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Pricing Lessons from a Cleaner and a Translator

Two non-accountants have taught me this week more than any Pricing Strategy book

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As a newbie sole practitioner, I still struggle to find the correct pricing. I always have the feeling I am being "cheap" for the amount of time and effort I put on my current work, and I keep thinking about how to improve processes to maintain prices but work less.

Recently I got 2 lessons from 2 different sole-traders, a cleaner and a translator:

1) Cleaner's Lesson. Cleaner contacts me 5 weeks ago, she wants to register for self employment as this has been requested by the Universal Credit department. I register her for self assessment after doing all the AML and questions. She is not interested in more accounting services. I send her an invoice for £30 but tell her not to pay until she receives the UTR. Next day a friend of mine asks me if I know any cleaner as he needs to clean his house every 2 weeks. I put both of them in contact, and since then she has worked 15 hours at £20 per hour in cash.
She received the UTR 4 weeks ago. My software has sent her 3 reminders for the £30 which is still unpaid. 

2) Translator's Lesson. This one has just happened 10 minutes ago. A prospect who works as a courier has contacted me saying "his previous accountant in theory registered him for VAT and UTR in November but I have not received anything yet by post so I have not included VAT on my invoices". I tell him to contact him and ask what is going on. The guy has replied sending him the VAT certificate requested in November but effective since August (Flat Rate Scheme Courier!!!) saying "he only received the VAT confirmation yesterday". He is not an accountant, just a translator with a website which helps immigrants to "find bedrooms, translate documents or deal with any admin task they need". He created a Government Gateway Account using the username and password of the courier and registered him since the day the courier arrived to the UK, in August 2021. I will call HMRC tomorrow but I think it is late to change the effective date of registration based on their website.
When I asked this courier how much he paid, he said £80. I charge £40.  

Replies (33)

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By David Ex
10th Feb 2022 20:48

You don’t have to spend too long on here to see that accountant’s skill and knowledge is regarded as quite worthless.

Pretty sure I wouldn’t choose accountancy if I had my time over. Are solicitors “disrespected” to anything like the same extent? Absolutely not.

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Replying to David Ex:
seneca
By Seneca
10th Feb 2022 21:12

David, let's start a cleaning business then!

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Replying to Seneca:
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By David Ex
10th Feb 2022 22:37

Seneca wrote:

David, let's start a cleaning business then!

Would be nice to feel valued!

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Replying to David Ex:
Slim
By Slim
11th Feb 2022 00:55

.

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Replying to David Ex:
By mrme89
11th Feb 2022 10:38

My fiance is a solicitor. She wouldn't go into the profession if starting over.

When she qualified, the going rate in area was for a newly qualified was £32k. Her firm offered her £25k at the end of her training contract (their reasoning was that it had cost them money to put her through her training contract).

Needless to say, she left pretty much straight away for somewhere that would pay her the going rate.

She's 32 and it seems like everyone around her age group all enjoyed legals dramas and wanted to become a solicitor and it's driven salaries down.

She works for a large organisation now as an in-house solicitor and whilst her salary is pretty good, she wonders why she slaved away studying for years for a customer service manager to be earning more.

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Replying to David Ex:
Morph
By kevinringer
15th Feb 2022 13:27

David Ex wrote:

Are solicitors “disrespected” to anything like the same extent? Absolutely not.


Our value is measured by how much we charge. Our local solicitors charge out rate is multiples of ours: even their lowest paid admin is charged out at more than our partner rate. If we quadrupled our charges we would be respected more.
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Replying to kevinringer:
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By Winnie Wiggleroom
15th Feb 2022 13:43

kevinringer wrote:

David Ex wrote:

Are solicitors “disrespected” to anything like the same extent? Absolutely not.

Our value is measured by how much we charge. Our local solicitors charge out rate is multiples of ours: even their lowest paid admin is charged out at more than our partner rate. If we quadrupled our charges we would be respected more.

I disagree, a few weeks ago a client was telling me a tale of when he was stuck in some rural area and desperately needed to print out a page that required his signature and put in the post that day - one business he asked flatly refused due to "data protection" so he went to a local solicitor - they did it quite happily and charged him over £100 for the privilege! I can guarantee he now has no respect for the legal profession.

Also you cannot compare the two professions - much of what we do is advertised on TV as being as easy as taking a few photos on your phone, not to mention the Self Assessment system being open to anyone, I have not seen any adverts that tell you how easy it is to represent yourself in a legal matter.

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Replying to Winnie Wiggleroom:
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By Rgab1947
17th Feb 2022 10:22

Unfortunately true

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By SPHAccounting
10th Feb 2022 20:46

The cleaners UC will taper off once he/she starts self reporting all that cash income though I'm definitely sure of that oh yes I am.

Are you using a pricing model or just seeing how it goes for now?

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Replying to SPHAccounting:
seneca
By Seneca
10th Feb 2022 21:16

Haha, my friend told me he could deduct £30 from her the next time and give them to me directly. Friends as debts collectors. I told him not obviously.

Not pricing model. Most of my clients are sole traders therefore I am not VAT registered either so I am quite cheap compared to other accountants. My pricing model is £30 per month or £39 per month for VAT registered ones, hassle free accounting. They just have to scan the documents and send them to me.

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Replying to SPHAccounting:
Slim
By Slim
11th Feb 2022 00:56

I’m no expert but I thought UC put a bottom value on self employed earnings to stop abuse?

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Replying to Slim:
seneca
By Seneca
11th Feb 2022 09:45

I am sure this cleaner is an expert and knows the figure to report better than all of us together.

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Replying to Seneca:
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By SouthCoastAcc
11th Feb 2022 13:20

Aint that the truth

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By Hugo Fair
10th Feb 2022 20:54

Don't let either of those experiences get under your skin ... and certainly don't treat them as 'life lessons'.
There are plenty of ungrateful/selfish people (the 1st one) and parasites that prey on the vulnerable ... but there are far more people, who despite their human frailties, are essentially kind and helpful and trying to do the best they can.

Experience will help you more easily discern the ones to avoid ... but it's an imperfect world, and we all get fooled from time to time. The key is to move on, not dwell on it.

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Replying to Hugo Fair:
seneca
By Seneca
10th Feb 2022 21:26

Thanks Hugo. As Seneca said "He knows his own strength; he knows that he was born to carry burdens"

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Replying to Hugo Fair:
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By Paul Crowley
10th Feb 2022 23:24

Agree
We all have good long term clients who respect us
Over 50% of my clients pay within 2 weeks

MTD will be a thin down if it stays as HMRC want it to be
I like most would probably be more profitable If I culled 10% of my clients
That 10% is in numbers not value.

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Slim
By Slim
11th Feb 2022 00:57

You are way too cheap but i guess you realised that already.

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By Wanderer
11th Feb 2022 06:01

Here's a couple of lessons.

For the two tasks in your OP, in the future, charge 5 times what you are charging presently.

For your proposed call to HMRC to change the EDR don't waste your time.

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Replying to Wanderer:
seneca
By Seneca
11th Feb 2022 09:50

Thank you. Maybe 5 times is too much but 2.5 or 3 times more (£85-£120) for one off tasks will be paid still accepted by most clients.

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Replying to Seneca:
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By Wanderer
11th Feb 2022 10:51

I note you've only been in practice for under 2 years.

You charged £30 to the cleaner. With all the meetings / conversations / admin / CDD etc (she's not interested in ongoing Accounting Services) what you did is worth at least £150.

Similar for the translator.

You are undervaluing yourself.

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Replying to Wanderer:
seneca
By Seneca
11th Feb 2022 11:39

Thanks Wanderer.

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By RobbieT
11th Feb 2022 09:57

When starting out, it's always "fun" trying to reduce the difference between your charges and what the market will bear. Top tip: don't ask the client "would you pay more?" as they are not impartial.
I found the most important things are:
- it's OK to establish some initial goodwill with some free calls but get your engagement sorted ASAP;
- if offering a fixed-fee basis, agree what is NOT included, and don't then roll those in for free if asked to provide these at a later date;
- don't do it cheaply just because it doesn't take you much time: you've trained so your knowledge has value (see the "nuclear engineer with the hammer" homily). Hourly rates are not your friend here, so have a menu of fixed-fee services.
- your improved efficiencies should be to your benefit, not to your clients'

Anecdotally, I had a bookkeeper who also ran a cleaning business. She packed up both last year to run a cafe.

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Replying to RobbieT:
seneca
By Seneca
11th Feb 2022 11:42

Thank you Robbie. I planned to do all of this during the year.
PS: I guess your bookkeeper has a very clean cafe now and the accounts are even including the tips!

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By Winnie Wiggleroom
11th Feb 2022 09:59

The lesson I would take from this is the same thing I learned very early on, I pretty much flatly refuse to do one off jobs, I am only interested in a client that wants my services for the foreseeable future.

If your cleaner had asked me to do that I would have pointed her to the HMRC link, if they want me to do it it would be on standard terms - a monthly fee from now on

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Replying to Winnie Wiggleroom:
seneca
By Seneca
11th Feb 2022 11:43

Thanks Winnie

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By Justin Bryant
11th Feb 2022 10:57

If you're that cheap, just ask for upfront funds from all new clients, which should be OK re AML. See:
https://www.lawsociety.org.uk/Contact-or-visit-us/Helplines/Practice-adv...

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Replying to Justin Bryant:
seneca
By Seneca
11th Feb 2022 11:45

Thanks Justin. Funnily enough, most of my sole trader clients are good payers. They want to "get rid of their debts" asap, monthly preferred to annually. I tend to not issue the invoice until the job is done but I will take all the advice in this post to change this method in some cases.
Thank you all!

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By I'msorryIhaven'taclue
11th Feb 2022 16:48

I had a lesson in optimum pricing from a startup hairdresser a few years back.

She'd worked school-friendly hours for minimum wage and shared tips in a downmarket High Street salon where she was the most popular stylist. When their kiddies reached latch-key age, she sprang into action by remortgaging the family house and buying outright a freehold shop on an upmarket housing estate. Canny.

First clients were her previous entourage. Each and every week when she was booked to 80% or so, mostly with her previous mob of clients, she'd close her booking diary and instead deliver leaflets / reserve spaces for her upmarket housing estate prospects. Every week her prices for her old guard increased by 20p or 50p (mucho brass back then). And within 6 months she had the monopoly on her entire upmarlet estate; all paying top whack and only the most determined of her old customers hanging on in there paying the new inflated tariffs.

I was particularly impressed with her acumen when dealing with her old customers: she'd get them all in on one day, to avoid mixing them with upmarket clientele. Half Price Pensioners' Wednesday? That lived and died in a tomato-season. The second the books were full for other days then Pensioners' Wednesday became overspill day, and all pensioner concessions were summarily removed.

All those fr*gging supply and demand graphs (for anyone unfortunate enough to have been made to study Economics) and optimum pricing tables were called into play. Within a year our hairdresser had managed to quadruple her tariffs.

There's always a downside. Our protagonist moved on to another accountant during Y2, regardless of all that extra input from yours truly. Bah, Humbug! During Y3 ,the supportive husband who up until than had been a bus driver was similarly dislodged.

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Replying to I'msorryIhaven'taclue:
seneca
By Seneca
12th Feb 2022 11:47

Thanks for sharing the story! Still lots to learn, lots of times from people who didn't study Economics.

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By Charlie Carne
15th Feb 2022 11:24

As others have said on here, you are grossly under-charging. You don't say what qualifications you have, but £30 to set up a new client with a UTR and doing AML etc. must take about an hour, so you are only charging £10 ph more than your unskilled cleaner client.

You also complain about being under-valued and unpaid. Perhaps this is related to the value you place on yourself. If you see yourself as a £30 ph service, then your clients won't value you any higher and, since £30 ph is not the rate expected of a professional practitioner, you won't be seen (or valued) in that light. You need to charge MUCH more, even though that may mean losing some potential (unprofitable) clients.

It reminds me of a client who is a very talented video director and made a number of very successful pop videos for new bands at a large record label, but all were made at approx 50% discount on what they'd normally pay a bigger name director, as the label didn't want to take big financial risks on untried bands. His videos for that label won a number of awards and the bands got successful as a result. He complained to me that they treated him badly and, when the label wanted to spend bigger budgets on videos, he was never in the running, despite them loving his work and continuing to use him for the small budgets. I told him that, for so long as he was willing to make cheap videos, they'd never hire him on bigger budgets because he was the cheap guy. If the label hired him on a big budget and the song failed (possibly for reasons entirely unconnected with the video), the video commissioner would likely be fired for paying (say) £60k for a £30k director, so why would they risk their jobs when they could hire the £60k director for the £60k job. He needed to turn down work at low budgets and take the hit until they gave him bigger budgets or he'd never be as respected or valued as the bigger name directors.

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Replying to charliecarne:
seneca
By Seneca
16th Feb 2022 11:47

Thanks for the feedback Charlie. I have been thinking about this a lot since I created my post and the conclusions I got are, bearing in mind most of my clients are sole traders:
One Off Projects: Definetely too cheap. Talking to a Spanish Accountant in Spain this week, Spain being a cheaper client, he says he never issues an invoice for less than €100 for one off projects, no matter what the task was.

Non VAT Registered Soletraders: Honestly, I am not that Cheap, I charge £30 per month, therefore £360 per year. Problems are a) I go very into the detail. If I think they have missed expenses even if they are tiny I chase them. b) I do monthly updates (quarterly would save me time) c) I didn't set up clear engagement letters. This week I was asked by this client if he could go to the mechanic with the MOT expired from last week. Speaking with other accountants I see they charge less but they don't check every single transaction during the year as I do, instead they give them a guide and a spreadsheet and if it looks reasonable, those are the numbers submitted.
VAT registered clients: I am cheap. I charge £39 per month (£468 annually) for 4 VAT returns, 1 self assessment, and checking thoroughly every transaction due to the VAT record keeping requirements.

This is the list of actions to be taken in my planning before April:
1) Letters of Engagement with all clients, establishing a minimum fee for work out of the agreement.
2) Being more efficient with non VAT soletraders
3) Increasing Price to VAT registered ones.
4) Charging minimum £100 for one off jobs.

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Replying to Seneca:
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By Wanderer
16th Feb 2022 12:00

Good that you are doing 1, 2 & 4

Regarding pricing models there's a million pricing of combinations with a few 'gurus' out there.

You are, understandably, hesitant about price increases. Re-read I'm sorry's hairdresser example above. Then increase your prices each year over & above inflation, (10% compound?). Over the years you'll lose a few who don't value you but in the end you will have a decent client base who value you & your work & you'll be getting a decent income & working less onerously.

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Replying to Wanderer:
seneca
By Seneca
16th Feb 2022 13:32

Thanks Wanderer.

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