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David W.
Cottle
Busting some popular CPA pricing myths

Don’t let these myths prevent you from charging what you’re worth.

November 4, 2013
By David W. Cottle, CPA

Editor’s note: Pricing myths abound in the CPA profession. David W. Cottle, CPA, explores several of these myths and debunks them in his book, Bill What You’re Worth. This column is an excerpt from that book.

Myth: CPAs should do the job first and worry about fees later.
Reality: There is always time to discuss prices.

You don’t work in the emergency room of a television hospital where clients are frantically wheeled in the door on a gurney with blood spurting from severed arteries. “Quick, she needs a financial statement for a meeting with her banker on Monday!!!”

You must make a profit to stay in business, even in recessionary times. It is in the best interest of clients for you to be solvent and prosperous so you can remain in business to serve them.

It is also in clients’ interest for the profession as a whole to be profitable enough to continue to attract high quality people to the profession to protect its future ability to serve the market.

Most accountants don’t understand that all they have to sell is time and information. Giving away either one reduces financial success and sends the wrong message to clients.

Myth: If CPAs raise their prices, they will lose many of their clients.
Reality: If CPAs raise prices, some clients might leave, but far fewer than anticipated.

I have coached hundreds of accountants through price increases ranging from 10 percent to 35 percent. Clients notice only when the increases approach 20 percent or more.

When I was a teenager, I was very concerned about what my peers thought of me. If you have teenagers, you may recognize this characteristic. I had to wear the right clothes and have the right hairstyle. I had to listen to the right radio station and dance the right dances. My father used to bring me down to earth by saying, “Son, you wouldn’t worry so much what other people thought about you if you knew how seldom they think about you.”

By the same token, I say to accountants, “You wouldn’t worry so much about what clients think about your prices if you knew how seldom they think about them.”

After 12 years of practicing accounting, followed by 30 years as a consultant to the profession, I have concluded that accountants are more price conscious than their clients! The clients who are most price sensitive are frequently your least desirable clients—the ones you would be better off without.

Myth: CPAs should raise prices only if demand exceeds supply.
Reality: If CPAs work smart, demand should never exceed supply.

No CPA should want to be booked every available hour because the result is the following:

  • No time to plan and manage
  • No opportunity to take advantage of marketing opportunities
  • No opportunity to respond to client or firm emergencies
  • No personal life
As your firm develops, you should make more and work less because your skills and reputation make you more valuable to clients.

Myth: If CPAs do good work, clients will appreciate the quality and pay for it.
Reality: Technical quality is invisible to clients. They take it for granted.

Most clients assume, rightly or wrongly, that all accounting firms of a given size are comparable in technical proficiency. For the most part, they are right, thanks to good education and self-regulation by the profession.

Consequently, you cannot market your services by saying, “Use us! Our accounting principles are more generally accepted than those of our competitors!” (By the way, avoid the word competitors, especially when talking to clients, prospects, and referral sources. It is much better to call them colleagues.)

Ask yourself, how can clients pay for my quality if I do not charge them for it? Clients seldom pay more than the amount of your invoice. Therefore, the only way for clients to pay for your quality is when you invoice them for it.

Myth: CPAs are paid for the products and services they deliver.
Reality: This concept of deliverables is important only to the extent that the tangible report is evidence to the client of the intangible service you perform.

By themselves, reports, tax returns, letters, and so forth, have very little value. But, by demonstrating, “We put the care in ElderCare” (or the equivalent marketing message for whatever service you are rendering), they can be very valuable indeed.

Myth: If CPAs do not charge clients for all the work they do, the clients will be more likely to pay the invoice.
Reality: Clients do not know how much work their CPAs do, nor how much the CPAs write off.

I have asked entire rooms full of accountants, “When you send a client an invoice, how often do they know whether you took a write-down or write-up?” Over 80 percent of my audiences tell me that their clients almost never know whether the accountant takes a write-down.

This is because accountants do not show write-downs on the invoice or otherwise inform the client there was a write-down.

Because most of the work you do for smaller clients is done in your own offices, most of the work you do for clients is invisible. British consultant Mark Lloydbottom, FCA, calls it the iceberg of time because most of your time is “below the waterline,” where clients cannot see it. Ninety percent of the mass of an iceberg lies hidden beneath the ocean’s surface. It’s not visible, but that critical mass supports the visible 10 percent. Similarly, most of the time we accountants spend is not visible to the client. The client knows we work on their records but has no idea how much time that takes.

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David Cottle, CPA, consults with professional firms on profitability improvement, partner compensation, marketing, client service improvement, and strategic planning and management. He also provides advice at retreats, speeches, and seminars.