Do you ever feel uncomfortable setting your own rates when it comes to your services?
It’s a pretty common occurrence for individuals to set their prices low in order to ensure they get the sale, but that’s not helping you or your clients.
Believe it or not, most companies and clients will happily pay what they think you’re worth. But it’s up to YOU to influence that thinking and show your value as a trusted accountant!
The best way to do that is by letting your confidence in your work show through. You do this showing how you can be of service to potential clients and how you can help solve their problems. This will include things like showing how much money you can save them, maybe by sharing case studies of how you’ve helped other clients.
The bottom line is that your price should never be determined by the client. You can show them what you’re worth by showcasing your skills through your confidence.
Recently, Marc Schnoll joined The Abundant Accountant Podcast to share a huge lesson learned for him and his firm.
Marc is an excellent accountant and has been in business helping his clients for over 14 years, but confidence hasn’t always been Marc’s strong area. There have been many occasions where Marc has undercharged in order to guarantee a sale or keep a client.
Over the last year, Marc had worked hard to build up his confidence and start asking for what he’s worth. He knows he can save his clients thousands of dollars and he just needed to start showing that to interested prospects until they saw it, too.
Outsourced Accounting Department
Marc had a client, let’s call him John, who had been working with Marc for well over 15 years. Marc’s firm did everything for John’s business. They were literally his outsourced accounting department – they did his bookkeeping, payroll, year end tax planning and accounting. Not to mention the countless emails they received from John on a DAILY basis.
Over the years John’s business expanded and became more successful, Marc’s firm was the go-to for all of John’s accounting needs.
When they began working together they set a monthly fee that felt fair. Marc estimated that it was around $2,500K a month, plus some end of year tax work, that netted them about $25K over the course of the year.
In the very beginning, this amount felt okay. While they were managing a lot of John’s business, it was still in the small growth stages. However, John’s business began to grow geometrically, and Marc’s fees only grew linearly.
John’s revenue increased seven or eight times while adding more entities to the portfolio of companies, compared to what it had been when they first began working together. At the end, Marc was only charging John about $2,500 a month, with extras costing around $2K per month, meaning that Marc was only making about $4,500 per month in revenue from his largest client. A client where they were handling ALL parts of the accounting.
When income increases that much you have to assume that the complexity of the work must also increase, but the thing that never increased was Marc’s monthly rate.
It stayed the same at $4,500 per month.
Managing the Daily Emails
This might seem like an insignificant part of your business, but think about this. How often does a client email you? And, how often do those emails need a response?
If you’re anything like Marc, you’re receiving upwards of 10+ emails a day from one client. Some of those messages are quick responses, while others take some thought and research.
Even if you’re answering quick 2 minute emails, all of that time adds up. And if you’re not charging for it, not only are you losing time, you’re losing money.
What Marc decided to do was perform an analysis of the last 90-day period of emails from just his major client. What he found was that he had received somewhere around 300 emails in that 90-day period.
If you do the math, even spending just 2 minutes on all of those emails adds up to 10 hours of time. But we all know that the average email probably takes more than two minutes, and there’s often a lot of other things that go on before responding so even more time is going unbilled.
Marc realized his firm had a problem, and he did not want to continue serving his client at a loss. But he also knew that if he presented a new pricing structure to his client, they would likely be shocked and could potentially walk.
Initially Marc allowed his fear of losing a client outweigh the confidence he was building. He knew he was worth more than he was being paid, but was afraid to do anything about it.
But after doing his analysis and realizing how much time and money he was losing, Marc realized that he had to approach his client with a rate increase.
Marc asked for $12K a month, but believed he probably could have even made a case for $15K per month with all of the services that they were providing to John. Not to mention that they had developed a new tax plan that was going to save John about a million dollars annually.
After being presented with the price increase, John did decide to go elsewhere, but it worked out perfectly. It opened up more time with Marc’s staff that had been dedicated to this client, and it allowed a client who was willing to pay their rates to come in.
I know it feels scary to raise your rates, but you should never be afraid of losing a client. There will always be another who is dying to work with you and is willing to pay your rates!
How to Determine Your Prices
Alright, so you’ve built up your confidence and you now know that you deserve way more than you’ve been charging. Now it’s time to determine the prices you really deserve.
The first question you should ask yourself is what does it cost to provide each service?
Occasionally it might just be doubling the time it takes to do the work, but that might not always work. If you’re looking to make a profit, sometimes just doubling won’t do it.
The other thing to ask is how much value are you providing?
If it’s costing you $5K per month to provide a service to a client, what sort of profit margin would you like to make?
Let these answers guide how you price your services.
The final question you should ask yourself is, what are your client’s other options in regards to what you do for them?
These are the exact questions that Marc asked himself when he was trying to determine what he should be charging John.
The scary part for Marc came when analyzing whether John could find people to do the work for cheaper.
Marc knew that the client could easily replace the bookkeeping and day-to-day accounting for well under what Marc was asking. But, when it came to the higher level services, the tax planning, staying on top of deadlines, and guaranteeing all their work, those are things he likely wouldn’t find elsewhere for cheaper.
In the end, as I mentioned earlier, the client did walk. Parting ways wasn’t easy and it definitely didn’t happen overnight, but Marc knew he could no longer lose time or money for this client.
Losing a client as large as John could have had a devastating effect on his business, but because Marc has been working hard to raise his rates, losing John was actually a good thing.
Losing him actually opened up a ton of capacity in Marc’s firm. They now have the more time and energy to bring on new work which is of higher value and results in higher revenues.
Not to mention that the employee who had been dedicated to John’s firm was finally able to take a vacation, something he hadn’t done in literally FIVE YEARS.
On a personal level, Marc no longer wakes up at 6 AM to check his emails and get right to work on answering things from John. He can now focus on the things that he’s actually going to get paid for.
Show Your Value as a Trusted Accountant
We all have that long-term client that we’ve been working with, and odds are you are undercharging many of them.
One thing that Marc recommends you do is start analyzing the time you spend on those clients and then slowly start raising your rates 10 to 15 percent.
After that initial increase, you may find that you deserve even more, but in order to not shock all of your clients, raise your rates a little bit every year. You don’t want to be too aggressive about pushing your fees onto long-term clients who are actually the dream clients you enjoy working with.
The second thing to remember is that whenever you bring in new clients, you must focus on being paid what you’re worth from day one.
If it’s a client that you’re going to be doing a lot of day-to-day work with, make sure you’re pricing yourself higher. And if they choose not to pay it, that’s OK!
There will be clients who are willing to pay what you’re worth and more.
I know how scary it can be to ask for what you’re worth.
You fear that no one will be willing to pay that amount of money. But I can tell you from my own experience and from that of my clients that there are always people willing to pay you what you’re worth.
When you’re trying to prove your value, embrace your confidence that your services are top-notch, and then show your clients where you’ll be spending time, and how that time will turn into value for them.
When you put it this plainly for them, they’ll have no choice but to say, “Where do I sign?”
Have you been holding off on raising rates for any long-term clients? I’d love to hear about it in the comments.
P.S. Are you tired of feeling like you have to give away your knowledge and expertise for free? Register NOW for my FREE Accountant Masterclass and learn to implement my 3 proven strategies for your accounting practice to stand head and shoulders above your competition and offer superior value and unmatchable service to easily build your practice with premium clients who eagerly pay you what you’re worth. Get FREE access NOW at abundantaccountant.com