3 reasons bookkeepping cost cutting creates absolute chaos in Accounting & Bookkeeping firms
Honestly, it doesn’t matter what kind of business you’re running, if you have clients who pay you low fees, it creates chaos on many levels. But we’ll get to that in a second.
Why do cheap clients create absolute chaos?
There are a few reasons. Let’s start by defining what a cheap client is, by looking at an example.
Meet Flora, a firm owner. She had 52 clients who were paying low fees (around £30 per hour) and she was working hourly. She was intelligent, quick and very entrepreneurial. But she was selling herself short for less than £1,500 per month for complex tax work.
When she spoke with her private clients, she’d often tell them that they are not charging enough. How much people charge speaks to two issues:
1. How much you value yourself, and
2. How much you believe your services will transform your clients’ lives.
Usually, you can design an advisory offer that you can charge £1,500 per month. Or, £5,000 – £15,000 per project. However, it depends on what you offer and the specific transformation (the value) the client receives.
Flora had designed a £1,500 per month offer. But she was earning less than £500 per client per month because hourly work is capped based on PRICE. Not value. This is important. The hourly service buyer is not looking for value. They are looking for affordable.
If you sell cheap services, how can you find, recruit and train the right people to operate it? To what extent can you attract quality staff if you are being paid £30 per hour?
The truth is, you cannot. Which causes your first problem:
Problem 1: You will lack the resources you need to invest in good systems
The number one reason cheap clients create chaos is because your business will lack the financial and time resources to put in good systems.
There are two types of accounting and bookkeeping businesses. One that’s built based on high volume. For example, 52 clients charging £30 per hour, capped at £500 per month. Or – type two – 10 clients or five clients charging £3,000 per month.
They have the same amount total revenue. Different number of clients. And therefore, require different infrastructure to operate. One business is in Absolute Chaos. The other is running smoothly.
In our 20 years of business building I am sure about one core truth: Systems run businesses, people run systems. If you have more clients, you will need better (and more sophisticated systems) and more people to operate those systems. Unless of course, you decide to invest heavily in tech. In which case, you are a software company (which is not a bad idea!).
Without good systems in place, finding good people to create repeatable results for your clients is difficult.
So, what happens?
YOU – the owner – end up doing all this work. You find yourself doing a lot of client work or fixing the work your staff did. This is what happened to Flora. As the owner, you’re supposed to be working ON your business, not in your business.
Flora calls it The Chaos Cycle.
Problem 2: Cheap clients effects your confidence during the sales cycle
Selling to cheap clients for an extended time affects what you believe about what (and how) you can sell your services. You can sell £2,000 per month clients or £20,000 projects. It is possible. But it requires you change the way you think about yourself and your business.
Here is an example:
Let’s says that you have a sales appointment today. The appointment is with a £6,000,000 property business. They need help fixing a complex finance issue. And you have the skill to fix it.
Over the past five years however, you have worked only with cheap clients. And cheap projects. As a result, your belief of your value is also “cheap”.
So, you ask yourself: “Why would they pay me more?”
“Why would I charge more money to do the same thing?”
“How should I price this?”
“Maybe I should increase my fees just a little bit?”
You end up pitching £50 per hour (instead of £30). WIN!
The company rejects your proposal.
The issue here is very common. You didn’t have confidence in the sales cycle. All the cheap engagements sucked the life out of your ability to close lucrative deals.
You see, the company that needed your help was paying for a solution. A transformation. A result. But you were selling the same services you always sell – bookkeeping and accounting.
Businesses have deeper issues. Deeper than compliance work. They are looking to maximise profits and grow. Most importantly, they are willing to pay LARGE fees to companies that helps them achieve that goal. This reality requires you to become an advisor during the sales process and explore their issue deeply.
This process is called consultative selling and it requires that you:
1. Decide who you want to help
2. Decide what your unique offer will be to help them
3. Make a list of all the pains, problems and thoughts that these people have in line with your solution
And you need to do all this work, BEFORE, you ever get on the phone to a prospect.
This is challenging. Your competition will never do this work. But if you do the work, you will win the business.
Problem 3: Burnout Before Earnout
For accountants and bookkeepers who have been running their firm for a long time with cheap clients… they get tired. Who wouldn’t be?
Working 50 – 90 hours per week in a business that is more like holding two full-time jobs. They find themselves in the burnout trap. Too tired to fix the issue. Making money from the current chaos business so they do not want to change.
Why change now?
Because after the COVID crisis, business owners need more help than ever before. Will you step up and help? Don’t get me wrong here, you are not a charity. You should be paid very well for what you do. But before you can get paid well, you need to increase your fees. And, if you must, focus on a better client avatar.
The Solution: Focus your business on one ideal client
The solution is simpler than you think (Read: Simple, not easy!)
The way for you to change the way you charge your client, isn’t about “just increasing your fees”. It’s about POSITIONING. Stop positioning yourself as a commodity. Instead, positioning yourself as a transformation provider for one specific thing.
Flora has a book called The One Thing and she says it’s so powerful.
It talks about just doing one thing. Unfortunately, accounting firms are more like supermarkets. Supermarket sell cheap things.
Focus on ONE thing, ONE transformation. Get good at that one thing and you will be known for that ONE thing.
So where do you start?
You start by designing your core advisory/consulting offer…
Here is how:
1. Decide who you want to help. And, specifically, what problem you solve.
2. Decide what your unique offer will be to help them solve this problem
3. Outline the steps a new client would need to go through to succeed.
4. Create the sales deck for pitching your service
5. Start generating leads.
It’s simple. Not easy.
Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on firstname.lastname@example.org or click the Contact Us buttonor please fill the form at the bottom of the contact us page.