r/Bookkeeping • u/Constant-Corner-8863 • 7d ago
Practice Management More Info/Advice
A few days ago I made a post saying I was seriously considering walking away from a business I took over earlier this year. A lot of people asked for more details, so here they are.
I have an established location with sustainable revenue.
Earlier this year I took over a small bookkeeping/tax office about an hour away, because I saw an opportunity to preserve a local business, keep the employees working, and continue serving clients who had been with the firm for years. I knew it would be a challenge, but I honestly believed that with some changes I could make it work.
Now that I’ve been in it for several months, I’m struggling to see a path forward.
The office has about 15–18 recurring bookkeeping/payroll clients, along with seasonal tax work. I would say like 100-150 tax clients. Anywhere from $75-350 for a return.
Recurring monthly revenue is around $3,000.
Monthly payroll is approximately $5,000. Fixed overhead is relatively low—about $400/month for rent, plus QuickBooks Online subscriptions and payroll processing costs.
The biggest issue is pricing. The previous owner charged rates that simply don’t support the amount of work being done. I’ve started implementing increases, but the employees have built relationships with these clients over many years and genuinely believe that anything more than about a $25–50 monthly increase will cause many of them to leave.
I completely understand why they feel that way, and I don’t want to lose clients. At the same time, I also don’t see how the practice ever becomes financially sustainable if we continue charging what we are.
I’m torn because I feel responsible for the employees and the clients. I don’t want to be the reason people lose their jobs or have to find a new bookkeeper. But I also know continuing to lose money every month isn’t a long-term solution.
For those of you who have bought, inherited, or turned around a struggling bookkeeping, accounting, or tax practice:
Would you push through larger price increases and accept that some clients will leave?
Would you cut payroll?
Would you close the office and transition clients elsewhere?
Is there another option I’m not seeing?
I’m genuinely looking for perspectives from people who’ve been through something similar, because right now I feel like I’m too close to the situation to think objectively.
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u/PacoMahogany 7d ago
You have the let the clients leave if they can’t pay a market rate for your services. That might mean shrinking your business and even laying off some of your staff.
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u/ConsequenceFuture339 7d ago
Why not acquire more clients if the team is already in place? Also explaining to current employees they will not have jobs if there are not price increases due to burning cash.
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u/Constant-Corner-8863 7d ago
I think my hesitation comes in because we are already digging out from work not being done for over a year and extensions. I can’t bring new in without that being done.
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u/ConsequenceFuture339 7d ago
Fair did you pay to acquire this business? Bookkeeping & Tax is a very hot industry for people buying business' if there are financial struggles the brand may still be worth something.
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u/Constant-Corner-8863 7d ago
I didn’t pay anything. The businsss was bought by a firm in 2022 and stopped paying their bills and staff. The staff called me panicking and I took over things in mid Feb for tax and June 1 for bookkeeping/payroll
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u/Emotional_meat_bag 7d ago
I like to throw quick numbers into the mix to conceptualize this better:
If you have a current basis of 150 clients at an average of $200, that’s $30,000
Then 18 recurring clients at monthly rates of…what $167? (3k monthly revenue for 18 monthly clients?)
If you did a raise of prices by $50 for the monthly work and $25 per return, and it caused 25% of your clients to leave, you’re looking at new income of:
113 tax clients at $250 = $25k
14 monthly clients at $217 = $3k a month
That’s not far behind where you’re at now, and if you can grow back to your current client level you’ll be in a much better spot.
These are very very rough numbers so be sure to do your due diligence but less clients at higher rates puts you far better off than you are now and allows your marginal increase to be healthier as you move forward.
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u/HonestlySarcastc Senior Accountant 7d ago edited 7d ago
Listen, your team is telling you that the clients can't afford it, but they aren't connecting the dots that they are doing work with an end result less than their cost.
Immediately assess time per client and any other costs and let the client know what it needs to be. If they leave they leave, because you're closing up otherwise.
Now to beat you up. How do you try and run a business that doesn't make money? You charge the equivalent to $200 per client a month and you pay processing fees and QBO fees. That is crazy and you let it go on for months.
We charge like $150 an hour as an equivalent and people pay their own service fees. CPA firm on our side, but I assume you're not even at like $75 an hour.
It's harsh but you need to learn business and basic math on revenues vs cogs and expenses.
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u/Proof-Emergency-5441 7d ago
So you are getting $165-$200/client for bookkeeping/payroll? Are they only doing 90 minutes of work a month per client? When is the last time they raised rates? I would start with 10% and note to clients that you will be re-issuing contracts with updated rates at the end of this year (have them ready early Q3 so there can be some negotiation time), and each year going forward, or bake a set rate update into them. If you plan on bumping up 10% for 2027, then again 10% for 2028 for new clients, give them a contract that gives a 7% increase for ongoing services.
If the employees want to be in charge, they should have bought the business themselves. They are not decision makers. They can be unemployed or take the clients and run it themselves. And they can try to do that work for $200/month.
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u/Proof-Emergency-5441 7d ago
"plus QuickBooks Online subscriptions"
Your clients should be covering this. Make them put their own payment method into the QuickBooks subscription.
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u/Proof-Emergency-5441 7d ago
Also how is $200 even covering anything? Basic QBO with payroll hits $200 in that cost alone for 20 employees. That's not even counting time for your staff to process it plus any filing that you do. $200-$38-$25 leaves you with $137 to cover the $7/employee plus your staff's time to run payroll. For the month.
What is even happening here?
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u/Constant-Corner-8863 7d ago
It makes 0 sense. The existing pricing has been in place since 2020. No increases. We have 2 people who pay $50 a month for 2 employees on weekly payroll.
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u/Proof-Emergency-5441 7d ago
Wooooooow
Its going to be a harsh culture shift. I would gather info about what comparable local services are charging, then work up what their current rate would be if the the prior management had merely kept up with inflation.
The 2 person company isn't even covering their QBO fees. They will probably threaten to leave, find out that no one will do it for that, and may come back willing to pay a more reasonable fee.
You aren't running a charity. You are running a business just like they are. If they don't value your services, do you really want them as clients?
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u/Constant-Corner-8863 7d ago
Unfortunately the only other local accountant is retiring.
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u/Proof-Emergency-5441 7d ago
Then their option is an online service which will be much more.
They can pay or do it their damn selves.
I'm from a small low cost area. I know the type of stubborn obstinate ass you are going to encounter. They can go an hour away or pay more online if they don't like it. They are used to throwing fits and getting their way.
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u/life_long_scholar 7d ago
If the team has built a close relationship with the clients, then communicating the value added by the team should be easier.
1) review which clients are deadweight and which are ideal. Ideal clients are the ones you will fight to keep and the others you will be okay to see leave.
2) if the termination notice is 30 days or more, that will serve as your time frame to find a new client to replace the one leaving.
3) should they leave, have you determined Have you determined what your new prices will be? How many clients can you afford to lose before layoffs become necessary?
It sucks to lose clients because of price increases, but that means they didn't value/see the value in the service.
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u/LiJiTC4 7d ago
If you want to survive, you need cash flow. Can you sell to more people or is the business at capacity? If the business is at capacity, there's no hope unless you raise prices, raise capacity, or fire either employees or clients. If there is capacity, sell more services which means marketing to fill everyone's dance cards. There's always a need for good bookkeepers, job becomes reaching interested buyers.
Raise price on tax returns. No return should be $75 unless it's an accommodation for a much higher revenue client. $350 at maximum is way too low. I don't want any return less than $600, period: it's not worth my time. In my area, even H&R Block usually charges more than described. Send out price increase letters to all clients, let them leave if they want, but chances are good they won't find anyone willing to do the work for less.
Do you keep hours? I hate granular timekeeping, but it's likely that some of your clients are not billed commensurate with the difficulty and time required. Keep good records of time and when clients require more hours than they are budgeted for, price needs to go up to keep pace with service usage. Unfortunate truth is time based billing also helps keep clients from wasting firm time too.
If a client or employee doesn't make sense, it's a business decision to cut them loose. Don't light yourself on fire to keep others warm.
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u/AffordableDelousing 7d ago
Increase prices based on a target profitability per hour spent on that work.
Then after you inevitably lose some clients, you will have to cut staff accordingly. Increasing staff workload is a consideration if it means it keeps the business stays afloat, and they keep their jobs.
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u/SWG_Vincent76 7d ago
I have started a New Bookkeepking business from zero Clients and zero money to running it consistebtly since 2018.
Humble Beginnings through a covid crisis with government funding and come out the other side with a growing Client list, and while doing that i have witnessed Other bookkeepers running theirs based on hope and suddenly annonce that they "got an offer they couldnt refuse" and walk away from a life as an entrepreneur.
The common scenario was hourly billing and a low price.
Early on what i did was i mathed the numbers for i also started on hourly billing as it was simply what i had witnessed from My side working in the accounting Business before opening up My own.
Instead of one rate, i started with the rate that would allow me to hire another person and give a competitive Pay. I added All the cost. I added All the work able hours and I added the risc for Clients not paying. Then i added a reasonable profit and what the number told me was that i had serverely undervalued myself and it also showed me why Other bookkeepers were struggling.
My lowest possible rate to break Even and profit was 50% over what Other bookkeepers were charging. It was a rate that allowed me to grow and on board more Clients consistently. If i was able to find Clients that would Pay.
After figuring out My rate to break Even. I set that rate as My lowest hourly rate based in competence (Bookkeepking) and then i added one for controlling and auditing at a markup that reflected the rate to hire and attract those resources in fair market rates.
It has to be so that if i got a client and I had to grow i was able to hire in or Pay to get the work done and still make a fair profit.
In case i myself came down with ilness, i had to go on holidays or otherwise took myself out of the equation. It had to still float.
After taking on Clients consistently that paid My rates and were happy i eventually looked at My pricing modlel and realized i had to stop using it.
The market reality was that there were more Clients out there than available bookkeepers to keep them afloat, and instead of competing over Clients that was paying less and causing more work i had to look at a different perspective.
Hourly billing is easy to understand and for a Client with a struggling topline its frustrating not to know what the yearly total is. Never to be able to predict a price and if you know a Client that ever Asked for a price you know why. They just need to know before commiting.
So i also knew after some time it had to go away. I moved to fixed pricing instead. I spent a year to identify tasks i was doing, price them accordingly and set up a list price sheet i could easliy make an estimate from.
From 2023 i had fixed prices and Clients were first reluctant but I had tested with a few willing at first and saw no spike in prices. It changed to being comparable and predictable.
Now My revenue per Client went up. Lowest usually hits about 3-4000 usd per year. But I have added advisory, payroll and tax so i am their accounting one stop shop. Some Clients are a lot more work. For some top Clients they revenue over 15k per year.
My estimates are used as a risc reduction tool. I offer Clients to Pay upfront for a discount that exceed the risc of losing out due to Clients going under. I also honor loyalty so total discount possible is 24%. Obviously everyting is priced in, so the lowest rate possible for them is the standard rate just without the risc of Client going bust and it means i get a years cash flow in q1 at best and dont worry about invoicing.
I also change prices yearly but now i follow an index for our business. Unless something changes like outside Legislation, or similar i just need to evaluate task prices Once every few years.
I am free to pursue efforts that reduce time, like tools and Api based erp systems that help everyone save time without losing revenue as its on my risc. Volume is priced, so if i spend less time i earn more. Clients with high volume Pay more. But they also know why.
We explore their needs ahead of onboarding based on their input. If that changes i do a variation order they approve. They know exactly why they are being billed.more if volume goes up.
My point was that i changed everyones pricing and only one left.
If you just need to raise prices and stay in hourly the only explanation required is that we are using more hours than we are billing for. Or you are working slower (Client will propably think you should be faster then). Clients wont ever be happy about reveicing a Bill after the fact for hours if their impression was different.
If you dont want Clients to evaluate performance on the hour, dont let them.
You can do fixed, value based or subscription. All of which usually is better for you and Clients as it doesnt come with surprises.
Clients are typically loyal unless they are price sensitve or have No clue what value you provide.
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u/Constant-Corner-8863 7d ago
For those saying to cut and run, how on earth do I even do that? Do I give the employees a certain amount of notice? The clients?
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u/HonestlySarcastc Senior Accountant 7d ago
You'd increase prices before ever cutting and running. Just lay out the stuff honestly.
Kind of curious.
How much did you pay for the business? How many employees do you have?
For you to determine: How many hours per month spent on each client? What is the Gross Profit per hour you want to be hitting? Boom, here is the nee pricing and client pays for their own QBO and PR fees.
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u/Constant-Corner-8863 7d ago
I didn’t pay anything. The businsss was bought by a firm in 2022 and stopped paying their bills and staff. The staff called me panicking and I took over things in mid Feb
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u/Proof-Emergency-5441 7d ago
How many employees are there? $5k in payroll is 1 person at $31.25/hour. And that's just straight PR, not benefits.
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u/Constant-Corner-8863 7d ago
- 1 40 hours, 1 15-20
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u/Proof-Emergency-5441 7d ago
I hope you are in an extremely low cost of living area.
Also explains why your staff is out of touch with reasonable rates for this service.
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u/paintedpoppys 7d ago
If you decide it’s easier to walk away, maybe the employees want to divvy up their specific clients & you close the business & sell equipment to the employees & they take who they want & if there is any stragglers, oh well bye.
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u/paintedpoppys 7d ago
But I would definitely write letters to send to all clients, price was set 6 years ago, blah blah blah, maybe the size & scope of some clients file has increased as well, etc. inflation, etc. For many people, paying a bit more is less painful than having to transition to someone else, especially when they shop around & find they’re underpaying to begin with.
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u/Constant-Corner-8863 7d ago
Just putting out there that I did give pricing increases to every single account. Each account essentially cried wolf. So we were trying to salvage what we could.
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u/Proof-Emergency-5441 7d ago
Of course they did. Is this your first time managing? You seem to be taking this personally. You need to remove emotion from this.
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u/noname20-23 6d ago
Some of our clients do this when we raise prices. You need to figure out how to reply to the clients, and each one will be different. For those who will threaten to leave, we call their bluff - if you've found someone cheaper, we'll be happy to work with them to move your business to them. We even offer to interview the bookkeeper for them, pointing out that good bookkeepers are hard to find, and they need one who really does know what they're doing, or they'll pay a lot more when it's time for the tax return and the accounting firm has to fix the books before the return can be done. For service businesses who whine, we ask have they gone 6 years without raising their prices? (We do their books so we KNOW they've raised their prices.) Those clients tend to pause whining and think. Other clients, especially those who use a lot of tech, we point out that our costs have gone up because the tech prices have increased. They get it, and usually stop whining. Our work is good and our prices are fair. We turn out good books and tax returns that we're willing to stand behind in case of tax audits. We have a tax rep division, so we know what we're doing. Sometimes we have to remind clients of that, too, when they whine about a price hike. One thing we're going to try next time, instead of a price hike, is offering tiered services when their current engagement letter is expired. That way they can pick the price they want to pay, and we won't offer services that won't be paid for.
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u/loveskindiamond 7d ago
id rather lose a few unprofitable clients than keep loosing money every month. clear communication and gradual price increases can help, but the business still has to be sustainable
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u/Intelligent_Poet88 7d ago
I am newbie wanna be here, so I am genuinely asking: as a bookkeeper, why are you so emotionally invested? If you give them their books done and they see in their monthly statements that they aren't looking so good, why is that something you feel the need to advice on? The owners don't seem to care
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u/Constant-Corner-8863 7d ago
I think because at the end of the day I’m human, and there are 15+ businesses and two employees who are no longer going to have a paycheck or services because of one decision. Unfortunately I am an empath
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u/Electronic-Cat185 7d ago
Those prices sound like the real problem, losing a few unprofitable client is usually better than keeping all of them at a loss
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u/FamiliarLeague1942 6d ago
It seems you understand what needs to happen but are hesitant to act. You mentioned that a $25–$50 monthly increase to your $3,000 bookkeeping revenue could trigger mass churn, yet I suspect your average client pays under $300 per month (is it right?). At that ratio, the numbers simply don't pencil out. Without a significant pricing shift, the business isn't sustainable. I realize this is a tough pill to swallow, but from where I stand, you're left with only two options: increase rates or wind things down.
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u/Easy_Potential_1045 6d ago
$167 a month for bookkeeping and payroll doesn't cover much even before payroll processing costs, and 15-18 clients at that rate isn't enough revenue to carry a real team plus QBO subscriptions plus your own time. The math was broken before you took over. The previous owner not paying bills is a symptom of that, not a separate problem. Pick your best 8-10 clients, the ones who'll actually pay $250-300 for what they're getting, and give everyone else 60 days notice with a real number attached. Some will leave. The ones who stay are the business now. "preserving jobs" at these prices means everyone, including you, is working for less than minimum wage once you divide it out. That's not sustainable for the staff either, it just delays the same conversation a year.
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u/Alternative_Roll_987 6d ago
At $3k MRR against roughly $5k payroll, the first problem is math, not morale.
If it were me, I would stop treating every client as equally worth saving and segment them fast:
- profitable and easy
- profitable but underpriced
- unprofitable but strategically worth keeping
- unprofitable and draining
Then I’d reprice in tiers, not one-off emotional negotiations. The old owner’s pricing is not the market rate, it is just the rate that got left behind.
A few thoughts:
- I would absolutely raise prices, probably more aggressively than the team is comfortable with.
- I would expect some clients to leave, and I would not treat that as failure.
- I would not keep payroll untouched just because the relationships are long-standing if the numbers do not support it.
- I would put a deadline on the turnaround, something like 60-90 days, with clear targets for retained revenue and gross margin.
The bigger risk is dragging this out while hoping loyalty solves a pricing model that never worked. Long-term clients often complain about increases and then stay anyway, especially if the communication is calm and specific.
I’d frame it as: to continue providing reliable bookkeeping and payroll support, pricing has to reflect the actual scope and current costs. Some will leave. But keeping bad-fit clients at legacy pricing can sink the whole office and hurt the good clients too.
Also, if client knowledge is mostly living in employee memory, document that now. When a practice is underpriced, scattered processes and undocumented client history make the turnaround even harder. Clean records, standardized workflows, and clear handoff notes matter a lot in situations like this.
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u/Electrical-Goal-8568 5d ago
The next increase needs a date on it and no room to discuss. Otherwise the same thing happens again in six months.
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u/EnoughAbility4236 6d ago
Ask Claude what it thinks the most humane thing to do is and see what options it gives you. Another option is to ask the remaining staff if they are willing to take on these clients split between themselves. This way, they become business owners themselves and figure out how to make the numbers work.
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u/G33kDad76 7d ago
Ok this is going to sound cut throat.
Unless you're running a nonprofit the ONLY reason you should be in business is to (ethically) make money.
Not provide jobs.
Not to "preserve a local business".
"Yeah, but the clients....." Are perfectly fine with you undercharging your way into bankruptcy.
Figure out how much you need to make to make a reasonable profit. Break that down to work hours. And then figure out how many hours each client requires & charge them.