In my experience, pricing is the issue that accountants have the least confidence in and the least understanding of how to get right.
So often I hear that you can’t raise your prices because your target market won’t accept it. Or that you have no option but to charge really low fees because other accountants will undercut you and steal your clients.
But chances are your prices aren’t high enough.
Psychology teaches us that most people judge the value of something almost instantly based on its price. If it’s cheap, it must be poor quality. If it wasn’t, how could they afford to produce it for that price? At some point, too, we’ve all learnt that buying cheap is a false economy – whatever we’re buying, it never lasts very long. And so, subconsciously, we learn to identify price with value.
If you can show your clients the value of your services, they will happily pay a higher price. Value pricing isn’t about ripping off clients by over-charging them and then failing to deliver to a higher standard. It’s about enhancing the value you deliver. When you charge a higher fee, you and your team have more time. Time to analyse the data and identify opportunities for your clients that will improve both their business and their life. Time to provide much, much more than a bog-standard service.
Charging the right price
So how do you know you’re charging the right price? If you simply base your fees on those of your competitors, how do you know that they didn’t undercut their competitors – who in turn had undercut theirs? Undercutting one another is a vicious downward spiral of reducing profitability in which no one – neither you nor your clients – wins. You’re working more and more hours just to pay the bills but spending less quality time with your clients to help them spot opportunities.
That’s why we teach the accountants we work with seven methods to increase their prices in a way that demonstrates to even the most price-sensitive client that they’re delivering greater value. These seven methods are:
- your services and provide choice
- add more value
- explain this value
- link price to value
- communicate payment terms
- make the price seem smaller
- include power strategies such as guarantees.
By following our processes, AVN accountants tell us again and again that they’ve doubled, trebled and even quadrupled their fees. And I reiterate, this isn’t ripping off their clients – this is being able to charge a higher price because they’ve added value to their service and demonstrated that value to the client.
The result of charging too little
Here’s an example of what can happen when your prices are too low.
Cathal, an accountant we were working with, told me recently about a phone conversation he’d had with a client who was complaining about turnaround times and things that hadn’t been done.
Despite remaining as patient as possible, eventually, out of frustration, Cathal told him, ‘To do all of that in the timeframe you wanted would have cost €20,000.’ The client’s reply, however, was a real wake-up call. He simply said: ‘I’ve never refused to pay what you ask. Why didn’t you tell me that that’s what it would have cost to get what I want?’
The client’s actual bill was €6,500 and Cathal realised that he’d been guilty of making assumptions in his own mind about how much the client would be prepared to pay. The result was a dissatisfied client.
Thankfully, by complaining directly rather than simply moving on, the client gave Cathal the opportunity to respond by significantly increasing his fee so that in future he was able to deliver exactly what the client wanted.
How many clients might you have lost because your prices were too low, not too high?
For more on getting your pricing right, download your free copy of Putting Excellence Into Practice.
Shane Lukas, AVN for Accountants