Accountants and Bookkeepers commonly fall into the trap of dropping their fees at the negotiation table. At Practice Ignition, we want you to avoid this. Instead, we recommend harnessing fixed fee billing to set up a baseline set of services with key add-ons available to your clients.
Why competing on price doesn’t make sense
1) Lowering prices attracts lower quality clients; you will attract people who are more concerned with price than results. These clients are not exactly FUN to work with.
2) Lower prices push away potential high paying clients. Make that a double disaster.
3) Lower fees will attract clients who push the boundaries. This results in scope creep and performing, even more, work than you intended.
4) Charging low fees means you get less commitment from your clients. Rather than being ‘all in’ they’re instead ‘half out’. The size of a client’s commitment and follow through will almost always be equal to the size of their investment (HINT: the more they pay, they more they’ll actually DO to get results from your service!)
You ultimately need to decide what kind of service provider you want to be. The good news is that it is just as easy to compete on value as price. It makes no sense to choose the road that leads to less profit when you can easily do the exact opposite.
How to negotiate with clients
If your prospect then wants to negotiate the fees, you should start to remove services to fit their budget instead of fitting their budget to the full stack of services (i.e. eating away at your profit margin). For example, you might have cloud accounting training as an add-on service and then the client wants to drop the price. At that point, you might suggest that they use the software company’s free training resources instead. Don’t just give the training away to please them. You need to actively find your clients an alternative and lower the fees that way. Your core service package should always be kept sacred. It’s important for you to get on the front end of things, instead of taking a passive stance and saying ‘yes’ to every client request. Otherwise, your clients will be receiving far more value than they actually contribute to your practice.
Make sure you also take the time to improve your relationship with your clients. It’s important to know your clients on a personal level so that you can work with them to help them achieve their personal goals. That way when it comes time to negotiate, you won’t be surprised with your client’s expectations.
Ensure that the value you provide your clients is in line with your pricing. As the value you deliver to your clients is likely to increase over time (if clients increasingly depend on you for a wide range of services etc) you need to make sure that you increase the price in accordance with the value you add over time.
Don’t try to compete on price. Instead, use fixed fee billing to charge your clients and offer an attractive value proposition. Work with your clients to understand their business requirements. If your clients want to negotiate fees downward, you should remove services to fit their budget.
Be sure to also check out some our client’s interviews, to learn more about managing your client relationships.