Are my Fees Too Low? This is a question I am often asked. On the one hand, there are practice owners, moving more and more towards value pricing, getting away from hourly rates, and on the other hand, there are practices who charge hourly but haven’t raised fees in years.
Whatever end of the spectrum you may be on, here are some key points to consider when it comes to your fee:
1) Whether you value price, or charge by the hour, always keep track of your time. It is a basis for analyzing your practice and lack of this information makes it difficult to assess what changes may be needed, based on your average write-ups/write-downs.
2) An annual increase in fees across-the-board, is a great habit to cultivate. Everything goes up year to year – software costs, staffing costs, supplies etc. Up to 10% increase is rarely noticed by clients, and is very justified in terms of increased costs. It also means that you rarely have to make major adjustments to your fees.
3) If you have a practice where clients have had no fee increase for some time – for whatever reason, e.g. perhaps you bought a practice and didn’t want to change the fee structure they were used to, then group the clients into at least 2 categories – a) those that are not too low and b) those that are way out of line. On a) you can do up to 10% increase without having to communicate it in advance. Regarding b) some communication will be required and this is something that I can help with on an individual basis. It can be achieved so there is no backlash or upset, which is the primary reason practice owners refrain from doing it.
4) Value Pricing – this is where the value of the work done far exceeds the price tag of the time invested in it. This could be because of the fact that you had a similar project for another client so a lot of the research and ground work had already been done, or it could be because of some specialized knowledge you’ve gained that the client would have difficulty getting elsewhere. These are great incidences to consider value pricing. I recommend making a checklist which is not of course exhaustive, of the types of scenarios where you feel you should value price and then having that to hand when you do your billing.
5) Some practice owners tend to bill higher if they know the client can afford it and less if the client can’t. However, should a client’s financial means to pay the bill really be a factor in how much you charge? That would be penalizing a client who has done well in life, and rewarding someone who is not succeeding as well in life. Of course, ability to pay can be a factor when it comes to whether or not you take on a new client, in the first place, but personally e.g. I wouldn’t want to be charged more for a movie, because I earn more than the guy sitting next to me!
Having worked with accounting practices for over 17 years, and prior to that working as an attorney in a set-up, very similar to a CPA practice, Ciara MacMahon, CEO of Phase Two Management Consulting, has successfully boosted revenues of accounting practices by 3 – 4X, while allowing the owner to take more time out of the practice. Accounting practice owners are faced with endless deadlines and the challenges of managing workflow, finding the right staff, staff training as well as securing the acquisition of quality new clients! They are also often tasked with the not too pleasant responsibility of imparting bad news regarding taxes due, that the unprepared client is unhappy enough about, to oftentimes ‘shoot the messenger’!
Structuring the practice to be able to withstand these challenges and get far enough ahead of them to not only allow for expansion, but less stress and more time off for the owner, is routinely achieved by our strategic planning and consulting program. As no two practices are the same and each owner has his own vision for what he/she wants, the first step is a Planning Session to work out the owner’s goals and a strategy to obtain them, in the fastest time period, and for the highest return. To schedule your one on one complimentary practice analysis and consultation, email Ciara MacMahon at [email protected] today. www.PhaseTwoManagement.com
Services Provided to expand Accounting Practices:
• Strategic Planning, customized to each practice so you have your own 3 – 5 year Business Plan
• Efficiency/time management training
• Gaining agreement/buy-in from staff
• Staff performance review/management
• Exit Strategy – some of our clients have sold practices to other clients of ours, so having a lot of contacts in the accounting industry, has helped clients out both with buying for growth, as well as selling for exit strategy.
“I just opened my own CPA practice a little less than two years ago. What is unique in my situation is I had over twenty five years of experience as a manager and employee of small CPA practices. I met Ciara and we decided to work together to help me develop a better administrative structure, and a better marketing plan to help me achieve the type of growth I wanted to achieve for the practice. With Ciara’s guidance, I began to focus my efforts on my strengths, streamline my internal processes and more aggressively market my practice. She helped me see the value of social media and numerous other marketing techniques. She has superior knowledge on how small accounting works and knows what is needed to make the jump to the next level. My practice has grown with her guidance to the point I will need to hire help for the upcoming season! There is no doubt her guidance helped me get there. I recommend her services to anyone!”
Mark G. McNelis, CPA
“Ciara provided me with business management and development advice over the years that enabled me to more than double my CPA practice and finally sell the practice as I move into retirement. Her assistance has been invaluable ”
Howard J Crane CPA