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It's not enough to just do taxes and crunch numbers to run a successful CPA firm. You also have to run a business that makes money. But a lot of skilled accountants have trouble turning their skills into long-term profits. Who is to blame? Old ideas about how to package and price their services.
You're not the only one who works long hours but doesn't see the results in your bottom line. Many CPAs make pricing mistakes that cost them money and cause them unnecessary stress without even realizing it. Let's look at the five most common mistakes that hurt profits and, more importantly, how to fix them.
Mistake #1: Making Billable Hours Your Main Way to Set CPA Prices
The billable hour model seems easy: keep track of your time, multiply it by your rate, and send an invoice. But this old way of doing things is slowly ruining your profits in the CPA pricing strategies.
Here's why hourly billing doesn't work: it punishes efficient people. The more quickly and well you do your job, the less money you make. You can now finish that complicated tax return in three hours instead of six. You just cut your income in half. At the same time, your skills and the value you bring to clients have grown.
The Real Cost of Charging by the Hour:
- You are encouraged to work slower, not smarter.
- Clients are afraid to call you because the "meter is running."
- You can't make money by investing in automation.
- Scope creep is a constant fight.
- The hours you have available limit your income.
The Fix: Switch to value-based pricing, which means you charge based on the value and outcome you provide, not the time you spend. It was worth much more than the six hours you spent coming up with a tax plan that saves a client $50,000. Set the price accordingly.
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Mistake #2: Not dividing up services and using tiered CPA pricing strategies
A lot of CPAs offer the same basic service to all of their clients, no matter how complicated they are, what they need, or how much they are willing to pay. This one-size-fits-all method costs a lot of money.
Think about two clients: a freelance graphic designer who doesn't have a lot of money and a restaurant owner with multiple locations who has to deal with payroll, inventory, and complicated deductions. If you're charging them the same amount for "tax preparation," you're either charging the freelancer too much or the restaurant owner too little.
Why Service Segmentation is Important:
- Clients have different needs and budgets.
- Some high-end clients will pay more for top-notch service.
- Standardized packages make income more predictable.
- Clear service levels make it easier for prospects to make decisions.
- You can make money serving more kinds of clients.
The Fix: Make three or four levels of service, like Bronze, Silver, Gold, and Platinum. Each level has more services, quicker response times, and strategic advisory work. This lets clients choose what they need while making sure you get the right amount of value at each level. Your basic package might include preparing and filing your taxes, while your premium package might include quarterly strategy sessions, proactive tax planning, and support all year round.
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Mistake #3: Pricing Services Too Low Because You're Afraid
Fear-based pricing is very common in the accounting field. CPAs are worried about what will happen if they say no. What if they find someone who is less expensive? What if I don't get the client? So they give prices that seem "safe," which almost always means too low.
This way of thinking about scarcity leads to a bad cycle. You charge too little, get angry about the work, rush through projects to make the money work, and give less value than you could. In the meantime, you get clients who are sensitive to price and don't value your expertise. They are always looking for a cheaper option.
Signs that you are charging too little:
- When you send out bills, you get a sick feeling in your stomach.
- Clients agree to your prices right away, without any discussion.
- You're always busy but not making much money.
- You don't want to look at your profit margins.
- You can't afford to put money into your team or business.
The Fix: Find out what the average price is for your area and specialty, and then set your price at or above that. Clients don't just buy tax returns; they also buy peace of mind, a financial plan, and someone who cares about their success. If you're really good at what you do, charge what you're worth. Start by raising prices for new clients by 20 to 30%. Then, when you talk to existing clients about renewing their contracts, gradually raise their rates. You won't lose as many clients as you think you will, and the ones who stay will be more valuable and grateful.
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Mistake #4: Not making strategic CPA pricing plans based on your ideal client
There are differences between clients. Some are profitable, easy to work with, and send other people your way. Some people are demanding, send you documents late, question every bill, and drain your energy. But a lot of CPAs will take anyone who can fog a mirror and sign an engagement letter.
Working with the wrong clients doesn't just hurt your bottom line; it hurts everything. Your team's morale goes down. Your work gets worse. You hate Mondays. And funny enough, these hard-to-deal-with clients often pay you the least.
The Cost of Clients Who Aren't a Good Fit:
- Too much time spent talking and holding hands
- More stress and less job satisfaction
- Less ability to do high-value client work
- More people are leaving the team
- Damage to your reputation because of who you hang out with
The Fix: Be brutally honest when you write down your ideal client profile. What kinds of businesses do you know the most about? What kinds of businesses do you work best with? What kinds of personality traits help people get along at work? Then change your prices and where you put yourself to attract these clients while naturally getting rid of the ones who aren't a good fit. Charge higher prices for work with your ideal clients and limit the number of other clients you take on. It may seem strange, but being more picky and charging more often makes the clients you want want your services more.
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Mistake #5: Giving "Free Consultations" That Make Your Skills Less Valuable
In the accounting field, it's normal to give away useful strategic advice in "free consultations." This practice is meant to help sales, but it often goes horribly wrong.
Here's what really happens: prospects come to you with their hardest questions, get your best advice, and then leave to either follow your advice themselves or take it to a cheaper provider. You just gave someone free advice for 30 to 60 minutes, and they never really wanted to hire you.
Why Free Consultations Are Bad:
- They bring in people who just want to look, not serious buyers.
- You're literally teaching potential clients to expect free help.
- There's no skin in the game, so people aren't very committed.
- You just gave away your time, which is your inventory.
- It makes you seem like you can be replaced and are in need.
The Solution: Instead of free consultations, offer paid strategy sessions. For a focused 45-minute consultation where you give real value and useful advice, charge $250 to $500. If they become a client, this fee will count toward future services. This simple change does a lot of things: it helps you find serious prospects, pays you for your time, shows how valuable your advice is, and creates a sense of reciprocity that boosts conversion rates. Good prospects don't mind paying for expert help; they expect it.
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The Common Thread: You need to be clear and confident about your CPA pricing strategies.
The root cause of these five mistakes is the same: you don't believe in your worth and aren't clear about how your business works. The accounting field has taught people to be humble, careful, and focused on doing their jobs well. These traits are good for clients, but they can be bad for you as a business owner.
Going Forward:
Keep in mind that making money isn't about being greedy; it's about building a business that will last and let you serve your customers well for a long time. You can do the following when you get paid fairly:
- Put money into better training and technology.
- Hire people who are good at what they do
- Take more time to work on each client's plan.
- Keep a good work-life balance so you don't get burned out.
- Give your clients the level of service they deserve.
Not all of the CPAs who do well are the ones who are the best at math. They know that pricing is a strategy, positioning is power, and making money lets you be great.
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Conclusion: Change the way your business makes money today
If you don't make these five big mistakes, your business's profits and your quality of life will change a lot. The good news? You don't have to do this all by yourself. You need both strategy and execution to put new pricing strategies into place, change the way you market your services, and build systems that help you grow profitably.
That's where Progeektech comes in. Our specialty is helping CPA firms use technology and strategic systems to make more money while making their operations easier. We give modern accounting firms the technical infrastructure they need to be successful. This includes automated workflow solutions that free up your time for high-value work and practice management systems that support complex pricing models.
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Are you ready to stop losing money? Call Progeektech today to talk about how we can help you set up the systems, automation, and strategic technology framework that will help you charge higher prices and give great customer service. Your skills should be properly recognized—let's make sure your business does that.
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To set up your strategy session and start building the profitable, sustainable business you deserve, go to progeektech.com or call us.