Who decides what hourly rate is 'fair'?

Back in 2010 we were hearing about MP’s for hire and their differing daily rates. This brought to mind the question that many accountants are asked by prospective clients: “What’s your hourly rate?” and a related question only usually hinted at: Who decides what hourly rate is ‘fair’?

At the time the media had reported that Stephen Byers charged upto £5,000 a day (about £625 per hour). Patricia Hewitt and Geoff Hoon charged less, ‘Upto £3,000’ a day (about £375 ph). Later reports suggested that Andy Ingram and Richard Caborn charged upto £2,500 a day (about £312 ph).

It’s interesting to speculate as to whether the journalists, who uncovered the MPs’ willingness to take money for lobbying after they stand down, had inside information. Did they know who to target? Did they just get lucky? Or were these 5 MP’s just unlucky to get chosen and therefore revealed? No doubt there are many more MPs who operate as ‘cabs for hire’ and who would make themselves available for a daily or hourly rate. But that’s not relevant to this blog.

If you wanted to engage an MP – how would you choose who to use? Are they all the same? Why not just go for the cheapest?

Actually the question should be “Are they all the same as regards their ability to help me achieve my business objectives?” And the answer is clearly ‘no’. They each have different contacts, different levels of influence with other MPs, ministers and civil servants. And this is why there is no standard daily/hourly rate for which they can be engaged. Rightly or wrongly some charge double the amounts that others charge.

Dare I suggest that, in this context, accountants are just the same as MPs?  Who decides what is a fair fee for an accountant’s services? If someone thinks that an accountant’s quoted hourly rate is too high, of course they can go to find another who charges less. In real life, including that populated by ex MPs lobbying for their paymasters, what matters most are the results that are achieved.  And, of course, the relative cost of securing that outcome, advice or solution.

Accountants who allow themselves to be challenged over their preferred hourly rate need to feel comfortable that it is reasonable. There is no ‘right’ or ‘wrong’ hourly rate.

When I worked in large firms of accountants each level of staff had a different hourly rate. Managers had a higher rate than juniors and Partners had a higher rate than managers. One of the reasons for such differences was the speed with which more senior people could solve problems, source answers and provide advice. That came with experience.  Amongst sole practitioners it is quite likely that more experienced accountants charge more than those who are younger and less experienced.

In so far as the client is comparing straightforward compliance services, the winners will be those accountants with the most efficient systems and who are able to provide a good service for a competitive fee. Hourly rates are less and less relevant in these days of clients wanting to know what it will cost to get their tax return done or their accounts prepared.

When it comes to hourly rates for advisory or special work however, it is the prospective outcome that should matter most. One accountant could charge half the hourly rate of another (as with the MPs quoted above). But if he takes 2 or 3 times as long to get to the same result, the client hasn’t saved anything. The challenge for accountants, as for MPs, is how to ensure that prospective clients value the service that will be provided. Rates can vary and if you allow the prospect to think that the quoted rate is all that matters you will find yours forced down and down regardless of your knowledge, experience and ability.

Can you relate to this? What’s your take on the issue?

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Who decides what hourly rate is ‘fair’?

Back in 2010 we were hearing about MP’s for hire and their differing daily rates. This brought to mind the question that many accountants are asked by prospective clients: “What’s your hourly rate?” and a related question only usually hinted at: Who decides what hourly rate is ‘fair’?

At the time the media had reported that Stephen Byers charged upto £5,000 a day (about £625 per hour). Patricia Hewitt and Geoff Hoon charged less, ‘Upto £3,000’ a day (about £375 ph). Later reports suggested that Andy Ingram and Richard Caborn charged upto £2,500 a day (about £312 ph).

It’s interesting to speculate as to whether the journalists, who uncovered the MPs’ willingness to take money for lobbying after they stand down, had inside information. Did they know who to target? Did they just get lucky? Or were these 5 MP’s just unlucky to get chosen and therefore revealed? No doubt there are many more MPs who operate as ‘cabs for hire’ and who would make themselves available for a daily or hourly rate. But that’s not relevant to this blog.

If you wanted to engage an MP – how would you choose who to use? Are they all the same? Why not just go for the cheapest?

Actually the question should be “Are they all the same as regards their ability to help me achieve my business objectives?” And the answer is clearly ‘no’. They each have different contacts, different levels of influence with other MPs, ministers and civil servants. And this is why there is no standard daily/hourly rate for which they can be engaged. Rightly or wrongly some charge double the amounts that others charge.

Dare I suggest that, in this context, accountants are just the same as MPs?  Who decides what is a fair fee for an accountant’s services? If someone thinks that an accountant’s quoted hourly rate is too high, of course they can go to find another who charges less. In real life, including that populated by ex MPs lobbying for their paymasters, what matters most are the results that are achieved.  And, of course, the relative cost of securing that outcome, advice or solution.

Accountants who allow themselves to be challenged over their preferred hourly rate need to feel comfortable that it is reasonable. There is no ‘right’ or ‘wrong’ hourly rate.

When I worked in large firms of accountants each level of staff had a different hourly rate. Managers had a higher rate than juniors and Partners had a higher rate than managers. One of the reasons for such differences was the speed with which more senior people could solve problems, source answers and provide advice. That came with experience.  Amongst sole practitioners it is quite likely that more experienced accountants charge more than those who are younger and less experienced.

In so far as the client is comparing straightforward compliance services, the winners will be those accountants with the most efficient systems and who are able to provide a good service for a competitive fee. Hourly rates are less and less relevant in these days of clients wanting to know what it will cost to get their tax return done or their accounts prepared.

When it comes to hourly rates for advisory or special work however, it is the prospective outcome that should matter most. One accountant could charge half the hourly rate of another (as with the MPs quoted above). But if he takes 2 or 3 times as long to get to the same result, the client hasn’t saved anything. The challenge for accountants, as for MPs, is how to ensure that prospective clients value the service that will be provided. Rates can vary and if you allow the prospect to think that the quoted rate is all that matters you will find yours forced down and down regardless of your knowledge, experience and ability.

Can you relate to this? What’s your take on the issue?

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How to avoid giving free advice to prospects

I’m reminded of the old sex education message: Just say ‘no’!

As professional advisers we are all used to prospective clients seeking free advice. As I’m no longer in practice and as a frequent blogger I have very different perspective now. So here is some free advice from me.  When a stranger/prospect calls you need to set clear parameters. Why give any free advice?

I think the most common reason accountants give themselves is that it helps evidence their credibility, style, approach, knowledge and willingness to help clients.  In reality it is only the accountant themselves who doubts their ability and knowledge. The prospect generally takes all that for granted – after all our adverts or website makes clear we’re an accountant. All accountants know everything don’t they? We know this isn’t the case but prospects assume it is so.  Even more so if theye have been recommended or referred by a third party.

So accountants are generally proving nothing by giving free advice. They can evidence the other key qualities they want to exhibit without giving free technical advice.

I also tend to think that a side benefit of the Anti-Money Laundering (AML) legislation is that it gives accountants a statutory justification for any apparent reluctance to provide answers to technical questions before engaging a new client.  “I’m really sorry Mr Prospect but as a professional adviser I’m precluded by law from giving any advice before we’ve been through the anti-money laundering checks. I know it’s a pain but it’s the law.” The consequence of this will often be that you have engaged the client and secured their agreement to your preferred billing procedures before you give them any valuable advice. So the AML laws do have an upside after all!

Finally I would suggest you establish a process to qualify a prospect or to let them go elsewhere before you waste too much time on them. Initially you may want to qualify out time wasters on the phone. You will also want to determine what you need to cover in an initial meeting.

In many of my seminars I ask accountants if they offer a free initial meeting to prospective clients. Typically the answer is ‘yes’. “How long do you allow for such meetings?” Some put a cap on it. Others say ‘as long as it takes’. I ask the question – “As long as WHAT takes?” It’s not just about getting the prospect to want to appoint you. You need to find out quite early on if they can afford to pay the fees you would want to earn. You also need to determine if this is the sort of person you want to have a client.

Bottom line, I’d suggest you establish a process/checklist (that you will in time commit to memory) to use when you receive such calls in future and indeed when you have an initial meeting with a prospect.

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Radio 4: A Brief History of Double-Entry Book-keeping

Readers may be interested in this Radio 4 series broadcast in early 2010. There were ten episodes to the series so thank goodness it’s only a ‘brief history’!

  1. 8 Mar 2010 15:45–16:00
    BBC Radio 4
    1/10. Jolyon Jenkins traces the religious roots of some accounting practices.
  2. 9 Mar 2010 15:45–16:00
    BBC Radio 4
    2/10. Jolyon Jenkins goes back 5,000 years to see how accountants invented writing.
  3. 10 Mar 2010 15:45–16:00
    BBC Radio 4
    3/10. How a corrupt Roman governor was tried in court using his own forged account books.
  4. 11 Mar 2010 15:45–16:00
    BBC Radio 4
    4/10. The rise of double entry book-keeping in medieval Italy.
  5. 12 Mar 2010 15:45–16:00
    BBC Radio 4
    5/10. Jolyon Jenkins examines accountancy fraud in the Middle Ages.

 

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Save time with a travelling meeting room

The bus

This is a first. A friend of mine, Tom Ball, is the brains behind a unique idea that could be of use and interest to many professional firms. Hence the reason I’m blogging about it.

AllABoardroom is a meeting room and bar aboard a customised bus. They removed the seats and put in a proper boardroom for 8 people and a bar – and a fireplace.  It’s an inspired idea and provides an innovative working environment for upto 8 people. A boardroom and an executive bar so you can work together and have fun as you travel.

I think it could work well for small team away days so you can work while you travel to your eventual destination. It can also be used for meetings on the go between clients, meetings with prospects – you take the boardroom to them, touring offices and at an exhibition. I’m sure there are many more uses too.

They’ve got a competition to win a free day for your team. Have a look if the idea intrigues you: www.allaboardroom.com

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What do you say when you're asked for referrals?

Accountants are often seen as the ideal people to to ask for referrals. After all, accountants in practice will often act for dozens of clients, many of whom are targets for other complementary suppliers.

This means that accountants are routinely approached by financial advisers, will writers, software developers, marketing consultants and many other service providers. The only problem is that many such people mess up. They don’t know the first thing about how accountants work, what motivates them or how to get them to refer their clients on to other service providers.

I regularly hear about such encounters – both from accountants who are ‘fed up’ with such approaches, and from service providers whose efforts are failing to secure the desired outcome. Indeed this mis-match led me to develop a seminar (now a masterclass) to help such service providers better understand what matters to accountants. I’ve run the seminar a number of times since its first outing in January 2009 and feedback has been very positive.

In addition to my own insights and ideas I have been sharing the data I collated in a survey of accountants in 2008. Over 200 told me what was important to them when approached by someone asking for referrals.  This enabled me to extrapolate some specific advice based on empirical evidence.

Is this still an issue I wonder? Are you often approached? What’s your attitude and response when someone asks you for referrals to your clients?

Like this post? You can now obtain my 10,000 word ebook containing loads more marketing insights, short-cuts, tips and advice aimed specifically at accountants. You can buy the book or download a summary for free here>>>

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What do you say when you’re asked for referrals?

Accountants are often seen as the ideal people to to ask for referrals. After all, accountants in practice will often act for dozens of clients, many of whom are targets for other complementary suppliers.

This means that accountants are routinely approached by financial advisers, will writers, software developers, marketing consultants and many other service providers. The only problem is that many such people mess up. They don’t know the first thing about how accountants work, what motivates them or how to get them to refer their clients on to other service providers.

I regularly hear about such encounters – both from accountants who are ‘fed up’ with such approaches, and from service providers whose efforts are failing to secure the desired outcome. Indeed this mis-match led me to develop a seminar (now a masterclass) to help such service providers better understand what matters to accountants. I’ve run the seminar a number of times since its first outing in January 2009 and feedback has been very positive.

In addition to my own insights and ideas I have been sharing the data I collated in a survey of accountants in 2008. Over 200 told me what was important to them when approached by someone asking for referrals.  This enabled me to extrapolate some specific advice based on empirical evidence.

Is this still an issue I wonder? Are you often approached? What’s your attitude and response when someone asks you for referrals to your clients?

Like this post? You can now obtain my 10,000 word ebook containing loads more marketing insights, short-cuts, tips and advice aimed specifically at accountants. You can buy the book or download a summary for free here>>>

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