What is your hourly rate

Client not happy with our hourly rate

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I had three quotes recently for a plumber and all of them were charging around £90 + vat per hour.  Another one wanted £90 + vat just to come out to provide a quote.  I know builders that charge on a fixed fee but if you work out on a hourly basis its equivalent of  £200 per hour.  Of course Solicitors charge in excess £200 per hour. 

Labour rates have increased substantially especially since covid but I wondered as accountants do we undercharge ourselves.   I had a case recently where the client wasn't happy at our hourly rate

Client had a whole host of issues with VAT and accounting issue. I didn't know how long it was going to take so though hourly rate would be fairer. He signed the engagement letter with an management consultant hourly rate mentioned (£170 per hour).  If I was preparing accounts and filing tax return then the equivalent hourly rate would be a bit less.

Started the work and paid me but then called me in and took me by surprised by blasting me for charging so much. 

 

Replies (43)

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stonks
By WinterDragon
20th Mar 2024 16:13

JimLittle wrote:

What is your hourly rate?

£5 ph less than the commenter below...

I'm guessing the client's issue wasn't specifically with the hourly rate and more with the total amount charged?

I'm a bit weird on hourly rates because although I'm earlier in my career and less experienced than some of the veterans on here, I type at 130wpm and just tend to find I can work out software solutions and automation efficiencies much quicker than some of my peers. How is fair that for me to charge less per hour due to less experience but then get to the end result quicker and the overall bill is much lower?

When the job requires an hourly rate because it's impossible to offer a fixed fee then I make it up depending on the nature of the work. If I'm filling in a basic form then it's cheaper than if I were to be advising an ongoing enquiry.

The best I can do is try to advise as best I can ahead of time a range that I would expect our total fees to fall within. Also advising what bits can be done by the client to reduce the number of chargeable hours I'm doing gives them the heads up that they can take steps to reduce my fees rather than blast me if they were too lazy to do something themselves.

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By tom123
20th Mar 2024 16:25

Best thing I ever did was teach myself typing at 14. I had no idea that keyboards would form part of my working life, of course, but I must have been so efficient over the years compared to the two fingered stabbers in my office.

Whether that just meant I got given more work to do, I couldn't say..

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paddle steamer
By DJKL
20th Mar 2024 16:26

Always depended on the type of work (skill level). I could never justify that as I had no staff my full top rate should be charged for my doing the grunt work, so tended to modify. Just before I packed in I was playing with charging re bookkeeping by transaction rather than by hour.

So if you wanted cashflows etc and assistance with raising loan finance, expect the full rate nearer say £150 , if a little compliance work re a CT600 etc, effectively a near automated routine process etc, then I used to do this at nearer £65 ph, if writing things up, calculating creditors/debtors, then my bookkeeping rate was likely nearer £35 ph- but I was cheap.

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Replying to DJKL:
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By carnmores
20th Mar 2024 18:15

this is the correct way to go . Charge for the expertise required for the work NOT some nebulous charge out rate

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By ireallyshouldknowthisbut
20th Mar 2024 18:35

I just quote for some work for a Financial Dispute Resolution at £185+VAT an hour and wondered if I was too cheap. I bet the lawywers are charging £300 minimum.

We normally do fixed fee work, and I normally target £1k a day billed taking into my no.2's time which is approx £35/hour so trying to recover about £100/hour taking into account everything, which means in pratice charging about £120-150/hour for 'on the job' work as opposed to all the other mucking about you do. Most of my engagements letter have additional services in at £145/hour.

I find if you tell clients that, they run a mile.....when ever I have benchmarked I am told I am too cheap.

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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
20th Mar 2024 20:27

Most clients think any rate mentioned is too much. Most is fixed ptice now in quoting. but increased a bit each year.

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Replying to Paul Crowley:
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By Gone Sailing
21st Mar 2024 14:47

I'm clearly not charging enough!

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Replying to ireallyshouldknowthisbut:
paddle steamer
By DJKL
21st Mar 2024 12:36

The thing about lawyers (if you give the firm a decent amount of work every year and mainly use one team- in our case propert) is that the engagement letter may say £300/£400 etc an hour but they tend not to charge you that, often I will get told they have say £4,000 on the timesheets but our fee will be £2,400. (they want repeat work and do not want our say on average £20k a year going elsewhere)

If you want a good professional correlation to Accountants and basic work, the Chartered Surveyors we use for the bigger tenant dilapidations schedules ,which involves reviewing/interpreting lease, tidy drawings/plans re what physically on site, inspection, prepare schedule and budget cost it, letters re issuing to tenant etc, send me timesheet analysis with each fee, they last billed us at £100 an hour which was pretty fair and frankly for a lot of accountancy work, that is what it likely is actually worth. (They do however bill in 15 minute units not 6 minute ones)

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By kim.shaw-and-co.com
20th Mar 2024 20:37

In consulting, most work is done using an outcome-based fee approach. I know I'm probably not typical in that sense but it removes clients' hesitance to ask relevant questions / raise problems and I tend to find that the time saved not having to deal with the blame-game fallout of clock-watching on both sides is preferable to mopping up the mess from having acted or recommended based on incomplete information.

If it's hourly then up to £500/hr for anything with a strategic or specialist aspect depending on the work level needed. At those rates, mind, you cannot afford to make mistakes and often wind up writing off time commercially because doing the extra 'homework' required to cover every angle you need to in a thorough fact find eats away at recoverability.

I scale rates down for smaller businesses and private individuals who don't have the means to pay, but are either 'worthy cases' or tactically useful feeder clients, for example members of larger Groups that may have profitable work up for grabs or well connected individuals who are happy to share (and don't want to keep you all for themselves as some do !).

If a client looks like they're going to whinge about paying a proper fee for a decent job, so you're going to struggle to do one without losing out, then my own approach is turn it down. Unless there's a match with keeping standards at the level you want to set them consistent with your reputation it's not worth getting involved. Unless you are really struggling for work and prepared to effectively slash your cost to fill a gap because you've surplus capacity !

It's down to what you think is fair and reasonable for the job you deliver in the end. Everyone will have different benchmarks and expectations for that, and they may evolve.

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By paul.benny
20th Mar 2024 21:42

I've just consulted a lawyer. Smaller firm, first appointment, 1 hour (but not clockwatching): £400 + VAT

Worth it 100%

The way he approached the matter left me in no doubt that I was getting my money's worth, even though this was run of the mill for him.

Don't be shy about selling the value of your expertise. HMRC could have gone back 6 years, penalties for this that and the other, their opening demand could have been £500,000 or whatever. You've made all of that go away. No sleepless nights, Client just has a liability of X. And you've only billed Client hardly anything. It's not just the financial saving, you've shielded Client for the anxiety, the stress, etc.

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John Toon
By John Toon
21st Mar 2024 11:05

Starting rates of £250 + VAT/hr for myself and my team. We offer a discount for NfPs. Most of our work is of a consultancy type nature and the value we create is usually a significant multiple of our cost.

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By johnthegood
21st Mar 2024 14:34

Hourly rate, whats that?

I thought charging by the hour went when Noah popped his sandals

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Replying to johnthegood:
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By DKB-Sheffield
21st Mar 2024 15:05

johnthegood wrote:

Hourly rate, whats that?

I thought charging by the hour went when Noah popped his sandals

Yes.. but no... but...

What do you base a fixed fee on? And, how do you assess it's worth? Are you not guided by 'hours put in v profit realised'?

Bringing it back to the OP... client has VAT Problem. Could take 5 minutes, could take weeks, may involve calls to HMRC, may involve hours of picking through documents... In those instances, I'd struggle with an up-front fixed fee quote (either client gets overcharged, or we end up scrapping around for days on peanuts).

I'm not disagreeing on the fixed fee front but, there are times I find it can be inappropriate - particularly where the client (worse if 'new') has more problems than they are able to provide clues for!

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Replying to DKB-Sheffield:
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By paul.benny
21st Mar 2024 16:29

Fixed fee specifying what is and isn't covered. Reserve the right to increase if problem is more complex than initially suggested. I'm not in practice - but I would suggest you have internal hourly rates that differ for different kinds of work. You should recover a lot more on one-off specialist work with partner involvement than routine bookkeeping and tax returns done by clerical grades.

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Replying to DKB-Sheffield:
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By johnthegood
21st Mar 2024 19:59

DKB-Sheffield wrote:

johnthegood wrote:

I'm not disagreeing on the fixed fee front but, there are times I find it can be inappropriate - particularly where the client (worse if 'new') has more problems than they are able to provide clues for!

Indeed, lets not open that can of worms again - All I have to say is that in 25 years in practice I have never charged by the hour, I've always viewed it as a fools game to be limited by time and also I have always been able to work quicker and more efficiently than many colleagues so a rate per hour would not produce the same net result which seems more unfair than charging a fixed fee for the job.

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Replying to DKB-Sheffield:
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By Gone Sailing
21st Mar 2024 20:08

DKB-Sheffield wrote:

particularly where the client (worse if 'new') has more problems than they are able to provide clues for!

Really? so it's not just happening to me then :)

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By Gone Sailing
21st Mar 2024 20:11

I charge a fixed fee for FRS105 Accounts, CT600, Directors' payroll, Directors' SA100, Conf Stat.
Everything else is by the hour, eg. mortgage references, address changes, more complex tax forecasts, bookkeeping, time consuming extra questions, ridiculous delays etc..

It took me at least 5 years to properly learn that lesson.

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By bernard michael
22nd Mar 2024 10:40

Tell the client you agree that their invoice may be wrong and you'll adjust it to accord with your local vet's rate.

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Replying to bernard michael:
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By JimLittle
22nd Mar 2024 14:03

I thought I was expensive then maybe foolishly decided to carry out some work for free which took around 5 hours to keep them happy !

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Replying to JimLittle:
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By I'msorryIhaven'taclue
23rd Mar 2024 12:53

It sounds as though they were unhappiest with the £170 multiplicand rather than its
number of hours multiplier.

We've all been in that same boat as you, Jim, of writing off time for clients who hustle and moan at fees. When I charged a higher hourly rate I felt less able to charge for the background and administration time spent on a job.

Over the years I've lowered my charge rate but now charge for all time spent on a job: from updating my knowledge of the rules and principles involved, gathering the facts of the case from the client, applying those rules and principles to the particular facts of the case, advising the client, writing a report or email to confirm the advice and any actions, and of course the file notes along the way.

Straw poll: do others forum members, when charging by the hour, bill for their time spent on administration and background work?

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Replying to I'msorryIhaven'taclue:
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By JimLittle
25th Mar 2024 18:24

Actually unhappy at both and they do not see the effort that goes behind investigating the figures in the accounts.

I don't normally charge for research or administration.

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Replying to JimLittle:
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By I'msorryIhaven'taclue
26th Mar 2024 11:12

It's all swings and roundabouts, I suppose. I just find there's less resistance when billing say £100 x 8 hours of everything from soup to nuts than to bill say £200 x 4 hours of meetings. client-facing time and direct work.

Lawyers charge for every minute, research and background work included. My guess is that many accountants do a lot of uncharged work oiling their clients' wheels. We just don't have the rottweiler gene!

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Replying to I'msorryIhaven'taclue:
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By JimLittle
26th Mar 2024 18:32

Lawyers can get away charging whatever and their charges are basically the same plus there are much fewer lawyers than accountants. due to law protection A client can go to AAT who maybe proficient but will charge much less than someone ACCA or ICAEW and the client is none the wiser.

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Replying to JimLittle:
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By johnthegood
27th Mar 2024 12:48

JimLittle wrote:

A client can go to AAT who maybe proficient but will charge much less than someone ACCA or ICAEW and the client is none the wiser.

A very large incorrect assumption there, why would an AAT qualified accountant charge less than any other accountant? Even a QBE worth their salt will charge the market rate

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Replying to I'msorryIhaven'taclue:
paddle steamer
By DJKL
26th Mar 2024 11:13

Used to be absorbed in the charge out rate, the old third wages, third admin/overhead, third profit.

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Replying to I'msorryIhaven'taclue:
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By Rgab1947
26th Mar 2024 11:17

No. That is a freebie recovered by my hourly rate.

Some I charge fixed fee, some by the hour.

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By ralarsen
26th Mar 2024 10:52

I clearly don't charge enough at £70/hr. However being in one of the most deprived areas of the country doesn't help.
I recently lost a £3600 client on the basis he could get the jobs done for £1200 locally so I guess I charge too much for the 8 services we provide him.
He won't do his own bookkeeping and won't take the time to connect his bank to the bookkeeping. We run a large weekly payroll, company accounts and other services. I don't see how any amount of efficiencies would reduce a company's fees that much.

I would love to charge more but my clients would leave overnight and I would need to pack up tomorrow.

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By sammerchant
26th Mar 2024 11:07

I suspect he has been talking to 'his mate down the pub'!

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By Rgab1947
26th Mar 2024 11:11

I certainly think so.

I locked myself out so had to get a locksmith (during normal hours). He quoted £185 for drilling the lock out (15 min job which he admitted). I declined think a glazier would be cheaper and broke a small window to get in.

Big mistake. He charged £295 (No VAT invoice) for the two small panes which took him 35 mins.

Then I read that Aslef has managed to get a deal for the train drivers giving them a £100,000 salary + a good pension + retirement at 60.

We are definately undervalueing ourselves and quiet frankly in my next life I definately will not be an accountant.

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Replying to Rgab1947:
paddle steamer
By DJKL
26th Mar 2024 11:17

Remember tradesmen include in their charge out rates time to get to you and time to return home, though your quotes are excessive.

We pay our handyman /usual small works contractor £30 plus vat per hour, I find this expensive but then again he will turn out at 2.00 am to sort an issue.

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Replying to DJKL:
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By Rgab1947
26th Mar 2024 11:21

I thought so too (Note its London). As they were both local thought I would get a fair price.

As wife visiting family and me having to cope for myself (Not good at it LOL) was to stressed to start phoning around for a quote. Especially as they rarely answer their phones.

Hoping they come to me for accounting. Know what I will charge them then.

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Replying to Rgab1947:
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By JimLittle
26th Mar 2024 18:14

I just had to get a quote from a locksmith and they all are charging around £120+ vat for just a callout then have to pay for the lock on top.

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Replying to JimLittle:
paddle steamer
By DJKL
27th Mar 2024 13:12

Bit like accountants taking on new clients- there is likely a minimum invoice amount for which they can be bothered setting up a new customer.

(Should have mentioned that £30 plus vat an hour I mentioned is the discount charge (we give them lots of work), other customers apparently get charged £40 plus vat an hour by our Handyman/small works contractor, but he does charge travelling in and back time if a callout.

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Replying to JimLittle:
David Ross
By davidross
27th Mar 2024 18:33

Do bear in mind that they have to travel to and from your premises so this is nowhere near £120 an hour

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By ianthetaxman
26th Mar 2024 11:19

For compliance based services, we quote per job where we can, based on the likely hourly rate of the person doing the work.

For advisory work, we still aim to quote per job, but more often than not, include a catch all in the engagement letter that covers any additional/other work at hourly rates between £x and £y plus VAT. Our most expensive 'premium' rate for certain work is in the several hundred of pounds, but the lowest is £50 plus VAT.

As for the background work, this should be part of the fee being proposed, if that work is needed to do the task in hand. So, for example, if an advisory piece of work needs at least one meeting at either end, this should be factored in to the suggested fee. If this means increasing the fee then this is a conversation to be had with the client.

We assess the WIP and determine if we have gone over budget, then why. If there has been more work done (scope creep) and there has been value added as a result, then it should be billed.

I was once told it was about the perception of value from the client's eyes. While I still think this is true (and we always try to point out the savings from advisory work to combat fee moans), it seems more and more clients are driven by cost in many cases rather than what they are getting for it.

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By ianthetaxman
26th Mar 2024 11:19

For compliance based services, we quote per job where we can, based on the likely hourly rate of the person doing the work.

For advisory work, we still aim to quote per job, but more often than not, include a catch all in the engagement letter that covers any additional/other work at hourly rates between £x and £y plus VAT. Our most expensive 'premium' rate for certain work is in the several hundred of pounds, but the lowest is £50 plus VAT.

As for the background work, this should be part of the fee being proposed, if that work is needed to do the task in hand. So, for example, if an advisory piece of work needs at least one meeting at either end, this should be factored in to the suggested fee. If this means increasing the fee then this is a conversation to be had with the client.

We assess the WIP and determine if we have gone over budget, then why. If there has been more work done (scope creep) and there has been value added as a result, then it should be billed.

I was once told it was about the perception of value from the client's eyes. While I still think this is true (and we always try to point out the savings from advisory work to combat fee moans), it seems more and more clients are driven by cost in many cases rather than what they are getting for it.

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By Michael Davies
26th Mar 2024 12:26

I am about to have some hard landscaping done (on my garden),and even being very generous on cost of materials;I believe I am being charged £2000 net on labour for a days work.Even if there are two of them;the boy labourer is probably on minimum wage.
Plus the contractor was so busy ;he couldn’t start work for 6/weeks.

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Replying to Michael Davies:
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By FactChecker
26th Mar 2024 14:39

Garden in Dubai?

Last week I was charged (in fairly salubrious W. London) £400/day per person (who were what one might call labourer+ level, as in loads of digging/lugging but also trained in horticultural matters).
I'm fairly sure the boss (small local business) retains at least 50% of that ... so 'the labour' is getting a reasonable whack and the business remains profitable (despite my refusal to pay extra for their van parking fees).

So how you get to £2000/day for labour defeats me ... unless they're sending a larger team than you expect?
[Shades of the unionised early '70s - one to set-up, one to make the tea, and so on.]

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David Ross
By davidross
26th Mar 2024 15:26

£170 for 1250 billable hours a year (only about 25 hours a week) makes you worth £212,500 plus VAT - you must be a God!

The first problem with hourly rates like that is that the first one or two seems fair, but when they multiply they certainly are not. The same rate is applied to all the routine stuff and that is why legal cases cost Millions

The second one is that the client can't pay anyway - totally impractical

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Replying to davidross:
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By JimLittle
26th Mar 2024 18:28

We only charge on a hourly basis where we cannot quantity the effort required and some expertise is required. Most of our work is on a fixed cost basis which still works put to be around £150 per hour.

Only book-keeping and payroll maybe less then £100 per hour

£150 or £170 per hour is not unreasonable compared to other professions. Cost of living and labour costs have gone up substantially.

I think his previous accountant was charging much more looking at their set of accounts but don't think he realised. I am certain now he will opt for an accountant that maybe AAT qualified who will be much cheaper.

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Replying to JimLittle:
paddle steamer
By DJKL
27th Mar 2024 13:25

Not sure about not unreasonable, how much training really needed to knock out SME compliance work?

I suspect my gas fitter studied just as hard, at least I know he/she will have served his time and acquired his licences, and yes, the fancy CA tax planning work likely justifies the rates, but the debit/credits bits- not so sure.

As I think I may have mentioned, I pay RICS surveyors £100 per hour for lease dilapidation schedules (not that long back it was £60), they are regulated professionals, will have done either relevant degree or first degree then a relevant Masters, then minimum two years supervised training, a submitted project and possibly a viva. Same with others like Town Planners, my daughter holds her MA, then she has a Masters in Urban Planning, has over two years experience with a planning consultancy, yet doubt she would charge at anything like the accountants' rates in practice.

Not wishing to be rude but I think accountants kid themselves about how difficult the majority SME bread and butter work really is.

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By peter morgan
27th Mar 2024 00:32

In terms of the total fee your client has the market to form a view. If he's asking you for your hourly rate and trying to make a judgment he needs to understand your cost structure, including the sunk cost of your professional development to date. And he has absolutely no chance of understanding that so don't even engage. That's my price, that's my charge rate, if you don't want to engage, jog on.

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By peter morgan
27th Mar 2024 00:33

In terms of the total fee your client has the market to form a view. If he's asking you for your hourly rate and trying to make a judgment he needs to understand your cost structure, including the sunk cost of your professional development to date. And he has absolutely no chance of understanding that so don't even engage. That's my price, that's my charge rate, if you don't want to engage, jog on.

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