When I ask accountants about the level of fees they would ideally like to earn from new clients, they often struggle to give an answer. Some can’t even agree as to the minimum fees they (and their colleagues, if any) would charge for each type of new client work they might take on.
Many of those who do have ideal new fee levels in mind will admit that these are higher than their current average fees. That’s fine but all too often these accountants do not seem to have worked out what services they will need to provide to earn such a fee.
If you are happy simply taking on more of the straight-forward compliance-only clients, that’s fine. For now at least.
But if you aspire to be providing more of an advisory focused service (at whatever level feels comfortable to you) it helps to know what fees you’ll charge for such additional services. Or at least the range of such fees you will charge.
The more confident you are about this when talking with new clients, the more compelling will be your proposition. And, similarly, the less comfortable you seem talking about such services and fees the less likely you re to win those new clients.
A couple of years ago I met an accountant, ‘Steve’, who only wanted to take on clients who would pay at least £10k a year – for a compliance service plus outsourced bookkeeping and virtual FD. Not that he had the resources to provide such services I pointed out!
Steve hadn’t thought through his plans. Nor how he would evidence his credibility to provide such a full range of services to new prospects.
Another accountant (‘Sheetal’) once told me that he doesn’t want any more really big clients.
Sheetal already had a substantial practice with a strong support team. Their average fees were £2-£10k. Sheetal told me he was fed up with clients who were bigger than this as they are too demanding, treated his team badly, were high risk and less fun than the smaller clients.
He wasn’t actively looking to lose the last of his £40-£50k pa clients but he was discouraging his team from seeking them out and pitching for them.
Sheetal has since decided that his firm should focus on getting more of the lower fee paying clients (in his case that means those paying £2-10k pa). It’s not simply because such clients are easier to win (which they are), but also because they tend to be nicer people to deal with, value the advice they get and are more respectful than demanding.
To be fair Sheetal is only talking about the level of of recurring fees these clients pay. He and his team enjoy doing and billing high value project and advisory work. Do you chase bigger and bigger fees or prefer an easy life?
Having a small number of large clients who regularly pay you much more than average, can also make you very vulnerable to their demands. Typically they will know how significant their fee is to you and that it would take a lot for you to ‘sack’ them.
Accountants have also told me that as their average fee grew so did the number of demanding and difficult clients.
If you experience this I suggest you review your systems and processes as these often need to develop to match the service levels demanded by bigger clients.
As your average fee levels increase so do the risks of over-servicing your new bigger clients. And the bigger will be the impact of bad debts and slow payers – which tend to be more common with bigger fees. For this reason it’s never enough to quote higher fees (or, indeed, any fees) without also addressing your payment terms AND STICKING TO THEM!
If you have set a target for increased turnover in your practice, have you also considered the average fees you want to secure? And the services you will need to provide to secure such fees?
An increase of £100k in your turnover could be achieved by securing:
- 5 new clients each paying £20k
- 10 paying £10k each
- 25 paying £4k each
- 50 paying £2k each
- 100 paying £1k each or
- 200 paying £500 each.
Or indeed any combination of such fees. One thing is for sure though, you will find it much easier to achieve any significant increase in your fees if you have clarity as to how you intend to reach that figure.
Higher average fees mean fewer new client meetings, less time needing to be spent getting to know new clients and fewer clients to onboard. But typically such clients are harder to find and to win over.
Conversely, lower average fees may be easier to win but mean more client meetings, more client relationships to manage and more clients to onboard, service and keep happy.
Clearly you should promote your services to secure the type of clients that you want. And the type of clients who will pay the fees you want to charge for proving the services you enjoy delivering.
If you know your ideal fee level (and the services this buys) you may find it makes sense to avoid simply taking on more clients who can’t or won’t pay your ideal fees.
Like this post? You can get links to each of my new blog posts in weekly Magic of Success emails. These also contain other shorter, quick and simple practical tips and ideas for accountants and tax advisers who want to be more successful. You can join the thousands who get this free of charge each week by signing up here now>>>>
And, if you’d like to know more about how you could benefit from engaging me as a mentor, through a one off or a regular series of calls, check this out >>>>