Why price does not equal cost

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?

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At Ascension, our scope far exceeds basic accounting services. The practice includes consulting with business owners on how to run their businesses more profitable. Our focus is on reducing the overall tax burden businesses face and providing management consulting services to business owners.