Tax Advisory Supercharges Business
Most tax professionals consume too much time in compliance when tax advisory supercharges business. Many CPAs are searching for ways to grow their businesses, from payroll and outsourced CFO services to technology consulting and business consulting when tax advisory is an easy win. Fee compression and staffing shortages, meanwhile, are putting increasing pressure on tax prep. But with all those shiny new ancillary services beckoning, it turns out that advanced tax advisory, right in your wheelhouse as a tax professional, is one of the highest margin services you can offer clients.
Why tax advisory?
Outsourced CFO work might make $100,000 a year for a single project. Still, it requires a LOT of work, especially from the managing partner or the senior partner, Jackie Meyer, CPA, told Rory Henry on a recent podcast done together “so, the time really adds up,” she said. “While the net profit margin on outsourced CFO work is pretty good, it’s not as good as tax planning,” added Meyer, who founded Meyer Tax Consulting LLC and TaxPlanIQ planning software and Concierge Accountant Coaching programs. TaxPlanIQ was recently selected by the AICPA’s CPA.com Accelerator program for 2023.
With tax advisory services, said Meyer, you can tell a client: “Hey, we can save you tens of thousands, if not hundreds of thousands of dollars every year on your taxes. Here’s our cost (i.e., your investment in us) and your ROI.” It’s all based on the knowledge you’ve acquired over the years. Moreover, since it’s not a time-based activity, it can be highly profitable. Meyer said it’s not uncommon for clients to see a 300% to 400% return on the fee they’re paying you as their concierge assistant, and practitioners see profit margins typically in the 40% to 50% range.
Why concierge services?
Arrowroot Family Office was founded on the belief that they had to provide more specialized concierge services to their clients, such as lending, insurance, and estate planning. Traditional wealth advisory was not enough. The firm saw an evolution coming in software and technology that allowed them to provide more high-value services and not spend all day wrestling with spreadsheets and looking up tax law.
With tech solutions such as TaxPlanIQ, Corvee, or Intuit Tax Advisor, tax advisory is one of the best ways for firms to grow their book of business and provide clients significant value via tax savings and tax efficiency. Tax advisory is also an excellent way for CPAs to transition into wealth management by providing clients with future-facing advice instead of simply their financial history.
Meyer said it’s essential for CPAs to value-price their tax advisory services so they’re not giving expertise away for free. When it comes to tax advisory, Meyer said the biggest challenge for CPAs is not learning how to do tax advisory; it’s about “having the confidence” to sell it to clients and add it to their service model.
Shifting out of the "stay in your lane" mindset
Tax advisory and value-based pricing are significant steps for many accounting firms because they’ve used to charging hourly and have only had set pricing for one-off services. For example, Meyer shared the story of one of her coaching clients who planned to present a $50,000 tax advisory proposal to a client. The $50,000 fee was huge for a firm of her size, but it was reasonably priced considering the hundreds of thousands of dollars’ worth of tax savings she identified for the client. Her proposal looked great, but when Meyer asked how the presentation to the client went, the CPA responded: “Oh, it wasn’t really on my radar because I was too busy wrapping up October 15th deadlines,'” recalled Meyer. “I was shocked that she would prioritize a 50-grand project that would change the trajectory of her firm and her client’s life for the better.”
In response, Meyer sent her coaching client a calendar invitation to confirm when she was scheduled to present the tax plan to her client. “You have to keep pushing people because they’ve got that passion and purpose,” recalled Meyer. “They just need someone to help them get their confidence level up – and keep it there. And don’t be shy about charging appropriately for your expertise. There’s no reason to give your advice away for free,” asserted Meyer.
Getting away from the billable hour
Like many CPA colleagues, Meyer believes the billable hour is causing CPAs to grind out 80-hour weeks without sufficiently feeling compensated or satisfied with their work. That grinder mindset, said Meyer, stems from the fact that many accounting firm owners have tremendous technical competence that allowed them to rise to the top of our profession. Still, they never received training in leadership, sales, marketing, operations, and talent development – skills that highly successful business owners have.
Importance of year-round tax advisory
Regarding tax advisory, show clients your unique expertise because almost anyone can claim to be a tax specialist. According to Meyer, there are tax preparers who simply do compliance work. They might be making a tax projection, which is not tax advisory. A tax projection, said Meyer, “is just telling the client what tax they have due for the next year.” And then there’s actual tax strategy and advisory in which you’re “reducing a client’s tax load from prior years, the current year, or the future. As a high-value CPA, you want to be at that level,” asserted Meyer.
Above all, make sure your client puts the recommendations into action and that you are the one who is quarterbacking the implementation with the client’s financial advisor, estate planner, and other advisors. There are deadlines and activities that need to be met monthly, quarterly, and annually.
Meyer believes there is no right way to do tax advisory, but her firm finds it helpful to identify five to eight tax strategies they want to accomplish within the following year. Their software places the tasks that need to be done on the back end (by her firm and the client) to achieve that strategy and all the accompanying reminders. “Then we just check in with the client throughout the year to see if any developments could change their tax plan,” said Meyer. “Then we go back every year and have an annual strategy meeting and tell the client: ‘This is what we thought we were going to do for you. Here’s what actually happened. Here’s your ROI.'”
- There’s never a good reason to give away advice for free.
- Clients will happily pay for services that save them a fortune on taxes and have an easily measurable ROI.
- Changing lanes can be scary for CPAs, but most who switch to value pricing never return to hourly or fixed-fee services.
Bottom line: don’t be afraid to change out of your lane. After going through the process, it’s not hard to raise your fees for tax advisory because clients are thrilled with the savings and can see very clearly what they got for their money.
Need help learning how to solve your business’s accounting technology needs and selecting the right software for accounting or CPA Firms? Visit us at k2e.com, where we make sophisticated technology understandable to anyone through our conferences, seminars, or on-demand courses.
Contact Rory Henry any time if you’re interested in learning more about tax advisory as a service offering or utilizing our CPA partnership program to integrate holistic wealth management services into your practice.
Rory Henry, a Director at Arrowroot Family Office and host of the Wealth Management Forward podcast, provided some of this content. He can be reached at (310) 566-5865 | firstname.lastname@example.org