Many business owners mistakenly view the price paid for a service as the cost of the service. The cost of the service runs much deeper than just the price paid.
Let me give you an example of what I am talking about. We meet with a business owner recently who we will call Bill. Bill was not happy with the service his CPA was providing and was considering making a switch. Bill did not feel the CPA was providing much needed financial and tax advice. Bill said he was paying around $6,000 to the CPA for the services she was providing. After discussing Bill’s businesses we were able to make recommendations to save Bill around $25,000 in taxes. In addition there was a real estate transaction that took place where with some creative tax planning capital gain rates of 15% could have been paid instead of Bill’s marginal rate of 35%.
We quoted a price of $18,000 per year for our services. Bill brought up the fact that his current CPA was “only” charging him $6,000. We explained to Bill the other CPA’s services were actually costing him $31,000 a year (the $6,000 paid to the CPA and the $25,000 in additional taxes). Professional services are much like anything else you get what you pay for.
Had Bill been using our service he would have paid us $18,000 which would only cost him $11,700 after tax. Bill would actually make $13,300 by using our service. Bill would have realized tax savings of $25,000, which is dollar for dollar as there would be no taxes paid on the savings, less our after tax fee of $11,700.
The moral of the story is you can’t look at only the price paid for a service in determining if it is a good deal you have to look at the total cost. We believe a good CPA firm can more than pay for themselves. Our goal as a firm is to save our clients more money in taxes than they pay us in fees. So how much is your CPA really costing you?
