I’ll show you mine if you show me yours
Mark Lee notes an increasing trend for accountants to publish their fee rates on their website.
Let’s try and make this a focused discussion. One that does not descend into an argument between those who favour value based billing and those who continue to believe in timesheets as the best basis for determining fees.
When I talk to accountants, I often stress the need to stand out and demonstrate what makes you different to the others. “Different” rather than “better”.
Continued...
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Automatic Time-tracking
You could use something to automatically track your time, then bill your clients. Something like Clever Timesheets (http://www.clevertimesheets.com)
Just saw this launched yesterday
http://www.taxreturnsmadesimple.com/
Not just clear upfront pricing policy (at lower end of the market), but payment upfront too.
Simple Tax Returns from just £49 plus VAT. WOW!
Mark
Margins
@Mark - great example and the new competition - this cannot be ignored too much longer can it? You know, Crunch just had some serious funding and it is just a matter of time before traditional firms notice the loss of fees.
I am writing a report (called The Reluctant Bookkeeper) about what accountants can do with bookkeeping, it starts-off by saying that accountants have three choices:
Option 1 - bury their heads in the sand and use the donkey strategy of just working harder
Option 2 - Accept lower margins on traditional compliance work and change their business model and have more clients. Possibly introducing new services themselves.
Option 3 - take some strategic action…this could be marketing led (e.g. home visits) or operational (e.g. outsourcing).
It is no secret the vast majority of accountants work to a desired net profit by using charge out rates. And, the basis of calculating of the hourly rate has been a third for wages, a third for overheads and a third desired profit.
Most firms I speak with experience less than 100% recovery and I wonder if firms should stop fighting and change the basis of their charge out rate to 20% for net profit with 40% for employees and 40% for overheads.
What do you think?
Bob Harper
How long a piece of string is
Each of my clients needs a different amount of time (spent on book-keeping, VAT and payroll - not tax). Although the same hourly rate is generally used for all of them, some need much more support than others (support that is emotional rather than anything to do with accounts!) and others need more technical support than others.
Having spent 2 years not adjusting my rates due to the recession I have raised all rates recently and will give it another tweak around April, but how on earth I would quote someone who I didn't know, whose business paperwork I hadn't seen is beyond me. Prospects who ask what my hourly rate is up front without beginning to explain what they need are the very ones who really don't want to pay anything although they need the service.
My experience is that intelligent good quality businesses that take a shine to me when we meet will pay a reasonable amount on a regular basis if they understand how the bill is made up. I give everyone a monthly itemised breakdown of my time, which is transparent as I can be. That helps with giving rough estimates to new clients with similar amounts of paperwork.
Cock-Ups are Us
Simple Tax Returns from just £49 plus VAT. WOW!
Posted by bookmarklee on Tue, 02/11/2010 - 10:28
There's an awful lot of work out there putting right the appalling messes these "stack em high do em cheap" outfits make. Long may they continue because sorting out their messes is far more profitable.
You may be right CD
But on this occasion the service is provided by qualified chartered accountants who work for a reputable firm in the City. Their pricing model may look the same as the 'pile 'em high, sell 'em cheap' market boys, but I suspect the quality and accuracy of this service will be very different.
The £49 service, for example is only available to employees who have had just one job during the year and less than 10 sources of investment income.
The promoters are targetting people who complete returns themselves and file them online without any advice and access to tips and guides etc.
Looks very slick to me.
Mark
An alternative approach
I was chatting with an accountant yesterday who doesn't put his fees on his website (or read AccountingWeb - shame!)
His approach to reducing the number of time wasters who contact him thorugh his website is to reference the financial support and regular meetiungs that he has with his clients - at least 4 a year. He's not aiming to take on standa lone personal tax returns. The service offering is focused on his preferred target audience and (he think) puts off anyone who is looking for a low cost accountant who will simply prepare accountants and tax returns with maybe one meeting a year.
Mark
Understanding
@Mark - looks value based pricing to me…a fixed fee with a fixed amount of work. I wonder if their strategy is to cross sell financial service?
@Moonbeam - you can offer fixed prices but do them one-to-one; mass customization!
I would always recommend getting a good understanding before you quote and ensure the fixed fee is defined and understood by the client. the best way to do this is to develop a service WITH the client rather than for them.
Prospects who ask you your hourly rate are just trying to understand the cost. Your job (in sales and marketing) is to get them to focus on the value first, and then quote so they see a profit for themselves. Remember, price is part of the marketing mix.
Mark does not want this to be about the benefits of value pricing over time base or fixed fees so I will resist. All I will say is that your price is a MASSIVE part of your marketing so invest some time and energy exploring different strategies and you may be surprised.
As always, I have a CD on Value Pricing and another on managing a practice without a time sheet. However, if you are 100% happy then crack on doing what you are doing because it takes time, energy and there are risks.
Bob Harper
How much do you charge?
@Mark - the design and content of the Website should repel the wrong clients and attract the right ones so maybe the firm should look at this.
The content can also help qualify. Perhaps some firms want a page “how much do we charge” and include this click here.
And, the sales processes can also filter out the wrong clients - that is where a Welcome Book comes in. All these are sales and marketing systems which most firms lack as they are overloaded with operational systems.
Bob Harper
New trend or one that's increasing?
I saw this for the first time about three years ago. From there it didn't take long to find others doing the same. So- are you referring to an increasing trend or one that's becoming more visible to you?
"As we move towards 2011 I see more firms testing or adopting th
Isn't that clear enough Dennis? Plus my ref to the polarised debate on AccountingWeb in 2008?
What are you getting at?
Mark
Strategy first, then price
@Mark - Minimum fees are a good idea; I use them on my Website because prospects get a feel for the minimal level of expected investment. This avoids wasted time and embarrassment for everyone.
If the firm’s strategy is focused enough like Crunch then a firm can quote ONE fixed price. However, what I suggest most firms do because they are working a diverse local market is fill their Website with value content rather than being too bothered with cost content.
What is valuable is productising the service range to communicate what you do. Then you can bundle products together and create packages. The sum of A + B +C should be higher than the packaged offer.
When it comes to fees I think it can be worth putting a minimum and a maximum on the Website (linked to your strategy) and maybe some examples of service agreements. It is useful to explain how prices are calculated taking account of things like service levels, risk, quality of records, logistics and the outcome achieved. But, I recommend firms emphasise the focus will be value and to get the right service a meeting is required to fully understand the requirements and to explore delivery options.
Firms can give a guarantee of value. Firms can (maybe should) have a mix of services. So, for clients who want a local service but want the lowest cost option then firms can offer a Crunch style package. Perhaps using a sub-brand to protect the main brand.
By the way, this can create a nice block of fees for transition into retirement...sell the main practice and keep 50-100 clients with an average fee of £750 all using one accounting system and go and live overseas.
Bob Harper
Portfolio Marketing