How to explain a pricing increase to your clients: ROI case study for tax professionals

It’s all about the Benjamins. Find and communicate your ROI to your clients, and they will line up to pay you more. Whether you value bill or still charge hourly, open your eyes to the possibilities of pricing changes … or reinforce your confidence if you already asked for an increase.

I’m in love with my job. As a CPA and a certified tax coach, I bridge the gap between my clients’ duty to support this great nation’s tax system and the right to reduce their taxes to the absolutely lowest legally possible. There are arguably 70,000 pages of tax code, but only half a dozen pages actually discuss taxes due. The rest revolve around ways to avoid them. As tax professionals, we have the amazing opportunity to use the current code to its fullest, no matter what reform is to come. That’s our value, and it’s easier than many think to show it in actual numeric savings.

Last year, while pregnant with my second child and craving improvements in work-life balance (my sanity), I sold half of my clients – the ones I couldn’t find an immediate ROI for – and increased my revenue by 35 percent by converting to value packages. But, enough about me. Let’s talk about you and a real-life example for how mind-blowingly simple this concept is.

First, open a client’s 1040 and an Excel file, then add the marginal tax rate (let’s say 35 percent) to Excel. Start listing out what you brought to the table: Did you suggest a cost segregation study for their real estate? Did you find a medical expense reimbursement plan that allowed the client to fully deduct out-of-pocket medical expenses? Did you shift unearned income to a child while avoiding the kiddie tax? Add the deductible amount of each concept to a line item in Excel, then multiply by 35 percent. That’s how much you saved the client in taxes last year, or how much he or she would have lost out on if he or she weren’t your client yet!

Example of tax savings each year, based on 35 percent tax rate:

Retirement plan implementation and maxing out deferrals: $15K

Corp entity restructuring: $20K

Maximizing charitable giving: 10K

Summer job for children: $5K

Maximizing health care benefits: $5K

Total: $55K

Our Fees: $15,000

Your Net Tax Savings EACH year: $40K, ROI 266 percent

Whether for a new client pitch, or an annual client evaluation, it is insanely effective. From our initial engagement letter, we state an annual fee increase of 7 percent (or a reasonable market value). This removes the ambiguity (and awkwardness) of unexpected fee changes. Now, it takes me about 15 minutes to review a client’s prior return and assess pricing based on ROI. It’s sexy, it’s exciting and I implore you to hone in on your Wonder Woman (or Superman) skills as a valued tax professional.

I just returned from an American Institute of Certified Tax Coach conference, where I was encouraged to sell a $75,000 tax plan (mine currently average about $15,000). By surrounded yourself with peers who believe in you, the sky is the limit with pricing. Visit theconciergecpa.com, reference this article in the consultation box, and I’ll send you our highly effective price increase letter – and how to respond to complaints.