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Are accounting services elastic or inelastic?

When it comes to pricing our services as accountants, are we elastic or inelastic? If so, at what rate? Is there an "arc"? Does it depend on the "niche" market we are catering for? ("Niche" marketing is no longer cool I hear). Is this question coming from a fear of increasing my prices? Any thoughts would be appreciated. 

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By Maslins
13th Jul 2018 09:36

Personally I think it's in the middle.

Inevitably some customers are more price sensitive than others.

Lethargy is also I think key to accountancy firm success(!). For us I'm not inclined to increase prices. I'm sure some clients are delighted with our service and would stay even with a price hike. However, I'm sure there are many more that are satisfied...but a price rise would lead to them considering other options. If they're a good client from our perspective, we're servicing them whilst making a profit, why risk rocking the boat?

Similarly I'm not keen to cut prices. I don't think it would increase loyalty. We might get a handful more new clients who are fairly price sensitive, but I can't see that offsetting the reduced profits due to the price drop. Plus there's the perceived value thing...ie if you're reducing prices, that potentially sends out a message that the quality of your service is dropping.

If it ain't broke, don't fix it. Applies to both our attitude to pricing, and also I imagine client's attitude to our offering.

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to Maslins
20th Jul 2018 11:57

You need to put it up 3 or 4% a year for inflation.... otherwise in 10 years time when you decide to make a rise it will jump from 500 to 750 and they will be upset and look about

But 24 a year....1 on 5000 will complain

You are welcome and ... you owe me a beer...

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to Maslins
20th Jul 2018 11:57

You need to put it up 3 or 4% a year for inflation.... otherwise in 10 years time when you decide to make a rise it will jump from 500 to 750 and they will be upset and look about

But 24 a year....1 on 5000 will complain

You are welcome an ... you owe me a beer...

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13th Jul 2018 10:10

It depends on you and your client base.

Are you doing things that your clients think they could do, but they are happy to pay you for the convenience? Or, is the level of expertise your clients need such that there is not a cat in hell's chance of them being able to do it for themselves?

If the latter your starting point is you are in a relatively price inelastic market. However, I would argue that price as a factor is only equal in importance to two others - your ability to foster a positive relationship and also the client's perception of your technical ability.

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By Maslins
to andy.partridge
13th Jul 2018 12:09

andy.partridge wrote:

Are you doing things that your clients think they could do, but they are happy to pay you for the convenience? Or, is the level of expertise your clients need such that there is not a cat in hell's chance of them being able to do it for themselves?


Who you ask this question to is key. I imagine clients will often think it's the former, accountants will often be confident it's the latter!

Having said that, potential clients that tell me they could easily DIY it tend to be people I don't want as clients. They're overconfident in their own abilities, and/or don't appreciate our experience/knowledge.

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By Mr_awol
13th Jul 2018 10:23

I'm cautious over price increases. If they are communicated in the right way by the right people then normally clients will accept them. Plus of course, it's always a mixed feeling when I pick up work form some shark nearby who have been charging around 25% more than I would have, for a half-arsed hatchet job.

As an example, we used to chuck in a free P11D service to a payroll/accs/co+ptax client and our payroll manager tried to add a charge for the service (in line with the charge for other clients). Client immediately provided details of a quote from another firm for all services.

OK so he wasn't actually that keen to move and wasn't a huge client that would have a massive effect on profits - but he's a good client whom we get on well with and have a long relationship with, and it's c£2.500 to £3k of work that we could have lost because one department wanted to add £150 to their billing figures.

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to Mr_awol
13th Jul 2018 10:28

Mr_awol wrote:

. . . our payroll manager tried to add a charge for the service. Client immediately provided details of a quote from another firm for all services. . .

- . . . but he's a good client whom we get on well with and have a long relationship with

Sorry, but that is not the reaction you would get from a client with whom you have a good relationship.

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By Mr_awol
to andy.partridge
13th Jul 2018 11:42

andy.partridge wrote:

Sorry, but that is not the reaction you would get from a client with whom you have a good relationship.

No. It's the reaction you get from a client with whom you no longer have a good relationship because some idiot sends him a bill he wasn't expecting.

I've charged him much more than that for extras and he's not batted an eyelid. It's about communication and understanding that every person has a threshold at which they will push back.

Or, as I stated (but you chose not to include in your quote) "If they are communicated in the right way by the right people then normally clients will accept them". I should probably have added something about them being fair, too, of course.

Often on here there is an attitude of 'if they value you they will pay and if you don't charge them enough they wont value you'. There's a small element of truth in that but not a lot. Generally your value (and perception thereof) should come from your work, not your prices.

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13th Jul 2018 10:51

some clients are very price sensitive and / or dont really have an understanding of what you do for them, for these type of client there can be a knee jerk reaction to price increases and a feeling of being fleeced

it depends upon your business strategy, but if you are billing in an honest way it shouldn't be too hard to explain and educate the client as to why your fee is what it is.

if the client doesn't or wont take that on board then they really don't value what you do

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By DJKL
13th Jul 2018 11:19

I think it depends upon trust.

If your clients trust your judgement they will, in my opinion, be less likely to move and a fee increase, if modest, ought not to have them chasing alternative quotes. (And by logic any large unwarranted fee increase would be damaging to said trust) However I do keep my fees pretty modest and I provide a service predicated on actual contact in person which helps build trust/ personal relationships; I will likely meet with a typical client where I deal with their vat at least 8 times a year, even if it is just collecting and returning their records each quarter.

On most practice client lists I have seen ,when I worked for other firms, there were some clients where price was everything but chances are they were not really the firm's real clients they were merely the ones , like nomads, who happen to be resting on the client list at a particular point in time; all practices if they chase for clients seem to acquire some of these, they flit to you and then elsewhere.

Re managing their expectations I would frankly take little heed of the nomad reaction, it will not matter what you charge the grass, for them, will always be greener.
These are the sorts of clients where holding them for more than three years is a real result but it was always really unlikely they would ever become ten year plus clients.

I would also caveat the above, I practice part time, I run a small client list, it is not my living and I can afford to lavish time on clients and have really no client turnover as a result, but I do appreciate that for someone running a full time practice as a living they would need to work an excessive number of hours to both eat well and devote the attention I do to each client.

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By SXGuy
14th Jul 2018 09:31

Client Friday said to me, you know what, I think I'm gonna do this myself next year. I just can't afford the costs anymore.

Bare in mind he's a black cab driver and owns a rental property.

Now personally I don't think what I charge is unfair considering his income and the fact he has. Annuities, pensions etc.

My charge is not that much compared to his turnover, but he doesn't see it that way. And if he thinks my skills are not worth the increase in tax he's probably now going to suffer through under or over declaring expenses, that's up to him.

In fairness he wasn't looking for a price reduction. But I wasn't prepared to offer it either. If he thinks what I do is easy enough for him to do, go right ahead.

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to SXGuy
20th Jul 2018 12:00

450+vat
That's the opposition.
Measure yourself against that?

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14th Jul 2018 18:28

Try doubling your fees and see what happens. If your clients have faith in you and they really enjoy your company you might be pleasantly surprised at the outcome.

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