How do you bill for time and ideas

Maybe I am missing a trick here, but we include that type of advice in the annual fee and don't charge extra.

Charging time is easy, all you need to do is decide on an horly rate and record how long you spend doing something.  But, if you are any good (which you seem to be) you are probably leaving money on the table.

I recorded a Webinar on this with Ron Baker which I think you will find helpful.  Visit my Website and register for a copy now I would just mention here that the idea is that you a) bill for a package and b) use the value element (knowledge and ideas) to uplift the value of the more time consuming elements. 

So, a compliance service for a small Ltd Co may have a perceived value of £1,275 in your market.  But, when you add a couple of hours with a "what if" analysis and a discussion with the client plus a few ideas it maybe worth 15% more.  The way most accountants set their hourly rates and experience write-offs this simple strategy will improve net profit by 38%.

What most accountants need to appreciate is that they need to help build value in the sales and marketing WITH the client to get their agreement to the value and price before doing the work.  Many accountants are missing this vital step and trying to add value without the client's involvement - this is the basis of my Selling BUY Numbers sales training programme for Accountants.

Bob

www.portfoliomarketing.co.uk

Surely the problem with Bob's advice is that the 'perceived' value of the compliance service in that area is driven by the price set by other accountants in the area, most of whom will be billing from timesheets i.e. a business owner can only determine value by looking at the market. So, if the base price is effectively set by timesheet, 15% over and above that is simply an increment on time-based billing, not true value-pricing. 

I've read Ron Baker, and other value-pricing 'guru's' & looked at the Verasage website, they talk about discussing value with the client prior to an engagement starting, and I could maybe accept the comment if it started with the accountant having a 'clean-sheet' discussion with the client which went along the lines of "our price is based on x, y & z services which because they are unique (or at least packaged as unique) are not comparable to other quotes you might receive".  

However to me it always seems to come down to up-selling/onselling additional services e.g. monthly attendance at Board Meetings, what-if analysis etc.  Some clients, those few you're very close to, may be prepared to accept a "premium loading" on your bill for 'general advice', but for the majority I'd suggest that you need to provide a more tangible service offering to warrant the extra fee.  Once you've a 'product' the difficulty is then how you price it ... perhaps here you can apply value pricing methodologies?

By the way Bob could you please proof-read your comments before up-loading them, your last post made for painful reading!

In that situation we would charge. We decide the fee and get their agreement beforehand. If they don't agree we don't provide it .... simples!

We would do the MLR checks before giving the advice, too. I am not sure if this is overkill, but better to play safe.

I'm really quite torn on this. If I were still in practice I am sure I would be inclined to move more towards the Ron Baker style approach as advocated by Bob. 

These days much of what I do involves writing or speaking and I'm keenly aware that in so doing I 'give away' ideas, insights and advice that might otherwise be chargeable.

I certainly understand the idea of using a spratt to catch a mackeral. Equally I'm well aware that plenty of people will simply say 'thanks very much' for free advice and then never have a reason to come back again. And even if they do, by the time they have a relevant need, your 'favour' has been long forgotten.

Lawyers, I think, are much better than accountants when it comes to resisting the urge to give free advice to prospective clients. Coincidentally I wrote a piece, on my blog for ambitious accountants, just last week: How to avoid giving free advice to prospects.  That may be useful here too although the main focus was on prospective clients for recurring compliance services.

One of the oft forgotten downslides of giving away free advice to prospects is the expectation this generates. If you give free advice to non-clients, presumably you don't charge extra when you give valuable advice to clients. That may be fine if you factor such advice into your fee and you pay no regard to the amount of tax that your advice might be saving (and thus how valuable is your advice).  Alternatively you may want (or need) to set some ground rules to manage client expectations as to what is and what is not covered by your regular fee.

Coming back to your question - can you charge anything at all? It sounds as though you may not have done your AML checks or secured the 'prospects' agreement to any fee at all. If you have concerns about non-compliance with the AML regs you may decide to chalk this one up to experience. The absence of a fee doesn't exclude you from compliance with the regs of course.

If you're satisfied on the AML side you could always try the approach advocated in the old joke about the chiropractor who is called in to relieve the back pain of an eminent Emir. He does what he can and the Emir is at last free from pain and very grateful.  But what should the chropractor charge? He asks the Emir's accountant whom he knows well. The accountant suggests the Chiropractor send a fee note with the amount left blank and with a message on the invoice: "The Emir is always fair".

The rest of the joke isn't relevant here - but it's included on the Accountant jokes and fun blog.

Mark Lee

TaxAdviceNetwork.co.uk

I try to be careful what I give for 'free'. Basic business & tax advice is built into our fees but we charge for advice that is unrelated to quoted services.

I have learned the hard way that if you give too much for free it encourages clients to have unrealistic expectations. It also means that some clients will not value your time, and because it's free they don't always take much notice of what you say, because they think they can have another 'free' session to go over it all again.

When clients pay for advice these problems are unlikely to occur, and if they do need another session at least you get paid again. However, if clients pay for advice we do summarise it in writing for them, detailing the information the advice is based on, and our recommendations.

@Anon - I didn’t say value pricing was easy although it is easier for simple services, like compliance.

Remember, the job of the marketer (you as the practice owner) is to differentiate your firm from the competition and you can do this by focussing on “how” you deliver the service and focus on the experience.  This in turn will start to get you focussed about "who" your ideal clients are.

I was not suggesting you calculate the price at 15% above time costs but it could be the perceived value the client attributes to the package.  You will only know after a discussion; the time it takes is irrelevant to the price and the discussion will have a big impact on the value.  This is where most most fall short.

One way to get a “clean sheet” discussion is to go to your clients and tell them that you appreciate the economy is difficult and you don’t want to take their business for granted so you’d like to have a “service review” discussion to make sure they are getting the “right” service.  How ethical is that!

At the moment, some of your Value Pricing discussions may end up with a lower fee and a different way of working.  Others may end up with a higher fee which includes services extensions to help clients address the challenges they have.  Value pricing is about the right price not a high price.

I also find it painful reading some people’s comments because they spell everything 100% and have read the books but don't get it!

By the way, having a fixed fee with some free advice thrown is not necessarily Value Pricing because very often the price is set by reference to the time it takes. 

Bob

www.portfoliomarketing.co.uk

Please excuse my ignorance, but how does value pricing work for compliance services?

We do try to estimate the skills/time involved and quote accordingley. How does value pricing compare?

ps. is this advice chargeable?   ;)

@Shirley - Value pricing is not about estimating skills/time involved; that is cost plus pricing!  It may not seem right or fair but your skills and time has nothing to do with value.  Value Pricing is about estimating the value of the service as perceived by the client and capturing as much as you can with your price.

Like I mentioned above, if you can get 15% higher fees by “how” you deliver the service you can increase profits by 38%.  That is a lot smarter than looking after 38% more clients.  By the way, there is no reason why you cannot do both!

I have mentioned it before but I have an excellent (and free) CD with Ron Baker which you can register for on my Website.  I would recommend you list to this and give it some mind time.  Maybe chat to a few colleagues and if you want book a Marketing Mentor session with me.  That maybe the quickest way for you to get a really good understanding of the subject as well as coming up with a few ideas on what you can do if your practice.  Somethimes it takes someone who is not involved to spot the obvious.

When I was first looking at this Ron explianed that the problem is that accountants have been trained to believe that time is money. It is almost an ideology!  It took me a while to change my mindset and fully understand the concept but it is the key to marketing so your time, energy and any coaching you invest in will be retuned many times over.

What is 38% of net profit worth to you over the remaining life of your business?  Or, put another way, imagine having the same profit as now but only working 3.6 days a week.  What would you do with that time? Think about it - that is over two months a year extra fully paid holiday.  That's the value, the cost is some of your time and energy and if you want £75 plus VAT for a go with me!

Bob

www.portfoliomarketing.co.uk

I will have a look at your website and may request the CD - if I think it will suit our practice I will contact you for more information.

(psvrichard - please accept my apologies for hijacking your post)