Lost my first client - Highest fee income

Lost my first client - Highest fee income

Didn't find your answer?

My practice was really on the up - till I received a voice mail late today from one of my key client - They are leaving me.

This is a substantial fee client. 25% of my fee income is from this client. Reason why they are leaving from the voice mail - fee savings.

This is my first client loss since I started. The client will call again on Monday. I hope to get further feedback.

I just did not think this client would leave me. It did not occur to me. In terms of probability of the client leaving I would have put it to 3% to 5%.

I hope to learn from the feedback. It will be tough to make up that income.

Anyone else been in a similar situation losing  a key client? Tough one!

Replies (90)

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By kim walsh
19th Aug 2011 17:51

Overcharging?

I agree with TonyKelly

Accountants can only reduce their fees if they are overcharging in the first place or can agree areas where the client can do more for themselves.

I would suggest that some clients won't be satisfied no matter what and my experience over the last three years is that when people (clients) are under extreme financial pressure nothing is cheap enough.

You are better off using the spare capacity to spread your risk than paupering yourself to keep them.

Its is bothering you more because you have done what we all do and have a more personal relationship with a client that takes up a lot of your time.

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By petersaxton
19th Aug 2011 18:39

Overcharging

I disagree with Tony and Kim. I think there's a good chance that FirstTab was "overcharging" the client.

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By Daffy Duck
19th Aug 2011 19:31

What's overcharging ?

Actually Peter there's no such thing as overcharging, merely charging more than the client is willing to pay.

 

That is the whole point, it's all down to what the customer will pay.

 

In FT's case it appears the customer isnt willing to pay.

 

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By petersaxton
19th Aug 2011 20:28

Is there or isn't there?

 

“Actually Peter there's no such thing as overcharging, merely charging more than the client is willing to pay.”

Actually, Daffy, there is such a thing as “overcharging”. If FirstTab was proving a service for £25k and other accountants were providing the same service for around £15k then FirstTab was overcharging. If you say there is no such thing as overcharging then how would you describe charging 67% more than all other accountants for the same service? Just because you dont like a word it's not a good reason to dispose of it. We should always retain words if they serve a useful purpose.

Many accountants have their own set fees – with some leeway for various factors – and will charge similar amounts for similar clients for similar services. Some accountants will charge what they can get away with. Client A could want a lot of service and Client B could want little service but one accountant (the “set fee” accountant) would charge Client B £1k and Client B £2k. Another accountant would simply charge whatever was possible to get away with – say £2k for client B and £5k for client A. Eventually these clients may find out what others are being charged. If they are happy with the service they may not change. If they aren’t very happy with the service, or they have to cut costs, then they may change.

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By dbowleracca
19th Aug 2011 20:56

Whatever the reason, FT needs to learn from it
I've been following this thread with great interest, as it is a really important challenge that can and will face all accountants, although hopefully not on this scale.

My experience is that regardless of what a client says they rarely if ever leave on price. They leave for many other reasons, which they may put down to price.

This particular client had been happy to pay FT a large fee, which equated to 25% of FTs total fee income. I doubt very much that they suddenly decided this was too much, more likely that the value to them of what they were receiving was lower than they desired.

The ONLY reason price is a deciding factor, is when there is no difference in any other area. If they have found someone to provide EXACTLY what you provide, but for less, then you have to look at how you can add value to what you do and differentiate to help you get a more profitable price.

Good luck on Monday FT hope it goes well, would be really interested to hear about how you get on.

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By petersaxton
19th Aug 2011 22:52

What are the services?

If the fees are 25% of fee income you must be talking a lot of money. Unless it is incredibly specialised, what possible services can justify that amount? Shouldn't you advise them to get a bookkeeper for some of the services?

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By Tosie
20th Aug 2011 14:34

fees

just been looking at accountancy websites in my area.Fees from accountants describing themselves as Chartered (but no partner details) are charging £99 for self employed and contractor returns, £325 for ltd companies. Individual returns £45.

I suspect that many cash strapped clients will be looking at saving money and many more of us will be losing clients based on cost.

I am afraid that no matter how good the service if you "aint got the money" you have to look for savings.

Good luck "first Tab" I know from experience how distressing it is to lose your first client.

 

 

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Replying to carnmores:
By petersaxton
20th Aug 2011 17:27

Are the prices "from ..."?

Tosie wrote:

just been looking at accountancy websites in my area.Fees from accountants describing themselves as Chartered (but no partner details) are charging £99 for self employed and contractor returns, £325 for ltd companies. Individual returns £45.

I suspect that many cash strapped clients will be looking at saving money and many more of us will be losing clients based on cost.

I am afraid that no matter how good the service if you "aint got the money" you have to look for savings.

Good luck "first Tab" I know from experience how distressing it is to lose your first client.

Have you got any links?

I'd be really interested in seeing the websites. Are you sure they are not saying "from ..."?

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By Daffy Duck
20th Aug 2011 18:44

Cheap & nasty

Tosie - "just been looking at accountancy websites in my area.Fees from accountants describing themselves as Chartered (but no partner details) are charging £99 for self employed and contractor returns, £325 for ltd companies. Individual returns £45. ""

 

 

At those prices they are welcome. I've seen what happens to clients who move to cheap and cheerful "accountants". Invariably they end up paying twice as much tax and with no support at all. The minute things go wrong the "accountant" bails out.

 

 

 

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Replying to carnmores:
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By User deleted
20th Aug 2011 22:03

Ditto

Daffy Duck wrote:

 

At those prices they are welcome. I've seen what happens to clients who move to cheap and cheerful "accountants". Invariably they end up paying twice as much tax and with no support at all. The minute things go wrong the "accountant" bails out.

 

 

 

 

I'll second that emotion!

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Replying to carnmores:
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By The Innkeeper
21st Aug 2011 20:30

Cheap

Where are they based charging these fees? On a row boat in the middle of the North Sea?Frankly if they are members of a proper body I can see them getting a slapped wrist on a control visit as it cannot be possible to provide a proper service with all the PI ,CPD  etc that is compulsory these days

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By User deleted
22nd Aug 2011 19:13

to delete

I am found out!

 

 

 

 

 

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FT
By FirstTab
22nd Aug 2011 19:16

Response from the client

Thank you all for your response.

I spoke to the client today to get  feedback on why he decided to leave and to look into the possibility if he could stay on.

I remember making it clear to the client that I do not get involved in any way with risky tax strategies regardless of the fact that some other party will undertake both the advice and implementation of the strategy and explain all the pitfalls.

On reflection,  client wanted these risky tax strategies that I failed to provide. They have found a tax law specialist whose key business is various types of tax strategies and the compliance work is just a side business for them.

The new accountants have also cut the accountancy fees by 50% since their income will be derived from tax strategies and implementation.

Having listened to the client, I understand where they are coming from. Reduction of 50% in fees plus tax savings was really a big pull for the client.

I wished the client best of luck and did not offer to reduce my fees since I do not think I would be able to meet client needs on risk tax strategies.

The question I have to ask myself now- should I get involved in risky tax strategies. I need to provide what client wants and not  impose my ethics on my clients. At the same time, I am just not comfortable to get involved in this area. I will think about this.

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By Daffy Duck
22nd Aug 2011 19:50

Is it legal?

FirstTab  - "The question I have to ask myself now- should I get involved in risky tax strategies. I need to provide what client wants and not impose my ethics on my clients. At the same time, I am just not comfortable to get involved in this area. I will think about this "

 

 

Several options.

Risk continuing to lose this kind of client.Get involved with something you say you're not comfortable with.Get a business arrangement with the other accountant letting them do the tax planning while you do the compliance work.

When it comes to tax planning you should forget "ethics" - all you need to know is is it legal or not, and if it's legal what will it save the client, and what are the risks if any. If you are basing advice on your own morals rather than on what's best for the client then you are not giving them the impartial advice they pay for.

 

 

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By petersaxton
23rd Aug 2011 09:01

risky tax strategies

There's a big difference between "risky tax strategies" and tax planning.

You should be able to do tax planning yourself.

Maybe you should come to an arrangement with a "risky tax strategy" accountant?

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Replying to User deleted:
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By The Innkeeper
23rd Aug 2011 09:09

Who says they are risky

It seems that FT is very risk adverse. It might well be that the tax strategy in question are just aggressive.Like most areas tax planning covers a wide spectrum

of issues - some might be simple and others aggressive .

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By petersaxton
23rd Aug 2011 09:38

one good point

At least FirstTab now knows what is wrong and I feel he can't be blamed in his attitude or service

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By DMGbus
23rd Aug 2011 13:30

"Risky" is a matter of judgment / boundaries of knowledge

I expect that we all have a boundary as to how far our tax strategy advice goes.

I believe that a small number of practitioners might still be averse to the "low salary / high dividends" concept that most of us subscribe to.

Then there are those who are scared of giving tax credits advice and get confused between moral/judgmental .issues and what expert advisors say is lawful.

Personally I don't get involved with Offshore Trusts but if a client mentions them I would look for a specialist to advise them.  Same goes for Umbrella companies.

How far an individual tax advisor should go should be determined by his technical knowledge - does he think that the "scheme" will work or not?  Does he realise that tax avoidance becomes tax evasion if a crucial fact gets misrepresented to HMRC?  Will the extra professional fees involved be less than the sought after tax to be avoided?

 

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By dbowleracca
25th Aug 2011 16:18

What were this clients profits?
FT what level if turnover and profit did this client generate? And out of interest, would you mind Sharing what your fees were for each service you provided?

We do help clients with tax strategies, but like you have said we use specialists for the advice and implementation. I'm shocked that another firm would offer the same services as you for 50% of the fee just because they are helping with tax strategies because this should be extra not part of the fee.

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FT
By FirstTab
25th Aug 2011 22:31

dbowleracca

I have always found your response helpful. This is why I do not feel good by saying this, I do not want to give away the information you are asking. We are talking high numbers on all fronts.

My understanding is that the fees for tax strategies and implementation are at a premium.  Clients do not have a problem with this since as far as they are concerned tax savings more than compensate the premium fees.

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By petersaxton
26th Aug 2011 08:14

What did you expect?

From your response to questions it would appear that you were charging way too much and it was only a matter of time before your client realised. You either have to continue with your strategy of charging as much as clients will pay but accept they will leave as soon as they know what other accountants charge for the same service or bring your prices more into line with other accountants prices.

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By dbowleracca
26th Aug 2011 23:31

You're right FT
FT I asked because I am trying to identify how a new firm could halve your fees and provide the same level of service, however I appreciate that this is sensitive information and respect you for beig so open with the rest of the information.

Please don't take offence, but I do agree with Peter that you must have either been overcharging or underservicing this client. No firm would ever take on a client who was interested in tax strategies and use the premium they got from this to enable them to discount the compliance work by nearly 50%. This is because the tax strategy work is only transactional and the client may not wish to do the strategy a second time, may not qualify or the strategy may be void.

You are right in that the fees or tax strategies command premium fees - however they do involve a fair amount or work and involvement on your part just keeping the client in the loop and looking after them. If you are now a member of AVN as you mentioned before, o recommend you speak to them about how you could offer advanced tax planning to your clients.

Do you feel the client that left got good value for money and was looked after and cared for like they expected - being 25% of your income?

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By DMGbus
27th Aug 2011 00:04

New firm strategy...

My guess the new firm's strategy is profitable as follows:

1. Provide a tax avoidance "premium" service at a premium price

2. Use the high profit made on the "premium" service to subsidise the loss or minimal profit on the compliance service

If the client is "sold" (or maybe hoodwinked) into the avoidance premium service (we don't know how robust or safe this avoidance strategy is as I don't think that it's been explained) then they'll be very happy to pay a premium price to "get one over the Revenue").

The compliance service is of little value to some clients.

For all we know the new firm might be deceptive and selling a very dodgy avoidance scheme (not explaining the true extent of risk to the client) and perhaps offerring a substandard compliance package as well.  

 

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By petersaxton
27th Aug 2011 10:39

DMGbus

Maybe the firm offers to do the compliance work for fear of another firm finding out that the "premium service" is dangerous?

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FT
By FirstTab
30th Aug 2011 19:40

Update - Fee reduction

There has been a few exchange of emails between the client and me. The bottom line is that the client is not happy with the new accountant. I do not know  the reason why. This does not mean with certainity they would  come back to me.

Their email indicates they want a reduction in fee. The client has asked me not to respond to the new accountant's clearance letter.

I am now confused. Being honest to myself, I do not want to reduce my fee. The fee I charge is reflective of my work. I do not think I would be the same with the fee reduction.

Any views?

Thanks

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By User deleted
30th Aug 2011 20:15

Don't reduce it

You'll look like you were overcharging in the first place (which may be the case but..) and / or are desperate. If they want to come back they will regardless of the price. And if they don't then it wasn't meant to be.

(Admittedly it's easy to say when it's not you but what does your gut say?)

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By mesmags123
30th Aug 2011 21:04

Don't reduce it

If your fees are high - dont reduce them.  Offer to expand some services at the current cost - these should be 1 time type services (reviewing the riksy tax strategy) - present a bill and then waive the fee as a jeature of goodwill after they have returned as a client.  Then make sure they know of your value to them - or are your just someone that completes their taxes?

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By User deleted
30th Aug 2011 21:34

With the timescale of all this ...

... the cynical part of me sees this as an elaborate way to a) get the fees reduced and b) keep them reduced by the fear it will happen again if you try to raise them over time.

If they do come back I would be chary of having the sort of exposure you have to a client of this ilk - too many sleepless nights for my liking!

At the least I agree with the idea of keeping fees the same but throwing in a few more bits if you can. If they come back it needs to be on your terms or you will forever be their "pet" accountant and you objectivity will be tainted.

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By Tosie
30th Aug 2011 22:49

crazy

They can hardly have got to know new accountant. I would not have them back they will want further reductions and further reductions. They will mess you around and delay paying.Move on and make sure that you do not depend upon one client again.

Believe me I know I have been there.

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By Spartacus
30th Aug 2011 23:06

Don't take them back -

My policy has always been that once a client leaves there is no turning back.

They left once, so they will do it again. Move on.

 

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Replying to chatman:
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By User deleted
31st Aug 2011 08:20

Probably true

Spartacus wrote:

My policy has always been that once a client leaves there is no turning back.

They left once, so they will do it again. Move on.

 

In the majority of cases, probably so, but one of our longest (and highest fee-generators) clients has been with us since a spell with another firm. Always dangerous to generalise, and it will depend on the particular client and the type of relationship that existed previously.

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By User deleted
31st Aug 2011 05:48

re OGA's post

... the cynical part of me sees this as an elaborate way to a) get the fees reduced and b) keep them reduced by the fear it will happen again if you try to raise them over time.

 

Totally agree. Except I might have substituted 'sneaky' or 'underhand' where he's used 'elaborate' :)

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By petersaxton
31st Aug 2011 06:05

Guesswork

 

Dbowleracca asked what your fee levels were for each service but you didn’t want to tell him.

How can we possible advise you if you wont give this information? Everything we say will be based on guesswork. My advice would be a lot different if you were charging £100 for a few transactions of bookkeeping than if you were charging £1,000. I still don't see what you are gaining by witholding this information. Are you embarrassed by the amounts you are charging for very little work?

“The client has asked me not to respond to the new accountant's clearance letter.”

You should respond to the clearance letter. You should tell the new accountant that their new client has asked you not to respond.

“The bottom line is that the client is not happy with the new accountant. I do not know the reason why.”

Ask them.

I suspect that the new accountant has been successful with marketing bullshit and cannot deliver but it is very early days for a client to not be happy.

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By Tonykelly
31st Aug 2011 10:24

too little information

Mr. F. Tab has posted a query asking for some advice regarding a lost client. He has been requested to provide further information regarding the circumstances. He has refused to do this.

By neglecting to provide further information, the whole thing begins to look like a hypothetical scenario.

If I go to a solicitor and ask for advice, he will have some queries surrounding the circumstances. If I refuse to give this information, how can I expect him to advise me? The whole thing becomes a bit of a joke and farcical.

I agree that in post-GFC times, people are a little more wary of giving out information.

However, if we are expecting people to help us, then we should at least be as helpful as possible with the background information. Otherwise the whole situation looks a bit of a farce or the figment of someone's imagination.

 

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FT
By FirstTab
31st Aug 2011 10:23

hypothetical scenario

I really wish it was.

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By petersaxton
31st Aug 2011 10:47

I believe FirstTab

The crux of the issue seems to be pricing and service but seeing as he wont provide information it is difficult to consider his specific problem.

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By Tonykelly
31st Aug 2011 11:13

I am not accusing him of making the whole story up

I give people the benefit of the doubt, but I do find that people seem to embellish the facts to make things seem more interesting.

For example, what is the point of posting a query along the lines of: I think I have lost a client, what should I do? No, if that client represents 25% (yes 25%) of total fee income, then the whole query takes on a different nature.

Mr. F. Tab is hiding behind a pseudonym, as I can tell you that is not his real name. I know who he is, as he was involved with an erstwhile colleague of mine some time ago, for some telemarketing.

However, I will not disclose his identity on this here forum, as it is his confirmed wish to remain anonymous.

If you are posting anonymously, what is the big deal about giving further information, when requested by people who genuinely want to help?

 

 

 

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By Spartacus
31st Aug 2011 11:41

And your problem is ?

Tonykelly

"However, if we are expecting people to help us, then we should at least be as helpful as possible with the background information. Otherwise the whole situation looks a bit of a farce or the figment of someone's imagination """

 

 

 

Of course, if there is insufficient information for your liking you always have the option of simply ignoring the thread.

 

 

 

 

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By petersaxton
31st Aug 2011 12:09

Help

"Of course, if there is insufficient information for your liking you always have the option of simply ignoring the thread."

But how much does that help FirstTab?

Isn't it better if people explain why information is needed to help him?

I assume FirstTab is posting on here asking for help.

If FirstTab had said: "I have been charging a client £40,000 a year to do his tax return with UK  employment income as his only source of income" would get totally different answer than if he said "I have been charging a client £1,000 a year for full bookkeeping with 200 transactions a month, VAT returns, payroll, statutory accounts, personal tax and ad hoc assignments"

I feel the issue is one of price but everybody is giving all sorts of advice that will most likely not make any difference to the situation because they don't have sufficient information.

The client wants lower fees but FirstTab doesn't want to lower his fees. We don't have a clue what services he provides so is it sensible to suggest he provides more services?

 

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By kim walsh
20th Sep 2011 10:44

Mutual trust and respect

Surely this has now gone?

If they respected you and had made a mistake or were hoodwinked they would not have the gall to ask for a fee reduction.

If you want them back suggest a strategy where they can reduce fees by taking on some work themselves.

I would leave well alone, and take advantage of the new capacity.

 

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