Giving client work away for free

Giving client work away for free

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Like a lot of other firms we operate on a fixed fee basis . Despite having typical overheads for a High St practice, we try and be as competitive as we can. Our problem seems to arise when clients require advice on specific issues. How do you decide wwhen to charge additional fees. For example yesterday, I received an email from a client asking 5 technical questions. Two I can answer off the top of my head, two I will need to do a bit of research, and the third I my even need to run past a specialist. I dont' want the client to think I am unhelpful or milking them, but I do want to recover a fair fee for the time spent. How do you get over this issue without the client thinking they will receive a bill every time they phone you? If only I could crack this issue I know we could add a fair few thousand pounds per partner to the bottom line.
Anon

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By AnonymousUser
07th Apr 2009 11:52

Pricing a job
Paul – one of my motives is to agitate and threads concerning strategy and pricing are fair game to promote The E-Myth and Value Pricing. Some don’t like it and others get the point. Another objective is to turn off a segment of the market that doesn’t fit our model – that’s the essence of strategy.

Putting aside my chosen style and focusing on what’s important, it’s interesting that you are personally having the pricing discussions. Could it be that you’ve built your practice on clients and services that require “you” to manage the relationship?

If I’m right you’ve got yourself a job which you’ve made pay well, although I’m still not convinced of the long-term impact of this approach. The idea is not to catch the client out but to set the right level of service at the beginning with your clients involovement. I don’t know many people who go out for dinner and are happy getting charged for the salt and pepper!

Anon – I agree, it is a big decision to base a business on one software although most do anyway with Sage and IRIS. We prefer to think of it like the software is your own, we become your development and support team - that's how our agreements work.

Bob
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By User deleted
07th Apr 2009 10:42

Replies to comments
Paul, thank you for your very interesting and useful posts. Sorry I havent posted in reply sooner, but I think one of my posts is lost in the ether! I think that my annual fees need uplifting a bit to give a certain amount of built in support. At one point I was thinking of making this a separate service, say at £10 per month SO, which with 200 clients would give me an extra £20K+. However other advice that I have received regarding marketing professional services indicates that bundling them together is the way to go. Although, I think there would be fee resistance from the smaller sole traders at an extra £120 pa.

Robert - I have looked at your software, and whilst as a concept I love it, there is no way I would build my business around a third party software supplier I had no control over.

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Teignmouth
By Paul Scholes
07th Apr 2009 09:50

Anon a few last words
I don’t think there is a system or textbook to tell you exactly what to do in these cases. Every time a client contacts me the question s/he asks is usually “loaded” and has to be judged on several merits. Two clients may ask the same question, the first client is in dire need and hasn’t a clue and so, to him or her, my answer is worth £250 whereas the second is 99% there and so I point them to the website and tick a mental goodwill box. This is the case whether my answer takes 10 seconds or 10 minutes and is the prime reason why I no longer keep timesheets.

I find judging this sort of interaction and having to make snap decisions over value several times a day difficult and risky and I’ll admit, even when I know the answer, I’ve resorted to “Let me check it out and come back to you in 5 mins” to buy myself some thinking time.

For me therefore, rather than have to make this decision 10 times a year with each client I offer each an annual fee to enable them to contact me at any time. Yes I have to go through the same process, i.e. what is this offer worth to this client but I only do it once each year and when it’s right for me. Also it enables me, perhaps over 2-3 emails or calls, to better judge the value of an additional piece of work or advice as it starts to develop making the quote to finish it more realistic.

Good luck and it would be interesting to have your views on what’s been said.

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Teignmouth
By Paul Scholes
07th Apr 2009 09:19

With apologies to Anon
Robert, yes I am happy to share my opinions but, they are more than just opinions they are my experience of running my general practice and I offered them to someone else in the same boat.

Not only are your queries or statements on my postings irrelevant to Anon but, by intent or mistake, misconstrued and I am not here to satisfy your needs.

You say you practice what you “preach” and that word speaks volumes.

I am not the first to call your didactic approach arrogant or to suggest that your prime motive in entering this forum is to highjack the thread in order to market your services. Offering free CDs of, or quoting from, gurus such as Ron Baker doesn’t make you a guru you are just someone who believes that, in reciting their words enough times, something is bound to rub off. What’s ironic is that as a preacher on marketing your approach is likely to turn off a sector of your market.

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By AnonymousUser
06th Apr 2009 17:03

Anon questions
Paul – you seem happy enough to share your opinions, all I’m doing is asking questions on something you’ve put forward. The questions where for the benefit of Anon because so many firms have made expensive pricing mistakes.

Maybe you’ve got it right and if you have well done - it’s easy to put me right and help Anon. Just tell me you’ve been pricing like this for a long time and you’re comfortable your clients understand the bargin because you have an effective engagement process and client education programs/systems.

I don’t have a clue what you’re talking about when you talk about “the religious fanaticism spouted by certain groups”. Ron Baker (the leading commentator on pricing) has the opinion that accountants have an ideology towards pricing rather than a religion. But, I do believe in what I am doing and practice what I preach.

Bob
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Teignmouth
By Paul Scholes
06th Apr 2009 10:57

Here we go again
Anon - be careful

Robert - I got caught up with and turned off by the religious fanaticism spouted by certain groups this time last year and I smell the same again here. Your assumptions, especially over my short-term financial success are arrogant, so mind your own business.

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By AnonymousUser
05th Apr 2009 20:29

Long term pricing strategy
This is a massive issue for proactive firms. Many know there is a better way than time based billing and you’re right, knowing the answer will add a few thousand per partner to the bottom line. It may even be a lot more than that.

I’d like to suggest that your question indicates that your problem is using fixed prices with a time based mentality. The answer is to fully understand value pricing and if you call the office 0800 915 4225 I’ll send out a pricing CD from a Webinar we recorded with Ron Baker on this subject.

Paul – I’ve got a couple of questions because you seem to be having some short-term financial success:

1) Your reply suggests that you’ll only consider charging extra if the issue can’t be dealt with quickly. What’s to say that a one minute email isn’t worth all your £50 put together? What systems do you have to capture value?

2) I assume there are lots of minor fees – are you aware that the Sage ABC survey of clients and accountants reported that surprised fees are a top frustration?

I appreciate it all depends on the engagement/fee discussions but issuing lots of extra invoices where the client believes they have a “fixed” fee can be like an insurance company trying to wriggle out of paying up because of small print. In today’s climate this could be an excuse for clients to moving on. Have your surveyed your clients on pricing?

Bob
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By Richard Willis
04th Apr 2009 12:33

Why not charge for telephone support?
Hi Anon

As an outsider to practice my objective opinion is that you should charge a pre-arranged fee for each of preparation of accounts, VAT, Tax, etc. and then make it clear that interim telephone support incurrs an additional fixed fee. You can then chose at what point to activate the fee, depending on complexity, ime involved, and your relationship with the client. The amount that you quote can be variable, depending on the skill set and compliance of the client.

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By Marilynne
03rd Apr 2009 19:59

I say 'ten minute queries' are always free within reason but
if the work requires any significant extra research or additional work then I will tell them in advance that it will cost before I go ahead.

That way they know they aren't going to get charged for picking up the phone but they also know that I reserve the right to charge if something meaty or unexpected comes up.

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Teignmouth
By Paul Scholes
03rd Apr 2009 17:01

Time & Fees (not)
Hi again Anon - as this topic always sparks a storm I'll keep it short. If you quote fees you can forget about time, it's a self imposed burden you don't need.

Each client is billed based not only on the amount of "effort" it takes to service them (ie one minute speaking to A and I feel jolly compared to another with B and I get the rope out) but also on the value of that work to the client, so you can charge A & B different fees for the same work.

For budgeting, hours are not much help. What fees will your client base deliver and how does this compare to overheads. If the fees are inadequate, the individual quotes need reviewing or, you are (as you suspect) not identifying extra work or you need more clients or less overheads.....ie just like a normal business.

Time (and the sheets you write it on) are history.....just thought of that, not bad for a Friday.

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Teignmouth
By Paul Scholes
03rd Apr 2009 13:41

Swings & roundabouts
Hi there. Firstly I think much depends on what is covered by your fixed fee. In our case we quote them one amount for the year setting out all the normal stuff we anticipate doing, ie accounts, PAYE, advising on the colour of toilet paper etc etc and, most importantly, saying that the fee enables them or the authorities to contact us at any time about anything without an extra fee.

On the face of it that looks scary but statistics prove that half the clients will contact you regularly and the other half won't, then next year they will all swap around and so as a whole you will not lose out and the clients get to know that you are always there without a ticking clock.

The key word in the above is "contact" and so with regard to extra work, we go on to say that from time to time issues will arise that can not be cleared with a few emails or calls and so they will be discussed and a seperate quote given. This is reasonable and understood by most people and, I'll be honest, if I had followed the above and a client refused to pay for extra work then they would be encouraged to go elsewhere.

No service provider can ever predict extra work, but, there are hundreds of possibilities to identify extra work as you go along, ie because we are now more involved in what they think & do, we can spot opportunities for us & them. It may only be an extra £50 here & there but they mount up. Lats year it looks like we added 25%+ to the core quoted fees for additional work.

Hope that helps

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By AnonymousUser
03rd Apr 2009 14:04

£1 A MINUTE
I charged a pound a minute nett (I can do it in my head!) so expected £60 an hour 35 hours a week for 47 weeks (I take some holiday) = £98,700 in theory. Actual fees achieved net of VAT were £65,813. That means I lost one third one way or another. I assume I would lose 10% doing admin eg loading sage tax 2009 etc. Email and internet will probably lose another 10% so I reckon free advice costs me the balance of 13% of £98,700 or £12,831. I am today increasing my fees by 10% because I daren't go higher.

It has to be said some clients are more high maintenance than others and you cant win them all. You have to charge more than you apparently need. Then there are the slow payers............................

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