Just in case you haven't noticed, over the years I've had some discussions with various members about Value Pricing (VP).
The members who disagree with me seem to think VP is about ripping clients off. They prefer a "time/cost plus notional profit" approach to pricing, sometimes using timesheets sometime not.
I come at this from the position that time/cost pricing is selfish/self-centred and effectively makes the profession unethical. Continuing with time/cost pricing will make the accounting profession irrelevant. The conclusion is that accountants will just do is more accounts/tax returns as they gradually become more efficient forced by prices falling.
Many existing practitioners may get out before they experience too much pain, but what about the future?
When you understand VP you appreciate it is the only approach to pricing that:
- Puts the client first
- Fully aligns the accountant and client
- Encourage and rewards innovation
- Drives down costs on low value work
- Maximises value for everyone (clients, practice owners, employees and society)
Pricing is fundamental to strategy so it seems sensible to me to understand as much as possible about such an important topic. At the end of the day being an accountant in practice requires much more that technical knowledge of accounts/tax. But, there is another reason to fully understand VP.
Business owners expect/need this extra knowledge (especially now) and an accountant who does not understand VP and just prices with cost/plus will probably only be able to talk to their client about things like job costing.
Over the years I have invested time and energy to build my knowledge of VP through:
- Reading books
- Attending seminars and Webinars
- Accountants (and other professional) who have adopted VP
- Using VP
I'm interested to know where you have gained your understanding. What have you actually done to build your knowledge of VP?
Bob Harper
Replies (380)
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RAN and value pricing
"RANBob Harper PM | Sun, 11/11/2012 - 21:08 | Permalink
@0103953 - that's a really interesting experience - I've come across it before and I wonder if that is quite common.
Personally, I am not sure it is worth trying to change an established firm. There is value in the practice that should be protected so I'd now recommend setting up a new brand.
Many firms buy added-value products and try to "add" them on top of what they do but they need to change what they do.
I also think accountants expect clients to pay too much for business advice.
Does that ring any bells?"
The lesson I learned from it was that it is that there is possibly a market there for the small practitioner, but the opportunities are few and far between. I wouldn't want to try and build a practice on those sorts of opportunities. For the small practitioner, the bread and butter is and will be for the foreseeable future compliance based, unless they have a niche management consulting speciality.
Whether you use timesheets or not (I generally don't bother) doesn't change the fact that my clients primarily want a compliance service, so there is not much you can "value price" there.
I don't think Kent said ...
... it was VP.
But, fixed price is not cost plus!
As for buying a book and not reading it, I've bought a few and got bored.
As for American books, the general rule is read the first and last chapter, everything in the middle is generally b******t, their ethos being why use ten words when a thousand will do!
Not quite total (lack of) understanding
@Bob I've looked at RB's website, read a few of his articles and blog posts but to be honest that's as far as it will go.
I do understand VP and can appreciate that it may work for some, but not for me thanks.
I'm happy doing what I do.
If I do decide to dip my toe into earning fees through performance it will be the AVN way.
For any others who are interested in meeting up at AVN in London on 21st November PM me.
I use day rates at times
@OGA - day rate sounds like time billing to me.
@Kent - I highly recommend AVN although I have my own views on pricing.
Bob
I am a sole trader with minimal overhead so I don't have a cost per se.
The day rate will depend on a combination of such things as the type of work (including risk exposure, irritation value etc.); the value to the client; the value to me; and my relationship with the client .
I imagine most practices would use this approach.
I don't know why I waste my time, you can't have reasoned discussion with monochrome people.
Responses
"For any others who are interested in meeting up at AVN in London on 21st November PM me."
I'm going to the meeting on the 20th.
"I highly recommend AVN although I have my own views on pricing."
I thought you had Ron Baker's views?
Lack of understanding what is wanted
"I will see if I can put something together for those accountants who want understand why time/cost pricing is such an ineffective theory."
You'd be wasting your time. I would recommend that you put something together to explain what YOU think value pricing means.
Question
"Do you link your fees for non-tax planning to the clients outcome?"
It is many years since I read Ron Baker's book "Value pricing" so can you clarify the above? Do you mean the fee is linked to e.g. increased profits? The reason I ask is that, in my experience, this has been the biggest source of fee disputes and upset clients.
Is Bob making it up again?
"I may do that as well although Ron has already done that."
Ron Baker has explained what YOU think value pricing means?
Where?
Doesn't seem reasonable
"Do you mean the fee is linked to e.g. increased profits? The reason I ask is that, in my experience, this has been the biggest source of fee disputes and upset clients."
It must be difficult to determine what increase in profits is due to the accountant's advice and what would have happened without the advice.
Would the accountant pay for any reduction in profits?
Exactly
This was the problem experienced in a firm I worked for many years ago. And it matters not how "contractually" tied down the fee is, the argument rages along the lines of "well you didn't do exactly what I suggested", "It would have happened anyway", "It happened because of another intitiative", etc. No one wins and everyone feels unhappy.
Which is why I was wondering if I had understood the import of Bob's question correctly.
.
Fun weekend all?
I am amused by
1. The thought I must be doing time sheets. Tax investigations only for us, out of necessity, but even then I still charge what I think I ought to.
2. The strange world in which I clearly have infinite time, as my time does not affect the price I charge. There was me foolishly thinking my main metric was weekly billing, closely followed by who I have kept sweet for the longer term by doing that extra for no visible fee, and who I have signed up for the future.
3. Above all the "crunchers" franchise which by its brand would seem to be focused to the basic bookkeeping end of the market, and employs at best some AAT's (the best of whom managed all of 30 sign ups in a year at goodness know how much cost given your main sign up method is cold calling) is suddenly going to be equipped to offer not only dirt cheap compliance (which we no has no 'value' to Bob, so must be priced rock bottom) but are going to tackle the really hard 'value added' stuff (that lots of CA's struggle with quite frankly), Ie the bit that requires some genuine business experience, detailed tax knowledge and some credibility to deliver.
Talk about horses and the wrong courses.
Ever considered a role in Government Bob? You would fit right in.
ah yes being selective....
over the years i have met a number of 'business coaches' who are very selective....i suppose (1) because the client needs to be able to pay £1000-1500/mth for one mtg and a telephone call per month (2) needs to be motivated to make a success of his business (3) needs the capital to spend on marketing etc as instructed by said business coach.
I am sure we all would like the big clients who offer the maximum possible returns on work done....but i guess there are some of us who also feel it is a civic duty to offer smaller and start up businesses the service they need at the time at a fee that they can afford......
The penny drops
start-ups and micro businesses is Crunchers chosen market
Enough said, really
I think time should be called on this thread now, as it's going absolutely nowhere.
@BKD
start-ups and micro businesses is Crunchers chosen market
Enough said, really
I think time should be called on this thread now, as it's going absolutely nowhere.
... totally agree, it's being going nowhere since the original post - but it has kept me entertained throughout the weekend!
£199?
start-ups and micro businesses is Crunchers chosen market and we've come up with a way of getting the advice to clients for a fee they can afford.
Does that include subbies...
Dragons Den
They laughed Value Pricing out of the den......but of course they are all wrong in addition to all on here.
Thanks for the reply
I honestly cannot remember the percentage now but it was high enough for the strategy to be kicked into the long grass.
I may have misunderstood the question put to Mark. Was it meant as a purely open question or effectively a suggestion of an approach to be adopted?
I agree with Bob!
There is a 'total lack of understanding' .... but it's Bob that doesn't understand us, our practices, our pricing structures, or our clients.
I thought it was funny
I said: "I would recommend that you put something together to explain what YOU think value pricing means."
Bob's reply was: "I may do that as well although Ron has already done that."
It made me laugh at the idea that Ron Baker would explain what Bob Harper thought value pricing meant.
question for BOB
Sorry if this has been asked or answered but after reading to page 4 i gave up.
You state that using time based fees clients are not getting the best advice.
Can you explain that one to me?
I, like most accountants will use a rough how long will it take me, what are the risks, what is the client getting out of it approach and will quote a figure.
Over the last 6 months using this method i have saved one client 25k in tax, another £6k, raised finance for a client where he was struggling, improved clients profit margins, identified a loss making department, identified where a client was losing sales month on month through an error in their systems.
What best advice are clients not getting?
May be i am missing out on increasing my turnover by not Value pricing and charging £10k instead of the £5k... but i have gained more trust from my clients and many referrals and therfore increased my long term prospects.
Quick buck does not always work.
5 pages later
Seems to me that the entire thread was summed up in the very first reply by Andy Partridge
If ...
@OGA - I accept your day rate may vary but fundamentally you are charging time; the clue is in the name.
Bob
... a client wants me to be there for a day, I am there for a day. I charge what I think appropriate, there is no other way to charge such work. Depending waht it os i may charge a percentage of what I achieve on top, depends what i am doing for that day. It may be sitting in on meeting with the bank, interviewing for a new staff member, bedding that staff member in, sometimes they just want to talk!
Often the value to the client is more than they can afford, but in a mature professional relationship compromise is reached, I'll probably be struck down for saying it but I have been know to do such things for free for the right client.
The big thing to remember is value is not always represented by a pound note, and that applys to both parties.
confirmation
@Mark - we only have one office running with the new positioning of "Alternative Accountants", the other offices are using Crunchers "We Love Bookkeeping" on the side of their accountancy practice.
So you have one client operating under "Alternative Accountants". Is this the one that has got 30 clients in a year?
How many of your clients operate under "We Look Bookkeeping".
Regards
Mark
Ok...so i guess I should
just go back to the one question....
What is your retention rate and time for clients (or churn, whatever you want to call it).... or should i say for your client's clients.....?
VP is a concept I think everyone uses to one degree or another....just wondered about the potential 'downsides'....how many new customers will i need to find each year etc?
NHS!!!
@uktaxpal - how would VP work in the NHS? Really well.
Bob, my dear chap. Have you any idea how the NHS actually works (or rather doesn't)?
To make VP work you would need:-
People actually in charge.People not always covering their backs.People with perhaps a modicum of business sense.People with perhaps a modicum of sense!
So no, Bob. VP would not work "really well" in the NHS. VP would not work at all. Jings, even the most basic of business concepts are alien to the NHS.
(I have to declare an interest here - my wife is a GP and has contact with them on a regular basis - THEY ARE UTTERLY CLUELESS.)
Please don't ...
@OGA - you should not seek to charge 100% of the value because the client needs to make a profit.
Bob
...put words in my mouth - I have never said that, I think I actually said I sometime even charge 0%!
Also, please don't patronise me (us) - however little clue we have, I don't think anyone on here would think you charge 100% of the value to the client!
Some clients cannot afford the advice now, I would give that advice for free if I could see it would help that client get through any current difficulty and enable them to remain a profitable client for the next 5, 10, 15 +++ years! I am sure I am not alone.
value pricing
Whatever method of charging you choose it comes down to whether the customer perceives they getting value for money.
There are merits in all methods and I would suggest no one method covers all eventualities.
I think Bob is in danger of undervaluing all accountancy work particulary bookkeeping work which in my experience is so simple no body can get it right. Its value is seen as very low by some, but I would regard the rock on which you make your business decisions and calculate your tax as quite important.
Crunchers: had a look at the website and could not quite see how numbers added up to make a profit for the franchisee. Added to which the marketing strategy seems to rely on being the cheapest in town at a price that the job can't be done properly for?
No
..... please make it stop
to stop reading it?
But if I think that a thread has run its course (and I would appear not to be alone in that thinking) I am entitled to say so. I suggest that those that want to continue to argue the toss on a [***]-for-tat basis do so via the PM facility, and let AA revert to what it was designed for - to provide questioners with meaningful and constructive answers, and not to provide certain individuals with a platform from which to spew their unwelcome drivel.
Now, now
let AA revert to what it was designed for - to provide questioners with meaningful and constructive answers, and not to provide certain individuals with a platform from which to spew their unwelcome drivel.
Oh I don't know! I and many others see it as a bit of light relief. I never realised that "certain individuals" could provide us all with such comic genius.
But I still miss the other one!!!!
Fair point, Nigel
Oh I don't know! I and many others see it as a bit of light relief. I never realised that "certain individuals" could provide us all with such comic genius.
In which case, the 'discussion' ought to be moved to Time Out
Totally agree
In which case, the 'discussion' ought to be moved to Time Out
Which is where the OP should have posted in the first place!
(But then I would have missed all the fun 'cos I don't frequent Time Out).
Nanny state
Oh I don't know! I and many others see it as a bit of light relief. I never realised that "certain individuals" could provide us all with such comic genius.
In which case, the 'discussion' ought to be moved to Time Out
That's a ridiculous suggestion. Maybe Bob has failed to convince anybody but other people have made some very interesting contributions. If you can't see that and you don't want to read this thread then I would suggest you stop reading it. It looks like the nanny state is needed after all for some people!
Perhaps
Oh I don't know! I and many others see it as a bit of light relief. I never realised that "certain individuals" could provide us all with such comic genius.
In which case, the 'discussion' ought to be moved to Time Out
That's a ridiculous suggestion. Maybe Bob has failed to convince anybody but other people have made some very interesting contributions. If you can't see that and you don't want to read this thread then I would suggest you stop reading it. It looks like the nanny state is needed after all for some people!
You should go and lie in a cold bath in a dark room - arguing with Bob has clearly got you upset. Or perhaps put you in such an argumentative mood that you'll now argue with anyone for the sake of it.
Too complicated for one person
..... please make it stop
to stop reading it?
But if I think that a thread has run its course (and I would appear not to be alone in that thinking) I am entitled to say so. I suggest that those that want to continue to argue the toss on a [***]-for-tat basis do so via the PM facility, and let AA revert to what it was designed for - to provide questioners with meaningful and constructive answers, and not to provide certain individuals with a platform from which to spew their unwelcome drivel.
You may not be alone but it would appear you are in the minority.
Your suggestion of discussion via PM is ridiculous because I think PM is meant for a 1 to 1 basis. Any Answers is meant for multiple people. If you don't want to read what is said then you just don't look at the thread.
Obviously you don't understand that concept but I am more than happy to explain it to you.
PM
You may not be alone but it would appear you are in the minority.
If I'm in a minority of one I'm nevertheless as free to express my opinion as you are to voice yours. My comment was not about the content of the thread per se - it was an observation that it is going nowhere and ought to be terminated here and now. As with football, politics and religion there can only be one outcome - which is no outcome at all.
Your suggestion of discussion via PM is ridiculous because I think PM is meant for a 1 to 1 basis.
You may think that - but you can include as many or as few participants as you wish with PM.
Obviously you don't understand that concept but I am more than happy to explain it to you.
In any event, you are arguing in an open forum with Bob on a 1 to 1 basis - what is different about doing so in private? I'll tell you - it keeps the site free of the playground-style "my way's better than your way" temper tantrums.
not a tough question
just trying to understand how clients take to this, and how long they 'believe' in VP before they move on. (if they move on at all)....just seeking to establish some reality.