Small business owners are facing numerous pandemic-related challenges, but what about the obstacles faced by their accountants, like undervaluing yourself? If you've been losing money because you're guessing your clients' "money stories," here's how to stop.
There are many reasons why accountants and bookkeepers undercharge for our services. And, no, it’s not always because we’re “afraid” to charge what we’re worth.
Sometimes, we don’t understand our own value. We discussed that challenge - and how to overcome it - in a previous article.
But sometimes, we’re confident in the value of the services we provide. We’re less confident that the client will pay what we want to charge. This leads us to undercharge for our services, which, in turn, can lead to overwork and dissatisfaction with the customer relationship.
Why do we do this?
Telling Our Clients’ Money Stories for Them
One of the first things I did when I started my bookkeeping practice was hire a business coach. And one of the first things I learned from her was to stop telling my clients’ money stories for them.
Stop me if you’ve heard this one: I had quoted a client (my third!) a ridiculously low flat fee for the work they needed done. Then, once I had started working on their books, I discovered more work needed to be done than the client or I had originally thought. Also, the scope of the work necessary to keep their books properly was a lot larger than I had been led to believe.
Because I was charging a flat fee, my hourly earnings on this client plummeted from $15/hour (remember, I was a new bookkeeping practice owner...don’t judge!) to less than $5/hour.
Here’s how the conversation with my business coach went:
Coach:You have to have a conversation with this client about the scope of work. And you need to triple what you’re charging them.
Me: I can’t do that!
Coach: Why not?
Me: They’ll find someone else.
Coach: I doubt they’ll find anyone to do the work for less. And if they do, what are you really losing? You’re making less than $5/hour on this client.
Me: But that’s better than $0.
Coach: Is it? Couldn’t you go back to that last part-time job you had and earn more?
Me: Yes, but-
Coach: No buts. You say the client is happy with what you’ve done so far. You don’t know that they won’t pay. Your job is to propose a price you will be happy with. Let them decide whether or not to pay it. You can’t tell your clients’ money stories for them.
(Spoiler alert: The client paid the new fee...triple what I had originally proposed.)
A Common Challenge
As I’ve discussed with the Profit First Professional accountants and bookkeepers I guide, I’ve discovered “telling the client’s money story” is a common challenge. And that challenge manifests itself in two ways:
We convince ourselves the client won’t pay what we really want to charge, but
We need the money and would rather take a sure Yes (by undercutting our fees) than risk a possible No.
The funny thing is, many clients seem to know when we’re undercharging them. Numerous colleagues have raised their rates only to have clients say, “It’s about time.” Are clients thrilled by the opportunity to pay more? Not necessarily, but they don’t often disengage due to a price increase if they are otherwise happy with your services.
When it comes to our pricing, we have one obligation: To provide the value promised at the agreed-upon price. When the value (what we often refer to as scope) changes, our obligation to ourselves and our firms is to quote a new fee. It’s up to the client to decide whether or not they want to pay this fee.
The key here is to not immediately start justifying your price. Explain the change in value (scope), state your fee...and then stop talking. Let the client make the next move. This is going to take some practice, so role play it with a coach, a colleague or a friend who owns a business.
You might be surprised how often the client responds with a simple, “Okay.” And in those (rare) cases when the client decides to disengage, see it as an opportunity to bring on another client at a better fee.
The Next Step
Sometimes, we can see that a client won’t be able to afford our services, and when we confidently state our price, the “no” is not unexpected. At this point, we can be tempted to reduce our fees because we really know we can help the client.
Is this a good reason to undercharge? We’ll explore this in the next article.
Billie Anne Grigg has been a bookkeeper since before the turn of the century (this one, despite what her children think). She is a QuickBooks Online ProAdvisor, LivePlan Expert Advisor, and a Mastery Level Certified Profit First Professionals. She is also a guide (coach) for the Profit First Professionals organization. Billie Anne started...