when not to charge for an initial consultation

bonus: a sample initial business valuation consultation engagement proposal.

by ed mendlowitz

q: i was wondering what your thought is regarding initial consultation fees.

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currently, i do not charge a fee for an initial consultation, and it seems that most cpas do not charge either (at least not the sole practitioners that i know).

would the fee deter new clients or actually weed out the ones who are most likely not going to become clients anyway? if a fee is charged, then how much, and how long should the consultation last? should the fee be applied to any work that i am eventually engaged to do?

a: there seems to be a toss-up between two different philosophies: people value something more when they pay for it, and you don’t want to create any barriers to entry.

i always charge for an initial consultation except if the consultation is for a substantial business client or a big work project (such as preparing five years of tax returns or an fbar situation). most (over 65 percent) of my initial consultations provide the information the client is seeking and there is definite value to the meeting. if they don’t want to pay, i see no reason to spend my time, and pass on it.

most of my initial consultations do not lead to additional business because they have their answers. of the remaining, about a quarter lead to additional work, so i am paid for all of my meetings and about 8 percent result in additional work on bigger projects.

the types of initial consultations i have are:

  • business valuation
  • estate planning
  • succession planning
  • tax planning
  • financial planning, business plan and projections
  • leveraged or management buyouts

following is a draft of an initial consultation engagement letter that i have used.

while this deals with a valuation, it can be adapted to most any situation, and i have. i also quote a fixed fee that is somewhat based on the value of the meeting to the client. there is no need to quote an hourly rate on this type of situation that i am hoping will lead to additional services and many people do not relate kindly to hourly rates and open-ended time possibilities.


sample initial business valuation consultation engagement proposal

dear mr. accountant,

you asked me what was involved in work, time and the cost of performing a valuation for a client of yours.

based on what you told me, i do not believe your client would need a formal conclusion of value. rather, he seems to need a discussion providing an indication of the value and a method that could accomplish what he wants. in most situations, i can cover that in an hour and half consultation. the fee for that would be $__________________ , including all of my advance preparation.

if your client needs the valuation for a tax-based transaction, transfer or estate tax return, he would need a conclusion of value for the fair market value prepared in accordance with irs rulings and requirements. i could quote on that, but this does not seem to be the case here.

note that the fee does not include any memos, calculations or written documentation. the client should not need it, but he could take all the notes he wants at the meeting. you as well as his attorney or other advisors could be at the meeting.

once i need to put something in writing, it becomes very involved. i have to state the facts, issues, purposes of valuation, include an extensive discussion not only providing the methodology of my determination of value, but why alternative methods are not applicable, have to address or offer explanations of eight specific items the irs wants to see covered and applied as applicable to the company being valued, apply adjustments and explain why, for control or minority interests, and discuss other potential issues that become a lengthy and costly process not necessarily adding to the determination of the value for your client’s purposes. i also will have to include detailed calculations and to follow procedures under aicpa standards for valuation services that will add quite a bit of time. further, i will need to have the report proofread and reviewed internally, adding more time.

my method of getting the information, reviewing it, running some numbers that i could refer to at the meeting and preparing a presentation tailored to the client’s situation, with the ramifications explained, seems to work well and is cost-effective for the client. it is also done at a fixed fee regardless of the time i need to spend once i get the requested information.

note that i am accredited by the aicpa in business valuation, financial forensics, personal financial planning and am the author of a book on succession planning that was published by the aicpa, as well as dozens of speeches and articles on business valuation and succession planning.

in case the client wants to proceed, i attached a document request. i would need as much of that information as possible as well as a check payable to my firm or credit card authorization for $_________________.

if any questions, do not hesitate to call me (cell_____________________).

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