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Starting out - is this one of those startup traps?

Starting out - is this one of those startup traps?

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I will be starting my own accountancy practice in a couple of weeks and everything had been going fine until today. I have all my paperwork done and have a few clients already.

Today one of my key potential clients with whom I had some great meetings turned around to say my fees were too high, I would not have the time to manage them as I would have loads of admin to do starting up and what would happen if I was ill. At our previous meetings, I had tackled all these issues and had agreed deadlines for bookkeeping work which were very doable. I told them that I had insurance, practicing cert etc and will be regulated by my Institute. And I have an experienced bookkeeper on hand to take over if I am ill etc. I was prepared to deal with all these issues at our meetings and had all my answers researched and ready. They appeared happy with the answers at the time.

At the end of our last meeting, during the "chat time", we spoke about the challenges in setting up as they had done this themselves many years ago. I mentioned that I had been planning this for a while and had everything ready to go except the website which I hoped to launch in a few weeks time. They recommended to have a decent holding page in the meantime and I agreed that this is what I was planning to do.

They are now saying that they aren't ready to move, they want me to "add more value" and then launched into criticisms about how I don't know how much time would be taken up with admin etc. I already manage a practice in my current employment and am well aware of the issues and told them so. I also said that I had no major work on before Christmas so could concentrate on them. They also threw in the fact that I didn't have the website completed as proof that I wasn't ready yet. (Maybe I should have finished my website before wasting my time on regulation, researching software and setting up my systems.) They finished by saying they would like a proposal with a substantially reduced fee plus details of what will happen if I take a day off, confirmation that I am ready to go etc. (There was also some other personal criticisms thrown in for good measure.)

This potential client would allow me to pay the bills for the next year and would take a weight off me and my family in terms of finance. I just can't help thinking back to previous posts where new startups took on anyone and everyone and ended up regretting it.

My gut reaction is telling me that they are just getting stroppy to get me to reduce my fees. They will take up approx 50 hours per month and my charge out rate is about 50% less than my other clients. I reduced their current fee by about 10% plus I agreed to do their management accounts much earlier, make the reports more relevant and offer them more day-to-day support. I left a small bit of negotiation room in my fee quote but not enough to make a "substantial" difference.

I have negotiated fees with clients before but it has never got this personal. Maybe this is because it is now "my" business.

So should I suck it up and deal with a potentially troublesome client with relatively low fees because I don't have any other work (at the moment)?

Any advice from those who have been down this path would be gratefully appreciated.

Replies (30)

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By petersaxton
18th Nov 2011 01:14

You would regret it if you did it all the time

What kind of work are you doing for them? It seems like a lot of bookkeeping.

In my position I have a lot of different clients and am busy so I would just say that these are my fees and it they want to go somewhere else then they can do it.

If you really need this work and it would enable you to spend a year getting other clients I would consider taking them on and then telling them to find another accountant when it suits you.

You seem to have treated the client like a friend and they are taking advantage of your situation.

I wish you all the best in your new practice. It will be difficult in the early years but you wont regret it.

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By Moonbeam
18th Nov 2011 01:20

Gut reactions are spot on

I think your preparation work for setting up your practice has been immaculate. Think about how badly organised some of your competitors are - your systems are probably vastly superior to theirs.

You must obey what your intuition tells you. The prospective client is indeed a PITA. They have already dented your confidence when you need to be bold. If you are relying on what you earn from them you will find cancelled DD's, dodgy cheques, lots of chasing and probably no payment at all. Think of all the hours that you plan to devote to this *** that he is going to challenge later. What a waste of your valuable time!

The prospect is a typical bully that many of us in business have learned to spot a mile off. The fact that you have spotted this yourself indicates some good business skills that will stand you in good stead if you use them.

You have felt obliged to go into tremendous detail to reassure the prospect that you are a kosher outfit. There was no need for this, but that is how we all were when we first started in business. How dare the prospect try to lower your fees. If your fees are already lower than those of other professionals of similar stature then you must not cave in.

By going into such detailed explanations about your business, rather than telling him point blank that you have a wealth of experience already and are a professional, this has suggested to him that you lack confidence. The bullies look for this sort of thing as a way of dragging you down so that they can gain the superiority of claiming that your services are rubbish, you know nothing and therefore they need pay nothing.

I know it's very hard to turn down work when you need all you can get, but you will struggle to get paid, and may well have to fight this client in the Small Claims Court, when he will make extravagant unsubstantiated claims about your incompetence. Even though these claims won't be true, and you will win your case, it will drag you down and sap your energy. You may still need to send in the bailiffs to collect the dosh.

On a positive note, your organisation prior to going into business has been so magnificent, you now just need to use these skills in the marketing area. Have a look at some of the really inspiring discussions in the last 6 months on Aweb. I regularly print these out and try to copy some of the fantastic ideas.

Let us know how you deal with this, but just think how empowering it would be to tell Mr bullyboy very politely that you won't be taking on the work after all, as you consider his manner unbusinesslike, and untrustworthy.

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By ShirleyM
18th Nov 2011 07:30

Your suspicions are spot on!

You would regret taking on this client as things stand. However, I know how tough it is at start up, so maybe you could get a more agreeable contract and put up with them for a few months?

Reading between the lines ... they will want all of your time, they will treat you as if you are their personal slave and demand instant action, you will get neither thanks not gratitude, they will keep you dangling for payment, and any problems that crop up will be placed squarely on your shoulders for you to resolve at your cost. I can envisage the 50hrs per month becoming much much more ... for no extra fees. God almighty - they are even baulking at you having a day off!!!!  I really pity their staff!

The end result will be that you will have no time to source new clients, other clients will become dissatisfied because you are tired, disillusioned and grumpy, but because you are dependent on this client for fees to pay your bills you will feel trapped and a vicious circle is created.

Set out your stall NOW! If you give in to bullies your life won't be worth living. Go back to this client with a detailed schedule (and get it signed!) of what they are buying and make it very clear what isn't included, and that anything outside of the agreed work/time is extra. With this particular client I would maybe restrict them to the 50hrs per month, and detail the days/times that you are available for their work, and specify that any other times are billable as extras. This way you could have days off, but still meet your obligations. I would consider that to be fair to both, and you cannot be on call to any client 24/7. You need a life, too!

Their reaction will indicate whether they are willing to consider your needs and requirements, or whether they simply want a slave at the cheapest cost.

If they are not willing to accept a limit on what is included in their fees then walk (run!) away and be grateful that you didn't fall into their trap! Even if the 'rebargaining' doesn't achieve anything, you will have gained valuable experience in dealing with the 'hardnosed' business men, so it is still worth the effort :)

 

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By Flash Gordon
18th Nov 2011 07:40

Agree with the above

I agree with the above posts. I'm a great believer in gut instinct, if you have to think about something too hard then it probably isn't a good idea.

On the upside if you've already been this successful in attracting fees (albeit it's going a bit squiffy now because they're a PITA) then there's no reason why you won't pick up more clients quickly - and good clients who won't quibble.

It gives you a bit more time to finish getting things sorted and that is a bonus because once you're busy you won't have time!

Best of luck :)

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By Cardigan
18th Nov 2011 08:01

Thank you for your advice

Thanks for your advice. I normally trust my gut instinct and it has served me well but something was really bothering me about all this and I couldn't put my finger on it.

This advice hit the nail on the head:

"You seem to have treated the client like a friend and they are taking advantage of your situation."

"By going into such detailed explanations about your business, rather than telling him point blank that you have a wealth of experience already and are a professional, this has suggested to him that you lack confidence." 

From your reactions above, I may just have dodged a bullet. But I have also learned some valuable lessons in client presentations. I tend to wear my heart on my sleeve and this has served me well in gaining and keeping clients for my current employer. It's a different situation going forward without the backing of a large firm and I need to step up my game.

 

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By lisimano
18th Nov 2011 08:06

I agree

I started on my own just over a couple of years ago. After a few hard months I took a client on that sounded hard work but do-able for 4 days a month work on management accounts/period end work. This work was outside what I really intended to offer in my practice and even when I took it on I was unsure - but the money was great and would pay all my bills and allow me to carry on without worrying. 

3 months later I walked away from it, it was never the agreed hours, there was always more to do and it was making me miserable. I realised I could not grow my business by undertaking this kind of job - not only did it take far too long, but it sapped me of energy.

I agree with Flash Gordon, gut instinct should prevail. Gut instinct is really our mind already calculating the information it has taken in. (Sometimes we listen, other times we don't).

Good luck in whatever you decide to do - you can always change your mind!

 

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By Canary Boy
18th Nov 2011 09:02

Well isn;t this

what aWeb is all about. It is really refreshing to read a genuine well thought out question being answered so thoroughly by other members.

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By uktaxpal
18th Nov 2011 09:09

mutual respect?No!

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Teignmouth
By Paul Scholes
18th Nov 2011 09:19

Get your own back

On the bright side, far better to have discovered the potential grief now rather than in 6 months time and there will always be other clients in the wings to make up for the loss of money.

I only did this once but in a similar situation a few years ago, when I was being forced to jump through hoops just to get my foot in the door, I went with it, played their game, cut out the bits of the engagement letter they didn't want, promised they could have my mobile number and could call at weekends etc etc and eventually, when it was signing time and I had been lold the other two firms in the frame had been told no thanks, I told them where they could stick it, in the most professional of terms of course.

Good Luck

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By Old Greying Accountant
18th Nov 2011 09:53

Being cynical ...

... they never had any intention of moving, just used you as a stick to get their current accountant to reduce their fees!

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By ireallyshouldknowthisbut
18th Nov 2011 09:45

.

I can see this perfectly from the other point of view. They have identified that you have no other work, and are attempting to negotiate on that, and hard. I wouldn't say that was bullying, that's business, albeit rather aggressive and in this case probably not very good negotiation.

Those types of people will think a lot more of you if you stick to your guns than cave in. As above your big mistake it letting them know you had just started out.

On a wider point I wouldn't ever take on a client on this size. Period. If anyone is too big to fire they will make your life a misery. You may do better by suggesting they take on a bookkeeper for the day to day stuff and you act as accountant at the month end rather than your trying to offer both. This might be a better proposal to come back with so you (a) retain your status as an accountant and allow you to charge a proper charge out rate for your time (b) lower the cost for them (c) lower your time exposure to a single client.

Hope that helps

NB there is a more or less infinite amount of work available in accounting given so many accountants are just bad at it [technically, running their business or both], so dont stress about this client.

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By bigdave1971
18th Nov 2011 09:48

Just a few thoughts ...

What difference does it make to that client that you haven't got a website sorted yet, far better to have systems and software and most importantly experience and qualifications, isn't it?

If you still want to act for them but they are unsure about whether you can deliver, why not offer a discount for the first year and then charge the full fees the year after? Put it in the letter of engagement to avoid them denying agreeing to it.

If they push you or upset you or undermind your confidence then you can always walk away, its your business.

A big fee may be very tempting but there is better work out there.

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By wilcoskip
18th Nov 2011 09:51

Drop them and walk

People like this take away the whole point of working for yourself.  As others have pointed out, if they're like this now, they're going to be worse - much worse, later on.  The security of the fee is nice, but ultimately they will prevent you growing your practice into something you want it to be.

WS.

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By zarathustra
18th Nov 2011 10:20

How is the prospect getting all this work done at the moment?

The one unresolved question i wonder about here is who is the client paying to do this work currently, and how much?

How does your proposal relate to theirs?

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By ShirleyM
18th Nov 2011 10:49

Haha - my vote for best idea goes to ...

Paul Scholes :)

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By Steve McQueen
18th Nov 2011 11:05

Another vote for Paul Scholes...

Paul, I love it!

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
18th Nov 2011 11:13

And another!

And another vote for Paul!

Excellent advice, I have nothing more to add - definitely a client to decline, you don't want the hassle!

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Red Leader
By Red Leader
18th Nov 2011 11:13

walk away ....

... now.

When I've decided to part company with either a prospect or client, you have to do it with a "straight bat". By which I mean just give a bland reason or no reason at all why you won't be proceeding further. There are some types out there who seem to want to engage in some sort of emotional tussle which is often tantamount to bullying or they have some problems with anger management. They will just latch onto any elaborate explanation or discussion about why you are giving them the heave-ho and start to argue or get angry/emotional. Just draw the line and eventually they'll forget about you and move on to their next victim. You are not obliged to be their accountant.

Either way, don't let them into your life.

A lot of good advice from other posters, by the way. Chimes with my experience of the last 14 years.

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By petersaxton
18th Nov 2011 11:31

Is it the right time

It's all very well giving this advice when you all have plenty of business but the OP may be in a totally different situation to you.

He hasn't given much indication about the money we are talking about.

If the money is such that he can keep going for a few months until he gets sufficient extra work it may be the difference between giving up and continuing.

The OP can always get rid of the client at a time to suit him.

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By martin.curtis
18th Nov 2011 13:58

Maybe they are not that nasty

A business which has the need for and can afford to engage an accountant for 50 hours per month must be of a reasonable size. It could of course be that they are trying to say to you, perhaps a little to subtly, that however much they like you they don't want to entrust their affairs to a brand new one-man-band business. If you look at the situation objectively and not subjectively; would you? Suppose you needed 50 hours per month legal advice, would you go to the new starter, even if he is really nice and seems knowledgeable or to the larger practice next door.

When I was working for someone else many years ago we had a large, very important client. I learned a lesson which has never left me when my principal rang the client and told them we would not be acting for them any more. When I spoke to him about it he explained that they had crossed a line and now represented more than 30% of his turnover and he would not let his business be beholden to anyone else. I have since seen clients who have allowed their businesses to be dominated by a single client whom they have come to rely upon, my clients have then had to build up their businesses almost from scratch when they do eventually part company. There is a danger that your potential client would fit into this category.

My advice would be to build your business with lots and lots of small businesses and grow with them. If you have plenty of spare time and no income, that is a great incentive for wearing out shoe leather looking for more work. In the meantime many existing practices will have surplus work that you could do for them on a sub-contract basis. If that is of interest pm me

Good luck with your business, I have a feeling you will do well

Regards

Martin

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Me!
By nigelburge
18th Nov 2011 16:05

When you start up.............

................ it is VERY hard indeed to turn down clients. Been there, done that.

But as others have said, go with your gut instincts - they are rarely wrong.

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By mn2taxhbj
18th Nov 2011 22:21

Institute Rules

Most Institutes have guidelines which recommend that  you should not have more than 15% of your practice income from one client, or your independence in relation to that client could be called into question.

To me it sounds like your client has found out the difference between what they would pay an employee for the work you are doing, and what they pay a practice for the same work, and is trying to get your fee down tot he elvel of an employee, witht the control rights of an employer over an employee thrown in.

Unlike some of the others I would take the client on initially as a guaranteed source of income and tell then to take a hike as soon as I could jsutify it financially.

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By petersaxton
19th Nov 2011 06:52

mn2taxhbj

I'm glad you agree with me about the practicalities regarding setting up a practice. Very few people can start their practice and pick and choose their clients from day one.

I thought the 15% guidelines referred to audits? I think that it's sensible to extend that rule to any work. Obviously, until a new practice gets seven or more clients the practice will have client(s) with over 15% of total fees.

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By Cardigan
19th Nov 2011 09:03

In answer to a few queries above:

The potential client has known from the start that I am a one-man band startup as they were referred by someone I know.I know the fees they are paying to their existing accountant and after working out how long it would take me and my charge-out rate for bookkeeping,  my fee quote came in about 10% lower.I have some savings which will keep me going for almost a year if I keep my business and personal spending to a minimum.

The reason the hours are so high is that it involves a lot of calls from their own customers and from their many staff members. (Danger!)

I have to say, I am well impressed with the detailed answers everyone has given and am so grateful. It's not easy starting up and it is fantastic to know that there is support available from people who have been there. You have helped me build my confidence again after this minor setback.

I know in my heart that taking on this client would hinder my ability to grow my practice and develop my ideas but the money was so tempting (especially to my other half.)

Red Leader, I like your idea about letting them go. I have an "excuse" that they would find difficult to argue with and which keeps my self-respect. I found out yesterday that there is a (small) possibility that their current accountant is going to subcontract work to me and I wouldn't want to damage that relationship. (The universe is trying to tell me something!)

So I am going to tell them that I will be working on some projects with their existing accountant and I don't want to damage the relationship. It will show them that I am capable of getting new work and don't need them.

Instead of letting this dent my self-belief, I am going to let this person go with confidence and hope the door hits them on the way out.

And I am going to have the best damn website the world has ever seen!

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By Ken Howard
19th Nov 2011 09:57

They need an in-house book-keeper

From your last post and the details of what they expect, it's crazy to expect a small accountancy practice to do that kind of work.  They need an in house book-keeper.  It's crazy to expect an accountancy practice to deal directly extensively with customers and employees.  If you do it, you're open to all kinds of potential claims and counter claims - i.e. the usual "he said, she said".  It sounds as if they want to abdicate responsibility for the accounts/admin instead of delegating it.  Regardless of whether the work was needed or not, I wouldn't entertain that kind of arrangement.  You'd be setting yourself up for a  fall later on.  As for it being a bridge until you got more clients, I think you'd find it was taking up too much time that you wouldn't have the necessary time to nurture decent long term clients.  When I started up, I took on two clients which were very large (even now 10 years later I don't have clients so big!) and whilst the money was good, they sucked up all my time and energy to the detriment of getting others.  Eventually both became so demanding that I took a deep breath and sacked them both, meaning I virtually had to start again from scratch.  But it was the best thing I'd ever done and the relief when they'd gone was amazing.  Never looked back.  I'd echo others and say a clear "I'm out".

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Replying to Sciah1984:
By Hopelessly devoted
19th Nov 2011 10:35

Be professional

Remember that you are now in busines and they are in business. This is all about negotiation and you need to set your price for the work and be firm. It sounds like you may bump into them again. If they see that you have a professional approach to running your practice based on a sound business plan and you are not prepared to step beyond those parameters, they should respect you for it.

Show them that you will stand your ground in this and they will also realise that you intend to set and maintain professional standards in all aspects of your business.

Your image and reputation in the business community is, in my view, far more important than whether you have a website or not. It is also why I would personally advise against any point scoring or revenge tactics.

But maybe I am just old-fashioned.

Good luck for the future.

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By ShirleyM
19th Nov 2011 11:12

Peter, Hopelessly devoted, and others

Good sensible advice (that happens to agree with my own), but being sensible and business like, isn't half as much fun as Paul's idea.

@Cardigan ... maybe it would be wiser to go along with the sensible and 'business like' approach for now ... and then when you are better established make use of Paul's idea ;)

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By Cardigan
23rd Nov 2011 16:39

Update

Just to update you all, I let the client know that I would not be submitting a new proposal. It told them that circumstances had changed and that I would not now be in a position to work with them as I hoped to work with their current accountant on future projects and wanted to maintain my good working relationship with them.

They accepted my position and asked no questions. I felt relieved once I had done it.

There is more financial pressure on me now but I think it is a good thing. Having such a big client might have made me too complacent and what would have happened if they left? Now, I am even more motivated to get out there and get some more clients.

I want to thank everyone most sincerely. I really mean it. Your advice, support and sense of humour has been fantastic. As Canary Boys says, this is what AWeb is all about.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
23rd Nov 2011 16:45

Hooray!

Brilliant news Cardigan, glad it's worked out and good luck with getting some more good quality clients :)

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By ShirleyM
23rd Nov 2011 16:59

A diplomat, too :)

You handled it well without anyone getting upset. Well done, Cardigan.

Good luck for the future. :)

 

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