You know it’s time to go up on fees when you hit a growth plateau. If you are capped out on time and can’t take on new clients to increase revenue, it’s time to increase your fees.
This week we have Loren Fogelman on the podcast. She is a business coach for accountants and gives step-by-step advice for raising fees. Her expertise is in pricing strategies.
There are 5 steps Fogelman recommends to increase practice revenue:
- Know your high-quality clients.
- Communicate value- use the right words in your marketing for your target audience.
- Package your services. You need to separate services from hours.
- Value price those services. You could earn up to twice as much by doing this.
- Gain some confidence in conversation. Learn how to sell your services well by asking the right questions.
Fogelman had some interesting stats which we have found ring true in Accounting Practice Academy as well. Clients are service sensitive, not fee sensitive. 57% of accountants are vastly undercharging for accounting services. Fear of losing clients is to blame. In reality, when you go up on fees, on average accountants keep at least 82% of their clients. This gives you more time and more money.
Going up on your fees acts as a “reset” and gets rid of those clients that don’t value the service you provide. Bad clients tend to show themselves the door when you increase fees. That’s good! Our advice and Fogelman’s advice, don’t be too timid. This takes courage, not confidence. Fogelman realizes fee increases are a scary move, but it becomes necessary when you realize you can’t keep working as much as you are.
Clients value results and problem resolution. If you are able to provide that to your clients, you have value. Value pricing has become much more accepted in the accounting profession because so much of the work is headed towards advisory services. You can’t put an hourly price on insight and expertise.
The way you acquire new clients who value your insight is by showing them you can help them by asking the right questions. In sales, it’s all about the questions. Fogelman says she tries to encourage accountants to listen for 70% of the conversation and only speak 30% of the time in those initial discovery calls with potential clients.
What is the benefit of raising the cost for clients and switching to a value model? You don’t need as many clients to meet your revenue needs. Because of this, you are actually able to have a more quality relationship that is less transactional. You also are becoming more results-focused which is invaluable to the clients you serve. When a client sees you as a member of their team, it develops loyalty that allows for increased rates without any pushback. You end up having less client turnover. This better relationship increases referrals and decreases your burnout.
Fogelman has a formula she likes to use for learning how to increase your fees. She says, calculate the original fixed fee you would charge a new client. Figure out how many hours of work you think you would commit to the job and multiply it by cost per hour. Then to get to your new “good rate”, you are going to take that number and multiply it by 1.5. Enroll three new clients at that new “good rate” and it will give you some confidence that people aren’t as fee sensitive as you thought.
You are going to take it a step further and figure out your, “better rate”. Figure out that same fixed fee and multiply it by 2X. Then after enrolling three people at the 2x rate, you are going to jump to 3X. Getting to that, “best rate” helps you attain respectful high-quality clients.
It’s a training wheels approach to figuring out how much more you can comfortably charge and helps give you the confidence to raise fees on existing clients.
We know you are going to enjoy this one! Watch the video here.
Listen on the player below:
00:36 – Loren’s Background
01:43 – Entry into Business Coaching
04:25 – How does pricing play a role in owner hour reduction and rev. growth
07: 09 – Who are your Target Clients/Who do you help the most?
08:15 – Are you seeing a shift toward value pricing more these days?
10:46 – How does pricing fit in today’s marketplace with inflation?
12:15 – What do you say to someone who’s resistant to switching to value pricing/price increases?
13:27 – How to articulate your value as an accountant
16:40 – Benefit of raising the value of a Client
20:27 – How do you get through to people who are stuck in the fixed fee mindset?
24:48 – What advice would you give to someone starting a practice from scratch?
25:27 – What do you think are the biggest threats facing the accounting profession right now?
26:33 – Book recommendation – Blue Ocean Strategy
27:29 – Loren’s socials – Website