One of the most popular tax problem resolution topics is fees. We are entering the time of year when taxes are top of mind to most people. (If you don’t think so ask Mitt and Newt…) So it seems good time to start some discussion that encourages you to examine your fees, and moreover, your approach to setting fees.
Many practitioners are slogging along with the old standard of billing by the hour. This puts you at cross-purposes with your client. You need to spend more time to earn more. They want you to spend less time to save fees. It also puts you at cross-purposes with yourself. As you become more skilled and more efficient, thereby reducing your time on cases, you should increase profitability. Hourly rates penalize you for increased productivity.
With hourly billing to earn more, you work more. Yet, you only have so many hours per week so hourly billing also limits your income and diminishes quality of life. It can also discourage enhancing the use of new technology.
Hourly billing might place your focus is on time spent at the expense of results. And, it places risk on the client while making the professional suspect in the clients mind.
An alternative to hourly rates is value pricing. Clients will find comfort in knowing their fee in advance. They will know they won’t be blind-sided by a bill far in excess of their expectations. For your part, it’s better to know of any fee resistance before you put in the time and effort on a case.
Value pricing quoted in advance clarifies expectations, enhances client communication and gets client involved in pricing decision. Having the fee discussion at commencement projects your confidence and experience. Further, it prequalifies clients and eliminates reluctance to contact professional based on fear of added charges. More on fixed fee techniques including menu pricing, the build-up method, and change orders for additional
services in the next blog.
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