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Pricing strategies: Starting the conversation

What’s the most proactive way to initiate those tricky fee conversations with your clients? GoProposal founder James Ashford talked us through the steps of creating the perfect fee proposal for your practice.

15th Feb 2021
Community Assistant AccountingWEB
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Over the course of the past year, many accountants will have watched their firms and clients adapt to the unforeseen circumstances of the pandemic.

Having the dreaded payment conversation with clients might seem a more daunting prospect than ever, but it’s crucial to open up these narratives as swiftly as possible if you want to see your practice thrive. 

But what’s the most proactive way to initiate these tricky conversations with your clients? Founder of GoProposal James Ashford talked us through the steps of creating the perfect fee proposal for your practice.

Working as a team

Members of the AccountingWEB community have increasingly reported problems with clients dragging their heels throughout the past year: “If they have agreed for you to do the work then they should be chased, hence the importance of agreeing on fees for work in advance rather than doing extra bits to help and then wondering how much to charge, which results in the water becoming murky,” advised reader pauld.

This is where having a standing order payment plan comes in handy – having a set monthly fee in place will prevent those tricky conversations when you inevitably have to chase up clients who haven’t paid. 

Ultimately, the firm needs to establish a consistent pricing system that the entire team can use. 

“Let’s say you’ve got a firm owner – they can go and learn a pricing methodology,” explained Ashford. “But the reality is, it’s their staff who are on the front line doing it day in, day out.”

A good way to understand this is to imagine a head chef in a restaurant – he knows how to price meals and how they should be charged out. He can’t, realistically, go to each table and serve the dishes up, but he doesn't tell any of the waiters or waitresses what the prices are. 

The server needs to be aware of the entire process - if a customer asks for a side dish or a drink, for example, the server needs to know what to charge them based on the menu and the quantity.

Understanding the psychology

In order to establish strong connections of trust with clients, which is essential for successful pricing, it’s important to develop your understanding of the psychology behind your relationships.

Establishing a consistent pricing system is key to building this trust as it determines the value within your services.

For example, a firm might decide to forgo the fees ‘just this once’ under the impression that the client will be nothing but grateful for the favour and will undoubtedly come back for more. The client might be struggling with their finances due to the pandemic, and the firm might want to show some kindness in the hopes the client will appreciate it and tell all their friends to seek out their services.

However, having a non-negotiable fixed fee payment plan is crucial to strength of the client relationship. 

If a client asks for a reduction in the price and the firm owner agrees, although the client might initially have feelings of jubilation from spending less, they will inevitably question the reasons for the discounted price. Even if it’s subconscious, there will instantly be doubt in the client’s mind.

“They might start to think, if it was worth the discounted price a month, why didn’t you just charge me that in the first place?” asked Ashford. “Without even knowing it, you’ve lost trust in the relationship, because you fundamentally lied to them in the first place.”

Bartering with the price subconsciously trains the client to undervalue your services, Ashford explained, because you’re giving them away for free – maintaining set prices will show your client that your work is worth what you’re charging, and they’ll respect your practice more for it.

The conversation

If a firm has a client come to them complaining of their last accountant, the most crucial part of the fee conversation is understanding what their accountant did that they didn’t like, so they can then do better. Finding out what they need as opposed to what they want will elevate your services above their prior experiences and allow you to properly charge what you’re worth.

“Unless that conversation happens, they’ll never be able to price the services properly,” Ashford said. “What they’ll end up doing is making the same mistake as the previous accountant.”

Asking the right questions to tailor your services towards your client will allow you to discover not only what they need from you, but what you should be charging.

If you can assess from the start everything you’ll be doing for this client, there will be no surprises later on with raised fees once you realise that the workload wasn’t what you originally thought it to be.

Existing clients

This conversation might be more tricky to navigate with existing clients; it can be challenging to ask people you may have been working with for years for more money. You might be aware that the conversion needs to happen, but hesitate to have it until it’s an absolute must.

If you find yourself in the situation where you realise you’ve got to raise your fees, Ashford explains that there are two options you can take:

“You’ve got to do a fee review every year with your clients – so do you just roll this new pricing out over the next 12 months, by which time you will have carried out a theory with every client? Or do you bite the bullet and say we’re doing it quicker – we’re going to reprice them all?”

A client of Ashford’s was once pricing short of where he needed to be; he chose the latter option and repriced all of his clients in the space of three months. In doing so, he lost 17% of his clients. Despite this, his revenue increased by 23%.

This client now had more money, fewer clients, was able to employ a new member of staff and shift to working only four days a week. 

Above all, Ashford advised remaining transparent at work - ask yourself how you would feel if you were the client in the situation.

“Think about how you and the client could develop a long-term relationship that enables you both to profit,” he explained, rather than focusing solely on the profits for your practice.

Making your fees public

“My marketing support recommends putting clear pricing on our website, what do you think?” AccountingWEB member Louise76 recently asked.

“The thing to do is not to show what you price because people don’t care about that - what they really care about is how you price,” explained Ashford.

Pricing is complex because every business will have variations and nuances in the services they provide; going through the pricing with the client on a personal level is what is going to simplify the process and make both parties happy.

Ashford advised that if you’re wanting to make your fees public, just go with a minimum set fee as a baseline. After that, the methodology to your pricing strategy will take care of the rest.

Avoid comparing yourself

Ultimately, comparing your firm and your prices to other practices isn’t going to get you anywhere fast - if you can shift to comparing yourself to yourself, you will always be proactively aiming to better yourself and your pricing strategy.

“You can’t compare yourself to another firm because you don’t know if what they’re saying is true or not,” said Ashford. “All you can compare yourself to is your firm last week, or last month, so you’re always trying to be a little bit better than you were.”

Put your practice first

Focusing on making yourself more financially stable is the kindest thing you can do for your clients, Ashford advised: “It means you can serve your clients to a better standard… Not to do that is to actually put your clients at risk.”

He compared this to putting your mask on before anyone else’s in an emergency mid-flight, or pegging down your own tent so you can help others do the same in a storm.

“If you can peg your tent down correctly, the storm will blow over and you’ll be fine,” Ashford explained. “And the way you peg it down correctly is by having a solid pricing methodology - by charging monthly, by not pricing hourly, by making sure that you have a way of collecting money from people.”

Developing the confidence to help yourself first, and to value yourself enough to properly charge your clients, is ultimately what is going to see your business grow and see you through to the other side of the storm of the pandemic.

Replies (6)

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By BryanS1958
16th Feb 2021 10:09

...."by charging monthly, by not pricing hourly, by making sure that you have a way of collecting money from people."

I always try and collect something on account by direct debit. Not charging hourly is very difficult - if a client wants a mortgage reference I could say to them it's a fixed fee of £150 (which is about 45 minutes of my time), but the lender may end up wanting more and more information and it could end up taking 3 hours.

My clients know I charge my time, not a fixed fee, so they will (or should) understand that if the lender is being difficult it will cost more. Same with a set of accounts or a tax return or anything else. Trying to move away from hourly seems very difficult and not very profitable in many cases.

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All Paul Accountants in Leeds
By paulinleeds
16th Feb 2021 12:08

Fixed prices work best on relatively fixed work.

If I agree to prepare your accounting records for £1,000 pq and you come with more invoices, unbalances records, missing bank statements then I need to charge more. The client hasn't stuck to the agree pricing methodology.

To me, you have to over price to cover the little extras in a fixed price. Why do I take the risk of undercharging for valuable work for a fixed price to the client?

As long as clients are aware of the extra work and the extra charge I find they do not complain. If the work takes less, then you charge less with hourly billing.

Mostly, I use fixed(ish) prices for regular work.

I do not like annual bills and monthly Direct Debits if I'm not recovering for my time/work.

How many times have you had to do extra work and bill extra to then find the DD is not covering the extra work?

Fixed prices are great to for work. If I want a service on my car for £300 then I agree that. We all know exactly what will be done in that service.

If I then ask to fix the air-con I do not expect that to be with the same price.

Thanks (0)
All Paul Accountants in Leeds
By paulinleeds
16th Feb 2021 12:23

Fixed prices work best on relatively fixed work.

If I agree to prepare your accounting records for £1,000 pq and you come with more invoices, unbalances records, missing bank statements then I need to charge more. The client hasn't stuck to the agree pricing methodology.

To me, you have to over price to cover the little extras in a fixed price. Why do I take the risk of undercharging for valuable work for a fixed price to the client?

As long as clients are aware of the extra work and the extra charge I find they do not complain. If the work takes less, then you charge less with hourly billing.

Mostly, I use fixed(ish) prices for regular work.

I do not like annual bills and monthly Direct Debits if I'm not recovering for my time/work.

How many times have you had to do extra work and bill extra to then find the DD is not covering the extra work?

Fixed prices are great for fixed agreed work. If I want a service on my car for £300 then I agree that. We all know exactly what will be done in that service.

If I then ask to fix the air-con I do not expect that to be with the same price.

Thanks (0)
All Paul Accountants in Leeds
By paulinleeds
16th Feb 2021 12:10

Fixed prices work best on relatively fixed work.

If I agree to prepare your accounting records for £1,000 pq and you come with more invoices, unbalances records, missing bank statements then I need to charge more. The client hasn't stuck to the agree pricing methodology.

To me, you have to over price to cover the little extras in a fixed price. Why do I take the risk of undercharging for valuable work for a fixed price to the client?

As long as clients are aware of the extra work and the extra charge I find they do not complain. If the work takes less, then you charge less with hourly billing.

Mostly, I use fixed(ish) prices for regular work.

I do not like annual bills and monthly Direct Debits if I'm not recovering for my time/work.

How many times have you had to do extra work and bill extra to then find the DD is not covering the extra work?

Fixed prices are great to for work. If I want a service on my car for £300 then I agree that. We all know exactly what will be done in that service.

If I then ask to fix the air-con I do not expect that to be with the same price.

Thanks (0)
avatar
By davidbrokerage
18th Feb 2021 08:39

What's the problem that's being discussed here? Scope creep?

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By Fagin125
27th Feb 2021 04:33

It’s just what it sounds like: you calculate the cost to deliver a product or service (cost) and then add a 10% margin, for example (plus). Cost-plus is straightforward for the entrepreneur, but doesn’t take into account the mindset of the customer. You may also leave money on the table by focusing on cost.

https://www.targetehr.me/targetpayandbenefits/

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