Total lack of understanding

Total lack of understanding

Didn't find your answer?

Just in case you haven't noticed, over the years I've had some discussions with various members about Value Pricing (VP).

The members who disagree with me seem to think VP is about ripping clients off. They prefer a "time/cost plus notional profit" approach to pricing, sometimes using timesheets sometime not.

I come at this from the position that time/cost pricing is selfish/self-centred and effectively makes the profession unethical. Continuing with time/cost pricing will make the accounting profession irrelevant. The conclusion is that accountants will just do is more accounts/tax returns as they gradually become more efficient forced by prices falling.

Many existing practitioners may get out before they experience too much pain, but what about the future?

When you understand VP you appreciate it is the only approach to pricing that:

  • Puts the client first
  • Fully aligns the accountant and client
  • Encourage and rewards innovation
  • Drives down costs on low value work
  • Maximises value for everyone (clients, practice owners, employees and society)

Pricing is fundamental to strategy so it seems sensible to me to understand as much as possible about such an important topic. At the end of the day being an accountant in practice requires much more that technical knowledge of accounts/tax. But, there is another reason to fully understand VP.

Business owners expect/need this extra knowledge (especially now) and an accountant who does not understand VP and just prices with cost/plus will probably only be able to talk to their client about things like job costing. 

Over the years I have invested time and energy to build my knowledge of VP through:

  • Reading books
  • Attending seminars and Webinars
  • Accountants (and other professional) who have adopted VP
  • Using VP

I'm interested to know where you have gained your understanding. What have you actually done to build your knowledge of VP?

Bob Harper

Replies (380)

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By petersaxton
12th Nov 2012 14:05

Simple fact

"This is why time spent is irrelevant - do you care/ask how long it took to design a car before you buy it?"

A product is totally different to a service.

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By JCresswellTax
12th Nov 2012 14:11

What a load of

*****

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By Bob Harper
12th Nov 2012 14:13

Time

@Nigel - your list reads like a accountancy firms.

I have not considered VP in the NHS but I think it could be more like Germany where you have specialist and doctors get paid more if there patients are not ill.

@JustSoTax - it could be that clients are with us for say seven years on the basis that at some point we could do no more for them, other than accounts/tax. 

Bob

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Replying to neiltonks:
Me!
By nigelburge
12th Nov 2012 14:24

Well done Bob!

Bob Harper wrote:

@Nigel - your list reads like a accountancy firms.

Bob

Yet another totally uncalled for insult to us all (at least I think that's what it was - grammar was a bit weird!) - keep it up - you really do make me smile. :-)

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Replying to neiltonks:
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By User deleted
12th Nov 2012 14:27

Ah, now we're getting somewhere ...

Bob Harper wrote:

@JustSoTax - it could be that clients are with us for say seven years on the basis that at some point we could do no more for them, other than accounts/tax. 

Bob

... chew them up and spit them out!

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By petersaxton
12th Nov 2012 14:14

Think of an estate agent

The client wants conveyancing done for a house purchase. Nine estate agents will charge the market rate of £1,000. Bob is in favour of value pricing and comes up with a price of £2,000.

What price would Bob actually suggest to the client and what would he do to convince the client to choose him?

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By User deleted
12th Nov 2012 14:20

Just worked it out ...

 ... Bob is a Cylon skinjob, the missing 14th variant!

 

(if you must ask, look here http://en.wikipedia.org/wiki/Cylon_(reimagining) - well worth watching, on e of the best Sci-Fi series ever, IMHO)

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By Bob Harper
12th Nov 2012 14:30

Wrong

@Peter - wrong again because you don't understand VP.

@OGA - with is a difference between free advice in terms of not charged for and delayed payment linked to results.

I am sure clients would agree to fees if they hit certain targets. And, if you knew you would get paid if they did I wonder if you would do more for them or find innovate ways to work with them.

Perhaps you'd set up a franchise/network of accountants and develop tools, video training and resources that start-ups could use for free for 12 months.

Bob

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Replying to cjtrevor:
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By User deleted
12th Nov 2012 15:33

I find this answer,

Bob Harper wrote:

@Peter - wrong again because you don't understand VP.

@OGA - with is a difference between free advice in terms of not charged for and delayed payment linked to results.

I am sure clients would agree to fees if they hit certain targets. And, if you knew you would get paid if they did I wonder if you would do more for them or find innovate ways to work with them.

Perhaps you'd set up a franchise/network of accountants and develop tools, video training and resources that start-ups could use for free for 12 months.

Bob

apart form being patronising as usual, frankly insulting and borderline libelous.

You know nothing of me, my clients or my approach and to spout such rhetoric ad nauseum is potentially legally problematic for you.

I fail to see how the items you suggest are aimed at my clients, I prefer to work in a client focused way, rather than a one size fits all. I don't say that there is not a place for your approach, but who is entrenched and closed minded, the one trick pony, or someone who takes each case on merit and deals with it appropriately?

So say we all! (sorry, rather into Battlestar Galactica at the moment - I need a dose of realism to help cope with all the fantasy on here!)

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By Bob Harper
12th Nov 2012 14:32

Hand them on

@OGA - interesting how people see things differently.

My thinking is that once we have achieved everything we can do they should consider moving on to someone else who could help them with the next phase of their journey.

That's the right thing to do isn't it? At least offer it.

Bob

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By Bob Harper
12th Nov 2012 14:35

@Nigel - you insulted the NHS but I was thinking about accountancy partnerships which are usually managed like a golf club arguing about parking spaces.

Bob

 

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By petersaxton
12th Nov 2012 14:37

Bob's standard response when he can't respond sensibly

"wrong again because you don't understand VP"

or he just ignores the question.

 

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By uktaxpal
12th Nov 2012 14:48

VP in NHS see Youtube Video "Not the nine o'clock news"-NHS    (Have an auction)

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Replying to 0098087:
Me!
By nigelburge
12th Nov 2012 14:58

Can't find it........

uktaxpal wrote:

VP in NHS see Youtube Video "Not the nine o'clock news"-NHS    (Have an auction)

.... can you post us a link?

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Replying to DJKL:
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By MarionMorrison
12th Nov 2012 16:23

Not the 9 O'Clock News

nigelburge wrote:

uktaxpal wrote:

VP in NHS see Youtube Video "Not the nine o'clock news"-NHS    (Have an auction)

.... can you post us a link?

http://www.youtube.com/watch?v=-UdIgFyFCyA gets you a chunk of NTNOCN starting with the sketch where Pamela Stephenson first met Billy Connolly but goes into the Hospital Bed Auction at about 30 secs and follows it with another good sketch.

Funnier than this thread of utter wasted time.  I'm sure Bob's an Inland Revenue agent trying to waste our billable hours....

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By justsotax
12th Nov 2012 14:52

ok, so they move on to who....

an 'accountant' who rips them off because he charges based upon time or indeed is not fully committed to using the VP strategy?

 

I only asked the question as in an average firm, you may retain say 80% of your clients for lets say 10 years (excluding business cessation/death)....so there will be some loss due to service provided/price/perceived VFM etc....just really wanted to compare that with a VP practice.....

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By uktaxpal
12th Nov 2012 15:11

sorry the patient seems to have jumped and the bidding will need to start again

 

It was there but now isnt

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By The Black Knight
12th Nov 2012 15:11

Record? Henry?

and now for something completely different!

is there an AWeb record for the number of reads and posts or has this thread just set one?

 

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By Bob Harper
12th Nov 2012 15:14

No

@Peter - ignoring the question would not be responding at all.

It's not compulsory I answer every question and you have a book that you haven't read. But, I VP doesn't always mean a high price.

Bob

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By Bob Harper
12th Nov 2012 15:17

Lower price

@JustSoTax - moves on to a firm who just does compliance for a lower price than us.

Bob

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By petersaxton
12th Nov 2012 15:21

Lack of understanding again

"It's not compulsory I answer every question and you have a book that you haven't read."

Of course it's not compulsory but, given people's experience, there's a good chance they would be correct in why they think you haven't answered.

It's also pointless reading a book if you don't understand it and given your answers or non-answers it would appear that you don't understand value pricing or at least what you have described it as because people have come up with very valid points that you have failed to address.

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By justsotax
12th Nov 2012 15:34

I just don't get it....

for 6 pages you have proceeded to tell anyone who will listen that unless you do VP you are a ripoff merchant of the worst kind offering the client the worst possible deal.

 

Only to then suggest that a client with compliance only requirements (who has outlived there useful life with you) then move to someone charging a lower price....presumably not a VP firm as they want to maximise fees by offering various services.....so someone perhaps offering a variety of charging levels....perhaps dare i say time based...or a variant of VP but not as you like it.....

 

Bizarre...

 

 

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By Bob Harper
12th Nov 2012 15:36

Estate agent

 

@Peter - your question was:

The client wants conveyancing done for a house purchase. Nine estate agents will charge the market rate of £1,000. Bob is in favour of value pricing and comes up with a price of £2,000.

What price would Bob actually suggest to the client and what would he do to convince the client to choose him?

The problem with the question is presupposition that I would come up with the price; VP is about developing the price "with" the client based on their value drivers.

So, I could not give you an answer.

However, I would offer 3-5 prices and include different features/benefits, safeguards/guarantees so the client could choose. This could be timing of the service or the way it is delivered e.g. daily progress reports.

The objective with marketing (which comes before pricing) is to differentiate so you can't be compared to the competition. The object with strategy (which comes before marketing) is to target a specific market with an unmet need.

If you do the strategy and marketing right there is not a lot of need for selling and even less price pressure.

This is why VP is not easy; it forces a firm to go back to basics.

Bob

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Replying to DJKL:
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By The Black Knight
12th Nov 2012 15:50

tactical avoidance?

Bob Harper wrote:

 

@Peter - your question was:

The client wants conveyancing done for a house purchase. Nine estate agents will charge the market rate of £1,000. Bob is in favour of value pricing and comes up with a price of £2,000.

What price would Bob actually suggest to the client and what would he do to convince the client to choose him?

The problem with the question is presupposition that I would come up with the price; VP is about developing the price "with" the client based on their value drivers.

So, I could not give you an answer.

However, I would offer 3-5 prices and include different features/benefits, safeguards/guarantees so the client could choose. This could be timing of the service or the way it is delivered e.g. daily progress reports.

The objective with marketing (which comes before pricing) is to differentiate so you can't be compared to the competition. The object with strategy (which comes before marketing) is to target a specific market with an unmet need.

If you do the strategy and marketing right there is not a lot of need for selling and even less price pressure.

This is why VP is not easy; it forces a firm to go back to basics.

Bob

 

And I thought you had tactically avoided a trick question? because estate agents can't do conveyancing? Although they do charge referral fees to solicitors. A no value to the client transaction, hidden of course.

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Replying to pauljohnston:
By petersaxton
12th Nov 2012 17:03

Estate agents/solicitors

The Black Knight wrote:

Bob Harper wrote:

 

@Peter - your question was:

The client wants conveyancing done for a house purchase. Nine estate agents will charge the market rate of £1,000. Bob is in favour of value pricing and comes up with a price of £2,000.

What price would Bob actually suggest to the client and what would he do to convince the client to choose him?

The problem with the question is presupposition that I would come up with the price; VP is about developing the price "with" the client based on their value drivers.

So, I could not give you an answer.

However, I would offer 3-5 prices and include different features/benefits, safeguards/guarantees so the client could choose. This could be timing of the service or the way it is delivered e.g. daily progress reports.

The objective with marketing (which comes before pricing) is to differentiate so you can't be compared to the competition. The object with strategy (which comes before marketing) is to target a specific market with an unmet need.

If you do the strategy and marketing right there is not a lot of need for selling and even less price pressure.

This is why VP is not easy; it forces a firm to go back to basics.

Bob

 

And I thought you had tactically avoided a trick question? because estate agents can't do conveyancing? Although they do charge referral fees to solicitors. A no value to the client transaction, hidden of course.

Just a bit of silliness on my part!

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By Bob Harper
12th Nov 2012 15:41

Lower price

@JustSoTax - I really find it hard to believe you don't get it.

I think I have said this more than once on this thread; VP doesn't always mean a high price. I would not move a client to a firm who charged based on time.

Bob

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By justsotax
12th Nov 2012 15:48

Oh I hear what you

say....and you may not understand my concern.  But i find it hard to believe that there is a VP firm out their that as a result of this pricing strategy has decided to corner the market in offering the lowest prices but is still able to achieve the 'best' for the client in service etc....if it looks to good to be true?

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By uktaxpal
12th Nov 2012 15:51

Is VP the equivalent of Black Marketeering?

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By User deleted
12th Nov 2012 16:03

Also ...

... this is the correct forum, we are having (an albeit endless) discussion on the pricing structure of a practice.

So far I have learned that there are only two ways of running a practce, either on Value Pricing, or on Cost Plus pricing. There can be no mixing and matching as this would upset Ron Baker and his dsiciples and we could end up in the European Court on human rights issues of religious intolerance.

I have also learned that VP gives you prescient powers allowing you to make informed and accurate assertions about clients and accountants and their relationships and business models without even knowing who they are, let alone having met them!

I have also discovered VP means you charge vitually nothing for compliance work, yet are able to be undercut by rivals offering this service.

I have also discovered that after seven years I am incapable of adding value to a client and should cease the relationship, forcing my client to have a new firm waste hours of their time finding out things I already knew and to lose a valued and trusted confident.

I think Man. Utd. are lucky Sir Alex doesn't use a VP strategy!  

 

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By User deleted
12th Nov 2012 16:02

Ah but ...

... the thread can't be stopped, like Skynet it has beome selfaware and will not let anyone pull the plug!

Besides, we have never drawn this much information from Bob in a single thread, the more we can get the more effective my Vodoo doll!

I don't think there have been any temper tantrums, there is only one voice saying there is only one way to price - it is more akin to the behaviour of red deer stags this time of year!

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Replying to forrest gump:
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By User deleted
12th Nov 2012 16:06

Information?

Old Greying Accountant wrote:

...Besides, we have never drawn this much information from Bob in a single thread,

He may have said lots, but I'm struggling to find much meaningful information in his posts. In terms of repeats, it's worse than Family Guy.

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Replying to stepurhan:
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By User deleted
12th Nov 2012 16:15

Exactly ...

BKD wrote:

Old Greying Accountant wrote:

...Besides, we have never drawn this much information from Bob in a single thread,

He may have said lots, but I'm struggling to find much meaningful information in his posts. In terms of repeats, it's worse than Family Guy.

... the more he says, the more the stitches fall out the emperors clothes.

I vote to keep going and see Bob naked :o)

 

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By justsotax
12th Nov 2012 16:14

But BKD....

don't you invariably notice something else when you watch something repeatedly....something you didn't notice when you first watched it....(just an observation)

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Replying to forrest gump:
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By User deleted
12th Nov 2012 16:20

Gleaning further info

justsotax wrote:

don't you invariably notice something else when you watch something repeatedly....something you didn't notice when you first watched it....(just an observation)

Sometimes - but not in this case. The opening post was full of BS and I haven't noticed anything else yet.

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By User deleted
12th Nov 2012 16:16

OMG ...

... did I say that out loud?

Anything but that!

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By User deleted
12th Nov 2012 16:22

Ah but ...

... my roses need a tonic!

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By Fidodido
12th Nov 2012 16:36

Question again bob

Bob sorry but you did not answer the question.

what advice are clients not getting by not using value pricing.  That is what you stated.  So either the statement is wrong or you can explain.

Just because you do not use value pricing does not mean you do not give the best advice possible to clients and look for all oppurtunities possible to help your clients.

 

Trust is gained from clients over the years. People in business talk and if x got charged y for a piece of work.  why did we charge them y +z.... thats where you lose trust. So that is how i am linking trust with fees. we have already charged a premium for the premium work that we are happy with and we know the client will be happy with.

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Replying to Justin Bryant:
Red Leader
By Red Leader
12th Nov 2012 16:46

@Bob

Is there anything you'd like to add?

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By Peter Kilvington
12th Nov 2012 16:56

285 posts and counting

Can anybody put an estimate on the value of the 285 (now 287 two crept in while typing) posts shown in this thread

If possible I would like the estimate in terms of:

Chargeable timeCost plus notional profitValue pricing

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Replying to mely:
Me!
By nigelburge
12th Nov 2012 16:57

NO, no, no

Peter Kilvington wrote:

Can anybody put an estimate on the value of the 285 (now 287 two crept in while typing) posts shown in this thread

If possible I would like the estimate in terms of:

Chargeable timeCost plus notional profitValue pricing

Only VP is valid.

The other two are a total waste of time only used by people with no brain.

Come on. Do keep up!!!!!

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Replying to mely:
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By The Black Knight
12th Nov 2012 17:01

priceless

Peter Kilvington wrote:

Can anybody put an estimate on the value of the 285 (now 287 two crept in while typing) posts shown in this thread

If possible I would like the estimate in terms of:

Chargeable timeCost plus notional profitValue pricing

chargeable time £28,500,000

Billable £ nil

value £ nil

Bob spanking entertainment  £ priceless

 

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By petersaxton
12th Nov 2012 17:02

Is he serious

"You should go and lie in a cold bath in a dark room - arguing with Bob has clearly got you upset. Or perhaps put you in such an argumentative mood that you'll now argue with anyone for the sake of it."

That's strange. You come on here saying that people shouldn't take part in discussions because you don't want to read it and you fail to understand there is a way of not reading it that sensible people are able to understand. It's not my fault if you can't understand the obvious solution for you.

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Replying to lionofludesch:
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By User deleted
12th Nov 2012 17:14

Yes, I'm serious

petersaxton wrote:
.

You come on here saying that people shouldn't take part in discussions because you don't want to read it

Where did I say that? But thank you for confirming my view - Or perhaps put you in such an argumentative mood that you'll now argue with anyone for the sake of it.

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Replying to Wanderer:
By petersaxton
12th Nov 2012 17:21

Here

BKD wrote:

petersaxton wrote:
.

You come on here saying that people shouldn't take part in discussions because you don't want to read it

Where did I say that? 

 

10:28 I think time should be called on this thread now, as it's going absolutely nowhere.

14:01 ..... please make it stop

14:49 But if I think that a thread has run its course (and I would appear not to be alone in that thinking) I am entitled to say so. I suggest that those that want to continue to argue the toss on a [***]-for-tat basis do so via the PM facility

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Replying to mrme89:
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By User deleted
12th Nov 2012 18:10

Misconstruction

petersaxton wrote:

BKD wrote:

petersaxton wrote:
.

You come on here saying that people shouldn't take part in discussions because you don't want to read it

Where did I say that? 

 

10:28 I think time should be called on this thread now, as it's going absolutely nowhere.

14:01 ..... please make it stop

14:49 But if I think that a thread has run its course (and I would appear not to be alone in that thinking) I am entitled to say so. I suggest that those that want to continue to argue the toss on a [***]-for-tat basis do so via the PM facility

Not one of which quotes is a valid response to my question. I could try and explain the difference to you (for starters, most of this thread is anything but a 'discussion'), but seeing as how you're just plain argumentative at the moment, I don't think I'll bother. So if that's how you want to misconstrue my comments, go right ahead.

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By petersaxton
12th Nov 2012 17:09

Not efficient

"You may think that - but you can include as many or as few participants as you wish with PM."

You can include as many as you want but not efficiently.

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By ireallyshouldknowthisbut
12th Nov 2012 17:17

.

What a nice bookend for the day.

I have billed a £299+VAT husband and wife landlord 'fixed' fee for which I added £125+VAT as we did some extra work for him going overseas and he is minted and wont mind. 

Three quarterly £325+VAT fees which only needed a flat rate VAT comp and little else. Did all three in 30 minutes as assistant did most of the paper shuffling. 

One VAT that needed a good hour on it, but I only got £75+VAT for it but there is no point asking for more as they are normally a 20 minute job.

And did a stack of emails, couple of calls, arranged a rare face to face meeting (paid for £300 on the table) for next week and filled in my ICAEW CPD declaration. 

No timesheet filled in. No real "added value"

Just routine compliance work and assuming £75 earned for the VATs (most of it is for the year end), £724 plus some profit on the flat rate VAT scheme, about £100 of assistants wages and off just after 5pm, got to be at least £600 profit there for the day. 

 

No money in basic compliance work of course.

 

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By petersaxton
12th Nov 2012 17:24

Don't forget the extras

"No money in basic compliance work of course."

But if you'd thrown in a few lifetime cashflow forecasts you could have charged £6,000!

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By Bob Harper
12th Nov 2012 17:43

Looks good

@JustSoTax - what about www.crunch.co.uk?

If we can't find a firm/s we may have to offer the service ourselves or create another network of accountants who just want to do low price compliance well. At the moment we are working to around £750 for accounts/tax for a limited company.

@Fidodido - I'd need to talk to your clients to find out what advice they didn't get but to understand the principle of why VP delivers more value you'd need to understand VP and the best way to do that is to read Ron's books.

We can't really have a discussion without having the same base understanding. That was the point of this thread.

@YouReallyShouldnt - well done.

I never said you can't make money out of compliance and for the record I never said time/cost billing doesn't work.

Bob

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Replying to Paulsoper:
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By Fidodido
12th Nov 2012 19:14

That's not really an answer
So your statement can not be justified... What services does value pricing give to a client that they do not already get under cost/ time/ a premium here and there basis.
If you can tell me services that I should be offering then I will completely agree with you, but so far you have not answered my question. Why would you need to speak to a client to see what services are offered. You state that clients miss out on services by not using vp so you must know what these are? No?

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