4 big mistakes you could make when selling advisory services to your current clients

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As a tax professional, you know that advisory services can be a great way to increase your prices and add value for your clients. But how do you go about selling these services to your existing tax clients?

It’s important to understand what advisory services are and how they can benefit your clients. Advisory services typically involve providing advice and recommendations on tax planning and other financial matters. By offering advisory services, you can help your clients save money, minimize their tax liability, and make more informed financial decisions.

Once you have a good understanding, you can start selling, and at this point, it’s important to focus on the benefits your clients will receive. If you can effectively communicate the value, you should be able to sell them successfully.

Of course, there are a few things you need to keep in mind. First, make sure you’re providing value-added services that your clients will find useful. Second, you need to be able to articulate the benefits of advisory, and third, you need to be prepared to price your services appropriately.

Many tax professionals have begun to offer value pricing for their services because the demand for strategic planning has increased. Small business owners are embracing do-it-yourself accounting software, so accountants need to provide expert advice in order to help owners reduce their tax expenses. Accountants have found success by breaking through pricing barriers and reducing the risk of scope creep in their experiments with value pricing.

Yet tax planners are afraid to offer their planning services at a higher price to their existing clients. They think that clients will be angry because they have not offered these services in the past. They also worry that raising rates will mean losing clients.

Even though new clients like having certainty about prices and value the strategic work, many tax professionals are reluctant to offer different processes to their “old” clients. As a result, they may have a list of new people working with the firm who are on value pricing and higher-value services. However, considering that it cost at least five times more to gain a new client than to approach an existing one, many accountants are leaving profits on the table.

Here are the four biggest mistakes I see tax professionals make by not offering advisory services to clients. 

1. Believing more time equals more money

In the hourly billing model, you need to bill for as many hours as possible to make money.

Selling tax planning, using value pricing, means thinking differently. Focus on what the client gets, not how many hours you work. This may mean that you have to “unlearn” some of the things you used to do, such as working quickly so you could charge less money and do more work.

It can be difficult to determine the requirements to complete a goal in tax planning. To do this, it’s important to spend more time with each advisory client to learn their business, goals, and desires. This will help you solve these goals.

It can feel different from the way you are used to doing things in your tax practice. For many of us, charging by the hour, meeting deadlines, and sticking to “within budgeted hours” has been ingrained in us. We often recognize a project’s completion when a form is final, a report is written, or even when budgeted project hours expire.

However, in strategic planning, the finish line is often determined by a developed and fully implemented plan, achievement of a particular goal, or providing open ongoing advice. This can feel uncomfortable when the amount of time is less than expected. Let’s say, for example, work is not needed for several weeks or months on a project. You may feel that you haven’t earned or deserved the income related to the project, without matching billable hours. I’ve even heard from some tax pros that value pricing for advisory services is unethical or dishonest.

To avoid this mistake, focus on the goal. The goal can often be an outcome or result. When your attention drifts to the time you have or haven’t spent on this engagement, refocus on the desired goal.

I find it helpful to remind myself just how many different pricing methods are available in the work I’ve seen throughout my career. Some of my small business clients base their price on cost plus a markup, while others base it on the risk of liability or desired profits.

Think about a diamond.

As an accountant, I find the art of a good deal baked into my DNA. I love searching for discounts and sales. I even do this with jewelry. If you haven’t yet explored the diamonds sold at your local Costco, you should! It is a great adventure, leaving some customers wondering what treasure you might purchase, but also amazing because of the kind of discounts you can find.

A one-carat diamond solitaire engagement ring recently caught my eye. Diamonds are graded and certified using universal scoring. On one occasion, I discovered a particular grade, size, and cut of diamond selling for just over $4,000 at Costco. You may be surprised to learn the identical ring, including size, gold weight, cut, and grade, sold less than a mile away for more than $24,000 at Tiffany’s. Same product. Much different price. Is it unethical for Tiffany’s or Costco to adopt their own ideal pricing model? Of course not.

Different clients have different perceptions of value. Your business success depends on your ability to offer something desired in the market, at a price the client values.

2. Fearing the client will be upset by failure to offer these services in the past

Tax pros often hold themselves to an impossible standard of getting it right 100 percent of the time. While this illusion is appealing, it is nothing, if not unrealistic. Just because you may not have offered a service in the past does not mean clients will feel dissatisfied if you offer it now.

The idea that we must make our clients happy all the time can cause some practitioners to avoid introducing a new service. They judge themselves as failures for not addressing all the clients’ needs throughout their relationship.

The truth is that your clients are not loyal to you because they believe you exceed their expectations. In fact, according to a survey of small business owners, the majority of taxpayers are dissatisfied with their current accountant and have previously sought a new advisor because they “did not give proactive advice, only reactive service.”

You may focus on the fact that you are offering something new and feel overwhelmed with the change. After all, you are adapting to a new service, new pricing, and new work. However, your client is not overwhelmed when you offer a new benefit and value. In fact, most clients see this as a special offering exclusively for them. It makes them feel that being a long-time client has its privileges. They feel cared for, valued, and well-served.

To avoid this mistake, focus on making your offer feel special to your existing clients. Consider how you might position your request as a reward for their loyalty and business.

3. Working reactively instead of proactively

All too often, our work begins when a client makes a request. We may feel adequate at providing answers when someone asks, yet when it comes to planning work, most work in this arena begins even before a taxpayer asks for help.

People don’t know what they don’t know. As a result, they rely on advisors to inform them of their needs and best practices for their business. This is problematic if the only time you review your clients’ needs are when asked.

The opportunity to offer advisory services to existing clients is always present. In fact, you most likely have all the information you need to put together a proposal right now. And you have the added benefit that your client already knows, likes, and trusts you.

To take advantage of this gold mine, set aside time regularly to meet with your clients and/or review their files. Everyone appreciates when someone is thinking about them. Simply making a call or sending a message letting them know you want to catch up, hear about their business, or make recommendations will help turn those opportunities into paid advisory engagements, but not if you wait around for it to come to you.

4. Not using value pricing

Raising prices is not easy to implement, particularly if you are offering the same thing to the same people. While some understand inflation, most of us are not happy to pay more.

Still, our costs continue to increase, and while the product we offer may appear the same year after year, we know that what is necessary behind the scenes has changed. With IRS issues causing more notices and processing errors, our costs grow each day.

When we price based on the time we spend on a project, we assume the buyer will be satisfied with an increased price, or we’d better be prepared to discount our services when they refuse to pay for the work completed.

Pricing based on our input or costs creates questions and negotiations. Someone may ask, “Why did you need to research that? Don’t you know the answer to that issue?” They may wonder if you really spent the amount of time you claimed on their specific project, or whether they are paying for bathroom breaks or time spent on hold with the IRS for a different client.

On the other hand, pricing based on value keeps the focus on the most important part of the engagement: the objective. It is the result we create that adds value. Most people have heard the story of the engineer and the broken machine. An engineer fixes an important piece of equipment with a quick whack of a sledgehammer. He promptly submits an itemized bill for the work, including $5 for the hammer and $4,995 for knowing where to hit the machine with the hammer. The time taken to hit the machine does not fix it. But the result of the working machine is what everyone is after.

When based on an estimate of costs for the work, fixed fees are not much better than hourly billing. While providing more certainty for the client, there is still a risk that they are unhappy with the resulting work, and losing our profit if the costs incurred to do the work exceeds our price. It also places a focus on an irrelevant part of the process.

As long as you remain focused on creating ultimate value for your client, and your client can clearly see that value, pricing based on that value allows you to make more money, emphasize the most important part of the engagement, and get paid what you’re worth.

Now’s the time to start

If you can do all of these things and avoid the more common mistakes, then selling advisory services to your tax clients can be a great way to increase your revenue and add value. What are you waiting for? Get started today!

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