By Shane Lukas, Managing Director, AVN
Are you undercharging for your services?
Undercharging is all too common in the world of accountancy. And, while the most obvious impact of this is on your profitability, it goes much further than that.
Undercharging affects the way your clients perceive your accountancy practice and the kind of prospects you attract. ‘You get what you pay for’ may be a cliché but that’s because it rings true. If something has a high price, we place more value on it. If it’s low priced, we assume it has little worth.
So if you pitch your accountancy services at a low level, you’re effectively saying they aren’t valuable. And that’s exactly how your clients and prospects will see them. Which means they won’t value your expertise and skills and are likely to quibble over fees, timescales etc.
All of this also means that you’re unlikely to attract those high quality clients who would be happy to pay for higher value services. The long-term implications of undercharging can be very serious indeed.
Why do accountants undercharge?
In my experience, pricing is an issue where accountants really lack confidence and an understanding of how to get it right. I often speak to partners/owners who are working long hours for an income that’s not great and who are stressed and unhappy. When I suggest raising their fees, their first reaction is usually, “Oh, I can’t do that. My target market won’t accept it,” or “Oh, I have to charge low fees because other accountants will undercut me and steal my clients.”
In most cases, they’ve simply set their prices based on what their competitors are charging. But if you do that, how do you know that they didn’t undercut their competitors? Who in turn had undercut theirs?
A race to the bottom benefits no one in the long run.
Another common cause of undercharging is that you yourself don’t recognise the value in what you do. Because you’ve spent years studying and training, preparing a tax return or a set of accounts doesn’t seem difficult. But just think of the value you’re giving to your clients in making sure these important figures are correct.
How to stop undercharging
If you don’t differentiate your firm from your competitors, prospective clients will have nothing to go on other than price. And as I’ve noted above, if they don’t see much value, they’ll choose the firm with the lowest price.
So it’s essential to make your firm stand out from the competition. You might be wondering, ‘How can I do that, when I offer the same kind of services as all the other accountants around?’
It’s not so much about what you do, as how you position it. Look at most accountant’s websites and you’ll see them making the same kind of claims about being proactive, professional, leading, established etc, etc – the list goes on. Well, they might be good at talking about themselves but what business owners really want to know is if you can help them make their business more successful.
So highlight the benefits of your services and the outcomes they’ll get, whether that’s reduced tax, increased profitability, better cashflow or anything else. Think about your ideal client and what kind of help they would most value. Then write your website and marketing content to appeal to them.
Focus on their pain points. For most business owners, having too little time and too much stress are big challenges. How do your services solve those issues? And of course, saving money or earning more money are also top priorities – how can you help them do this? Show them the difference that working with you can make to their business.
When you’re confident in communicating the value you bring to your clients, you can be confident in setting your prices at a profitable level.
For more insights into effective pricing (including a session called Pricing Doesn’t Have To Be This Painful) take a look at The Accountants KnowHow Club. It’s packed full of insights and advice from leading experts and award-winning accountants – and you can trial it for just £1.
Find out more about The Accountants KnowHow Club.
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