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114 CPAs Need to Stop Accepting Trap Money
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CPAs Need to Stop Accepting Trap Money
Trap Money is money that looks like good money, but in reality, it’s a trap.
Trap Money is important to be able to recognize because it’s one of the factors keeping CPAs under the glass income ceiling and working long hours.
If you can learn to recognize Trap Money for what it is, you’ll be better equipped to say No Thank You at the gates, and then, eventually move your Trap Money income out of your revenue streams.
If you can stop accepting Trap Money, it will make your transition to a high-margin CPA firm that much faster, and that much easier.
So what is Trap Money? It’s money that appears to take only 20 minutes to make, and you make 3 or 4 hundred dollars. Typically it’s in the form of individual returns.
It looks like good money, because the thinking goes that if it takes 20 minutes to make $300, that’s an hourly rate of $900, and that’s not shabby.
The problem is, that math doesn’t account for the whole picture.
The math on 20 minutes for a personal return is 18 weeks working 40 hours a week. 18 weeks is 4.5 months. Tax season is only 2.5 months, or 10 weeks.
Now, if you have 3 staff you can push the work to, that’s another situation. That’s 6 weeks per staff member. So that’s doable. If it’s truly 20 minutes per return, which we have established that it’s more like 2 – 3 times that.
But would you rather that your business have:
- 10 CFO-Advisory clients at $75K
- 30 clients where you are a Concierge CPA at $25K
- 50 simple Advisory clients at $15K
- 250 business returns at $3K
- or 2,000 Individual returns at $350 apiece?
A reason that so many CPAs are stuck on the hamster wheel is Trap Money.
Recognize it for what it is, decide WHO you want to have as clients and where you want to focus your talents, and get rid of anything that risks getting you caught in trap money.
If you don’t believe me, let me give you an update from Minnie, my client from last week’s episode. Last April, she was drowning in Trap Money. She was making enough Trap Money – she was making GOOD Trap Money – but the earning of that money had taken control over her life and crowded out time to spend with her new little one.
Once we got into her business, set up consulting packages at $2500, $5K, and $7500, she was able to start buying her time back, and that enabled her to find a new home for about 30 clients.
So watch out for these offerings you have that look like easy money….
If you’re not convinced, Do the math… and add up all the increments of time.
Your next steps to getting to the bigger ticket items is to stop accepting this type of work, take it off your services list, and if people ask for it, recommend some other CPAs who would be happy to have that type of work.
If you think you might have Trap Money you can’t see, and you want me to help you find it, a single 1:1 coaching session with me will surface it.
Getting rid of Trap Money is just one way to get your business to the next level.
Changing how you price is the single fastest change you can make with the largest impact.
Episode mentioned:
113 Out of Compliance and into Tax-savvy Stock Option Consulting, with Minnie Lau, CPA
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114 CPAs Need to Stop Accepting Trap Money
Stop accepting Trap Money to make your transition to a high-margin CPA firm faster and easier.
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“I used to work 60-hour weeks. The money was solid, but I was missing my 1-year old. Now, I work 30 hours a week and there’s more cash in my bank account than ever. It feels kinda strange, but I love it. What really matters though is I’m not missing the early years anymore.”