Why Are You Selling Your Time When Your Client Is Buying Your Expertise?

IMGCAP(1)]If you walked into a Mercedes automobile dealership and the sales person greeted you by asking, “What kind of Kia do you want to buy today?” you just might be a little perturbed. This is how many of our clients see us.

CPAs usually bill by the hour, but clients are buying your knowledge and experience. The consequences aren’t disastrous, except in terms of your and my bottom-line profits.

When I started in public practice over 30 years ago, every CPA I knew billed by the hour. Here’s an actual experience I had. A new client called me once and said, “Let’s get together. I need a plan to be more successful.” Well, we met several times over the next few months to examine his skills, his past financial performance and his interests. We put together business and personal plans over the course of several months. I charged my usual hourly rate and we were both happy.

Today, 20 years later my client followed all of the advice and is a multimillionaire with monthly income of about $60,000, mostly sheltered by depreciation and all of it passive income. My fees may have amounted to $1,500 at most, but what was that service worth: $5,000, $10,000?

Now we all learn from our experiences, right? Not so fast. I was at a conference and there was a short talk by a noted consultant to CPAs. His talk was similar to many I’ve heard and read before. He asked the crowded room of CPAs a couple of questions:

“How many of you think of your clients as your friends?”

Everyone in the room raised their hands.

“How many of you take phone calls from your clients and don’t charge them?”

I was one of the few people in the room who didn’t raise my hand.

Next he asked, “How many of you go to your client’s place of business and expect them to give you what they are selling for free?”

There were a lot of puzzled looks from the room full of CPAs. He then went on to say that CPAs are robbing themselves by not billing for that time.

I totally agree with CPA consultants that not getting paid for even a seemingly small service is just not a good business practice. It not only robs you, but it also robs your family. I also feel that if a client calls you up and asks, “Should I buy a new work truck?” the client is not interested in how much time it takes you to answer the question. The client is trying to purchase your expertise, your knowledge and your professional opinion.

So be professional and get all the pertinent information: “How much is the truck? Is it a new truck? Are you thinking of trading in an old truck? Are you going to finance the truck? How much money is this new truck going to make for your business, etc.?” Then do a real workup and give your client a few choices and a recommendation that is going to do that client the most good.

While you’re asking the client those questions, throw in a few questions that are pertinent to you: “I think this is a good question you’re asking. I think we should spend a little time and get together and discuss your and my thoughts on this new truck. Does that sound good to you? I think this is a big decision, don’t you? Spending $45,000 is a lot of money. I think that I can fit you in next Tuesday to go over my recommendation. Will that work?”

If the client says, “Yes, that’ll be great,” then I usually say, “This is important to you and your future earnings. Is it OK if I take my time and do it right?” If the client says yes (they always do), then I ask, “You’re talking about spending $45,000, right?” Then I say, “This analysis is going to cost about $1,000 and you will have a better idea if this is the right thing for you and your business. Is that OK?”

I have rarely had a client say no and have never had a client leave my practice because of my billing in this manner. I also know right then what this client thinks about my skills and my value to his business and to him. The clients who accept usually go away happy and usually bring another set of issues that lead to more billings and referrals. The very few that have said no usually receive a letter thanking them for being a client, but my business has grown and I can no longer handle their workload.

I’ve been a CPA since 1984, and although I’m not the fastest learner out there, I had over a 68 percent profit margin in my old CPA practice. Are you getting paid what you are worth? Do you know what your profit margin is? Do you know that your clients are willing to pay you 20 percent or 40 percent more money (perhaps even more) for the services you are already providing them? I’ll bet you know more about your client’s profit margins than your own.

Gerry Horowitz, CPA, has over 30 years of experience as a CPA. After selling his practice in Flagstaff, Ariz., and retiring in January 2015, he relocated to Medford, Ore. A year later he came out of retirement and started a practice management consulting firm and a tax resolution practice. He can be reached at gerryhorowitzcpa@gmail.com.

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