Fee pressure resulting from increased competition is one of the most commonly articulated concerns of financial professionals these days. CPAs complain their services are being treated like a commodity and that they're undercharging for fear of losing clients or prospects to the firm around the corner.
So what can they do to avoid this?
They must delve deeper into the perceived value clients have of their services and how to better market not only their services, but themselves, as trusted business advisors.
During a recent webinar, Sandi Smith Leyva, president of Accountant'$ Accelerator, provided insights as to why accountants undercharge for their services. She offered some advice on how to raise fees without raising clients' eyebrows.
The primary factor that impacts pricing is a lack of perceived value, according to Leyva, but communication during the selling process can be improved. Questions to ask prospects can include:
Were you surprised by what you had to pay (what you owed) the government last year?
Did you owe any penalties?
How afraid are you of the IRS? In other words, would you like someone to look out for you year-round and set boundaries so your costs don't get out of whack?
Accountants tend to judge what clients will be willing to pay, but they don't have the full picture of their needs until they drill deeper into what's going on behind the scenes, Leyva said.
Lack of negotiation skills or a willingness to let go are other reasons CPAs aren't earning what they're worth. They often are doing work way below their experience level, such as bookkeeping work or even simple 1040s. Firms need to look at their organizations like doctors' offices, assigning assistants and administrative help, Leyva said. "Delegate and build a team around you so you can do the work you have the education for."
Having no formal marketing training is a common problem for experienced accountants, so accountants shouldn't beat themselves up if they fall into this category. Leyva pointed out that marketing could be done in a way that resonates with numbers-minded individuals by focusing on fun metrics and by using spreadsheets. Accountants should ask what skills they have and they feel comfortable with, and then turn other tasks over to colleagues or third parties. For example, maybe one partner is comfortable with public speaking and can highlight the firm's industry expertise, but another partner is more comfortable putting together a marketing plan.
Another reason for underpricing is related to entrepreneurs who leave larger firms to start their own business. They often will start off charging just a little more than their former employer did, but they forget to factor in costs of computers, insurance, and even taxes. They should be charging three to four times their former rate to cover all of that, Leyva said.
One thing accountants can start doing immediately is keeping track of time better, being diligent about what they record and how they categorize it, she added. Seeing it on paper will help improve time management and practice management, allowing more time for personal development and marketing skills.