How to Negotiate Pricing With New and Existing Clients

As an industry that deals in hard facts, why do accountants struggle to calculate and communicate their own value?

This short guide helps you articulate your worth and have that (not so) difficult conversation about setting client fees.

Why are accounting firms so terrible at increasing their fees?

Whenever I ask an accounting firm why they don't charge more, I see the same look in the partners' eyes. I call this 'The fear'.

In the early days of building a firm, the goal is to win new customers at any cost. This creates a problem: as the business matures, the mindset sticks. Owners are terrified that a price increase will send customers and prospects running for the door.

This is not the case if you enter negotiations armed with a powerful weapon: a clear understanding of your value. As we will see at the end of this article, losing certain clients is not necessarily harmful to your business.

How to understand your value

Your accounting firm is not just 'a vendor' but an integral part of your client's team. To unpack this, consider doing a value audit of your firm. What benefits do you bring your clients in the following categories?

1. Cost reduction – tax optimization, advisory, self-audit, budget management, financial analysis and reporting, cash flow management, and energy and resource management.
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3. Revenue increase – growth advisory, financial planning, and risk management, data analysis, and reporting.
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5. Business efficiency – accounting processes and management reporting that enable them to quickly scale and attract investment
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7. Time – saving management time with punctual work, speedy communication, and accessible online data

While doing this, consider the industry expertise that enables you to give invaluable specialized advice. For example, if your clients are in the not-for-profit sector, demonstrate your ability to help them maintain transparency and accountability, optimize resource allocation, and impact on donors.

Do not underestimate 'soft' value-adds such as being nice to work with – think about when you've worked with someone difficult. What would you have given to be rid of the stress?

For all of the above, consider not only how you deliver value but how you deliver it better than competitors.

How to negotiate fees

Calculating your value will prepare you for discussions. The next step is to prove it to your clients and prospects.

1. 1. Know your client
2. This stands for existing clients as well as prospects. Extend your research to the challenges and special skills needed in their sector. For example, in a consumer downturn, retail clients may need help tracking inventory, analyzing sales trends, and boosting operational efficiency. On the other hand, care homes might need help with accurate record-keeping to keep pace with increasing regulatory compliance.
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4. 2. Send in the right negotiator
5. It can be daunting to have a difficult conversation with a client with whom you have an amicable working relationship. However, passing fee negotiations to a salesperson is disrespectful and risks damaging trust. Save your salespeople for winning new prospects.
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7. 3. Prove it!
8. Demonstrating your value is easier with existing (rather than new) clients as you have the data. Come prepared with hard figures showing what you have earned them over time in cost savings, increased revenue and efficiency (see 'how to understand your value' above). If you can show you have saved them $10,000 in tax over the last year, they will not dispute a $500 fee increase.
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10. 4. Research your competitors
11. Come prepared with a knowledge of your competitors' fee structures and offers. If you are more expensive, be prepared to explain why the fee differential is worth it. For example, you might be a specialist in their business sector. Remember to include soft values, such as personalized and friendly service.
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13. 5. Customize your offer
14. Listen to and respect your client's needs and budget. If they are solely after bookkeeping, do not push end-of-year accounts. Listen to their concerns and explain the value you offer. A trusting relationship is a foundation upon which to add more services as their business grows.

Evaluate your clients

One of the most potent negotiating skills is the ability to walk away. Value is a two-way street. It is a client's job to evaluate you. Equally, it is your job to evaluate your clients.

Clients who expect more for less are often inefficient to serve – for example, the disorganized ones who ignore advice and are late with information. Likewise, you may have longstanding clients that are long overdue for a rate increase.

Continue the conversation

The above exercises should give you a new mindset for approaching fee negotiations. Use this to continuously reassess your fee structures to ensure they remain competitive, sustainable, and reflective of the true value you bring to your clients.

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