Pricing Pressure in the Accounting Industry
NEW episode of the Life First Accounting Firm podcast this week:
S1E2 Starting Stories: Buying a Tax Firm w. Logan George
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First off, hats off to everyone who does tax prep work! You made it to today! You are AMAZING! I hope you have something phenomenal planned to celebrate!
I think there’s downward pricing pressure facing our industry right now.
Full stop. (All the value-pricing spokespeople just unsubscribed. It’s fine.)
To be fair, I think there’s downward pressure in a lot of industries right now. In accounting services, I see it less in compliance tax prep and more in bookkeeping and fractional CFO / controller services.
But I don’t see anyone else broadly talking about it and I don’t know why. My theory is that the biggest voices in the accounting-influencer space don’t currently have firms, so they’re not feeling it and the ones of us that do (1) don’t know how to talk about it or (2) don’t think it’s happening to other firm owners so they feel a weird shame about it.
Quick backdrop on the US Economy
In case you haven’t taken a 30,000-foot view of the past 18 months in the US, here’s what we’ve faced:
New political administration
Tariffs…wait, no tariffs…yes tariffs…no tariffs…some tariffs?
Higher interest rates
War
Spiking oil prices (see War)
The age of AI ‘roid raging
Layoffs (see AI)
The lowest Consumer Sentiment Index EVER, just this month
Mix it all together and you’ve got a lot going on. Take a deep breath. We are living history…but aren’t we always.
What does that have to do with my solo accounting firm?
When Liz Wilke (now Chief Economist of Chase Bank) used to host the Gustonomics podcast, she would describe the economy along the lines of:
”a bunch of people doing their thing with other people.”
As firm owners, 100% of our clients are people reacting to all the things listed in the bullet points above. And the odds are good that most, if not all, of their customers or clients are people reacting to all the things listed above.
So to Liz’s point, you have a bunch of people reacting to a current situation. And based on the Consumer Sentiment Index at an all-time low, I think we know how people are feeling about the current situation.
So what do people do when things feel confusing or unstable?
They hunker down and try to stay safe.
If you’ve ever lived in a tornado-prone area, you know this well. Sirens go off, you grab anything with a beating heart, get to the basement, and you hunker down. You’ve stopped whatever you were doing and you’re just trying to stay safe.
Economic reactions can have the same impact on people with their money.
Something feels scary, people hunker down (with their cash) and stay safe.
Which means, people are not spending their money like they use to.
Which means your clients are not getting customer’s money like they use to.
Which means your clients have less money than they use to.
And if your clients want to preserve their own take-home income (which is almost always everyone’s immediate concern)…
Your clients will start looking for cheaper version of the things they are already spending money on.
Including…accounting services.
Or maybe I’m totally off base and I’m the only one seeing clients facing cashflow concerns. If not, I’ll write more next week about what our next steps are as firm owners.
Erica
**As a caveat to this, Yes, there are always industries that will thrive in rough situations. Home Depot sells more plywood when a hurricane is coming and your local Walgreens thrives when the flu rips through an elementary school. If you’re in a thriving industry right now, cheers! Seriously.
What’s Happening in Aligned
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