Does price matter most or does value matter most, to your customers?

Several conversations with a few accountancy firms in recent weeks have made me angry. Angry at the natural tendency to accept price sensitivity as a simple compare and contrast exercise with the other firms rates in the market. Suggesting that other firm’s prices determine what price your firm can charge – what codswallop!

What do you think?
 

Comments

Our policy

Anonymous | | Permalink

We charge what we think will give us a reasonable profit, regardless of what others charge.

We give a more comprehensive service than the majority of small business accountants in our area, so if we competed on price we would lose money rapidly.

We occasionally lose clients due to them wanting a cheaper service, but they would not compromise on the services they received (or reduce their expectations). We accept their decision as we see no point in taking work with no, or very little, profit. Some have found accountants 'working on the side' that have very little overheads, and we couldn't compete on price, even if we tried.

We have had many ex-clients return to us!!!! The service they received elsewhere did not live up to expectations.

The Minion's picture

It isn't cost

The Minion | | Permalink

it is perceived value.

If a client feels happy with the service it will take alot to lose them.

Usually you may get the occasional grumble but in the main if the client feels that they are not just a number and are given a good service then there will not be a fee issue.

The usual time we get fee issues is when we are taking on a new client who maybe does just view accountants as a necessary evil and it is therefore simply cost. If all they want is compliance then that is what they need to be told that they are getting.

There is no point at all in letting them think they get all the whistles and bells, when in fact some are an extra that they did not expect. Fee disputes arise from the unexpected as in they thought that sending in a partially completed cashbook or sage or whatever fills their side of a fixed fee quote. They need to be told as soon as soimething like that happens that there will be an exra cost unless they want to do it properly and bring it back corrected.

 

naomi2000's picture

beauty is in the eye of the client

naomi2000 | | Permalink

Of course value and quality are more important than cost. However, if you're a business shopping for a new accountant, it's easier to compare quotes than assess value.

If your new client has been introduced by someone they trust, they're usually prepared to consider the proposition that you may be able to provide a better service & are often prepared to pick you over a lower bidder.

If they've picked your name out of yellow pages or googled your website and don't know you, then I think they're much more likely to look at the cost.

 

rstensaker's picture

I'm a big believer in value pricing...

rstensaker | | Permalink

Like most sole practitioners, when I first launched my practice, I was a bit intimidated about pricing.  I ended up taking on some clients that were quite miserable to deal with, and ground me on my fees at every opportunity.  I eventually 'got religion' and started firing those clients.  For some of the commodity-like services (year-end compilations, tax returns etc), I have established a rate grid based on a base-level of service - anything additional is charged at an hourly rate, and I have a 'special' rate for those 'pain-in-the-neck' shoebox people that is nothing short of userous. 

I assess each engagement and bill accordingly - usually on the basis of value pricing.  I am no longer intimidated about pricing, and I proudly present each fee billing to my clients.  I make no apologies for my fees, and whenever someone calls up looking for 'rates', I tell them that I'm "not accepting low-rate clients at this time."  People who are so focused on the 'hourly rate' or the 'fee' tend to be the highest-maintenance clients, who consume huge amounts of your time.  At the end of the day, this type of client is looking for something for nothing and will take his business to the next cheapest guy down the street in a heartbeat. 

I am very fortunate now to have a portfolio of clients whom I sincerely like working with, who appreciate the value I add to their businesses.  By focusing my time and energy on cultivating relationships with such clients, my practice continues to grow and prosper. 

Would I rather take on a low-rate, high-maintenance client who has no sense of the value a good accountant adds to thie business and lacks any sense of loyalty?  Or would I prefer to take a day off?  Hmmm....I'll take the day off anytime!

The benefit of experience

Anonymous | | Permalink

I wholeheartedly agree with arguments in favour of value pricing, and with the view that clients who are focused solely on fees are probably more trouble than they are worth. However I find it very difficult, as a new practitioner, to know what the value of our services are. I seem to fall into the "hourly rate" camp almost by default as I find it so difficult to determine, in advance, fees which are fair to all parties. I'm particularly good (bad) at undercharging my start up clients because having done the accounts I know exactly how little money there is available to pay me!

Would any of the more experienced contribututors be prepared to post their "fee basis grids", or the basis for which you determine your fixed fee quotes as mentioned in your previous posts? And if you're feeling particularly generous, I'd love to know the standard of record keeping you expect from your clients for the most basic compliance services.

Thanks all!

It probably depends how desperate you are

chatman | | Permalink

When I started, the prices I quoted dropped mid-sentence when I was talking to prospective clients, because I was so paranoid about not getting the business.  Now I am not so desperate for fees I refer to a table of prices I have drawn up. If someone wants a service I do not want to provide (such as face-to-face meetings or bringing me paper documents) I quote such a high price that I do not really mind whether they accept or not.

I have had clients complain about the fees and I just tell them that they are absolutely right to try to minimise their costs and they should get some alternative quotes to see if they can get a better deal.  So far they do not seem to have bothered (or else they could not find anyone cheaper).

I must admit, I would like to know what other accountancy firms charge for the same services as me, because I suspect my prices are a little low, and I probably would let it influence my pricing, but I am very bad about calling the opposition to find out their rates (although I would have no objection to someone doing the same to me).

I accept that it is virtually impossible to compare my service with theirs, but if everyone seemed to be charging more than me for a similar service, I would probably increase my prices.

Someone told me that if you never lose a client on price, you are pricing too low. I think that is a very good point.

A client has just gone to another accountant who said they could knock £20k off his £37k tax bill (based on nothing but a review of the tax comp I prepared), but he said he still wants me to do his bookkeeping and VAT (although I suspect they will try to get that too). I think this is supports the point of a previous poster who said, if people like you, it will take more than price to make them leave you.

Response to Anonymous

chatman | | Permalink

I would be quite happy to let people know my pricing scheme. Especially if they reciprocated. 

sparkey999's picture

start up fees

sparkey999 | | Permalink

I am considering starting my own practice and am worried about initial fee levels, especially given the current climate, in which price is paramount in a lot of people's minds. I will have very low overheads and have a target fee income in year 1, but am concerned about the need to have a high volume of low fee clients in order to do this. Help please anyone? Especially in how I can obtain new clients in the current climate..................

 

ShirleyM's picture

Quoting system

ShirleyM | | Permalink

I have written an access quoting system and the quote is 'created' in the clients presence. They decide which services they require, the standard of records they will present, and the level of verification they require.

If the fee is too high (in their opinion) they have the opportunity to amend the parameters. The software then produces a written quote (listing all the parameters) for the clients approval and signature.

Many clients have commented that it improves clarity over fees and the services included, and they can easily see how their records influence the fees, etc.

With this system, we can offer a 'high end' service, or an economy service, at the choice of the client, and there are no misunderstandings later as to the expectations from both sides.

Chatman

Connie1 | | Permalink

I'd be very happy to reciprocate on sharing fee structure; although like you I suspect my fees may be on the low side. I'd also be really interested in the elements ShirleyM uses in her quote system if she was prepared to share them?

I also imagine that you, Paul, must have a wealth of experience on fee levels and average fixed prices for different services - could you share them?

Quoting System

chatman | | Permalink

I have something similar in Excel, but I am not 100% confident about the base prices and increments I use.  One method I use (but not frequently enough because I hate doing it) to set my base prices and increments is calling other firms to ask what they charge. 

I've just come across

Connie1 | | Permalink

This!

https://www.youronlineaccountants.co.uk/online-accountants-fees-step01.asp

Perhaps this might remove any initial shyness. Would people like to comment on whether their services come in above or below these levels?
If nothing else, I'm very grateful to these guys for putting their fee structure so transparently online!

C

ShirleyM's picture

Pricing structure

ShirleyM | | Permalink

I have parameters (eg. does the client complete a bank reconciliation) which will have a combination of a fixed price, a basis price, and a percentage adjustment (applied only to basis prices). Most of the parameters have a basis price, and the % uplift is based on the no. of transactions.

For me, I think the no. of transactions is a fairer method than use of turnover. All of our 'fixed fee' quotes specify that the fee may be adjusted (upwards or downwards) if the parameters change. This is essential for us when quoting for a start up, or growing, business. Equally, it benefits the client where there has been less trading due to the recession, or ill health.

I find I have to stop myself from adjusting the quotes, as they sometimes appear very high, but when you review how much work is involved then a lower fee would make the work unprofitable. As mentioned in my previous post, the client has the ability to reduce the fee by presenting better records or reducing the services/verification required.

OnlineAccountants.co.uk

chatman | | Permalink

I think the site Connie1 found is great. Does anyone know where I can get a site like that?

Clues in the site??

Connie1 | | Permalink

If you try clicking on the Calculate your Fees calculator icon at the very top of the page (rather than in the body of the text) it takes you to another site called Clever accounting. It looks as if they might have something to do with it....

p.s sorry I haven't replied you your pm yet. Will do now.

C

Clever Accounts

chatman | | Permalink

I assumed that was just the provider of the on-line accounting software, not the accountancy firm or web-site designer. 

quality over cost

daviesluke101 | | Permalink

If clients feel that the service rendered to them is exemplary, they will be more likely willing to pay for a higher cost. Every businessman would want to get a good value for their money. So if they feel that a certain firm isn't good enough when compared to another, they would also expect prices to differ.

Service quality should therefore come first.

 

http://www.ripefinancial.com/

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