I could hear the fear in his voice…
“Rudi, I can’t possibly increase my fees, I’ll be the most expensive accountant in Newcastle!”
Mike had just joined my mastermind & coaching programme, and we’d very quickly realised when creating his long-term roadmap that one of the first things he needed to do was improve his profitability and cash-flow.
Now aside from transitioning his clients to Direct Debit, we also recognised that his fees were too low.
And deep down, Mike knew they were too low…
He was just too worried to do anything about it.
The fear was almost crippling.
He was worried about how his clients would react. What if they all ran off and joined his competitors? What if the word got out that he was too expensive and overcharged his clients?
The truth is, this kind of fear and worry amongst practice owners when it comes to increasing fees isn’t uncommon.
And rightly so, implementing a fee increase is never an easy thing to do.
However, with the right mindset and a proven process in place for doing it, it can be much easier…
So how do you go about implementing a fee increase in your accountancy practice?
1. Start with understanding who needs to be increased
The starting point is knowing who your fee increase is applicable to, and who it isn’t.
For lots of practices they have a group of legacy clients who tend to be on lower fees from way back when. But over time they’ve gradually increased their fees bit by bit, but often not to the point where they could be.
It’s also worth doing an analysis of your client base to look at individual client’s profitability.
Over time the scope of work can change, and your fee might not have been adjusted to make it worth your while aka profitable. By doing this analysis you will identify which clients are unprofitable and therefore which clients can have their fees increased. You can find out more about how to do this analysis in this article here.
2. Know what you’re going to charge
Once you know which clients will have their fees increased, you need to have an idea of what their new fee is going to be.
This is often the hardest bit for practice owners – and is where they start looking at their local competition to make a decision.
Benchmarking your fees on local competitors can be useful, although you need to bear in mind that although you know their fee, you don’t know the level of service that comes with it.
A couple of years ago I ran a benchmarking exercise with my clients to figure out average fees for services across the UK. The highest fees were mostly in London. And one of my clients at the time, Kamran, whose practice is based in Birmingham decided that he was going to take those London prices, and use them in his practice (this is the type of person he is…)
Eventually, after more no’s than yes’s – he settled on his new fees which were about 75% of the London fees. This was still a huge increase compared to the fees he was originally charging.
It’s more important at this stage when figuring out what fees to charge to have a good understanding of your cost base and what goes into the different services you provide.
As your practice grows, and you bring in more people, systems and technology, your cost base will change with it – so it’s important that your new fees cover your new costs and leave you with plenty of profit.
3. Run the process
Ok, so what is the process?
For me, this process can run hand in hand with transitioning clients to a monthly Direct Debit.
It will allow you to kill 2 birds with 1 stone so to speak.
I cover the process in more detail in this article here, including how one of my clients did it over a 12-month period with little resistance from their clients.
But to summarise, the process goes like this:
- Organise clients by end of financial year – you can do it part way through the year, but it makes it a lot easier to do it at the end, especially when moving them onto a monthly Direct Debit as well.
- Use a quoting tool or software e.g. GoProposal. This will help with your confidence in charging higher fees. Think of it like a menu in a restaurant. You wouldn’t sit down and negotiate the prices there, so it’s unlikely your clients will try and negotiate your prices if they’re in a menu/quoting system
- Prepare for your objections – you’re bound to get some objections, but if you prepare beforehand then you can have some good answers for them
- Communicate the value – it’s important that they understand the value behind your service. 4/5 clients are value-sensitive, not price-sensitive, so providing you communicate clearly the value, the price shouldn’t be an issue.
Will you lose a couple of clients?
Probably, but only a few. The reality often is that these are the unprofitable, problem clients who are more price-sensitive than value-sensitive. You can read more about the types of problem clients and how to deal with them here.
The best thing is that your increase in fees will more than cover the value of clients that drop off. I’ve never seen this not happen in all of the years I’ve helped clients to increase their fees.
And for the future, you want to have your fee increase built into your terms of engagement. As long as your clients are aware they will have an X% fee increase each year upfront, then it won’t be an issue.
So, what are you waiting for?
Sit down and start planning to implement your next fee increase as soon as possible. Putting it off will only make it feel like more and more of a challenge.
Follow the process, and the results will follow.