How to negotiate higher fees

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Mark Lee interviews Derek Arden who shares invaluable tips to help accountants negotiate higher fees

There are many crucial business skills that many of us learn through experience. As such we are tempted to assume that it’s all down to common sense. That common sense often comes from experience so it can be tough the first few times you need to work out what to do to resolve a challenging situation.

For example, over time many accountants develop their own techniques to negotiate the fees they want and deserve from their clients.

I thought I'd ask an expert on the subject to see what tips he might share for readers of AccountingWEB.

ML: Derek, you're known as Mr Negotiator; what are the fundamental issues to keep in mind when seeking to reach agreement with clients over fees?

DA: These days, accountants, in common with many other service providers are faced with clients who do not like to be quoted hourly rates. Clients consider these to be arbitrary and depend on too many factors outside the client’s control. So ensuring that the client understands the value that they are getting and the work involved, goes a long way to getting a sensibly negotiated win win fee.

ML: Often a prospective client will be comparing one accountant’s fee with another. Presumably it’s important to ensure that they are comparing like with like?

DA: Absolutely. One way of doing this is to give them a choice of service levels and let them choose.

ML: Makes sense. I know a lot of accountants who do this.

DA: I recommend three options – you might call them the gold, silver and bronze options.

This utilises the power of three, which of course means the client has a choice of which service he uses. And the contrast principle will come into play, which makes the silver option look much better value compared to the more expensive gold. 

Gold – this would be the all embracing service for business owners including a number of meetings and advice across the year.

Silver – this might be the standard added value service with a once a year meeting etc

Bronze – just completing the basic paperwork and filings with no advice or meetings.

ML: Many accountants may only be offering the equivalent of a ‘bronze’ level service so this can help to show the difference and why some charge higher or lower fees. There will also be clients who only want that basic service.

DA: The other important thing to do is to evidence the value of the additional elements involved in the service and gold offerings.

ML: What about when the accountant simply proposes a fee and the prospective client baulks at the sum quoted?

DA: I call the term ‘flinching’ in “Win Win” and it’s handling the flinch with a justification, which is important. That is when you go into overdrive telling the client what they are getting and why it is good value for all the value added services and how they will benefit from these.

ML. Thanks Derek. Now what about when a client disputes a fee that’s either higher than they expected or they simply don’t want to pay the outstanding balance over and above any monthly instalments?

DA: In 2015 you might expect some flinching from some of your client. It’s only to be expected. You basically have three choices (and don’t forget, when you are negotiating it’s a good plan to work out what the three choices are to clear your thinking)

  1. Play hardball and insist on being paid
  2. Explain the issues and give a small discount as a one off
  3. Concede the amount for relationship reasons.

The best option is the middle one in year one; if you think preserving a “win win” relationship with this client is a good idea. Make sure you signpost the charges so it doesn’t happen again. However remember some people think negotiating is a game and will always try it on to get more off. Year two it’s much easier to stand firm and remind the client what you did for them in year one

ML: On a related point, I know many clients are hesitant to raise their fees each year. Once a few years have passed the increase they really want will have become a more significant figure. Any suggestions as to how they could address this with clients?

DA: I think it is better to raise your fees annually in line with inflation, as everyone understands that. If you leave your fees the same for too long your clients may assume that costs have come down in your profession – or that your fees were out of line in the first place. When the fee hike comes there is bound to be trouble. Little and often, less is more, is better!

ML: Finally Derek, please can you share your top 3 tips accountants can use for power negotiating with their clients?

DA: Yes of course Mark

Tip one – Refer to a higher authority whenever practical. The tactic enable you to link it to good guy/ bad guy and often keeps conflict out of the relationship.

Let me give you an example “I would love to agree to your request Mark BUT I have agreed with my colleagues we won’t discount our prices beyond what we are doing for you – so sadly I am unable to go any further”

Tip 2 – Is have three options, as above. And if you do walk away, what is the alternative position OR as the Harvard negotiating project called it, what is your BATNA? (Best Alternative To A Negotiated Agreement).  This is especially relevant when negotiating with one of your bigger clients, whom you earn good fees from. If the service and the extras you provide is really good, perhaps you can get nearer to your best position (your dream position), than you think.

By starting high and sign posting that you might be able to come down, you may achieve more than if you just start low. You can use word softeners like, “for this piece of work” and “for all we do for you” (spelt out) our “normal” fee would be. See how they react to this; if they’re likely to flinch consider in advance how much you might be prepared to move. But do not volunteer to do so until they flinch.

Tip 3 – If you quote a fixed fee, beware of scope creep. Where you do extra for the client outside of the agreed arrangement. It is always more difficult to agree a fee for extra work after the event. Flag extras at the time and be clear what you are doing and doing for the fee.

ML: Many thanks Derek. I'm sure our readers will find that very helpful. 

Derek Arden is the author of 3 books on negotiating skills. His newest is Win:Win – How to get a winning result from persuasive negotiating – published by Pearson July 2015. He can be contacted via email at [email protected] - or call him on 07980 241185

Mark is consultant practice editor of AccountingWEB and a speaker at conferences and in-house events, helping accountants who want to STAND OUT from the pack. He also facilitates The Inner Circle group for accountants and is chairman of the Tax Advice Network of independent tax specialists who provide support to smaller practices.

About Mark Lee

Mark Lee 2017

These days Mark Lee focuses his business actiities on  two key activities:

1 - He loves being engaged to speak on stage to audiences of accountants in all size of firms. His latest keynopte talk is: The rise of Robo-Accountants - and how to beat them. He is an accountancy focused speaker, futurist and influencer with a positive reputation for entertaining, engaging and enthusing his audiences.

2 - He loves supporting savvy sole practitioners who want more out of their practice.  More clients, more money, more time, more satisfaction - or everything!

An accountant by profession, Mark moved away from the provision of professional advice in 2006.   He is now a professional speaker, mentor, author and debunker.

Mark is passionate about helping accountants generally so is a keen blogger and commentator in the accounting and tax press. He has been consultant practice editor of AccountingWEB and has written hudnreds of articles here that have been viewed over a million times.

Check out how he could help you here: www.BookMarkLee.co.uk/savvy

Mark no longer gives tax advice despite being a past Chairman of the Chartered Accountants’ Tax Faculty. He is however Chairman of the Tax Advice Network - the UK's highest ranked lead generation website for tax advisers and accountants. The network also publishes a weekly practical tax update for accountants in general practice and full tax support, on demand too.  You can also use it as a lead generation resource for local people seeking tax advice from an accountant.

Mark has extensive network reach through his blog, talks, social media activity, articles and his regular 'Magic of Success' tips and tricks email that goes to thousands of accountants every week.

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22nd Jul 2015 09:33

I don't like

the implications of the headline of this article. Accountants can think for themselves and they are much better placed to arrange a fee with their clients without resorting to tatty sales techniques.

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22nd Jul 2015 09:49

What title would you have given the article john?

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22nd Jul 2015 10:37

Good question, Mark.

The answer is "I wouldn't have written a tatty article like this in the first place".

However I do agree that for some the fee arrangement can be daunting. Using Sales techniques to gain a "higher" fee is not the way to cement good relations. If you've had a good training and had an indepth chat with your client you should have an idea of how much the fee should be. So you agree that fee for the first year, then iron out any creases (yes I am a dab hand at ironing, especially shirts) for future years.

In short, Mark, I feel that some of your articles belittle the Accounting profession (I know they are not meant to) .

Stuff like "scope creep", "word softeners" etc. have no place in our profession.

What I would like to see from you is an article on "How the Accountancy world can keep it's professionalism in these sales oriented times".

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22nd Jul 2015 10:51

Bandings

I tried it and it didn't work for me.

It works for the higher services, ie. extra consultancy costs more and is usually agreed without problem but that can be achieved without the need for bandings.

I guess the problem is that I don't really want to provide the lower type of service ie. compliancy only. I want clients to be able to call without fear of additional fees, as this prevents little problems turning into big problems and is more likely to result in a satisfactory relationship for both sides. Also, I don't want to have to say to clients 'I can see ways you can improve profits or save tax but that advice will cost you extra'.

Does anyone have any tips how to overcome these problems?

 

 

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22nd Jul 2015 10:54

Theoretical Advice

Tatty or not tatty - in the end we are dealing with human beings with all of their vagaries and failings.  I keenly await the day when I am presented with a magic bullet to solve the multiplicity of circumstances which confound fee negotiations and settlements.

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22nd Jul 2015 11:04

@Casterbridge

Easy peasey. Agree a first year fee then adjust subsequent years accordingly. As long as the client is aware (you could put it in your letter of engagement) then I don't see a problem. Be honest with your client and you won't need a "BATNA".

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22nd Jul 2015 15:59

Don't agree that annual is best

We review fees every two years since the great banking nosedive.  If you are charging someone £100 per month, going to £105 after two years is hardly going to be a deal breaker.  Negotiating it up £102.50 after one year and then another £2.50 in year 2 is double the work!

 

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