Accounting

Transforming tax advisory with value pricing

Published

5 months ago

August 16, 2024

Traditional billing models like hourly and fixed-fee billing often fall short of delivering true value to clients. Misaligned incentives, lack of transparency, and a disregard for the actual value provided are just a few of the inherent flaws. By adopting the “ROI Method” of value pricing, you can enhance client satisfaction, boost your firm’s revenue, and reduce the time spent on engagements.

Here’s a guide to start implementing this transformative pricing strategy in your tax advisory services. The first step in transitioning to value pricing is identifying which of your services deliver the most significant value to your clients. Focus primarily on tax planning and advisory services, and fractional CFO services. These areas provide substantial tangible and intangible benefits, making them ideal candidates for value pricing.

Tax planning and advisory services. These are at the core of delivering value. Through strategic tax planning, you can help clients minimize their tax liabilities and maximize savings. This might involve advising on tax-efficient structures, leveraging tax credits and deductions, and ensuring compliance with ever-changing tax laws. Clients see direct financial benefits from reduced tax payments, which form a solid basis for your value pricing calculations.
Fractional CFO services. These extend beyond traditional accounting to include comprehensive financial management, budgeting, forecasting, and strategic financial advice. By acting as a part-time CFO, you help clients improve cash flow management, optimize their capital structure, and make informed financial decisions. This service is highly valuable for small and midsized businesses that need expert financial guidance without the cost of a full-time CFO.

By concentrating on these high-impact services, you can demonstrate the significant value you bring to your clients, setting the stage for successful value pricing.
Financial and non-financial aspects

The ROI Method integrates both financial and non-financial aspects to determine the value of your services. Financial benefits include direct savings or increased revenue, such as the tax savings achieved through strategic planning. For instance, if a tax strategy saves a client $25,000 in the first year, this figure becomes a cornerstone of your ROI calculation.

Intangible benefits, such as handling complexity, urgency, and risk management, are equally important. These might include the peace of mind and time savings your clients gain from your expert services.

The fee you propose should reflect these combined benefits, ensuring the client’s investment corresponds to the expected ROI. For more complex engagements, aim for a minimum ROI of 200% for the client, potentially reaching up to 400% for simpler tasks.

Implementing the ROI Method

To successfully implement the ROI Method of value pricing, you need a structured approach that emphasizes thorough analysis, clear communication, and transparent agreements.

1. Proposal preparation. Begin by doing an analysis of their documents such as tax returns, financial statements, or wherever you can identify savings easily. Consider half a dozen strategies to package into Phase 1 of planning. If you’re concerned that the client might take advantage of your time, you can charge a flat fee, perhaps $2,000 for an initial tax plan. Then you can upsell the implementation of the plan, which is in high demand, and where the true value of the tax plan lies.

Then prepare a detailed value-based proposal. This document should outline the anticipated ROI, including both tangible financial benefits and intangible benefits like reduced risk and improved business stability. By presenting a clear picture of the expected outcomes, you help clients understand the true value of your services.

2. Client communication. Effective communication is critical in gaining client buy-in for value pricing. During your discussions, clearly explain the value proposition, highlighting how the anticipated ROI justifies the proposed fee. Use real-world examples and case studies to illustrate how similar clients have benefited from your services under a value pricing model.

Address any concerns the client may have about the transition from hourly or fixed-fee billing to value pricing. Emphasize that the fee is based on the value delivered, not the hours worked, ensuring that their investment aligns with the benefits they receive.

3. Agreement and payment. Once the client agrees to the value-based proposal, formalize the agreement. Ensure that the payment terms are transparent and clearly documented. Adding ACH collections is great for minimizing accounts receivable. The client should understand that the fee is fixed and based on the expected ROI, not the time spent on the engagement. This approach fosters a value-centric relationship, where both parties are aligned towards achieving the best possible outcomes.

Real-world impact

Consider the scenario of a midsized company looking to optimize its tax strategy. Under the hourly billing model, the firm charges $200 per hour, totaling $2,000 for a 10-hour engagement, with limited insight into the ROI. By transitioning to value pricing, the firm might charge a $6,000 fee based on an estimated $25,000 in tax savings. The actual engagement, completed in 12 hours, results in $30,000 in tax savings. The client enjoys a 400% ROI, and the firm benefits from a higher net profit margin with several thousands more in cash collected, and a more efficient work process.

This transformation highlights the superior, mutually beneficial nature of the value pricing model over hourly billing. It demonstrates how clients can receive greater value and satisfaction while firms enjoy increased efficiency and profitability.

Conclusion

Adopting the ROI Method of value pricing can revolutionize your tax advisory services. It shifts the focus from time spent to value delivered, fostering a true partnership with your clients. By identifying valuable services, applying a comprehensive value assessment, and communicating the benefits clearly, you can drive exponential growth and client satisfaction.

Embrace this opportunity to transform your practice, enhance client relationships, and achieve sustainable success.

Accounting

Citrin gets new PE owner as Blackstone buys New Mountain’s stake

Published

2 hours ago

January 7, 2025

Business Finance News

Citrin Cooperman announced today it will receive a significant investment from Blackstone, the world’s largest private equity firm, which will acquire a majority stake in the firm from New Mountain Capital.

The deal is the first instance of an accounting firm to transfer private equity ownership from one group to another in the U.S. Terms of the transaction were not disclosed.

“We are excited to have reached an agreement for Blackstone to invest in Citrin Cooperman as we enter our next chapter of growth,” Citrin Cooperman CEO Alan Badey said in a statement Tuesday. “Blackstone will help us make additional investments in expanded service offerings and technology as we deliver on our continued commitment to best-in-class firm culture and providing an exceptional client experience. We thank New Mountain for their years of partnership in helping to build and support our business.”

Allan Koltin, CEO of Koltin Consulting Group, who advised on the deal, commented: “For many in the profession, the biggest question was whether something like this could ever happen, and my belief is there will now be many other transactions like this in the future. Kudos to Citrin Cooperman, New Mountain Capital and Blackstone on making history today.”

New Mountain first acquired a majority interest in New York-based Citrin Cooperman in April 2022, fueling a wave of mergers and acquisitions at the firm. Two years later, New Mountain took a majority stake in Top 10 Firm Grant Thornton — marking the biggest PE deal to date in the accounting field.

“We are proud of our successful partnership with Citrin Cooperman, and we thank the management team, partners and staff of Citrin Cooperman for all we have accomplished together over the last three years,” Andre Moura and Nikhil Devulapalli, managing directors at New Mountain, said in a statement. “We look forward to seeing Citrin Cooperman continue to thrive for the benefit of all its clients and stakeholders.”

“The Citrin Cooperman partners and staff have done an exceptional job making the firm a leader through an unwavering commitment to excellence and client service,” Eli Nagler, a senior managing director at Blackstone, and Kelly Wannop, a managing director at Blackstone, said in a statement. “We are excited to invest in the business to help it continue to provide the highest quality offerings moving forward.”

Deutsche Bank Securities is serving as financial advisor, and Kirkland & Ellis and Gibson, Dunn & Crutcher are serving as legal advisors to Blackstone. Guggenheim Securities is serving as lead financial advisor to New Mountain and Citrin Cooperman. Koltin Consulting Group is serving as an additional financial adviser to both parties. Simpson Thacher & Bartlett, Zukerman Gore Brandeis & Crossman and Hunton Andrews Kurth are serving as legal advisers to New Mountain and Citrin Cooperman.

Accounting

Five trends that will redefine finance and accounting in 2025

Published

2 hours ago

January 7, 2025

Business Finance News

“Accounting is the best place to start because it’s the purest form of finance,” wrote Robert Kiyosaki, author of the Rich Man Poor Dad series of personal finance books. “You can’t fool it; it’s empirical.”

This insight resonates deeply in today’s business environment, where organizations must navigate macroeconomic uncertainties, technological disruptions and transformational opportunities. Amid these buffeting currents, finance and accounting have evolved from a number-crunching function to a strategic and consultative one, playing three critical roles — safeguarding assets, streamlining operations and influencing future growth. As we move into 2025, five key trends will define the F&A landscape and its ability to drive strategic value.

Accounting

Kacee Johnson departs CPA.com | Accounting Today

Published

3 hours ago

January 7, 2025

Business Finance News

Kacee Johnson, CPA.com’s vice president of strategy and innovation, announced that she has ended her tenure as a full-time employee there.

Johnson, who has been in her position for six-and-a-half years, said on LinkedIn that she officially stepped away on Dec. 31.

“The past 6.5 years have been nothing short of transformative. I am deeply grateful to have been part of such a visionary organization that consistently pushes the boundaries of innovation in the accounting & finance profession,” she said in her post.

In an email she said that the timing was right for her to pursue other interests she is passionate about. However, while she is stepping away from her position, she plans to stay involved and collaborate with the AICPA and CPA.com on strategic initiatives. When asked about specifics in an email, Johnson said she will still be very involved in the AICPA/CPA.com Startup Accelerator program (which she said was the most rewarding part of working at CPA.com) and serve as an overall strategic advisor to the organization working on key initiatives like the AI Symposium and Digital CPA.

In her goodbye message on LinkedIn, she thanked the AICPA leadership for helping her grow as a professional, and gave particular thanks to her research team, saying they are the true embodiment of change makers.

Regarding her immediate plans, Johnson told Accounting Today she plans to take a few months to reset and invest in some personal development interests. She added that she also completed her NACD Corporate Director certification and has been accepted to the Harvard Business School’s Executive Program on Private Equity and Venture Capitalism for the first quarter of 2025.

When asked about what her proudest achievement was during her tenure, she pointed to the AICPA Town Hall.

“I’m most proud of being part of the team that developed and produced the AICPA Town Hall. It’s inception was at the beginning of COVID; so many practitioners needed guidance on how to support clients and navigate all of the uncertainty. To see what the Series has grown into is nothing short of incredible,” she told Accounting Today.

Johnson joined CPA.com in 2018 as a strategic advisor before, in 2021, becoming senior director of strategy and innovation and then, in 2022, vice president of strategy and innovation. Prior to her joining CPA.com, she was the founder of accounting-focused tech consultancy firm Blue Ocean.

Accounting Today named Johnson a “One to Watch” in 2018 when she first joined CPA.com. She has since been named as one of Accounting Today’s Top 100 Most influential People in 2019, 2020, 2021, 2022, 2023 and, most recently, 2024.

Among other accomplishments, she was a major force behind CPA.com’s generative AI toolkit. Johnson has identified artificial intelligence as one of the key issues facing the profession, mentioning it as a vital matter in both her 2023 and 2024 survey responses. She has also expressed concerns about a certain polarization and cultural divide she has observed within the profession between firms where technology is an asset that drives value and firms where it is viewed merely as an operational expense. She has also expressed some skepticism of AI leading to a technological singularity that fundamentally alters human civilization and our conception as the dominant intelligence on Earth.