How to respond when a client pushes back on your fees
Has a tax client ever told you, “You’re too expensive”? That’s a common fear when adjusting your fees during tax season. No one wants to hear clients tell them they’re too expensive.
Here’s how to overcome it:
1. Explore, don’t react
It can be offensive to hear a client tell you, “You’re expensive,” when you know how hard you work and how qualified you are to do the job. Use this opportunity explore what they’re expressing behind the words.
2. Remember, “expensive” is relative
A $1 million home to someone with a $1 billion in the bank can be “cheap.” Everyone defines what’s expensive to them based on their perspective. When someone says something is expensive, it usually means they don’t see or understand the value yet, or they’re comparing your service to something else.
3. Find the comparison
Here’s an easy response: “Our pricing is Dynamic based on our capacity and each client’s unique tax situation. Is there another service you’re comparing our prices to?”
The common comparisons are:
Do-it-yourself tax software
“The online preparer assisting you may not know your tax history or your specific industry to maximize your available tax strategies. In many cases, they also can’t support you throughout the year after your filing.”
Other tax preparers in the area
“The same tax forms for two different people can require wildly different levels of effort based on the firm’s workflow, experience and the complexity of your financial life.”
A house cat and a mountain lion are related but are two different animals and can’t truly be compared. Similarly, it’s difficult to compare tax filings for two different clients, even if they’re using the same tax forms.
Advisory or tax planning packages vs. tax-only packages
“Those are two different service levels with vastly different outcomes for you. Your taxes are filed either way, but if the price includes tax planning/advisory, it includes strategic help to reduce your taxes legally based on your unique qualifications.”
If you compare a tax-only engagement with a tax advisory or planning engagement, this is another apples-to-oranges exercise.Registered U.S. preparers vs. outsourced work
“It can be practically difficult to have an ongoing dialog with someone based outside the U.S. in a different time zone. There also can be significant data, security or logistical considerations to understand when sending your data outside the country”.
We live in a globally connected world. A preparer outside the U.S. could be the perfect solution for some clients, but clients should at least understand the potential tradeoffs.
4. Identify progress
Once the client realizes that not all “tax fees” are created equal, ask them what progress they specifically want to make in their next filing.
Do they want to minimize their tax liability through legal tax strategies? Do they want someone to finally explain what their accounting numbers really mean and how to improve them? Do they want someone to use their numbers to help them make informed business decisions? Do they want someone to help maximize their retirement income in a tax-advantageous way? Or do they really just want the cheapest possible tax filing?
5. Give them options
At this point, if the client really wants help, you can give them two or three options for engaging with you this year and tie the options directly to the level of support they want and the progress they want to make.
Focusing the options on helping them make progress on the specific things they care about will ensure they see value in your pricing. The quote you give them will no longer be perceived as expensive.
This response framework is the key to positioning your value in the client’s mind. Without educating the client and connecting your fees to outcomes they care about, they will default to comparing you to whatever is easiest.
That’s fine. It’s not their job to know taxes in and out. It’s our job in the industry to educate clients and provide genuine help.
How much revenue could you add this year if you repositioned your value with just 10-50 clients? Start there and see your margins build. It will create a foundation for profitability in the long term.