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Downsizing Practice and Minimum Fee


b#tax

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I am working way too long of hours and have too many clients both tax and bookkeeping. 

I plan to raise fees this year, but I don't feel like that I will lose many based on past raises. 

Has anyone had any experience in raising the minimum fee to focus on higher end returns?  I am thinking about sending out letters to those under my new higher minimum fee stating they may be better served looking elsewhere for their tax needs. It is hard to do as many clients have been with me a long time, but I am feel like I cannot be the stop gap in the marketplace. Any thoughts would be welcome.....

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I feel that loyalty to longtime clients is more important than raising their fees.  Turning them loose in a world where everyone is raising fees is just wrong.  I have found, because many of my clients have been with me for 20 plus years; they understand when I give them a slight raise, but I also give them special consideration.  Every year, I lose a few or more through death or no longer having to file.  Every year I also gain new clients; almost always through referral; occasionally through the IRS website.  These are the clients who get the raise because I am still less costly than the par.  I already have new clients calling because their old preparers are cutting back or retiring.  Since I am training a replacement, it doesn't worry me to take on new business.  Absolutely, if circumstances change; they buy another rental or two; they open another LLC; whatever the reason; they are reasonable enough to know that they will have to pay more.  If they are a huge annoyance to me, they get fired; and that has happened a time or two.  Two years ago I had one come back after 9 years and ask kindly if she could come back and she has been a model client ever since.  Just had a client come through the door.  Have to run.

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I can not improve on mcb39's  comment one iota.  Everything Marilyn stated is spot on.

When downsizing, I started with the most time consuming clients (a.k.a - pain in butt), Ones who proved they couldn't / wouldn't get their 'stuff' together regardless the number of times I explained things.   

Clients seldom complained when I raised fees for same work as last year. They usually realized everything increased. If one questioned why - I explained, "many recent tax changes required added work" or  reply on a more personally identifiable level  "At least it's not as much as our utility company's monthly increase." Today, grocery prices are # 1 topic.    Of course that worked for general type returns. 

Make a few lists, by category, of clients who take too much of your time for their fee ~ the ones you know they won't change.  If they won't change ~ guess what, You gotta make the change ~ for your individual and / or family's health & wellbeing.

I wish you well on your changes. So many of us have been there. REMEMBER: Your mental & physical wellbeing is more important than any tax return.

Reread mcb39's comment. I've "known" her via ATX for decades & I trust what she says.

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About 6-7 years ago I fired all the jerk clients. Really wasn't a large number but holy cow my life became more enjoyable. Ever since I have routinely eliminated jerks from my life. (Co-worker's son and wife were the most recent) Raise prices but also suggest jerks go to another firm. Local investment firm does taxes for people and fired anyone without at least $500k in investments. Their letter just said they have refocused their practice to handle certain types of clients and listed 3 firms they suggested they contact (HRB, JH and a local EA). Do it politely and give them time.

 

When you see someone's name on an email or caller ID and your heart hurts - fire them. Life's too short for that crap.

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15 minutes ago, mcbreck said:

When you see someone's name on an email or caller ID and your heart hurts - fire them. Life's too short for that crap.

Absolutely!!  Once I got the nerve to do that the first time, it got easier.  The relief is immeasurable and the time that is freed up can double or triple the income from that one problem client.  Being polite and professional is a must, but there is no excuse for rudeness, excessive demands and complaints on their parts.  I even had to cry one time; but handed them their final return with depreciation schedules and said Goodbye.  Guess what, some of their relatives are still good clients.

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I think sometimes it’s our fault clients or people in general treat us bad, because we permit it.   A couple of years I had a tenant that had every excuse to pay the monthly rent, the rent was paid late, but paid, this happened for a couple of years, until I had a talk with them.  They had the nerve to get upset because I was no longer a nice person and threatened not to pay the rent, they were evicted in less than a month.  

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While one may feel bad for cutting clients.  I guarantee these clients would not blink an eye if you quit due to health issues or death.  Not trying to sound morbid.  But case in point, my father spent 60+ years doing income taxes.  And he always went out of his way to help others, even with non tax issues.  Upon his death only a handful of his clients came to either the viewing or funeral.  And he did well over 1,000 returns a year.  So dont feel bad when trimming the fat, they could care less for you.  Your just the tax guy or tax lady :) 

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When the owner of our CPA firm died, many clients went into mourning with us.  Some sent US flowers or goodies.  No, they didn't show up for the memorial service (usually attended by family and close friends), but that didn't mean they didn't care.

As for firing clients, raising fees rarely does it.  I had one client who was such a PIA that I kept raising his fee a couple of hundred a year, but he kept coming back.  (I stopped at $1500, for maybe a $600-$700 return) because at that fee I figured I was getting compensated for the aggravation.  Best to just fire them.  Every year we send a letter to some clients stating that our business direction is changing and their particular needs will be met better elsewhere.  Every year a few of the recipients beg to stay.  Sometimes we agree but not always.  We also have too many clients and really need to cull the list.

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I don't believe for a minute that they don't care.  Of course, some of them don't; but the majority do and show it.  During the course of the season, we get candy, flowers and everything from pizza to maple syrup and an occasional hot lunch.  I don't expect them to come to my funeral, which is going to be private anyway.  I can't begin to list the things that they bring, but the best are the hugs (sans Covid), the smiles and the "I"m so glad to see you" when they come through the door.  They love that I am training a girl who wants to run a business just like mine and will someday.  I've  been around too long not to be able to spot the ones who don't care in a personal way and they don't get treated any differently than the rest.  Many of my clients are my age (or almost) so along come their children and now their grandchildren.  I tell each and every client that he or she is the most important person in this room at the moment and they are free to tell or ask me anything.  When they get fired, it is because they deserve it and they can go and be the most unimportant person to someone else.🦃🤫 Happy Thanksgiving All!!!

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On 11/17/2022 at 3:34 PM, b#tax said:

I am working way too long of hours and have too many clients both tax and bookkeeping. 

I plan to raise fees this year, but I don't feel like that I will lose many based on past raises. 

Has anyone had any experience in raising the minimum fee to focus on higher end returns?  I am thinking about sending out letters to those under my new higher minimum fee stating they may be better served looking elsewhere for their tax needs. It is hard to do as many clients have been with me a long time, but I am feel like I cannot be the stop gap in the marketplace. Any thoughts would be welcome.....

I'm confused as to what your goal is.  Is it to raise fees with the goal of doing less returns and still having the same revenue?  Is it certain types of returns you no longer want to prepare?  

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  • 5 months later...

Just an update from tax season, I did not end up setting a minimum price but I did raise my rates 15% and posted that in my letter as well as in the office. I also provided information on free services from VITA and AARP for those who felt like my service no longer met their needs. 

I lost some but not as many as I thought I would and pickup up almost as many new clients as I lost but at the higher price point. I had less push back on the price increase from old clients than years I had a 2-4% increase and did not post it. 

Still have too many but I actually enjoyed my work again up to March 31 then same craziness hit. 

 

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If I had not "fired" 85 clients last year, I would have been totally burnt out and quit.  A much more pleasant year and I'll be renewing ATX in a few days.

I did lose some PIA clients along with their "healthy" fees, but a slight bump in price and 99% retention means I'm still profitable.

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I tried to get rid of one PITA client this year by suggesting VITA and local free-file services, telling them I had to increase my fees but they could get good service for free. Nope; they came back saying they'd rather pay me more, because they like and trust me. Ah, well.

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51 minutes ago, Catherine said:

I tried to get rid of one PITA client this year by suggesting VITA and local free-file services, telling them I had to increase my fees but they could get good service for free. Nope; they came back saying they'd rather pay me more, because they like and trust me. Ah, well.

The punishment for competence.

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