By Geraldine Carter

There are plenty of ways to make more money as a CPA, but the trick is making more money without working any harder. Many CPAs already work themselves into a time straitjacket; working even harder is either impossible, not worth it, or requires the expense of more staff.

There are three general reasons why CPAs work as hard as they do and still under-earn:

• Hourly billing – Hourly billing, an industry standard for a century, creates an arbitrary and artificial income ceiling. The time needed to deliver a task has little to do with how the client values that deliverable. The gap between value and an hourly rate leaves potentially hundreds of thousands of dollars a year of unearned revenue sitting on the table.
• Billing for services – Rather than delivering outcomes, many CPAs focus on delivering a service. When discussing the delivery of a service, often absent from the conversation with the client is an understanding of their desired outcomes. When the CPA does not know or fully understand the client’s desired outcome, that outcome cannot be priced accordingly. Because the outcome is always more valuable to the client than how you got there (the service), potential revenue is once again left on the table.
• Generalism – Many in the profession have a true desire to help. While there is an excellent business case to be made for helping, there is no business case for helping everyone. Instead, focus on a particular profession or industry to deepen your expertise and increase value, and thereafter your fees. Jacks-of-all-trades will generally lead to lower fees.

Fix these shortcomings and you will be on the path to earning more without working harder.

Make Changes in This Order

1. Specialize or Focus on an Industry – “The riches are in the niches,” goes the saying. Narrow the focus of who you serve and become an authority in that space. Doing so simplifies the business, adds value with less effort, and makes the acquisition of new clients inevitable. CPAs who focus in areas such as practice physicians, real estate investors, or software-as-a-service companies see fees increase by multiples of five or higher annually on higher-value services.

Look for niche professions that exhibit the following characteristics:

• You are familiar with the industry, either through client interactions, previous career experience or exposure, interest, or friends and family members in that profession.
• Business owners earn a minimum of $300,000. The lower the revenue, the harder it is to create value. Above $300,000, business owners are more willing to invest at rates worth it to the CPA. A sweet spot for many CPAs shifting to advisory work is with business-owning clients whose revenue is about $1 million.
• Have a proven business model, like the trades or professional services. Much has been written about how to be successful in these businesses, and working with those whose business models are proven makes it faster and easier to learn where you can add value.

2. Understand Desired Outcomes – Once inside a niche, it becomes easier to determine what clients really want to do with their business and how to help them achieve those goals. You, as a CPA, are likely the best-positioned professional in the business owner’s circle to provide data-based guidance on how to get results.

Here are some of the benefits of reorienting your firm around clients’ desired outcomes:

• Value provided increases, therefore fees increase
• Efficiencies are created, freeing up time
• Clients get improved results, leading to more powerful “social proof” in the form of testimonials and referrals
• Marketing becomes targeted and more effective, reducing its cost while increasing conversion rates
• Churn decreases, reducing time to disengage and replace dissatisfied clients

3. Learn How to Price Outcomes – Pricing and billing are two entirely different tools. Learning to price requires time and commitment that will pay off handsomely.

When moving away from hourly billing, commonly used pricing options include the following:

• Flat rate or fixed fee are great for basic deliverables. Clients get a clear price up front, allowing them to make an informed buying decision.
• Value-pricing is best suited for one-time projects with a discreet beginning, middle, and end, and where the minimum price is at least $10,000 for the project. Remember, just because it’s not hourly doesn’t mean it’s value-pricing.
• Menu pricing is most common for advisory services. It gives your clients options and allows them to compare among your service options rather than comparing you to another CPA.

Make the above changes in your CPA firm, and soon you will see a path toward making more money without working harder. As an added bonus, you will likely enjoy your work and your clients much more.

Geraldine Carter is a business coach for solo CPAs and small firms at She Thinks Big Coaching in Ketchum, Idaho. She can be reached at geraldine@shethinksbigcoaching.com. You can receive more of her insights at SheThinksBigCoaching.com and the sister podcast, SmartStrategyforCPAs.com.

Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.