Most Local Accountants are forced to Compete on Price Rather than Quality with over 1/3 charging Return Preparation Fees Under $130

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Major accounting franchises are taking a toll on small, local accountants, forcing them to wage a price war rather than focus on quality. Over 1/3 admit that return preparation fees average under $130.

Tax franchises and software continue to undercut local practitioners in terms of prices. They enjoy an economy of scale that allows them to offer discounts unthinkable to small practitioners trying to get a firm off of the ground. In a recent survey from Practice Builder Publishing, it seems accounting franchises are taking their toll on local practitioners. Over two-thirds of smaller accountants report tax return preparation fees of less than $180 and half of that group, just over one-third of all accountants polled, reports fees of less than $130.

During post survey discussions, most practitioners expressed displeasure with competing purely on price, stating that they preferred not to provide prices over the phone. A small percentage, however, did admit that they “price shop” the competition at the beginning of tax season to determine how to price their own products. Another small percentage indicated that they would discuss fees over the phone, but that they provided only a lower limit, with typical fees being higher.

Competing with large chains on price is usually a “no win” strategy, cutting into margins and forcing practitioners to work for wages that seem paltry in comparison to the amount of time and energy invested. However, if a low base fee is part of an overall market strategy to gain clientele cross-sell services, then it can be quite lucrative if executed properly. Kirk Ward, Editor at Practice Builder Publishing explains that “cross-selling to existing clients is one of the best ways to gain wallet share and foster long-term relationships. Low prices and ‘bargains’ can be used to get clients through the door, but there must be a solid strategy for retaining and building upon that business.”

Competing with large chains on price is usually a 'no win' strategy, cutting into margins and forcing practitioners to work for wages that seem paltry Click To Tweet

Ward goes on to explain that the key to building on business obtained through a “sale” is for the practitioner to make clear how superior his or her services are. In other words, clients should enter knowing that the discount is a way for them to compare the accountant with other firms, particularly large franchises, and recognize that the practitioner’s fees are generally higher as a reflection of the superior quality provided. Under this approach, an accountant can work hard on the discounted return, knowing that it is only a stepping stone to a more lucrative long-term relationship.

In undertaking such discounting, careful tracking of the marketing strategy is necessary to ensure that it is working. Checkpoints, progresses markers, and periodic reevaluation are all necessary for following a marketing strategy and evaluating its success. Marketing plans should have defined goals and clear rubrics for measuring if those goals are being reached. After all, it would be an unhappy circumstance to work long hours for little pay to find that it did not translate into customer loyalty and increased business.

One last thing to consider is that individual tax returns may not be the best basis for a practice. Most interviewees in the survey stated that the majority of their return preparation income was from small business owners where they were the keepers of record for all finances. They did not have to quote fees to these businesses because the business owners understood the importance of quality and of long-term relationships that protect their businesses. Small business owners should be a target demographic of any accounting firm as they are willing to invest in services that will ensure the success of their business.

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