Last year I stopped charging for tax returns and worked since then to repackage my messaging. This post continues that effort.
Almost nobody pays $1500 for just a simple tax return. That’s the point of this post. Yet lots of people want the confidence gained from the benefits of a strong relationship with a versatile CPA, a person they know who has proven to be a major benefit to others. They know that $1500 is a bargain for that benefit. We find that including simple tax preparation happens to be a good way to commoditize the launch of that relationship with an immediate tangible result. So how do folks arrive at that conclusion?
I see that four components go into a client’s decision to spend $1500 on a CPA when their only immediate perceived need is assistance with a simple tax return.
#1 Reputation
The first component of the decision occurs before we meet. They express something along they line of thinking that they demand the best and they understand, intrinsically, that this attitude they hold will cost them more. They are working with some combination of financial resources, ego, and fear, that drive them to first contact me. Often, they mention this in the first couple of sentences when we are first introduced. I recognize this has nothing to do with me, as the person, but rather my public identity, or brand, as some like to say. Of course, nowadays, much of this has to do with either Google organic search or social media, neither of which are controlled by me.
#2 Internal Value Judgement
Second, they must be willing and able to pay the established fee for the relationship. It is obvious that they are not paying this fee for the tax return preparation, so there must be another reason. From the other side of the economic decision, I set the minimum fee as the amount that ensures my own sustainability in business. That’s how the $1500 (individual) / $2500 (one person business) / $7200 (corporation or association) minimum fees were derived. At inception, it has nothing to do with value for the client, market rates, or anything else. Broken down monthly as most people prefer, it works out to a non-threatening $125 per month decision and I see that the decision is client’s decision is based purely on initial assessment of risk/reward of the relationship. The tax return becomes a side issue at this point. They know they are in control of the relationship and can stop this anytime. Marketing people tell me that I should be focused on creating demand for this limited supply service, but it is not that complicated for me. I just charge what I need to meet my lifestyle needs and go out and create value within that space. That’s the whole story. Since I choose to focus on serving primarily middle-income clients, my role is just to find the folks who see this as a great value, and then prove later that they made a wise choice. Again, this has little to do with me or my actions. It’s a value judgement that clients make on their own. I usually notice that they made this internal value judgement to commit $125 per month on this even before we first meet.
#3 Piling Up Value
Third, clients say that they see or hear things that they really value in our early conversations. This usually begins to happen by the time we have a second conversation. By the time they pile up enough of these points in their mind, their decision is easy. For this reason, it makes sense for me to offer easy conversation and direct connection without screenings, strings attached, or pre-payment. Clients specifically mention things like:
- They feel better after talking with me (the most frequent feedback)
- They appreciate that I said in an early conversation I really like them, care about them, and they know that I really want to help
- They trust me
- I sound experienced and confident, speak clearly, and do not use technical language
- I write well (engrained user of frequent bullet point written summaries) and communicate clearly
- I am committed to their goals and results, not the timeline or process
- They notice that I am polite in my manners and curious about them
- I am conversant in a wide range of topics that are important to them and that I take an inquisitive (coaching) rather than lecturing (advisory)
- I ask the right questions that make them feel understood (the most valuable thing I learned in law school)
- I answer my phone directly, never sound rushed, and respond to messages quickly
- I am available as needed or appropriate, not just during business hours
- I promote them socially and their business in the community and often refer them new business
- They mention that I have the right educational and professional credentials that they want/expect
- They like that I have a background in investment and law and can field random financial questions that may come up
- For local clients, I engage them with invitations to social events: deck parties and boating trips, or even offer them local food specialties sometimes (my hobby is commercial fishing, crabbing and oystering)
- I invite them to have follow-up conversations about various topics important to business and personal planning
- That I am willing to talk to them about …(whatever is their specific goal)
- That I offer other services that they do not need now, but they like knowing they are available, ‘just in case‘
- That I am willing to act as their legal representative in tax matters and other situations that may be appropriate
- That I urged them to have a conversation at some point about fiscal security, power of attorney candidates, and basic estate planning when few others are comfortable doing so
- That I transition smoothly in conversation from one topic to another and can integrate concepts and strategies (muti-disciplined)
- They have already thought about the need for an executor or co-executor, and have a vague idea that a CPA is a good choice for that
- They know they are paying for service throughout the year, so they don’t feel hesitant to call later when something comes up
I understand that in writing and publishing this list, it could be read as a huge ego exercise. That was not the intent. The point is to show that these perceived benefits are not a part of the immediate transaction under consideration and have little to do with preparing a tax return.
#4 My own evaluation
Last, I need to know that they are receiving value by my own standards, separately from their own evaluation. I know that if I can articulate, clearly, succinctly, and confidently, the value that they receive from our work together, that confidence transfers as a reinforcement of belief for them. I feel awkward and uneasy if the tax savings realized or financial gain is not a multiple of the fee. I have always been clear and strong throughout my career that I will not offer a service where the cost is more than the expected benefit. This is a fundamental principal of CPA ethics. It is also an important point in professional communications. If I feel assured, that assurance is conveyed in the communications. Unfortunately, sometimes this means determining that a client is not a good fit for my services, even if there were reasons to work together earlier.
Lately I also added one more intangible form of self-evaluation. I ask myself: Do I smile when they call? Do I get a warm feeling thinking about them? These naturally correlate with my belief of adding value. Of course, I want to work with people where the answer is always ‘yes’.
Assuming that all four or these conditions are met, I see no limit to the people who are willing to spend $1500 for a simple tax return.