Examples of Transparent Fees structure

Examples of Transparent Fees structure

Didn't find your answer?

My earlier thread on this subject has gone off course hence the reason for a new thread. Please, please, please stick to the subject here.

After a fair bit of Googling I found two websites that have transparent fee structure. I hope the owners of these businesses won't mind.

I would be grateful for any comments/opinions on above. http://www.conciseaccountancy.com/fixed-fees-accounts-packages.html is very much my way of thinking - make it very clear from the start to avoid problems and time wasters.

Replies (286)

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By petersaxton
03rd Jan 2011 15:37

Mentality

"@Peter - but using time-billing mentality"

It's not a mentality - it's common sense to want to know what it takes to do a job.

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By David2e
03rd Jan 2011 15:50

Better to know or not?

Argue? Why would you think there'd be an argument with the client if the rate and service have been agreed?

Don't you think it would be better to know that excessive time was taken to deliver a service, and possibly identify the reason to be able to address it in future rather than simply not have a clue or be unaware of the extent and carry on?

David Toohey
The Accountants Circle

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By Bob Harper
03rd Jan 2011 15:53

Common

@Peter - I do agree it is common for accountants to want to know how long they spend working rather than what the service is worth. But, being common does not make it right or the best strategy. 

Bob Harper

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By andypartridge
03rd Jan 2011 16:14

Time spent

Is the most valuable resource we have because it is scarce.

Knowing how it is used is not a 'strategy' or a 'mentality' but a tool. How the tool is used will determine its value in client relationships and ultimately profit.

I know you like to buck the trend, Bob. It does make your theories sound trendy. You have to persist with them because your livelihood depends on it. Mine doesn't so I can be more objective. Attempting to reinvent the wheel can occasionally result in ground-breaking concepts, but more usually it wastes a lot of time and effort and leaves one looking foolish.

Leaving your personal history aside, Peter has hit the target on more than one occasion of late and when he does you tend to ignore him.

-- Kind regards Andy

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By petersaxton
03rd Jan 2011 16:21

Making it up

"@Peter - I do agree it is common for accountants to want to know how long they spend working rather than what the service is worth."

I don't know who you are agreeing with because it certainly isn't me. Where have I given that indication? You seem to have made it up and then attributed it to me.

Because you want to know one thing it doesn't mean you don't want to know other things. That is just silly.

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By Bob Harper
03rd Jan 2011 16:23

Best at the wrong things

@David - the comparison/argument is time recording against Value Pricing not time recording or nothing.

I think you are arguing that recording time is the best way to manage a practice; I am arguing it is not because with time recording you are (at best) focused on doing the project the right way; Value Pricing is about doing the right things.

Depending on the state of the practice, time recording may make a practice better in the short term but it will not make it the best it can be. And, in the long-run time recording will make the firm less profitable and sustainable because the firm will be looking at doing the wrong things better.

Bob Harper

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By cymraeg_draig
03rd Jan 2011 16:26

Time & knowledge

........ I’ll reply by suggesting firms to ask themselves why selling knowledge rather than time so ridiculous when the time it takes to do the work is reducing, the amount of work is shrinking and the competition is increasing faster than ever before?

Posted by Bob Harper on Fri, 31/12/2010 - 15:59

 

You misunderstand how most, indeed probably all professionals, whether accountants, solicitors, doctors etc work.

Clients ALL pay for "knowledge" - that's why they use a professional instead of doing it themselves, BUT, they also pay for time.   The two are BOTH part od a professionals services and you simply cant sell one without the other.

 

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By Bob Harper
03rd Jan 2011 16:33

Time and value

@Andy - you and Peter are free to believe your time is the most valuable resource you have. Maybe it is; that will depend on your respective knowledge bases and creativity. 

Bob Harper

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By petersaxton
03rd Jan 2011 16:35

Bob's imagination

"@David - the comparison/argument is time recording against Value Pricing not time recording or nothing.

I think you are arguing that recording time is the best way to manage a practice; I am arguing it is not because with time recording you are (at best) focused on doing the project the right way; Value Pricing is about doing the right things.

Depending on the state of the practice, time recording may make a practice better in the short term but it will not make it the best it can be. And, in the long-run time recording will make the firm less profitable and sustainable because the firm will be looking at doing the wrong things better."

Bob

You are imagining what David is saying. I see no indication of him saying any of what you state.

The argument is not time recording versus value pricing. I am saying that you can have both. You seem to be confusing recording time with charging based on time.

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By Bob Harper
03rd Jan 2011 16:38

How long rather than how good

@CD - how long it takes to deliver the service is not a driver of the value/price. You missed dentist from your list, would you prefer to pay more for a filling that took longer or less time?

  

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By Bob Harper
03rd Jan 2011 16:43

Very clear

@Peter - value pricing and time recording are mutually exclusive because recording time is about believing time is money and trying to leverage time driving to efficiency. Not recording time is about charging for knowledge and searching for effectiveness.
 

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By petersaxton
03rd Jan 2011 16:45

Bob resorts to making it up again

"@Andy - you and Peter are free to believe your time is the most valuable resource you have. Maybe it is; that will depend on your respective knowledge bases and creativity."

Bob

You know you have lost this one so you are simply making it up. Where did we say that time is the most valuable resource we have? Is it worth asking the question? You ignore anything that refuse to answer truthfully. We are simply saying it is a valuable resource and it is sensible to know what we do with it.

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By petersaxton
03rd Jan 2011 16:47

Not mutually exclusive

"@Peter - value pricing and time recording are mutually exclusive"

They may be for you but not for any efficient accountant.

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By petersaxton
03rd Jan 2011 16:50

Supply

"@CD - how long it takes to deliver the service is not a driver of the value/price. You missed dentist from your list, would you prefer to pay more for a filling that took longer or less time?"

You are confused. A dentist wouldn't do the work if it took them too long compared to the price the customer is willing to pay.

Did you study economics? Price is determined by SUPPLY as well as demand.

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By petersaxton
03rd Jan 2011 17:02

More random sayings but nothing logical

"@Peter - value pricing and time recording are mutually exclusive because recording time is about believing time is money and trying to leverage time driving to efficiency. Not recording time is about charging for knowledge and searching for effectiveness."

Time does cost money. Why's that make the two mutually exclusive?

How do you know how effective you are if you don't take into account how long it takes you to do something?

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By David2e
03rd Jan 2011 18:04

Points

Bob

Why do you say the comparison is time recording against value pricing?

I've said before that when I've mentioned time recording here, it's not in regards to pricing. As far as I'm concerned one can both record time and value price, with the discussion becoming more about whether or not there can be any value or benefit in recording time.

I don't see recording time as managing a practice, though the data obtained may assist.  Recording time doesn't necessarily mean work is done as fast as possible and the quality of work is disregarded. It doesn't mean that additional time can't be taken on tasks if it adds considerable value and benefit.

You insist on time being somewhat irrelevant when it comes to money, though staff and contractors are almost always paid for their use of knowledge, skills, ability, experience in a period of time.

I am sure there are ways to earn revenue that take little to no time, but that's not the case for most accountants when clients are really in need of services provided by someone knowledgable.

I still hope to get an answer to my previous question, which I've asked a few times now... how is knowledge supposed to be provided to a client if not as a part of the service?  Maybe there is an answer which is part of the key to your point?

David Toohey
The Accountants Circle

 

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By cymraeg_draig
03rd Jan 2011 18:05

Get real Bob

CD - how long it takes to deliver the service is not a driver of the value/price. 

 

Of course it is.

Let me give you a simple example.  A client wants a job doing. I look at the job and I figure that by using my knowledge I can save him £2,000 in tax and that the job is worth £1,000 to him.  I know he will pay £1,000 and I know dam well he won't pay £5,000. 

What's the next thing I consider ?   Obviously how long it will take me.   If I can do the job in, say 4 hours then it's worth doing, BUT, if the job is going to take, say 40 hours, then I'm not interested.

So obviously time is a factor.   My services would still be of "value" to the client as I'd be saving him £2k, but his fee would be of no value to me because I wouldnt be earning enough per hour to make it worth while.

And let me tell you - when you reach my age, and when you've had a major heart attack and know your time left is limited, then time becomes the most valuable thing in the world.

 

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By Bob Harper
03rd Jan 2011 20:18

Time for some thinking

@Peter - see above “time spent is the most valuable resource we have” is what Andy said and I was replying to him. 

Correct, for me time recording and value pricing are mutually exclusive. Firms who get the two confused end up with what I call Fixed Pricing.

As far as I am aware, price is determined by an individual customer and an individual supplier coming to an agreement. The idea with good marketing is that the customer perceives the supplier as totally unique so there is no other to supplier on the supply curve!

Time records are not needed to work out how effective a supplier is because effectiveness is not the suppliers costs against income but the clients cost (your price) against their value.

@David - the explicit answer to your question is that the time it takes to access or transfer the knowledge has no relevance to its value. The time is a cost of delivery.

Time is not needed for billing and it is an ineffective way to manage a "knowledge" company. I said at the beginning "Keep in mind that time is not an issue if you are a knowledge worker” - I am talking about firms that embrace a new business model - you seem to be arguing with me about time records for a "service" company which it not what I am talking about.

I agree, if the firm’s business model is selling time then time recording will be needed.

@CD - time is a factor when considering if the project will be taken forward because both the provider and customer must make a profit. But, time is not relevant to the price.

I said above “I am assuming the provide has done it before so they know what they are doing but timing the first time you do something maybe necessary so you can calculate your walk away position”. 

What your time is worth to you is of no interest to customers, they are only interested in the results you obtain for them.

By the way, if it was an annual tax saving of £2,000 for a fee of £1,000 for 15 years that may be worth the one-off 40 hours.

Bob

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By David2e
03rd Jan 2011 20:40

Contradiction?

Bob

Sure, from a client's perspective time records are not relevant to the effectiveness, especially considering a value or fixed price (ie. agreed set figure).

Time required may have little relevance to the value for the client, but you even say that time is a cost for the delivery. Surely this in itself should indicate that time will be relevant for the supplier?

You can use words and phrases in different ways and "if the firm’s business model is selling time" and as you aknowledge the time is a cost of delivery for knowledge... then time recording will be needed (or at least may hold some value and benefit).

Just as per CD's example in his last post... a cost of delivering 'knowledge' is time and it's been assessed from past experience/time-records that the time cost of delivering this knowledge could be too high then time certainly can make a difference in a 'knowledge worker', does it not?

Then "time is not an issue if you are a knowledge worker" certainly isn't a true statement, since time is a cost which certainly can be an issue.  It's not just about the client, but the supplier too!

Personally I prefer not to assume the provider has done all various tasks before with the same technology and has such a clear picture that they would rarely be off the mark with work... which may be the case for some that are well experienced and provide a fairly flat and standard service to a small spectrum of client types and sizes.

It would be a challenge for many of the accountancy practices in the UK to be seen as totally unique and without any other alternative knowledger workers or service providers for the client to consider... the needs of the client would have to be rather specific as most general needs would have more than 1 option to choose from. That would take more than just good marketing.

David Toohey
The Accountants Circle

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By petersaxton
03rd Jan 2011 20:50

Business reality is important

“The idea with good marketing is that the customer perceives the supplier as totally unique so there is no other to supplier on the supply curve!”

Business is about reality not fantasy.

“Time records are not needed to work out how effective a supplier is because effectiveness is not the suppliers costs against income but the clients cost (your price) against their value.”

So an accountant is more effective if they are perceived by their client to be cheap and it’s irrelevant whether the accountant makes a profit or loss on the work?

“@David - the explicit answer to your question is that the time it takes to access or transfer the knowledge has no relevance to its value. The time is a cost of delivery.”

We know that. It’s still relevant to the accountant to decide if they offer to do the work.

“Time is not needed for billing and it is an ineffective way to manage a "knowledge" company. I said at the beginning "Keep in mind that time is not an issue if you are a knowledge worker” - I am talking about firms that embrace a new business model - you seem to be arguing with me about time records for a "service" company which it not what I am talking about.”

Your ideas would only be relevant if “knowledge worker” accountants could just spout out answers and not have to work to achieve what the client wants.

“I agree, if the firm’s business model is selling time then time recording will be needed.”

Total rubbish.

“@CD - time is a factor when considering if the project will be taken forward because both the provider and customer must make a profit. But, time is not relevant to the price.”

You’ve contradicted yourself. An accountant would only decide to take a job by comparing the time and the price so time is relevant to the price.

“What your time is worth to you is of no interest to customers, they are only interested in the results you obtain for them.”

An accountant’s time is of interest to the accountant. Your model seems to ignore how long it takes to provide what the customer wants. That’s a recipe for bankruptcy.

“By the way, if it was an annual tax saving of £2,000 for a fee of £1,000 for 15 years that may be worth the one-off 40 hours.”

You don’t understand business, do you? A client won’t let an accountant live on his laurels like that.

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By Bob Harper
04th Jan 2011 09:47

Progress

@David - you accept that time is not relevant to value so I assume you accept that time is not relevant for pricing. This just leaves the value of time recording for management.

Like I said; if a firm is selling knowledge then why do they need to record time? The only issue you seem stuck on is the knowing there will be a profit with the agreed fee.

Knowledge worker have knowledge, they know how to do something. If they have not done a similar project before they can break down the project into phases. But, with Value Pricing there is an element of risk, this is where the profit comes from.

Yes, it is a challenge to be seen as totally unique in business but that is a worthwhile venture because it eliminates the competition.

@Peter - progress!

When you say “your ideas would only be relevant if accountants could just spout out answers and not have to work to achieve what the client wants”.

By using the word “wants” I assume you mean accounts/tax returns, the work that takes lots of time? I would argue that these services are what clients need but the answer is yes; the idea is that accountants do less compliance work.

The change is that the accounts/tax returns become the basis of the relationship rather than the reason for the relationship. The revenue model is less than 50% coming from compliance services.

Bob Harper

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By David2e
04th Jan 2011 10:14

twisting it...

Bob

I don't agree that time is irrelevant to value. I only agree that time has little relevance to the client in terms of value, though it is certainly relevant to the cost of providing that value and hence the price too.

Using your buzz words, a firm selling knowledge has the cost of time associated with deliverying that knowledge... so why wouldn't having insight into that cost be important? And then even if it is profitable and at how much profit?

 

David Toohey
The Accountants Circle

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By cymraeg_draig
04th Jan 2011 10:30

Time is ALWAYS relevant to value.

@David - you accept that time is not relevant to value so I assume you accept that time is not relevant for pricing.  Posted by Bob Harper on Tue, 04/01/2011 - 09:47

 

Of course time is relevant for pricing.

Let's say that you decided that you wanted to race motorcycles. With 30+ years racing experience I could use my knowledge to turn you from an average rider into a real racer.  You might think that gaining that knowledge was worth £1,000 of your money and I might think I wouldnt mind earning a £1,000. So far we have only considered "value", the value to you of my knowledge & experience, and the value to me of earning £1,000.

However, then "time" becomes a vital part of that consideration.  If you have an important race scheduled in 6 weeks time and I tell you it will take 12 weeks to pass on my knowledge then time becomes a vital issue to you.   If I think its going to take me months to get you to the stage where you can benefit from my knowlege, so I'm earning £2 an hour then time becomes an issue for me.

Time is ALWAYS relevant to value.

 

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By Bob Harper
04th Jan 2011 10:42

Straight up

@David - you said “sure, from a client's perspective time records are not relevant to the effectiveness, especially considering a value or fixed price”.

I thought this meant you agreed time/costs are not relevant to value/price. OK, so you say time has “little relevance” to pricing - what exactly does that mean?

You also say that time “is relevant to the cost of providing value and hence the price too” - so do you think costs drive the value/price?

There are other ways to do cost accounting other than recording time. For example, with accounts work I could grade the bookkeeping and allocate costs. This may not be as accurate as time recording but it would enable me to assess profitability before I start. 

The reason why the cost of the time is not important is because profit can be managed by project management and knowledge firms business model is not about time. For example, OBK (the firm in North London who did the audio recording with Ron Baker for me) train their clients to do their own management accounts. When it comes to year end there is minimum work to do. With a minimum fee of £6,000 do you think they care how long it took to do the accounts?

The firms that implement MORE know how long it will take to prepare accounts are the year-end. They are using technology as a project management tool.

Bob Harper

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By David2e
04th Jan 2011 11:17

Twisting it more and missing points

Bo

My statement of time records not being relevant for a client in terms of effectiveness has nothing to do with the cost of time being relevant to pricing.

I also didn't say time has little relevance to pricing. I said it can have little relevance to value for a client, but as CD has pointed out in some ways it can certainly be relevant.

Cost alone might not be the sole driver of pricing but it should absolutely be considered... wouldn't you think?

I wouldn't say cost necessarily has anything to do with value, though it should certainly be an element considered within the price for that value.

I must be missing something on your example of working out the costing of accounts work with grading... so I'll leave that for you to be content with.

Of course your client firm would care on the time involved to earn their £6K.  They may be happy with it but only because the work is minimal and may require relatively little time which is the significant factor in them being happy.

I'd question the value for the firm's client though, having to do their own work when they could probably put their time to building their business, earning revenue etc. Needing to pass the work off to the client and then charging as though the work was being done by the firm... sounds like this is what you're getting at and doesn't sound like it would mean happy clients long term.

David Toohey
The Accountants Circle

 

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By andypartridge
04th Jan 2011 11:20

More time

To disregard time is the hallmark of someone with too much time on their hands and not enough work.

If I am busy and wish to increase profitability I have the simple choice of ditching a client and replacing them with a client who will pay more for something that takes me no more time, or a client that will accept a similar fee for work that takes me less time. Not rocket science.

I have seen Bob write that that time billing is unethical. I am far from being a slave to it but believe it has its place.

I have seen the video of the smug accountants that Bob favours boasting that they have charged up to £12,000 to form a limited company. I thought it smelt bad. Bob might say that it was OK because that was the perceived client value. I would say that it was unethical because the true substance of the work and marketplace was willfully withheld from the client.

-- Kind regards Andy

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By Bob Harper
04th Jan 2011 11:23

Clients are selfish

@CD - the delivery time can affect value; in many cases the quicker the delivery/response the more value.

The delivery time is not the issue here because we are discussing amount of time it takes, in your example 500 hours. The fact that it takes you 500 hours is of no interest to me, I only care about my time. If you could deliver the result in 100 hours of my time I would pay more - I do not care if you only spend 100 hours or 1,000. 

The only relevance of the 500 is whether you do it or not.

Bob Harper

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By andypartridge
04th Jan 2011 11:34

I strongly disagree, Bob

You appear to have little faith in accountants or their clients!

I believe that your mindset as a client is a minority one. In my opinion (my) clients have a respect for honest toil and accept that if their circumstances result in me expending more time that would be the case if they were routine, they are happy to pay more. Yes, they do recognise that time = value = money.

Not only will you need to convince accountants of your theories, you might find you will have to convince the clients too.

Many times have I heard them say that they will pay more because something will take me more time (than last year). I have never had one say that they will not pay more because the value to them has not increased.

-- Kind regards Andy

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By Bob Harper
04th Jan 2011 12:00

Very clear

@David - no, I do not think costs should be considered when pricing.

Let’s keep this focused with one question:

Do you believe the customer cares about the supplier’s costs when they consider the purchase price?

@Andy - I say time billing has made the profession unconsciously unethical. The example I use is the quality of the clients bookkeeping. Most accountants are not committed to improving their clients books because messy books = lots of work and this fulfills the time based billing model.

£12,000 for a Limited Company is not enough information to comment on. Perhaps there was a big goodwill value that the firm could obtain because they have specialist knowledge?

The firms I see on video are just amazed at how much they have been leaving on the table all the years. I have worked out this is just over £1m per practice owner.

Bob Harper

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By cymraeg_draig
04th Jan 2011 12:01

Spot on Andy.

Many times have I heard them say that they will pay more because something will take me more time (than last year). I have never had one say that they will not pay more because the value to them has not increased.

 

Posted by andypartridge on Tue, 04/01/2011 - 11:34

 

Spot on Andy.

Of course "one off" projects are a little different to compliance work, and occasionally "value" comes into it.  For instance we negotiated a compensation payment for a client from the gas company (who had dug up the road outside his business and closed the road diverting traffic away from his business.  Effectively this closed his business for 10 weeks as 90% of his business is passing trade).  We had no idea how much we would succesfully claim for him, so, agreed to accept a %age of the compensation obtained rather than a fee for our services. I suppose that could be described as "value pricing" but its hardly something we do every day.

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By Bob Harper
04th Jan 2011 12:13

Strong beliefs

@Andy - you are free to believe what you want and it sounds like you are seeing what you believe which makes it hard to see anything else.

All your example tells me is that your client is prepared to pay you more than you are charging. You asked for a price increase and used more time as an "excuse" - the reason they agreed was because they value you/the relationship.

Bob Harper

 

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By David2e
04th Jan 2011 12:14

Serious?

Bob - "I do not think costs should be considered when pricing"

Sorry but you've lost me completely with this statement.  I can't see how anyone in business could make such a statement.

It seems obvious you'd be happy to conduct business where your costs exceed the price since you don't think they should be considered.

Why this question?  "Do you believe the customer cares about the supplier’s costs when they consider the purchase price?"

An answer - Yes, absolutely. I think they should care because the supplier's costs will have an affect on the purchase price as virtually all suppliers (yourself excluded) should consider these when pricing.  Costs do have an affect on profitability (or do you disagree?) and a supplier's profitabily may determine whether or not they will be able to continue providing their products/services to the customer.

I don't agree with your understanding of the time based billing model.  An accountant will expect to spend a certain amount of time each week working (sure some flexibility and exceptions).  To aim to rip of clients by intentionally making books messy and needing additional time is not the point of this model, and won't help with building a relationship with a loyal client. It's just ridiculous really to make this sort of simplistic assumption that an accountant would do a poor job to fill time with 1 client rather than take on 2 clients and perform quality work.

 

David Toohey
The Accountants Circle

 

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By andypartridge
04th Jan 2011 12:40

Resorting to your fall back position

Because I don't agree with you I am blinkered?  Not true. I have considered value pricing in depth, flirted with it and come out the other side. Quite simply, I am not persuaded.

As I mentioned before, your livelihood depends on selling this and other theories. My livelihood doesn't depend on arguing against them. I believe that makes me far more objective than you.

I would not use time as an 'excuse' for a fee increase but I could and would use it as a reason on occasions.

You label me unconsciously unethical and yet suggest I should be charging more. Isn't that contradictory?

-- Kind regards Andy

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By Red Leader
04th Jan 2011 12:46

it's not worth your time.....

..... arguing with Bob.

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By Bob Harper
04th Jan 2011 12:50

Two separate decisions

@David - the thing you are missing is that there are two separate decisions.

The first decision is the customers; they compare the price to the value. The financial cost is a major part of the price they pay but there are other elements they can take into account like delivery times, hassle factor, service levels and guarantees. The profit the supplier makes is not a consideration.

The second decision is the suppliers; shall we do it for that price? Again, the financial implications are the key driver but can be other factors to consider like the personality of the customer. The cost of delivery will come into play in this decision because the provider will want to make a profit. But, this is not a pricing decision and you do not need to record time to calculate it.

Let me ask you this, do you really ask how much everything cost the supplier before you buy it?

Accountants do not intentionally make their client’s books messy; they just do nothing to improve the situation because they perceive there to be nothing to gain because they believe they sell time.

They see no incentive to improve their client’s books because they will lose fees and need to spend time/money winning new work. So, they leave their clients open to the dangers of a tax investigation, unable to have effective manageable to access to proactive tax advice.

However, if they embraced knowledge they would figure out how to improve the quality of their client’s books because it will allow them to increase value with higher levels of care, proactive tax advice and start to venture into other advisory services.

The firms have done this report that they spend less time overall, charge more, enjoy better relationships and get more referrals.

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By Bob Harper
04th Jan 2011 12:59

Flirting

@Andy - I do not know what level of consideration you gave Value Pricing nor do I know what “flirted with it means” but what I can tell you is that it is not easy to do because the first step is a complete change of mindset.

It is much easier and less risky for you to record and bill time. But, there is likely to be an opportunity cost for you and your clients - I do not know what it is because I do not know your capabilities.

I am not suggesting you should charge more, I said your example suggests you could but do you think charging more and making higher profits is unethical?

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By petersaxton
04th Jan 2011 13:00

Somebody doesn't know accountants

“The cost of delivery will come into play in this decision because the provider will want to make a profit. But, this is not a pricing decision and you do not need to record time to calculate it.”

Not a pricing decision? If you want to make a profit it will affect the price. If you don’t have a good idea of the time that will be spent how do you know the cost?

“Let me ask you this, do you really ask how much everything cost the supplier before you buy it?”

No, nobody suggested you did. But if a client hasn’t kept the books properly it is reasonable for the accountant to charge more to sort them out.

“Accountants do not intentionally make their client’s books messy; they just do nothing to improve the situation because they perceive there to be nothing to gain because they believe they sell time.”

By that statement it is obvious you don’t know accountants at all.

“They see no incentive to improve their client’s books because they will lose fees and need to spend time/money winning new work. So, they leave their clients open to the dangers of a tax investigation, unable to have effective manageable to access to proactive tax advice.”

It’s even more obvious you don’t know accountants.

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By David2e
04th Jan 2011 13:11

Another contradiction

Bob... firstly we are here discussing this primarily from the supplier's perspective.

I don't know why you think I'm missing the 2 decisions, though nothing you've said in the customer's decision has relevance to the discussion.

You have said the cost of delivery is relevant to the supplier's decision, but then that it is not a pricing decision.  The supplier's decision also usually consists of setting the price - either for negotiation by the client or take it or leave it. So either the cost of delivery is relevant to this or not?

A customer knowing costs to the supplier and amount of profitability is not something I have even come close to suggesting. I merely said a customer should care as it will can have an affect on them and future business, and possibly even the value they can expect.

I don't expect any decent accountant, or bookkeeper, to leave any client books messy - intentionally or unintentionally and I don't see how recording time or having an understanding of time involved should affect that.  Although we are not actually discussing time-based billing here, the method of billing shouldn't be relevent to an accountant wanting to provide value and quality service to a client for reasons far greater than just the method they use for basing rates.

A good accountant or bookkeeper will not lose money for properly maintaining books, and I'm sure many would find it offensive that you would suggest such a thing.  If they can save time performing one task better, that's time that can be spent elsewhere (eg. higher levels of care, proactive tax advice, other advisory services etc).

Otherwise I don't see how the argument for not recording time can lead to such benefits as charging more with less work (where's the value?), improve relationships or increase referrals.

Red Leader may be one of the more sensible 'participating' here.

 

David Toohey
The Accountants Circle

 

 

 

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By andypartridge
04th Jan 2011 13:12

@ Bob

do you think charging more and making higher profits is unethical?

Not per se, but of course it depends upon how it is done. Entirely acceptable if it is linked to the effort and/or quality of service I have provided (which could be time related). It is unethical if it is done by hoodwinking clients into thinking they are getting a unique service they are not and at a price they would believe to be unreasonable if vital information was not deliberately withheld from them.

-- Kind regards Andy

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By Bob Harper
04th Jan 2011 14:25

Someone doesn’t understand Value Pricing

@Peter - your costs will not affect what the customer is willing to pay it will only determine if you accept the engagement at the price.

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By petersaxton
04th Jan 2011 14:42

More lies
"Someone doesn’t understand Value Pricing

@Peter - your costs will not affect what the customer is willing to pay it will only determine if you accept the engagement at the price."

Did I say that the cost would affect what the customer is willing to pay? If I did please indicate. If I didn't then it confirms what has been obvious for a long time. You are not able to argue against what we are saying so you lie about what we say and then argue against your own fantasy.

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By David2e
04th Jan 2011 14:43

Why always costs and customer?

Costs alone might not affect what a customer is willing to pay but if it is a necessity the customer might not have so much choice in the matter.

Why are you always focussing on the costs and the customer and ignoring the supplier?

The engagement is usually not accepted by the supplier with pricing offered by the customer but the other way around... with the customer deciding whether or not to engage the supplier based on the pricing and everything else offered, which should already have costs considered beforehand and before the customer even gets involved in the ultimate decision.

David Toohey
The Accountants Circle

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By Bob Harper
04th Jan 2011 14:46

Perception

@David - yes, we are discussing pricing from the accountant’s perspective but there is no contradiction. 

You are coming at it from a cost perspective I am coming at it from value. You are all about the accountant knowing his costs so he can set a fee which returns a profit. I am suggesting there is a value conversation from which a price is agreed and then the accountant decides if they apply resources. So, in my world costs are only considered after the price is agreed.

Not sure I can be clearer.

I am not saying the cost plus pricing does not work, I am saying Value Pricing is better and this is why I agree that Red Leader has a good point. It is not worth arguing with me unless you are interested in looking at pricing from a different perspective. The issue is not accepting new ideas but getting rid of old ones.

@Andy - is building a brand and charging more unethical because there is more perceived value?

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By cymraeg_draig
04th Jan 2011 14:49

Anyone in business knows that time is a vital consideration.

 

 

A simple example -

A client asks us to supply a service (it really doesnt matter what) the FIRST thing I or anone else will do is perform a simple time calculation - namely, that job will take about 10 hours, the member of staff who will do it is paid £50 an hour, so, its going to cost me £500 to do that job.  

Now at that point I dont care what it's "worth" to the client - the simple fact is that I cannot even consider doing it for less that £500.

Time is the very first thing any businessman will consider, it doesnt matter whether you are providing accountancy services, legal advice, manufacturing garden gates, or painting houses, the first consideration has to be how long will the job take and what will it cost in wages & materials to do.

And of course, having then set a price for the job any sensible person will then monitor the time actually taken to -

ensure their estimate was accurateand, ensure staff are working efficiently. 

 

 

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By David2e
04th Jan 2011 15:26

At a loss

"in my world costs are only considered after the price is agreed"

I am not talking about solely basing price on costs, merely considering it.

It makes little sense to me why you are set on disregarding costs, regardless of the basis for determining pricing which is not something I've been arguing for or against.

How can you believe the above statement?  You would agree pricing and only afterwards consider costs and whether or not it might be profitable?

As for perceived value, certainly one important thing but the issue of it being ethical or not is raised if the customer is intentionally misled with the actual value they may be receiving.

David Toohey
The Accountants Circle

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By Bob Harper
04th Jan 2011 15:27

Different approach

@CD - I am not sure if you finished your post but there is a totally different approach.

The first thing would be to ask the customer questions around the project. These probing questions would get the client thinking about the value and enable the provider to fully understand the customer’s individual value drivers.

The answers and discussions would enable the provider to understand the customer’s expectations so that they could be exceeded. This conversation would be a value conversation which would enable the customer to set/agree a price/budget for the project.

It could be that the conversation uncovers issues which result is a wider and deeper service scope. So, only when the project is well defined and the value consider with a price would costs be considered.

If it was felt there was not going to be enough expected profit to warrant the return on resources and assumed risk then the project would be declined.  But, the project went ahead then before, during and post action reviews could be carried out so that lessons can be learned on how to be more effective in the future.

The initial discussion is completely different which often results is a different service which is less price sensitive.

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By andypartridge
04th Jan 2011 15:27

@ Bob

Is building a brand and charging more unethical because there is more perceived value?

I think you should distinguish between those brands that are backed by substance and those that are built on image alone. If time based billing is unconsciously unethical (I don't agree) image-only brands are consciously unethical.

-- Kind regards Andy

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By petersaxton
04th Jan 2011 15:42

I notice Bob continues to make things up and when challenged sim

Bob Harper said: "Someone doesn’t understand Value Pricing

@Peter - your costs will not affect what the customer is willing to pay it will only determine if you accept the engagement at the price."

Peter Saxton said: "Did I say that the cost would affect what the customer is willing to pay? If I did please indicate."

Bob Harper said: .........

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By Bob Harper
04th Jan 2011 15:44

Pricing for profit

@David - you either consider costs in pricing or you do not.  You do, even if it is not the only consideration, I do not.

Yes, like I said above, I would agree the price with the project scope as part of a value conversation with the client. I would be focussed 100% on the clients and make NO reference to costs. After I understood the project and agreed a budget I would then consider the costs of delivery when deciding if I want to get involved. 

This is why I ask accountants how they value practice development very early on in the discussion. It is also why I believe accountants need to offer more than accounts/tax returns because the value with these services is limited.

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By petersaxton
04th Jan 2011 15:54

Bankruptcy

"@David - you either consider costs in pricing or you do not.  You do, even if it is not the only consideration, I do not."

That attitude leads to bankruptcy.

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