stop undervaluing yourself.
by martin bissett
business development on a budget
undercharging – or lowballing as it’s also called – is the scourge of the profession. it has always been present, and unfortunately, it will probably be with us for the foreseeable future.
undercharging is directly related to fear – fear of rejection.
more: five reasons firms don’t thrive | prioritize your prospects | good enough is not enough | consistency is key to business development | comfort vs. complacency | five questions about your network
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when you are building your pipeline according to the process, you have assigned fees you think might be in the ballpark of what you believe you could get from a new piece of work or a new client. you may tend to estimate on the low side, which is not a bad idea in theory, because it lets you be pleasantly surprised when it’s anything beyond that.
i was on the staircase of a hotel that was hosting a nationwide accounting conference when a high-profile senior partner told me, “the thing is, martin, that all accountants of my generation suffer from a scarcity mentality. if we don’t win the work, we worry that another opportunity will never come along, rather than ‘creating’ another opportunity. that’s why we lowball. what’s worse is that we’ve passed this mentality on to the next generation, and they suffer from it now too.”
but is that really why you are doing it? probably not. if you are like many other accountants i’ve worked with, the real reason you assign low fees is that you don’t believe your own value. you think that if you go in with the true value fee, the prospect will automatically say no, because they haven’t been paying that much before.
and that is the crux of what we should be looking at. the client needs to be convinced not of the total fee you are asking, but that they should pay that much more than they currently do.
for instance, let’s say a prospect is paying their current accountant $3,500 a year, and you believe the service that would actually be the right fit for that business would require an investment of $5,000 a year. what you need to talk to the client about is not the $5,000, but the difference between $3,500 and $5,000 – in other words, $1,500.
it’s much easier for your prospect to think about that $1,500 than the much bigger total, so you need to help them see the true value they will be getting for that extra $1,500. of course, they will continue to get all the service they get from their current accountant, so there’s no worry about that. but what you will be providing over and above that is assistance and support that will help that business achieve its goals. so those are the extra services you are pricing at $1,500 in this example (broken down further into 12 monthly installments of $125), and your job is to help them see the value in these services so that they are willing to make the extra investment. how will you do that?
the fact is, if you just package it as the services you provide, it’s a tough sell. but if you equate it to what it means to them, it takes on a whole different complexion. what if that $1,500 investment meant you could provide cash flow forecasting or management accounts or new tax strategy that would give them much more in their bank account at the end of the year?
perhaps you can demonstrate how that additional investment can bring an extra $10,000 profit over the next 12 months, money that can be put to something the business (or the business owner) has been trying to achieve for some time. maybe it’s new equipment, or the down payment on a house, or a private education for their children, or even a dream holiday. whatever their goals are, if you can show them how that additional investment will help them achieve those goals, they are much more likely to move from their current accountant to you.
you need to reassure them that the typical compliance services they currently receive will remain unaffected, but it’s those additional elements that represent the value they get from the extra investment.
if your fee turns out to be genuinely too high, you can always reduce it, but if the fee is too low to begin with it’s extremely difficult to raise it and maintain your credibility.
don’t let fear lead you to put the growth and prosperity of your firm in jeopardy through the scourge of undercharging.
business development tasks
a. establish a price for a new potential client engagement in the conventional way.
b. consider the price again by asking yourself the following 10 questions:
- do we, the practice, have the solution for this client?
- do we know how profitable we want the job to be?
- have we factored in room for maneuver in the price in case the client wants to negotiate, or we misjudge the size of the project?
- do we know which element of our support the client values most?
- do we know how urgent it is to the client to obtain this value?
- do we know what the competition would charge for this work?
- is there any other firm that can offer what we do?
- if we’ve taken on an engagement like this before, did we price it correctly last time and can we use that as a benchmark?
- is it worth charging a slightly lower fee to get the work, based on how much referral or additional business it will bring to the firm?
- if this is an existing client who has been an excellent referrer, or who has engaged us for many projects in the past, should the fee for the potential new business reflect that?
c. schedule specific, non-interruptible time in your diary to build a case to justify for yourself the fee you plan to ask for each new engagement. commit to stop undercharging.