- This topic has 13 replies, 6 voices, and was last updated 8 years, 5 months ago by
Stilgoin.
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CreatorTopic
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January 4, 2017 at 12:28 am #1407002
CPA2BEE
ParticipantWhat would a reasonable billing rate be for tax services from a new proprietor CPA with just 3-5 years experience? Please provide some backup to your advices to ease my skeptical mind 🙂
If location matters, let’s say Orange County, CA.
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016
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AuthorReplies
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January 4, 2017 at 12:25 pm #1422464
CPA2BEE
ParticipantBump…Anyone have any input??
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016January 4, 2017 at 1:12 pm #1422512ipadminihalf
ParticipantWhen I was a staff at a boutique tax firm, the billing rate charged for staff (me) was around 125-150 per hour. What kind of tax services are you providing, and it is for individual, corp?
REG - 2/19/16 - 77!
BEC - 4/16/16 - 79!!
AUD - 6/04/16 - 84!!!
FAR - 8/31/16January 4, 2017 at 1:23 pm #1422525CPA2BEE
ParticipantIndividual, Corporate, & LLC/Partnerships. I'm wondering what the rate would be for a young proprietor CPA, I realize the rates won't be as high as the partners of actual firms yet not as low as the staff of firms.
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016January 4, 2017 at 2:10 pm #1422564ipadminihalf
ParticipantI believe the rate of 125-150 per hour was because the staff could leverage off of the experience of the other more experienced members in the firm. At other accounting firms, it is likely much higher. Even at $125 per hour, if you are able to bill out half the full-time hours per year, that is 1040hr * $125 = $130,000. In the firm I worked at, the hourly rate was only for consulting projects (audit, vda, planning). All compliance was covered by a flat fee and charge per return filed. This was for SUT, perhaps it is different for Income tax. In your previous job, was everything billed hourly?
REG - 2/19/16 - 77!
BEC - 4/16/16 - 79!!
AUD - 6/04/16 - 84!!!
FAR - 8/31/16January 4, 2017 at 2:16 pm #1422570Noche
ParticipantI am a senior at a mid sized firm (Top 25) in the east coast. I work with C-corps, S-corps, partnerships, and individuals.
We bill $190/hr for staff, $260/hr for seniors, and $360/hr for managers if that helps at all. Sometimes we discount the rates to certain clients at about 80% of the standard billing rate. Staff usually get senior after 1.5-2.5 years. Time between senior to manager varies on CPA designation and competency.
REG 80 [07/27/2015]
BEC 84 [11/25/2015]
AUD XX [02/01/2016]
FAR XX [05/30/2016]January 4, 2017 at 2:20 pm #1422572CPA2BEE
ParticipantI worked at two CPA firms prior to this, both for income tax. The billing rates for staff and partner were comparable to what you were saying. I was $120/hr for tax prep and $200/hr for cost segregation services, but I'm not doing cost seg anymore. Partners were all $250/hr. I'm thinking just throwing out there $150/hr and see who bites. If people eat it up then raise it to maybe $175/hr and if they are shy I could even drop it. I'm in the building stage so I'm also considering offering fixed fees until I have a real practice going. I'm just having a hard time gauging what I should bill out to compensate for my lack of experience. If I say $250/hr, clients will expect the knowledge of that partner-level CPA with 20+ years experience, which I just don't have yet.
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016January 4, 2017 at 2:23 pm #1422578CPA2BEE
Participant@Noche – the firms I worked for were small (less than 25 employees) and most of our clients were small businesses and high net worth individuals, which is the same type of client I am looking to pick up as a proprietor. I think the top 25 firms' billing rates are a little out of my league – $360/hr for managers, wow!
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016January 4, 2017 at 2:38 pm #1422584Stilgoin
ParticipantI know a firm in Missouri who bills $60 per hour for tax prep. Be careful. The firm was small, with 3 CPA partners and a staff of maybe 20. It also depends on where you are and the cost of living. It is not totally based on experience and credentials. If people don’t have $150 to pay, it doesn’t matter how experienced you are in tax.
B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, WaitingEthics | 93
"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill“In a world full of critics, be an encourager."
January 4, 2017 at 2:48 pm #1422624Noche
ParticipantAh that makes sense. Different markets. Best wishes for the start of your proprietorship! 🙂
REG 80 [07/27/2015]
BEC 84 [11/25/2015]
AUD XX [02/01/2016]
FAR XX [05/30/2016]January 4, 2017 at 3:03 pm #1422680jeff
KeymasterYou'll never convince a client you're worth it until you convince yourself.
Billing rates are arbitrary…$100/hour … $500/hour … $250/hour ….
Figure out
1) How much you want to make
2) How much you want to workBack into the math.
Don't assume that your average client has ANY idea what partners make or what they do.
All they care about is how much value you can bring them by effective tax planning and tax prep.
If you do a good job for them – you'll pay for yourself and then some.
It's up to you to walk them through that.
January 4, 2017 at 3:08 pm #1422681Anonymous
InactiveMy 2 cents:
Part of the reason you can do a higher bill rate with a higher work level is that the person knows what they're doing and can fly through a return. If you're a sole prop without employees, then you can't bill out at the partner rate, cause no partner does the data entry through to the sign-off, unless their customer knows they're paying a premium for it. So, I'd try to think of it as a rate for my time spent prepping that's at a more entry-level rate, a rate for my time reviewing that's a bit higher, and then figure the percentages and determine a rate from that. If you'd bill an entry-level person who enters the tax data at $100/hr, and you figure that's 80% of the time, and you'd bill a partner at $200/hr and that's 20% of the time, then as a sole prop, I'd say $100×0.80 + $200×0.20 = $120 = sole prop hourly rate. (It's been too long since I've done taxes for me to know what percentages would go to review and prep, but that's just to be an example.)
Also…if I went to someone who was new, and lower experience, I would expect an equivalently lower rate. I'd also be a little hesitant about paying them by the hour, since they might have to spend 10 hours looking up something that the guy down the street who is more experienced and charges more per hour could find in 10 minutes. So…they might be happy to pay $150 for their 30-minute return, but not to pay you $300/hr for their 30-minute return. Especially as a sole prop, I'd be much more a fan of pricing by the form or by the return, so that you can make your money without them knowing the hourly rate. At least in non-tax fields (my dad was a small business owner in a couple different industries much of my childhood), you can make a LOT more if you're charging by job than by hour…and as the new guy on the block, I'd imagine that by the job will go over a lot easier with your clients. They're not taking the risk of you being slow, and they're not seeing how much they're actually paying you. 🙂
P. S. This is referring to the tax prep piece and all covered services (for example, if you'll assist clients with audits for free). Things outside of that – extensive tax planning etc. – would need a different pricing structure, but I'd still try to price by the job. “Mr. Smith, for $xxxx per year, I can provide you with year-round tax planning as well as complete your tax return”. It might take some time in the industry to know estimated hours to structure pricing for tax consulting, so maybe that's hourly to start with, but the returns I'd keep by the project if at all possible.
January 4, 2017 at 4:14 pm #1422720CPA2BEE
ParticipantGreat advice from all of you, thank you guys. I'm thinking the billable rate might be something that gets incorporated once I actually have a “practice”. Lilla made a good point that it will take some time in industry to know how many hours per year I am billable, and then I can determine how much money I want to make and figure out x rate at y hours to hit the revenues I want.
So I've had 4 business clients contact me, mainly S-Corps. What I've been telling them is that if they send me their files, I'll take a look and give them a quote based on estimated time spent. Basically I'll let them know what they are going to owe me before they owe me anything. I just think it is going to be really tricky to set a billable rate at this point because I don't have much of an idea of how many hours I'll actually be billing. It may take a few cycles and some performance to evaluate before I can fine-tune that.
FAR - 80
AUD - 82
BEC - 80
REG - 85ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016January 4, 2017 at 4:25 pm #1422734Stilgoin
ParticipantI suggest having a base rate, then bill hours after the initial rate is paid if you are doing tax. Some people may expect too much for too little if you are new, and a base rate lets them know up front that you know what you are worth. That will weed out a lot of non-paying customers. Starting a business is tough, but after the initial inception, it gets better. You just have to be diligent. Good luck!
B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, WaitingEthics | 93
"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill“In a world full of critics, be an encourager."
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