When it comes to discussion about fees, pricing, and revenue, most tax professionals I talk to get extremely uncomfortable.
Oftentimes, as soon as I say something like, “Let’s talk about your fee structure…” there is a squeamish silence coming from the other end of the phone.
Why this awkwardness about fees? I really don’t know, to be honest. It seems to me as if most tax professionals appear to somehow feel shame for what they charge their clients. This is quite trafic, in my opinion.
As a tax professional, you should take pride in the services that you offer. You should take pride in your work, and you should recognize the fact that you provide an extremely valuable service to your clients. In fact, the service you provide vastly exceeds your fee.
By recognizing the value of your services to your clients, you should have no queasiness when it comes to quoting your fees, or discussing your fees. After all, you’re worth every penny, right?
Another tragedy in the tax business is the fallacy that you should base your fees on what your competitors charge. This is total nonsense. The value of the services you provide has absolutely nothing to do with what your competitors charge.
The proper way to set your fees is NOT to survey what other tax practitioners in your area are charging, and then decide where you want to be on the continuum. No, no, no, and NO. If you truly value your time, and value yourself as a professional, you’ll set your fees based on one thing, and one thing only: How much you want to make.
That’s really all there is to it. Do you want to have $200,000 in billable time this year? Let’s assume that half of your work week is actual billable time, giving you roughly 1,000 hours per year of billable time. That’s $200 per hour. Thus, raise your hourly rate to $200 per hour. If you don’t charge hourly, but rather do value billing or flat fee for service, then make sure that those rates are going to let you hit $200,000 per year.
Now I hear what you’re saying, “But Jassen, I can’t charge those kinds of fees in my market.” Yes, you can. In every marketplace, there are customers for the low, middle, and high range of prices for all goods and services. If that wasn’t the case, we’d all be buying everything at Wal-Mart and we’d all be driving Yugos.
You can choose to price yourself at the high end of the market, and I’d encourage you to do so. You are under no obligation to anybody to justify your fees. Just because the nationwide average fee for an itemized 1040 is $225, doesn’t mean you can’t charge $400. There are plenty of practitioners that do.
Is there a higher service expectation from your clients at these higher fees? Quite possibly. But you should be delivering five-star customer service anyway. If you’re not, then fix it.
I’ll repeat my main point of this article one more time: Your fee structure should be based on how much money you want to make, not on “industry norms”. Raise your fees to whatever you see fit. But understand that higher fees typically means better clients, fewer problem clients, and less money woes for your practice.