Introduction 1
Once Upon a Time in Ukraine 2
Why Some Accountants Earn Much More Than Others 4
Three Top Reasons Accountants Do Not Earn Enough 5
A Word About Terminology 5
Chapter 1: Pricing Methods in the CPA Profession 7
Types of CPA Firm Services 8
Specialist/Niche Services 8
Extension and Advisory Services 9
Compliance Services 9
Expert 9
Adviser 10
Cost-Driven Prices Versus Value-Driven Prices 10
Pricing and Risk 11
Using Chargeout Rates as a Benchmark 12
Investment Versus Value 13
Chapter 2: How Much Do You Really Earn? 17
The Problem with Partnership GAAP 22
The Ratio of Employees to Owners 22
The Salaries of Owners 23
Interest on Owners’ Capital 23
Pricing Philosophy 24
The Financial Analyst’s Dilemma: GAAP Versus Economics 24
Step 1: Convert Owner’s Salaries to Fair Market Value 24
Step 2: Convert Owner’s Capital to Financial Equivalents 29
Step 3: Convert Net Sales to Standard Revenue 30
Analyze the Profile Firm 31
Analyze Firm Overhead 33
Analyze Firm Write-Downs 33
The Key to Improving Profitability 34
When is the Top Line Not the Top Line? 36
Unavailable Time 37
Time Not Recorded or Not Delivered to the Firm 38
Sales Variances, or Planned Write-Downs 40
Chapter 3: The Pricing Myths 41
Chapter 4: How to Be Worth More to Clients 49
What Do Your Clients Really Need? 49
A Clients 50
B Clients 50
C Clients 50
D Clients 50
X Clients 50
How and With Whom Do You Spend Your Time? 51
The Potential of Client Meetings—Going from Effect to Cause 51
The Iceberg Value Principle 52
What’s Missing? The Future!53
The Rearview Mirror Perspective 54
Our View as Accountants54
Look Out the Windshield 55
Iceberg Value Strategy 55
“But My Clients Won’t Pay for the Extra Service”—The Rule of Price Flexibility 56
Creating a High-Impact Relationship 56
The Meeting Plan Campaign 57
Lessons from a Mime—Transition Your Client From Compliance to Advisory Services 58
How Not to Do It 58
A Better Approach 59
A Realistic Meeting Schedule 61
Chapter 5: Client-Care Key Performance Indicators 63
Client Surveys 63
Other Ways to Measure Client-Care 65
Time to Complete the Engagement 65
Three Other KPIs 65
Chapter 6: Pricing Strategies in a Troubled Market 67
The Problem With Price Estimates 71
How to Avoid Professional Panic 71
Ask for a Deposit, but Don’t Expect It 72
How to Handle Price Complaints 73
Current Client Complaints 73
Listen—Really Listen 73
Price Objections from Prospects 74
“Another Firm Will Do It Cheaper” 77
Chapter 7: How to Set Prices 79
Chargeable Time or Billable Time? 80
Five Factors That Affect Your Prices 81
When to Use Value Pricing 82
The Value Gap 82
Factors Affecting Value 84
Arranging Payment With the Client 87
When to Use Results Pricing 88
When to Use Fixed-Price Agreements 89
Packaging Your Services 90
How to Adjust Prices Upward 94
How to Make “Balanced” Changes 95
“But My Fellow Owners Will Never Go Along With That Large a Rate Increase” 96
Unleash the Power of Unconditional Service Guarantees 96
Chapter 8: How to Discuss Prices With Clients 99
Train Clients to Pay You Well and Promptly 100
What “How Much Is This Going to Cost?” Really Means 101
Turn a $438 Sale Into a $238 Sale Without Really Trying 103
Don’t Make It Look Too Easy 105
Your Pricing Communicates Your Value 106
How to Use “Cottle’s Law” and “Cottle’s Corollary” 107
The Problem With Price Estimates 109
How to Avoid Professional Panic 109
Ask for a Deposit 111
Be Flexible 111
The Preferred Client Approach 111
Five Important Tools in Negotiating Prices 112
How to Handle Price Objections 117
How to Handle Procrastinators 118
How to Handle Price Complaints 118
Chapter 9: Build a Better Firm With Better Clients 121
Why Are You in Business Anyway? 121
How to Recognize a Good Client 123
Evaluate Clients Realistically 125
Pick Your Five Worst Clients and Fire Them or Upgrade Them 127
Fire the Least Profitable Clients 139
Increase Your Minimum Individual Income Tax Price 140
Raise Prices on Aggravating Clients to $300 Above Standard 140
Give Your “Widows and Orphans” to Another Accountant 140
Chapter 10: Avoid the Seven Causes of Unplanned Write-Downs 143
What Are Write-Downs, Really? 143
Cause 1: Estimating the Engagement Incorrectly 144
Cause 2: Not Specifying What Is Included in the Price Estimate and What is Not 152
Client Planning Conference 152
Team Planning Conference 154
Cause 3: Inefficiency (Sometimes Laid at the Feet of the Employee’s Supervisor 155
Cause 4: Bad Scheduling 156
Assign the Right Person to the Job 156
Avoid Wall-to-Wall Scheduling 156
Cause 5: Bad Supervision 157
Plan 158
Budget 158
Monitor 158
Cause 6: Inadequate Skill in Managing the Client Relationship 159
Cause 7: Unwillingness to Confront the Client 159
Chapter 11: How to Set the Right Standard Chargeout Rates 161
Why the Two-Percent Rule is Dead 163
Three-Step Formula for Setting Standard Chargeout Rates 165
Chapter 12: Motivating Your People to Bill What They Are Worth 169
Define Chargeable and Nonchargeable Time 170
Use the 50-Minute Hour 177
Adopt Daily Time Reporting 182
Round Up, Not Down 183
Use Peer Pressure 184
Require Second-Owner Approval on Substandard Invoices 184
Invoice Promptly to Avoid “Toxic Lockup” 185
Invoice Progressively 187
Let Employees Draft Invoices 188
Do Not Compromise on Prices 188
Chapter 13: Get It in Writing 191
Engagement Letters 191
Include Realistic Payment Terms in the Engagement Letter 198
Allow for Value Pricing in Your Engagement Letters 199
Change Orders 200
Use the Invoice to Increase Client Satisfaction 201
Appearance of the Invoice 201
Language of Invoices 201
Details of Invoices 202
How to Handle a Higher- Than-Expected Invoice 205
Client Termination Letter 205
Glossary 207
