Many CPA firms work on cost segregation, but there isn’t much transparency between firms that compete for clients. There are knowledge gaps on pricing, processes, and how much cost segregation work other firms can take on.
A recent survey we conducted on the state of cost segregation and future trends can shed light on some of these knowledge gaps. In it, we found out how much CPA firms charge for cost segregation, on average, and other useful insights that all CPA firms should know.
How much are firms charging for cost segregation?
This is a question that all CPAs want to know the answer to, and we’ve got it. The average fee charged per cost segregation study is $9,000. However, that is the average of a wide range. Cost segregation fees vary from $2,500 to $30,000, depending on the size and complexity of the property.
Now, if you’re at the bottom end of that sliding scale, it could leave you wondering why others are getting away with charging so much more than you. While we don’t have a direct answer to that, the lack of transparency in this industry has likely created some wide price gaps.
Something else CPAs might wonder about is how many cost segregation studies other firms can complete.
How many cost segregation studies are firms able to complete?
Volume is a key part of a cost segregation business. The more studies you can complete, the more you will earn. However, some firms are limited in their ability to take on studies due to the high demand for labor and expertise to get studies done.
According to our survey, the average firm completes 310 cost segregation studies per year. That number ranges from as little as 2 to as many as 3,000. So again, huge variability and many dependent variables are in play, but you can get a sense of what your average competitor might be getting done.
Firms are also completing cost segregation studies on certain property types more than others. Here are the percentages out of all studies for each property type:
- 36.8% Residential and multi-family
- 31.6% Retail
- 18.4% Office
- 7.9% Industrial
- 5.3% Hotels
Another issue with volume is that many firms are outsourcing cost segregation to other firms simply because they can’t handle the amount of work. This again is the result of not having enough labor to complete studies, or perhaps using inefficient processes that don’t fully take advantage of the software and processes available today.
66.7% of those surveyed completed all their cost segregation studies in-house, 16.7% outsourced all their studies, and 16.7% did both.
How should you price your cost segregation services?
Now that you know more about what others are charging, you can take a balanced approach to match supply and demand. If you can’t take on that many studies, you’ll need to charge more for all that high-detailed work. However, if you can take on more studies using automation to make the process faster and easier, you can meet a greater portion of the demand curve.
If you can automate much of the work, you might charge a bit less to attract more customers (but not too much less). Then, you’ll maximize profits for your cost segregation business because you can complete more studies in less time. This is a more efficient way to scale than hiring more staff and continuing to charge higher prices.
How SegStream can help you maximize cost segregation profits
SegStream allows you to increase your cost segregation revenue without hiring any additional staff. Instead, you invest in making the process faster and more efficient through automation. SegStream enables this by removing much of the engineering and cost-calculating work. Instead, you enter your client’s property information into a detailed questionnaire, and the study is produced for you.