Cowardly CPA

[Black Bart]

Nothing cowardly

....(Quotes are) always difficult. You never know what you will run into once you get started. I give quotes with an verbal opening> "I really don't know what to charge you until the work is completed. There are many different issues with your type of business(whatever). But I should be within $1,000- $2,000 range."

about it; pricing new projects is just difficult and circumstances change as you work. You apparently did something right, as they came back for year two and besides, a (first-time) lowball price isn't necessarily bad since it sometimes hooks them for all succeeding years. Many customers look at accountants like we do software -- they just hate to change.

Bob's above "verbal opening" sums it up. Next time just say the same and adjust price range as needed. As you've found, written prices (other than "time billed at my normal rates") put you in a bind -- clients should be comfortable, but not to the point you aren't. If they insist on a definite figure, give them your maximum. And don't commit yourself to notifying them about things -- they can call you if they want to know how it's going.

After you go over the stuff and hand it to them, just say "My fee is so-and-so" and stop talking. If they say it's a lot more than the estimate; point out this is your first church job and the second year was a lot more work than you expected. If they think it's okay, they'll pay and stay. If not, nothing you can say or do will likely have much effect. Just trudge on and it'll probably work out -- at least half of clients are reasonable people.

[TaxBird]

A suggestion in the case of new clients with situations that take some learning time:
Bill the total hours and give them a 'new client discount' for the learning time.

But if the work is the same the next year, it should take less time. If it doesn't, then it wasn't the learning time--it was all the extra work that you expected not to be there next year. In such cases you might give a "new client discount" the first year, showing the normal billing and the amount of the discount. You could then explain that if they cleaned up their act, it would be less the next year.

I got stuck a couple of years ago by billing low with the expectation that the client would begin to do better accounting as time went on. The accounting got no better and the company finally went broke.

See that's what I should have done. I should have shown the discount I was giving rather than just mention it in a meeting (without attaching a dollar value).

Along those lines, and in keeping with the other great advice I've gotten, I think I will show the entire bill and then split the difference on the overage but this time, show it as a discount off of the bill.

[TaxBird]

about it; pricing new projects is just difficult and circumstances change as you work. You apparently did something right, as they came back for year two and besides, a (first-time) lowball price isn't necessarily bad since it sometimes hooks them for all succeeding years. Many customers look at accountants like we do software -- they just hate to change.

Bob's above "verbal opening" sums it up. Next time just say the same and adjust price range as needed. As you've found, written prices (other than "time billed at my normal rates") put you in a bind -- clients should be comfortable, but not to the point you aren't. If they insist on a definite figure, give them your maximum. And don't commit yourself to notifying them about things -- they can call you if they want to know how it's going.

After you go over the stuff and hand it to them, just say "My fee is so-and-so" and stop talking. If they say it's a lot more than the estimate; point out this is your first church job and the second year was a lot more work than you expected. If they think it's okay, they'll pay and stay. If not, nothing you can say or do will likely have much effect. Just trudge on and it'll probably work out -- at least half of clients are reasonable people.

This makes a lot of sense. I think you've helped me hone in on another of my problems - I share too much information.

Thank you!

[BOB W]

Get Mad...

.... at yourself and conqure the world. Show all of them all that you're worth every penny and more!!!!!!!!!!!!!!!!!!!

Added: Yes> too much explanation will get you in trouble, especially if you are talking to a person who likes to play logic games. Use the K.I.S.S. principle.

[TaxBird]

.... at yourself and conqure the world. Show all of them all that you're worth every penny and more!!!!!!!!!!!!!!!!!!!

Added: Yes> too much explanation will get you in trouble, especially if you are talking to a person who likes to play logic games. Use the K.I.S.S. principle.

You're right. I had to get mad at myself and that lit a fire under my you know what.

And yes...The K.I.S.S. principal. I like that. I'm going to add that to my drawer of visuals. The only other thing in there currently is a picture of a pay phone to remind me that, unless you deposit $$, I don't work.

Thanks again...to everyone.

[Joe Btfsplk]

Undercharging

Wen I started, I soon discovered that the lowest paying clients were the least loyal. Once someone asked what I would charge and I gave them a very low estimate. They said, "That's pretty steep. Last year I only paid $ 15.00"

Why would anyone who could get it done for $ 15.00 even consider changing accountants (unless they wanted it done correctly for a change)?

So now I make it a point not to do $ 15.00 returns.

Many people wouldn't trust you if you worked too cheap. I feel the same way about getting my car repaired. I go to a dealer instead of some shade tree mechanic who might be cheaper. I'd rather have it done right even if it costs more.

[BOB W]

QUOTE:

"How did you decide who would be part of your core? So far, I'm referral only (especially after the 'Jesus' incident) and try to accept only those clients who appear interesting and able to pay. So far, I've been right on the money - and I haven't lost anyone (yet). Beyond that, I've not been able to narrow it any further than that.

================================================== ===============

It is always nice to have clients that you like but that is not how I choose. Actually I choose by who will pay my fee, first. Second, how do they respond to me during the initial interview. I have to use a crystal ball to see how they will follow my directions in the future.

Most potential clients come in with the intention of interviewing me, but I turn the tables on them and I'm the one interviewing them. When the interview is over, it turns out that we are interviewing each other. This is good because it sets up a win/win relationship. I make sure they know that I am the middleman between them and the IRS and other govermental authorities and they have to be part of that process. I go over what will be required of them and what I will do for them.

BUT, the minute they start pointing fingers, rightly or wrongly, their bill goes up. This is to either say goodby or to account for the potential risk they may be to me. As you know, there are times when we make decissions that are "gray" and if a client does not understand that position I don't what them as a client. So that is one way to weed out clients from my "core". I only want clients that believe I am doing my best for them and they appreciate it.

NOTE of understanding: I'm basically talking about accounting clients. Basic Tax clients, it is all about "willing and able to pay". I don't have to like them, but I'm always nice and show interest in their tax return outcome.

[Joe Btfsplk]

Ol' Yeller

You never can tell about a guy like that. Once I audited a guy who was hostile the whole time. When I finished, he said, "I hope the next person you audit isn't as grumpy as I was."

One client started yelling at me over the phone, then got interrupted by an incoming call and asked me to call back. When I called back he resumed the discussion calmly and politely. That was several years ago and he hasn't yelled at me since.

[BOB W]

Respect

To me it is all about "respect". A client that does not respect you is a liability. Meaning they will turn on you in an instant. I say good bye to them and let someone else deal with their attitude and liability.

I currently have a client, retail ( you may know how I hate retail from previous posts( a good part of my background is "retail")) that I have had since 1983. As he got older, in his 60's, he stopped giving me info that I needed monthly. It would take months before I would get one month's worth of work from him. It could be 6 months before I would receive any payment and still have a balance due in excess of $1,500 at any time.

As the years went on I could not get 2-3 years returns' completed. I made request after request. Finally the notices started coming in and he said, "What's this about?". I said " John this notice is 2 years old, when were you going to give it to me?. "Well I thought you were taking care of everything," he said. "John, how can I take care of everything if you don't give me what I repeatedly ask for", I said. He said," Well it didn't sound like you really meant it and I was very busy".

Well he started yelling at me, probably from embarassment that he was at fault ( he is that type) and wanted to know what was missing. I gave him the list for each year and told him this will be our last year together and to find another accountant starting the first of the year. His wife called me, full of apologies and explained how he is very defensive and to give him time to settle down. I told her that this relationship is not going to work going forward if I don't get all your info monthly and my fee caught up and paid monthly. Well he still owes me $500 and October is 95% in. This $300 per month account is going to have to go.

It's all about respect.........Oh, and money too. But the money is no good if you can't trust a client who may turn on you by accusing that you are at fault. There is no way of telling how far that client will go when the Sh.. hits the fan. This client has shown me that he will turn on me down the road.

[S T]

Thank you

Bob W,

I can so relate to your stories and your posts, haven't been in practice as long as you have been, but have encountered some of the same issues with similar clients. And eventually who receives the "short end", well we all know that answer!

Reading your posts are very enlightening to me, in that I don't have to continue a working relationship, if it is not working either for me or the client.

Thank you,

Sandy

[BOB W]

Sandy

You have a great deal more tax knowledge than me and I appreciate your posts as well. I know my limitation and select clients that fit my expertise. I used to like a challenge (? It's late) but am not interested any more in non-billable time (research).

[TaxBird]

To me it is all about "respect". A client that does not respect you is a liability. Meaning they will turn on you in an instant. I say good bye to them and let someone else deal with their attitude and liability.

I currently have a client, retail ( you may know how I hate retail from previous posts( a good part of my background is "retail")) that I have had since 1983. As he got older, in his 60's, he stopped giving me info that I needed monthly. It would take months before I would get one month's worth of work from him. It could be 6 months before I would receive any payment and still have a balance due in excess of $1,500 at any time.

As the years went on I could not get 2-3 years returns' completed. I made request after request. Finally the notices started coming in and he said, "What's this about?". I said " John this notice is 2 years old, when were you going to give it to me?. "Well I thought you were taking care of everything," he said. "John, how can I take care of everything if you don't give me what I repeatedly ask for", I said. He said," Well it didn't sound like you really meant it and I was very busy".

Well he started yelling at me, probably from embarassment that he was at fault ( he is that type) and wanted to know what was missing. I gave him the list for each year and told him this will be our last year together and to find another accountant starting the first of the year. His wife called me, full of apologies and explained how he is very defensive and to give him time to settle down. I told her that this relationship is not going to work going forward if I don't get all your info monthly and my fee caught up and paid monthly. Well he still owes me $500 and October is 95% in. This $300 per month account is going to have to go.

It's all about respect.........Oh, and money too. But the money is no good if you can't trust a client who may turn on you by accusing that you are at fault. There is no way of telling how far that client will go when the Sh.. hits the fan. This client has shown me that he will turn on me down the road.

Oh Geez! I don't blame you!

My ol' yeller just likes to yell and scrap from time to time. It's just his nature. Otherwise, he is johnny-on-the-spot with regard to the information I need and usually pays me, if not on the spot, within a day or two of receipt of the invoice.

Now, he *always* complains about the bill (any bill really, not just mine) but has never refused or not paid. I think he believes that keeps him from getting ripped off. I also think he likes to fight and he especially likes it when he finds 'worthy' people to spar with.

I guess I should feel honored.

[Jiggers]

Discounted Bills

When I bill something less than my standard fee, I put that on the bill:

2005 1040 Income Tax Return $250.00
(Standard Fee is $325.00)

Work papers for 2005 Tax Return $125.00
(Standard Fee is $165.00)

[TaxBird]

QUOTE:

"How did you decide who would be part of your core? So far, I'm referral only (especially after the 'Jesus' incident) and try to accept only those clients who appear interesting and able to pay. So far, I've been right on the money - and I haven't lost anyone (yet). Beyond that, I've not been able to narrow it any further than that.

================================================== ===============

It is always nice to have clients that you like but that is not how I choose. Actually I choose by who will pay my fee, first. Second, how do they respond to me during the initial interview. I have to use a crystal ball to see how they will follow my directions in the future.

Most potential clients come in with the intention of interviewing me, but I turn the tables on them and I'm the one interviewing them. When the interview is over, it turns out that we are interviewing each other. This is good because it sets up a win/win relationship. I make sure they know that I am the middleman between them and the IRS and other govermental authorities and they have to be part of that process. I go over what will be required of them and what I will do for them.

BUT, the minute they start pointing fingers, rightly or wrongly, their bill goes up. This is to either say goodby or to account for the potential risk they may be to me. As you know, there are times when we make decissions that are "gray" and if a client does not understand that position I don't what them as a client. So that is one way to weed out clients from my "core". I only want clients that believe I am doing my best for them and they appreciate it.

NOTE of understanding: I'm basically talking about accounting clients. Basic Tax clients, it is all about "willing and able to pay". I don't have to like them, but I'm always nice and show interest in their tax return outcome.

I see your point. I think, for the most part (especially with longer term engagements) the 'do I like them' factor is just as important as their ability to pay. It gives me more passion for the work I do for them. As a result, I think it keeps me motivated for the work and I put out a better work product.

I liken it to how I can tell if someone likes to cook or not. If someone likes to cook, you can taste it in their food...there's just something 'extra' that's hard to pin down. But if a person doesn't like or care about cooking their food is usually disappointing.

I especially like "BUT, the minute they start pointing fingers, rightly or wrongly, their bill goes up." This reminds me of my Dad. He was a cement contractor. The minute he got an inkling that a person would be a pain in the a$$ he bumped up his quote. More often than not, though, he still got the work (very good reputation - never had to advertise).

I remember on one job, a patio, the guy started complaining (about nothing) and threatened to not pay (the job was done - we just had some clean up to do). My Dad walked over to his tractor, started it up, and lowered the dump and began to pick up one of the slabs. The guy started yelling "Hey! What are you doing?!!" My Dad said (imagine an italian accent) "If you not gonna pay, I'm taking dis wit me." The guy responded something to the effect that he didn't mean it so my Dad told him, "Now, not only are you gonna pay for dis patio, you pay to fix this piece. AND you gonna pay me in cash before I leave today." The guy was all 'Yes, sir. No, sir' after that.

A great family moment. Thanks for reminding me!

[BOB W]

Lets talk about "Cores"

While you are growing your business, "core" size plays an important factor, which is obvious. So when you are starting out, you refuse no one. Everyone is treated as a piece of your core. You do what has to be done to keep all clients. Be it slave labor or not.

Your advertising will be "price and competency". Your referal rate should be 1 tax client referal per 5 tax return clients. When your base exceeds 100 tax return clients you should have 1-5 business referals per year, [that is] if your tax core knows you are looking for that kind of business.

By the time you are up to 300 tax returns and maybe 30 business clients, you are ready to weed out the problem non profitable clients, if you haven't already. Price structure should have been increased every year but you are still below most of your competition.

Your bad clients> instead of tossing them out the door, just raise their fee and if they stay you're way ahead on your income and core. If they leave> good riddens.

Good clients> If you have been raising fees throughout your time in business, just continue what you've been doing but make it just a little steeper increase.

Technology will play an important role on how you progress from here. You have a choice of hiring more help or becoming more intregrated using technology.

What are your plans for the future? Do you want a large organization, medium, or small practice. Unless you have great managerial skills, I suggest staying small.

Small can be up to 600 personal returns and 75 businesses (S Corps). This is pretty much run by 2 people> yourself and a helper. If your are thinking a little bigger, you will need a second tax preparer and maybe a full charge bookkeeper.

In the end it all comes down to how fast you can build your "core" and how well you can keep up with your growth [ Technologically]. The bigger you want to grow, the longer you need to keep your prices "under-market". At some point size will become unmanageable as well as unprofitable. That is when "market value or greater" pricing needs to be put in place. No more core building, just maintaining status quo with slight decreases to your core.

Your "core" will still be spinning off referals no matter what your size so don't be afraid if it gets reduced a bit. Your fee income should go up by 20% per year for the next several years and than drop to increases of 5-10% per year after that.