Pricing takes confidenceby
Does the thought of losing or upsetting clients prevent you from increasing your prices? You’re not the only one.
According to a poll launched during last week’s PracticeWEB pricing webinar, 63% of attendees cited upsetting clients as the main reason for not increasing prices. This was reflected in another poll where more than half of respondents admitted to not broaching a price increase in over six months. So why do practitioners fear that their clients will leave if they increase their price?
According to the Go-To Expert Jon Baker, one of the webinar’s panellists, pricing takes confidence. “The more confident you are about your firm, yourself, and your abilities, the easier it is to price yourself higher than your current rates and higher market rates,” Baker said.
From working with accountants who increase their prices, Baker added that the losing clients fear does come true. However, the practitioners Baker worked with were not hit by a mass exodus - at most two clients left, and they were the ones the practitioners didn’t like working with anyway, Baker said.
Implementing price increase
Baker’s pricing confidence advice can be used to inform every aspect of pricing. For example, those without pricing confidence email their clients about their proposed price increases, shying away from confronting the issue. But clients can easily ignore these emails. The confident pricing approach is to call clients and explain the price increase and then follow up in writing. By speaking directly with their accountant, rather than reading about the increase presented in a formal letter, the clients feel more respected, Baker explained.
Later in the webinar, Baker’s Go-To Expert colleague Heather Townsend recounted a recent client who was afraid of losing clients and shied away from those difficult conversations. Too worried about pleasing people rather than making profit, this practitioner dodged proactive pricing conversations with clients and let renewal dates slip by, and instead, relied on overtrading and racing to the bottom by competing on price with their local rivals.
Getting practitioners into pricing shape, Townsend emphasised the importance of accountability. To overcome their pricing hump, the Go-To Expert discussed the importance of knowing why it is important to implement the increases. With the case study practitioner, Townsend blocked out a holiday based on whether they succeeded in their price increase challenge.
Townsend encouraged the accountant to use tools such as Spotlight reporting to accurately and consistently price all clients. For this case study, embracing pricing changes translated to the equivalent of winning 15 more clients.
But confidence and pricing are not just about how you relate this information to your clients, as the webinar explained how accountants need the confidence to adopt a flexible approach to how they price. For clients unwilling to accept the price change, Baker and Townsend suggest tweaking how you charge your services. So if your clients were so adverse to a 5% price increase, perhaps they would accept a 2% increase if they paid via direct debit. How about mortgage applications or general advice? Do you let it slide, offering these services as freebies for your client?
Know your pricing model
Finally, confidence informs how you price. Rather than accepting a reactive pricing structure, like the one mentioned in Townsend’s case study, where you are more preoccupied with competing with your rivals over the lowest price, causing profit erosion and attracting low value clients, both the Go-To Experts agree - value pricing is about knowing and understanding the value you offer.
Townsend and Baker also discussed value pricing, being assured by your own knowledge and experience, and growing clients’ profitability and through this, increase pricing.
Baker’s and Townsend’s PracticeWEB webinar can be accessed here. When was the last time you addressed your pricing situation? Do you shy away having those difficult conversations with your clients?