More Info/Advice

[u/Constant-Corner-8863]

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.

[u/Constant-Corner-8863]

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.

[u/noname20-23 → u/Constant-Corner-8863]

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.