Are you really billing what you’re worth?

This month I got two calls from clients that went something like this…

“Thanks, Steve, for your guidance on putting that proposal together for a new client. I took a potential fee from $2,750 to $9,000 because I tried the methods you taught me and guess what…. they work!”

I love it when I get calls like that from my consulting clients. It’s just so gratifying.

The trouble is, that far too many practitioners suffer from a lack of self-esteem when it comes to setting fees with clients and thus they fail time and time again to capture the value that they offer to clients.

The problem is, that once you have let your client set the price (even if it’s only subconsciously) you are often stuck at a price level that is tough to get out of. Before you know it, it’s not too difficult to feel like you’re stuck in a rut, and you know the definition of a rut, don’t you?

It’s a grave with the ends kicked out.

So what can you do about this?

The secret is to educate your clients from the beginning. The truth of the matter is that price is rarely an issue for our clients. It’s value that is the heart of the matter. If the client perceives value in what you propose to do for them, then the price doesn’t matter. Of course there are limits, but generally speaking the client is thinking ‘this is the cost of the project. These are the benefits I will enjoy if I go ahead. Do the benefits outweigh the costs?’

So let’s look at a fictitious situation. Raymond is a CA who runs his own practice, and he has a potential new client coming to see him who has discussed his situation in detail and provided all the information Raymond asked for in advance.

From Raymond’s review of the prospective client’s situation, he can see the potential for doing a section 85 rollover for the client, setting up a holding company and an operating company and saving maybe $30,000 a year in tax, every year.

Based on the time Raymond will spend on this project, at his usual rate, he would ordinarily charge about $2,750 for this work.

But that totally misses the point.

You see, clients do not buy our time. They buy results. Something that might only take a couple of hours to do might be worth several thousand dollars to the client.

And that’s the conundrum many practitioners face.

How on Earth do we know what a client will pay for our services, particularly one-off major tax saving deals?

It’s really quite simple. We ask them.

Yes, that’s right, you read it right the first time. We ask the client what it might be worth to them.

It might go against everything you’ve ever thought was right in terms of pricing, but it really is that simple.

It’s all down to the way in which we describe the benefits and how we approach pricing with our client or prospect.

This will be too avant-garde for some readers, but the truth is that clients do not buy any number of hours from us, they buy results.

Selling your services in this manner may seem foreign to many, but believe me, it is the way forward.

Look, for example, at a Dentist. It probably takes two minutes to pull a tooth. But what does it cost us (or our insurance companies)? For most it is probably about $120.

That works out to $3,600 an hour, but do we ever complain about that? No! We’re just pleased to be rid of the problem. (I’m sure if it’s a question of time, that your Dentist would be happy to take longer to pull your tooth!)

Our clients come to us in a similar situation. They have a problem that they want solved, and are incapable of resolving it themselves.

The crux of the matter is that we as practitioners are often too close to the situation to see where there might be hidden value in what we do. We take a phone call from a client who has a question, and we throw an answer straight back at them. In a way, we want to show them how smart we are, and that we know the answer to their problem. In doing so, we have inadvertently passed up an opportunity to create value in the client’s mind and generate a fee commensurate with that value.

Now, don’t get me wrong. I am not suggesting that we start ‘ripping off’ our clients.

Let me give you another comparison.

Let’s go back a few years and imagine the great artist Toulouse Lautrec is sat on the left bank of the river Seine in Paris.

A young lady walks by and recognizes him and shyly approaches the great man. ‘Oh Monsieur Lautrec, would you do me the greatest honour and paint my portrait for me?’

Lautrec agrees and within an hour, he hands her a beautiful watercolour portrait.

‘Oh Monsieur Lautrec, that’s just wonderful’ she says, ‘how much do I owe you?’

Lautrec looks her in the eye and says ‘That will be fifty thousand Francs, Madame.’

Stunned, the lady exclaims, ‘Fifty thousand Francs! It only took you an hour!’

‘No, Madam’ he replied. ‘It took me all my life!’

How many times each year do we do the equivalent?

A client calls with a ‘quick question’ and we respond instantly with an answer, and a darned good one too. How many times could we have taken a little while and ‘sold’ the idea to the client of the value of the answer, of doing some research, and tailoring an answer to the client’s specific needs?

How often does a client put the phone down after a conversation and think ‘What a steal!’
How much longer will you go on selling your life’s experiences for a dime, when you could be doing so much more?

So back to Raymond’s situation.

If he has done his homework properly, he could approach his meeting with his prospect by opening with a statement similar to ‘I can save you about $30,000 this year, next year, the year after that, and every year if, and only if, we go ahead with a project that works like this…’

Then, once the client understands in principle how the scheme works, Raymond should ask, ‘Now, what would a project like that be worth to you?’

That’s the ‘Butt-clenching moment’. You’ve taken a quantum leap ahead and totally changed how you price your services.

The client might say something like ‘Well, I’d imagine that has to be worth between ten to twelve thousand dollars’ at which point you can appear to be the hero and respond with something like ‘Well, I think we could do that for $9,000’.

Of course, not all clients will go for it, and selecting which ones you approach like this is the key to your success.

In basketball, the player who never takes a shot will never miss a basket.

In practice, we have to take shots at the basket. Are you up to the task of billing what you’re truly worth?

MFA Group 2006