Negotiating a fee increase is never easy; this is why it is essential to get your new clients in at the right rate from the very beginning. Your first interactions with a new client set the stage for how the relationship means to go on, at least in the client’s mind, so you need to focus on training them to work how you want them to and at the rate that you want. Here is why it is important to train your clients to expect regular fee increases from the start and 3 ways that you can do it.
Avoid the deadly deal
Many accountants, especially in the early days of running their practice, tend to underquote for their work. When a new client asks what can be done to lower their fees, they may simply negotiate a lower rate or offer a first-year discount in response. What they don’t realise is that this is actually doing far more damage than good.
Yes, they may have won their business, but what they have also done is trained them to think that there will always be a deal to be done or a discount to be had. All they have to do is ask.
When the time comes then, when their practice has grown and they need to increase their rates, these are the clients that will most probably resist this change. For many accountants, it results in them sticking to their current rate sheet and pricing model for much longer than they should!
From the get-go, they have made it much harder to negotiate fees up from such a low starting point that they may never get that client onto a profitable fee basis.
Train your clients to pay what you are worth
You can’t keep doing more for less, so to avoid the above situation, you need to be training your clients to pay the fees that you want from the start and to expect these to increase regularly.
Here are 3 ways that you can train them to have this mindset:
- Make it clear in the first business development meeting that your overall fees are reviewed annually, but their payroll will be reviewed monthly and their bookkeeping fees quarterly
- State your annual fee increase and regular reviews of their bookkeeping and payroll fees in your engagement letter
- Mention your annual fee increase and regular reviews of their bookkeeping and payroll fees in your onboarding meetings
So, how do you train your accountancy firm clients to expect regular fee increases? Put simply, you start as you mean to go on.
For every new client, build language into your contract, engagement letter and meetings to make it clear that fee increases will be implemented regularly. If clients know about it from the beginning, they are much more likely to accept it and not resist it further down the line.
When you think about it, most clients would be more than fine with a slight increase every year (e.g. 3%) rather than a hike up in prices every five years (e.g 10%).
Start from the beginning
The mindset of your client is set from the start of your relationship and will likely continue throughout, so make sure that you train them to expect fee increases from the very beginning using these three ways. This is actually a win-win for both you and your clients, as clients won’t be ‘ambushed’ with a sudden fee increase and you won’t have to worry about having those dreaded fee increase conversations!
"This article was originally published on the Accountants Millionaires' Club Website"