How to Handle This Common, Vexing Situation

A couple of weeks ago, I had a terrific consultation call with one of our All-Stars members who reported she has tripled her gross revenue since joining the program about a year and a half ago. During that call, we discussed one specific question that I think is common enough to justify telling the story here.

She has a prospect, a real estate investor if I recall correctly, who has a boatload of entities and files 17 separate returns every year. The prospect approached our member and asked for a fee quote for preparing the returns. The prospect provided copies of previous returns to use to work up a proposal. But (of course), the prospect did not disclose how much they’re currently paying for that service.

Naturally, our member’s first instinct was to price the job as low as she feels comfortable with. But is that the right instinct? Is there a magic price that lets you win the business and still make it profitable, on your terms? That whole scenario sets up an ugly dynamic. How badly do you want the business? How low are you willing to go to undercut the other guy’s price and still look yourself in the mirror at night?

But looking at the situation solely as a pricing challenge assumes that you have to accept the prospect’s implicit apples-to-apples frame. There’s a way to win the business and keep your pride, even if your price comes in higher than what the prospect is already paying. The real answer isn’t to shoot for that magic price. The real answer is to redefine the interaction so that you can give the client more value, even as you charge a higher price.

So, if I were in our member’s shoes, I would go ahead and work up a fee quote that I can be happy with. I’d probably structure it as a year-round maintenance plan, rather than just a one-time transaction, but I would keep the transaction price in reserve in case the prospect isn’t ready for relationship billing.

I wouldn’t worry what the prospect is currently paying – in fact, I would remember that there’s got to be a reason the prospect is asking for my pricing in the first place! And if it turns out that the prospect is just looking for a lower price, I would take comfort in the fact that they wouldn’t be a fit in the first place.

And then, I would say something like this:

“Mr. Prospect, I appreciate the opportunity to bid on your tax preparation business. I’ve given this a lot of thought, and I want to say a few words first to help you understand how I’ve come up with my proposal.

First, you’re probably expecting a pretty straightforward apples-to-apples comparison. I’ll tell you right now that if you’re just looking for a lower price, I’m not your guy. I don’t compete on price, I compete on value. So my proposal will probably come in higher than what you’re currently paying. But you’ll find the extra value is well worth the fee.

Most tax professionals focus on recording history. They do a great job putting the right numbers in the right boxes on the right forms, and tell you how much you owe. But then they call it a day.

My clients don’t just want to know how much they owe. They want to know how they can pay less, and stop wasting money on taxes they don’t have to pay. So I focus my time on proactive tax planning, and presenting concepts and strategies that you can use to ‘bend the curve’ and pay less, even if your actual income goes up.

OPTIONAL: Having said that, I would prefer to start with a formal tax plan. I’ve spent quite a bit of time reviewing your current returns, and I think I’ve found several missed opportunities that are costing you something like $xx,xxx in taxes you don’t have to pay. That’s money you could reinvest in your business, or take for your kids’ college, or even just use to spend on yourself if that’s what you choose. The fee for that plan would be $x,xxx, and I’m willing to guarantee you’ll be satisfied with the value or I’ll refund that entire fee.

The fee for the tax preparation would be $x,xxx per month, billed directly to your bank account or credit card. That would include tax preparation, of course, but it also covers any necessary service after the return is filed, like responding to IRS or state notices, providing copies of returns to lenders, or answering your own questions or emails.

That fee is probably more than what you’re currently paying. I’m not going to apologize for that, because your total cost of paying taxes plus paying for tax preparation will actually go down.”

You could do this with the pitch for a plan, as I include in the optional paragraph. You could include the plan without a separate fee and include it in the monthly maintenance fee. Or you could skip the plan and go straight to the tax prep, although that would be my last choice. Either way, you’re reframing the prospect’s request and avoiding that awful challenge of pricing the work blind, while still giving yourself your best chance at winning the work at a price you can take pride in. Lucror vestri dignitas!

And if the client says no? In the words of Frozen’s Elsa, “let it go.” You can’t win ‘em all. In fact, you shouldn’t even want to win ‘em all. You just need to win enough of ‘em who see your value to get you where you want to go.