I would really appreciate any help on how best to draw up a pricing menu for new clients as I'm starting out as a sole practioner. I'd like to offer a fixed fee but I'm not clear on how much to charge for items such as personal tax returns so it's difficult to know how to start! I'm based just within the M25.
Thank you!
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It's a fairly simple formula. Determine first how many hours you expect to spend on the work in question, given the type of client, quality of information and other relevant factors (which will obviously vary from client to client and the type of work). It is advisable to add in a bit of leeway for uncertainties in the first year with a client. Having done that you can determine what sort of reward you'd expect for each hour's graft. Multiply the two figures and you have your fixed fee. Revise annually as appropriate.
If you can do some research locally to see what other people tend to price at, you will know your market better. You also need to decide whether you are a no frills business that is at the budget end or whether you are aiming to be a premium brand. I made a conscious decision when I left my old firm to keep rates the same as them (despite not having the same level of overheads as a 1 man band), made sure my website made me look bigger than I was/ professional service. It is trial and error to some extent to start with but make sure your fixed fee quotes are clear on what is included. Bookkeeping hours extra!
Are you Lidl or are you Marks and Spencer?
You need to ask yourself some serious questions first. You can start by wondering why supermarkets don't charge the same prices for similar things.
If you want to charge a premium price for a premium service (I am assuming Food Hall here, not undies) you must know what you have to merit it, be able to communicate it to prospects and sustain it in your delivery.
'See what happens' suggests you are going to wing it. Respectfully, I say you will soon be found out if that is the extent of your approach.
Respectfully I say to thee
I'm aware that you're cheatin'
When no one makes me feel like you do
I'm channelling DJKL!
Would advise a software based approach to calculate your fees.
Easiest way to do would be to use something like excel and set up some options.
If you want to get more formal and pay for some pricing software then look at pricinginthecloud or goproposal. We use both pieces of software when we price up depending on what services the prospect is looking for.
I'd love to use the software myself, but can't justify £29 a month for either myself or a startup practitioner.
pricinginthecloud or goproposal. We use both pieces of software when we price up depending on what services the prospect is looking for.
Which do you prefer marks?
Worth remembering that pricing will also be influenced by such factors as:
- office rent (if not working from home)
- software costs
As well as type of clients you aim for: it might be tricky to expect an M&S price from the CIS subbie on £20-25k per annum or from a window cleaner etc. Similarly, you don`t want to charge Aldi prices for preparation of Accounts and the tax return for the self-employed business with stock and employees.
I have several price bands worked out based on the complexity of work and aim to review the fee for new clients after first six months.
If you can not work this out for yourself how on earth can you expect to advise any potential clients that may come your way!
Now then Paul. When you first started perhaps you knew everything about running a practice for the first time. When I started I needed just as much help as the OP does now. Lack of knowledge in pricing for accountancy work is nothing to do with the technical expertise in actually doing the work.
I suggest to the OP that they look around for a local mentor. I had a fantastic one that I could meet up with and got lots of help and also lots of support from Awebbers. Look on Facebook for other sole practitioners nearby and go for a cuppa with the ones you get on with best. You will learn what the going rate is locally.
Stick with us because you will find some dear kind people in amongst the snooty ones.
Pricing - tricky.
The trick that many use when starting out is to ask to see prospects previous set of accounts and see what his current/previous accountant charged, and then undercut.
Not a great idea if you want to earn a decent living and avoid all the [***] coming to you because you're cheap.
Have a look at the websites of some of the competition - lots advertise their prices.
Take out a demo of some pricing software - such as Go Proposal.
If you have a practice background think of some of the jobs you did and the fees that were charged to those clients.
My fees haven't changed greatly over 6 years but I am far more accurate with pricing now. In the early days I did make a few howlers.
As a starter:
£100k turnover ltd co, good standard of bookkeeping, year end accounts, tax, payroll x2 and personal tax of 1 director, email support during year, - £1,750pa
Sole trader (tradesman), £50k turnover, paper records - once a year contact - £500 to £600
Vat returns - minimum of £150 per return.
Edit - typo spotted!
Good advice from Kent there and certainly some fee levels to aim for if you can. It slightly depends on your level of skill, technical expertise and generally the way you present yourself as to the fees you command.
Theres generally no reason to undercut the previous accountant if they’re actively looking to change advisors, I often tell new prospects that their previous fees were very generous and that I charge more, this is far easier when it’s a referral from an existing client though.
The problem is that in the early days the new fees are very valuable to you cash flow wise, but once you have a decent portfolio and regular referrals then it becomes very easy to dictate fees, and you become less bothered if you get the new business or not.
Some of my lower fee quotes have often been to friends and their friends, I only get average returns on these but they proved to be the best referrers of quality clients where I can subsequently charge a premium fee.
Have a search on Aweb, as this is a common question, there’s plenty of advice, but there’s no correct answer. The more information you give, the more relevant our answers can be.
I have a new client who has a small but thriving gardening business.
A growing business? Start by finding out how much she charges per hour.
She is a sole trader. She would like my help to set up her business on Wave accounting
Whatever she charges per hour x 1.5
and also for me to help complete her personal tax return
£300 for self employed accounts & £150 for SA tax return.
and offer straight-forward advice on tax.
£50 hr - £75 hr
That keeps things nice and simple. I worry about the 'help her complete her personal tax return'.
I am visualising you sitting next to her with a cup of tea while she logs onto the Government Gateway and you take her through it box by box. Torture (for you both).
help complete her personal tax return
This will take much longer than doing it yourself, and you should charge accordingly.
Clients like fixed fees and some like an idea on the phone so you need to know your fees well. Although the prospects who ask about fees in the first few minutes have turned out to be the worst clients.....
Set a minimum limited company fee for VAT reg and non VAT businesses and check it is divisible by 12. Set a fee for personal tax returns, mine is £250, more if rental income, self-employed etc, less for Director clients. Although I saw an ad for a local sole practitioner whose fees start at £300. I am just outside the M25.
I also find that fees are pretty squeezed at the moment and the fees I am quoting to start ups have not gone up recently. As a result these are no longer my ideal client and I have stopped targeting them on my website.
You should be able to gauge your market rate locally, have a look at other people with a similar setup near you and see what they charge as most will quote prices from on their websites.
A common thing you will hear from prospects is that "my current accountant charges a fortune and you only see him once per year".
There can be 2 things that he is looking for, either more interaction or a cheaper bill. In my early days I would try and offer both but it doesn't work and I got loads of low value work which ran me ragged.
If you are going to do a better job that current guy you shouldn't expect to be cheaper.
The first 2 years are very difficult and you will find times when you will take cheap work as oppose to not working at all, unless you have a load of money behind or a well paid partner. I look back at that as character building now and it helps you spot the trouble clients who move around every few years.
In the early days unless some clients follow you from your existing job you will wont get many client referrals so look to build your professional network. Also the web is where many people will go now to look for "Accountant m25 area" so get some money put into a website. Rocketspark are good as they do specialist ones for accountants and are not expensive.
Pricing software is definitely worth considering . I've made my own in excel and it's had a big difference to the fees quoted. I'd say 10-30% higher than before . I'm thinking about using a paid one due to the efficiency savings in E signing etc which would easily save my practice the monthly cost .