How many purchases do you make without knowing the cost ahead of time? Tax services shouldn’t be any different. In most of our tax work, we use a fixed-fee pricing model based on value pricing: this model sets a fee before work begins, based on the value of the work provided to the client. We use this model to provide a price for you before the works starts so that you know how much you can expect to pay ahead of time.
Facts and Goals – You provide our tax professional with basic information about your situation, including the facts involved and your goals.
Options Available – You and the tax professional discuss the various options available to you. The tax professional can help you evaluate the pros and cons of each option and choose the quickest and least expensive way to reach your goals.
Scope and Fixed Fee – Once a decision is made, the tax professional develops a scope of work and gives you a customized, fixed fee before starting work. As long as the scope of work does not change due to an unexpected change in circumstances, the agreed upon fixed fee is the amount you can expect to pay.
Upfront Fee – Our value pricing allows you to weigh the costs of tax representation against the benefits and make an informed decision about how to proceed with your financial and tax affairs. Value pricing also encourages open communication between the tax professional and client. Because you are not “on the clock” for every phone call or e-mail, you can contact our tax professional with any questions or concerns, knowing that you won’t be penny-pinched for every response.
Value pricing is often distinguished from the more traditional hourly billing model used by most tax and accounting firms. This hourly model focuses on the work competed rather than focusing on the value provided to the client. While there is nothing unethical about hourly billing, it has a many problems:
Hourly Model Rewards Inefficiency – The tax professional is paid for his time on the project even if the additional work doesn’t add much value to the client. Instead of being driven to complete the project efficiently, the tax professional is rewarded for charging additional “billable” time to complete the work.
Unclear Expectations – It is generally agreed that it is difficult to budget tax-accounting time in the hourly billing model. Tax professionals will at times tell you that the cost depends on how much time is spent on the project. Most clients, as they have no tax planning or tax preparation background, have no idea with how much time can be incurred in a tax project. Without an accurate up-front cost estimate, clients often have very low, and unrealistic, expectations as to the total amount that they expect to spend. This will lead to unpleasant surprises when the final tax bill arrives.
Minimal Communication – Hourly billing can stifle tax professional-client communication. When a client makes a quick phone call to an tax professional that uses an hourly-billing model, the client will be billed for at least a quarter of an hour of tax professional’s time. Assuming the tax professional’s hourly rate is $300, every 15-minute call will cost the client $75. The result is to discourage tax professional-client communication. As the client is reluctant to contact the tax professional, questions go unanswered and concerns are not addressed.
For these reasons, we believe that value pricing is a better way to do business. We haven’t determined how to apply this approach to every case. But we use this model for all our tax preparation and compliance work. We also have flat fees for certain administration matters that do not involve tax preparation or compliance. It is our goal to provide you with exceptional quality work for a reasonable price and the personal attention you would expect from a friend. Please contact us–we welcome the opportunity to be of service.
Why do you price this way? – Our Value Pricing Model provides the most value to clients, unlike the traditional hourly billing model which suffers from many drawbacks, as stated above.
Does the Flat Fee Structure apply to all tax services you offer? – Unfortunately it does not. We’ve tried to think of every tax problem we handle that can work with a flat fee structure. If you present us with a new problem that we have not yet considered, we will try to find a way to apply a flat fee to that as well. However, many times a flat fee won’t work. For example, for most tax planning a flat fee won’t work because identifying all of the tax planning issues before diving into the details is difficult to determine. Also our tax dispute resolution service uses an hourly component for the same reason. Nevertheless, even if a flat fee doesn’t apply, we will do our best to offer you the most competitive fee structure possible.
Would a tax professional work for a “value added” fee when an hourly rate is generally more profitable? – Yes, a tax professional who recognizes that most individuals and businesses don’t want tax compliance costs to control their lives or their profit-margins would agree to this arrangement.
We try to build a base of pleased clients by being straightforward and honest. We are completely transparent — we don’t play games. And we provide all of our clients with the same, excellent, reliable services. So let us be on your team.
We look forward to the opportunity to help you with your tax and accounting needs!
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