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How to balance helping clients and making a profit

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From Accounting Web: Accounting is a service profession, but at a certain point, being too altruistic will hurt your cash flow. In the next installment of her series on why accounting and finance professionals undercharge clients, Billie Anne Grigg explains how to balance the desire to help with the need to make money.

Contrary to popular thinking, “fear” isn’t the only reason accountants and bookkeepers sometimes undercharge for services. Sometimes we choose to undercharge as part of a business strategy. Sometimes we undercharge because we don’t understand our own value. And sometimes we undercharge because the sure “yes” at a lower fee is more appealing than the risk of a “no” at a higher one.

Altruism can also play a role in our decision to undercharge for our services. And although it’s admirable to want to help others be successful, we have to be careful not to sacrifice our own health – business, mental, and physical – in order to do it. Altruism is admirable. Martyrdom is not, and it affects your profits.

The Challenge

At some point, all accountants and bookkeepers are approached by a struggling business owner. The business’s sales are down. Expenses and debts are high. Cash flow is at a trickle, or possibly a drip. Maybe the business owner is undergoing some personal challenges. And, usually, the struggling business owner is a very likable person.

We feel bad for them. We can see exactly what they need to do in order to turn their business around. We can also see that money is tight, and we think there’s no way the business owner will be able to pay what we would usually charge for our services.

We really want to help. We also don’t want to be accused of taking advantage of someone’s misfortune to increase our profits. And so, we undercut our prices.

Several things happen in this situation:

  1. We make a money decision for the client. Some providers will even choose not to create a proposal for a client they deem unable to afford their services.
  2. We go for the sure “yes” instead of risking the possible “no,” this time because we don’t want to scare the client away from the help we know we can give them.
  3. We undervalue the meaning of the long-term impact our assistance will have on the client’s business and the prospect’s willingness to invest in this impact.
The Fix

As mentioned in the first article in this series, if your business strategy includes a focus on giving back – meaning you have another sector of your business that is profitable enough to offset the lost profitability on reduced rates for underserved and financially challenged clients – then you don’t need to “fix” anything. Your strategy will ensure you can reduce your price to help the client without harming your own business..

If, however, you find your soft heart gets you into trouble more often than you’d like, consider the following:

  1. The client’s business financials might not tell their whole story. Some business owners have access to other sources of income or funding that would allow them to invest in your services at the rate you would normally charge. State your normal price with confidence (on the phone or a video call…if you really want to help, you want to be able to respond to any hesitation about price immediately) and wait for the prospect to respond.
  2. The business owner might be so committed to turning their business around that the possible “no” you dread isn’t even in their vocabulary. Again, state your normal price with confidence and let the client decide if the investment to work with you is worth it. It’s not your place to decide whether or not they can afford your services.
  3. Come up with a win-win proposition. Maybe the prospect truly can’t afford to pay your full price right away. Could they pay a reduced price for a few months and then increase what they are paying as they see results? This is similar to the “pay only for results” tactic some consultants use, only you’re protected because you still charge a nominal fee while you steer the client toward those results.

Remember, when it comes to pricing, your only obligation is to provide the value promised at the price you and the client agree upon. You have no obligation to be “affordable” for every client, nor can you define what affordable means for them.

This doesn’t mean you can’t be altruistic. You can still help struggling business owners without sacrificing your own business. Even when you’re approached by a prospect with significant financial challenges, it’s important to state your value and let the prospect decide if they are willing to invest in your help. In my experience, the clients with the most to lose are the ones most willing to do the work to turn their businesses around. This makes them some of the best clients to work with.

When It’s Them, Not You

So far, we’re explored internal reasons that can lead us to undercharge for our services. Sometimes, external factors play into our decision to charge less than we would like. In the next article, we’ll explore how to overcome criticism of our pricing from prospects and clients.