Remember: It’s rare for a client to drop an accounting firm just to save a few dollars. There are too many potential risks and unknowns on the other side of that decision.
When a client tells me they can “get it cheaper down the street”, I just remind them how much they can rely on my firm – and can they really be sure about what they’re getting down the street?
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All my best,