Cowardly CPA

[Unregistered]

I

At what point do you start charging the real rate? After you've had a client for three years you start charging them more? That's sorta like the "Discount for New Clients Only."

You mean like the cable companies, phone companies, magazine companies, and various others have been doing for years?

[BOB W]

Exactly....

........... it has been going on for years that way, but our industry has never made the volume connection. We just increased fees out of need and many times it was too little too late.

[Bees Knees]

There is no uniform answer to that problem. Some people won’t buy something unless they think they are getting a discount. The problem is, they won’t buy your product or service unless they get a discount. What Armando is saying is that if you start off giving them a discount because they are new, or you are trying to compete with someone else by undercutting their price, you have permanently trained your customer to always expect a discount.

That is why everyone does it. It is kind of a mushroom effect. Once it starts, nobody can stop it.

Unless, you are offering a product or service that is top of the line. If the customer cannot get that from any place else, they will pay for it assuming the price is reasonable.

There are two was to compete with H&R Block, for example.

1) Get into a price war with them, in which case you will lose because they have deeper pockets, or

2) Offer better tax preparation services.

Choice two means maybe losing a few customers who are only interested in price shopping. But eventually, some may experience poor service as going to a big chain like H&R Block may mean getting an inexperienced preparer one year who messes up the return. I have had some who do leave me due to price, but eventually return when the new guy didn’t provide the service the client grew to expect from me.

Now if I were to lower my price to try to compete with H&R Block in addition to better service, my client isn’t going to be trained to expect that better service costs more. The focus will always be on price, not quality of service.

[BOB W]

I think.....

...... you are missing my point. This is about starting a new practice and what I think is needed to build a "core" as soon as posible. If you look back, I talk about price AND compentantcy. Yes, you will get the price hunters but you will also get referrals and if you increase your fees regularly your compentantcy will carry you on to the next year's higher fees. People do recognize your abilities when they see it, they just have to be a client of yours first.

All of my posts really pertain to the first 5 or so (+) years in practice. After that you should be at FMV and above.

[Bees Knees]

I understand what you are saying, Bob, but in my experience, my clients who are getting by with the lowest charge from me are the ones who have been with me the longest. I've got people who first came to me back in the mid-1980's, and except for maybe one year where I bumped everyone up $35 for when I was required to e-file, their fees today are almost identical to those I charged back in the 1980s. It is the new clients that I get that I am able to charge FMV. I admit I am terrible at charging clients. But it is because once I set a fee for someone, the following year's fee is drastically influenced by the previous year's fee, and I have a hard time raising their fee unless there is something new I have to do for them.

[Armando Beaujolais]

You mean like the cable companies, phone companies, magazine companies, and various others have been doing for years?

Yes, the "New Client Discount" that all those companies have been doing for years. When will people understand that just because a company is big and powerful doesn't mean they can't do foolish things. In fact, in my experience, the bigger and more powerful a company is, the more likely they are to do stupid things.

I've stopped doing business with companies that gave new customers discounts. It makes people mad.

Sure, it's a great strategy to bump this quarter's bottom line, but aren't we talking about building a practice?

[BOB W]

Brad, your...

..... problem is typical of many practices. You look at your clients as friends and you do not have a win-win relationship with them. In essence you are letting them use you. You are top notch in this field and need to be compensated for your knowledge (education) and lifetime "goodwill".

Sometimes it is hard to shake "startup" attitudes, being afraid to lose clients. At some point you have to take a gamble and find out what you are worth to your older clients or weed them out. No big increases, but always give them an increase each year even if $10 or $20, but be consistant every year. You have got to strive for a win-win relationship when it comes to money.

Of course, now that you are rich and famous, you can give these older clients their '80's price and they will love you forever.

[Black Bart]

Gosh, Bees

...do not have a win-win relationship...

...now that you are rich and famous...you can give

And here all along, I was completely unaware that you're rich and famous. Please excuse my ignorance, but anyway, now that you are, could you give me ten dollars 'til payday? Please keep in mind that I knew you well (well...sort of) back in your QF days and once even referred to you as "His Exalted Enlightenment Whose Toejam is the Toothpaste of the Unenrolled."

P. S. If I get the $10, I guess it would technically be only a "win" relationship (for me) rather that that "win-win" thing. Still; give not and y'all will not be given (or sump'n like that).

[Bees Knees]

And here all along, I was completely unaware that you're rich and famous. Please excuse my ignorance, but anyway, now that you are, could you give me ten dollars 'til payday? Please keep in mind that I knew you well (well...sort of) back in your QF days and once even referred to you as "His Exalted Enlightenment Whose Toejam is the Toothpaste of the Unenrolled."

If you come to Minnesota for a visit and brave the snow and our 40 below wind chill, I'll buy you a steak dinner.

[Black Bart]

Thanks, but

If you come to Minnesota for a visit and brave the snow and our 40 below wind chill, I'll buy you a steak dinner.

I think I'll pass on it. One of my relatives drove a truck up there once and said his tires froze to the pavement. I'm afraid the steak might freeze to the plate.

[Bees Knees]

Not to worry. Most of our restaurants keep their indoor temps above freezing. I could find one with a fire place for you.