What Do Your Rates Say about You?
Yesterday, my dad called me on his way home from work. He wanted my opinion on which of two CPAs he should hire to do his taxes.
I’ve been working with a CPA for years now. But this is the first year my dad is outsourcing his taxes. In years past, he just had a personal return. This year, he has a rental property, so his taxes are now more complicated.
One CPA offered to do my dad’s taxes for $115. The other offered to do them for $345.
I couldn’t advise my dad based on price alone so I asked for more details. “Do they both do this full-time or what?” I asked.
“One guy does taxes for a living. He actually has an office with a couple of other guys working for him. The other one prepares tax returns in the evening after he gets home for his job.”
“Okay, so the guy charging $115 is the one doing it part-time and the guy charging $345 is the guy with the office.”
“You figured that one out quick,” my dad said.
I’ve learned that service providers who aren’t depending solely on the money they make from their business tend to undercharge.
I cautioned my dad about hiring the part-timer because he might be less responsive and may overestimate how much time he has to work on your return.
“In fact,” my dad said, “he was supposed to call me on Tuesday, but I haven’t heard from him yet.”
“Yeah, I’m not surprised. I recommend you pay the extra money and work with the guy who does this for a living. He’s depending on this money, so he’s got to make sure you’re happy. But the other guy has his job to fall back on. If you’re not happy, it’s not going to affect him that much.”
My dad was already inclined to hire the more expensive guy, but my input made him confident of his decision.
The reason I share this story here is because price is only one factor of many that influence how people decide who to hire.
If you provide an important service (like tax preparation or ad copywriting), charging too little may actually hurt your ability to get business.
That’s because people don’t want to hire the cheaper option and risk screwing up their taxes or an important sales promotion. They want it done right the first time.
What do the rates you charge say about you and the service you provide?
-Ryan M. Healy
