I recently took my family and some clients to the Cayman Islands for a spring break vacation. The five-star resort where we stayed was very nice, as expected. But several of us came away feeling a little underwhelmed. Everyone had a good time and nothing went wrong. In fact, if we hadn’t known it was a five-star resort, we would have said, “Great service and great experience” in our reviews. But because it was a five-star resort, we were expecting exceptional service, and from that perspective, the resort fell short. 

If we’d stayed at a three-star hotel, we probably would’ve praised it as exceptional. But at five-star prices, you don’t just expect “good” — you expect extraordinary. You expect the staff to greet you by name (with a smile). You expect thoughtful gestures for your kids. You expect the staff to anticipate your needs without being asked. At the five-star level, details aren’t just nice touches; they’re essential.

I bring this up because in these inflationary times, everyone’s talking about raising prices. Accounting firms are no different. I’m not against raising prices, but I don’t care how high the inflation rate is. If you raise prices without delivering more tangible to the client, your value goes down in the client’s mind. If you want to charge three-star prices and deliver a three-star experience to clients, that’s OK. But, if you want to start charging five-star prices, your client’s expectations will adjust accordingly.

The good news is, it’s not that hard to deliver more value for clients in terms of providing better communication, more proactive response time and better tools for clients, etc. But you must make sure clients are well aware of what you will be doing differently to deliver more proactive communication and advice, faster response time and better tools for them to use. If you don’t, clients will just see a higher invoice than last year for the same level of service. Expectations will go up and satisfaction will go down.

Just like hotels and restaurants, when you move up the price ladder, you move up the expectations ladder. Your level of professionalism must go up. Your client response time must be faster. You must increase the level of proactive advice given to clients. When you’re thinking about what kind of firm you want to be — i.e., a firm serving fewer clients at higher prices — you can’t just deliver a tax return without any advice, feedback or recommendations like you did before. The tax return itself is a commodity. Most of the fee you add on top of it is service. More on that in a minute.

If you want to increase prices and serve fewer clients, think carefully about what you’re going to do for them in order to be their most trusted advisor. All the levers you have at your disposal — tools, resources, proactive advice, response time, etc. — will have to move when prices move.

Think about the last time you researched a vacation. When you Googled hotels, did you notice the little box where you could filter for three-star resorts, four-star resorts, five-star resorts, etc.? The expectations you had for each type of resort was different based on the price point. Clients make the same mental calculation based on your pricing when deciding whether to stay with you or move up or down market for an alternative accounting firm. Again, you must align your prices with the expectations that come with those prices.

As accounting firms, we are essentially luxury service providers. Most of our clients are very intelligent, and if they had to, they could probably figure out how to do their own taxes. The luxury we provide them is saving them the headache of filling in endless rows and boxes, providing expert counsel on how to save money or buy more time, and most importantly, dealing directly with the IRS so they don’t have to. 

Again, you must align your prices with the expectations that come with those prices.

When my firm recently raised its fees, we told clients very clearly: “Here is our updated pricing model. We want to be more meaningful to you. We want to focus on the clients we work best with. This is your new, updated fee structure, and here are the additional things you will be getting from us.” A few clients pushed back, but most did not. 

Price is an automatic market positioner. If you want to charge $350 for a tax return, you are positioning yourself as a low-cost provider. Clients are not expecting much, and you don’t have to provide much in the way of service or advice.  But if you want to move up market and charge $2,000 for a simple return, people aren’t really paying you $2,000 for the return itself. They’re paying for access to a high-end professional who knows their situation intimately. No more than $400 of that $2,000 fee is for the tax return itself. Everything else is for the implied service you provide.

For more about going above and beyond for clients see my article Find your client’s key lime pie.

In a highly competitive market like professional services, you can’t charge Ritz prices for Holiday Inn service. Don’t get me wrong. There’s nothing wrong with Holiday Inns. They’re a great brand and a well-run operation just like Ritz. Both types of hotels are very intentional about what they charge and what you can expect when you stay there. They build well-honed systems and processes around what they can afford to deliver at their relative price points. No one’s mad when they book a Holiday Inn. No one’s mad when they book a Ritz. The friction only comes when their relative expectations aren’t met. 

What is your firm doing to deliver more value to clients? I’d love to hear more.

President Donald Trump said he would be fine with Republican lawmakers raising taxes on the wealthy, but acknowledged the political challenges of doing so for the party as he prepares to meet with the head of the House tax committee on Friday.

“Republicans should probably not do it, but I’m OK if they do!!!,” Trump said on his social-media platform.

Trump has been pushing lawmakers to increase rates on some of the wealthiest Americans as a way to offset other cuts in an economic package Republicans are preparing to move through Congress. He has also offered mixed messages on his proposal, complicating efforts to finalize the legislation. Higher taxes go against long-standing Republican orthodoxy and could further hamper efforts to move the tax legislation.

The president’s proposal, which he made in a phone call to House Speaker Mike Johnson earlier this week, calls for creating a new 39.6% tax bracket for individuals earning at least $2.5 million, or couples making $5 million, according to people familiar with the discussion.

“The problem with even a ‘TINY’ tax increase for the RICH, which I and all others would graciously accept in order to help the lower and middle income workers, is that the Radical Left Democrat Lunatics would go around screaming,”Read my lips,” Trump added on social media, a reference to former President George H.W. Bush. Bush had courted Republicans in his party’s presidential primary with the pledge on taxes only to agree to a tax increase when in office.

Representative Jason Smith, the chairman of the House tax committee, is expected to meet with Trump Friday and tell him the tax bill will deliver on the president’s priorities, according to a congressional aide.

Raising taxes on the affluent would give the party more breathing room as they look to find ways to pay for the cost of the multitrillion package that aims to renew expiring tax cuts from Trump’s first term and enact additional promises he made on the campaign trail, such as no taxes on tips.

U.S. prosecutors and regulators investigating a $32 million deal between CrowdStrike Holdings Inc. and a technology distributor are probing what senior company executives may have known about it and are examining other transactions made by the cybersecurity firm, according to two people familiar with the matter.

In recent months, investigators with the Justice Department and the Securities and Exchange Commission have been probing the transaction between CrowdStrike and the distributor, Carahsoft Technology Corp., to supply cybersecurity software to the Internal Revenue Service. CrowdStrike has previously said that Carahsoft made on time payments for the order. However, the IRS never purchased or received the products. It remains unclear why the companies struck the deal without an IRS purchase, but Carahsoft previously said it stands by the transaction.

Investigators have questioned former employees about how the deal was struck, what awareness CrowdStrike’s leaders had of it and whether staff raised concerns about other transactions, the people said. Investigators have also obtained internal CrowdStrike records, said the people, who asked not to be named because they aren’t authorized to discuss the matter.

The investigators’ questions suggest the parallel SEC and DOJ probes into CrowdStrike are broader than previously known. 

CrowdStrike spokesperson Brian Merrill said in an email, “As we have stated previously, we stand by the accounting of the transaction.” Carahsoft representatives didn’t respond to calls and emails seeking comment; a lawyer for the company had previously declined to comment on the federal investigations.

Prosecutors from the U.S. Attorney’s Office for the Southern District of New York have taken the lead in questioning several witnesses, the people said. A spokesperson for the Manhattan federal prosecutor’s office, Nicholas Biase, declined to comment, as did SEC spokesperson Cory Jarvis.

Shares of CrowdStrike fell 2.3% in premarket trading on Friday following Bloomberg’s report on the scope of the federal investigations.

Around the time CrowdStrike closed the deal for the IRS, on the last day of a fiscal quarter in 2023, some staff at the Austin, Texas-based company raised concerns that it was “pre-booking” the transaction, Bloomberg previously reported. The employees viewed the deal as incomplete because it was unclear whether the tax agency would ultimately make the purchase.

U.S. regulators have in some cases sued and fined companies over alleged pre-booking, also known as channel stuffing, claiming they misled investors by improperly recognizing revenue to inflate their financial figures.

In interviews starting last fall, prosecutors and regulators have asked whether CrowdStrike employees believed other deals were handled in similar ways, the people said. The investigators have specifically asked about another 2023 transaction involving the IRS that was worth more than $1 million, they said. 

According to one of the people, investigators also inquired about multi-million dollar deals for the Department of Health and Human Services and the Department of Energy.

A CrowdStrike spokesperson, Jeremy Fielding, told Bloomberg in October that a deal for the Department of Energy’s National Nuclear Security Administration was among transactions put through a “second, independent and thorough review” in response to employee concerns. He said the $32 million deal also got “a separate and extensive review,” that each transaction had “non-cancellable order” and that “it is demonstrably false that there was any ‘pre-booking.'”

Among the internal CrowdStrike records that investigators have obtained are employee responses to questionnaires meant to ensure transactions comply with the Sarbanes-Oxley Act, the people said. The law, passed after several accounting scandals in the early 2000s, was intended to reduce corporate fraud by improving financial auditing and public disclosure requirements.

One of these records showed an employee formally expressed concerns that the company handled the $32 million deal inappropriately, one person said. Investigators have also sought detailed information about CrowdStrike’s process for closing the transaction and asked about who in the company’s sales and corporate leadership may have been involved in different aspects of it, the people said.

The transaction was big enough that it could have made the difference between CrowdStrike beating or missing Wall Street projections on two key financial metrics for the quarter in which it closed in 2023. The company has declined to detail to Bloomberg how it accounted for the deal.

Chief Executive Officer George Kurtz highlighted it in an earnings call after markets closed on Nov. 28, 2023, saying, “identity threat protection wins in the quarter included an eight-figure total deal value win in the federal government.” The day after CrowdStrike reported results for the record quarter, its shares rose 10%.

Carahsoft paid CrowdStrike on time for the deal, the cybersecurity firm told Bloomberg last fall.

Both companies said then that they had a “non-cancellable order” between them, but declined to say why they struck the deal without a purchase from the IRS. A purchase order seen by Bloomberg split the purchase into four $8 million payments, with the final payment due at the end of last October.

Last November, CrowdStrike excluded roughly $26 million from the annual recurring revenue in its quarterly earnings report. Chief Financial Officer Burt Podbere said the company determined a transaction wouldn’t be repeated “after a distributor in the federal space provided notice of its intention to exercise transferability rights with respect to a transaction.” CrowdStrike representatives have declined to elaborate.