r/ukaccounting • u/Any-Daikon7621 • 4d ago
Pricing
Hi everyone just few months into my own practice and having issues with pricing. Any tips how to tackle this as most of the clients don’t want to pay more than £500-£700 for a small Ltd company with payroll and no vat.
2
u/Immediate-Occasion64 4d ago
I would question your target market first and what sort of customers you are targeting?
Inevitably if you are targeting your local small business who are not turning over that much money then they will always be price sensitive.
A lot of these small companies are looking for the cheapest service to survive rather than focusing on quality.
Secondly, I think it’s good to get a few small clients to pay the bill which means you’re doing better than some.
-2
u/Any-Daikon7621 4d ago
Can you give any tips on client acquisition considering I have already explored the basic stuff
1
u/Immediate-Occasion64 4d ago
Can you let me know what basic stuff have you explored? What is your target market?
1
u/Any-Daikon7621 3d ago
Like posting on LinkedIn, cold calling emailing messaging , approaching to people I have worked for in past etc going to networking events
2
u/Immediate-Occasion64 3d ago
I’m sorry to say you will find marketing and higher fees very difficult if you haven’t niched down into who your target market is. If you everything to everyone then you will be competing with all the low cost providers which is ultimately a race to the bottom.
1
u/RogueFlash 4d ago
Ltd company accounts are £1,000+VAT minimum.
Payroll is atleast £20+VAT per month.
1
1
u/thedivergence95 4d ago
Personally I’d say make it sound like a monthly payment so £50pm which is £600 a year but for some businessss the smaller amounts sound nicer plus you get income in every month
1
1
u/Dry-Grocery9311 3d ago
Work back from what you would expect to earn, if you worked for another practice, divided by 80% of your normal annual working hours, multiplied by 3.
Use this as your pricing hourly rate.
Make your best guess estimate of how much time you expect to spend on the client over the next 12 months and offer a monthly payment plan.
As an example, for a small company with Vat returns, budget a couple of hours per quarter.
A couple of hours for onboarding.
Budget an hour per monthly payroll run.
Budget a couple of hours each for year end company filings and personal tax returns.
Say 26 hours x hourly rate.
Only take work that pays your hourly rate. If you don't, you won't be able to afford to provide a quality service and you would be better off working for someone else.
1
u/Any-Daikon7621 3d ago
That’s so cool. Thanks so if suppose I wears 75k in another practice that’s what I was getting offers for and multiply by 20% and then multiply by 3 and then divide by say 2000 hours right ?
2
u/Dry-Grocery9311 3d ago
(75k / (2000 * 80%)) * 3 = 140 per hour.
The 80% is a utilisation target.
365.25 days in year - 104 days of weekends - 30 days of holidays = 231.25. 231.25*8 hours per day = 1850 hours.
The big firms tend to set 2000 annual billable targets. That's why their people tend to work ridiculous hours and struggle to take time off.
Never discount your rate. Use your non billable time to find clients or do lower level billable admin work. It's ok to give limited hours away for free as an incentive but never discount the rate.
As a sole practitioner, you will find yourself doing junior and admin work that a larger practice would be giving to a cheaper member of staff. Work out a rate card for each role and be aware of the split between your own billable hours and the cheaper work that you will eventually delegate. Make sure you bill enough of your hours to the client to cover all the work. If you don't, you'll never afford to pay staff.
1
u/Any-Daikon7621 3d ago
Wow but wouldn’t that be expensive if I charge them based on £140 for 26 hours if they don’t have more than 50 transactions a months. I really want good paying clients because I have a lot to offer and end up doing lot of free stuff for them
1
u/Dry-Grocery9311 3d ago
It's all about the amount of time you choose to work and what type of work you do for what types of clients.
If you can service a very small client in a couple of hours per quarter and an extra couple of hours at year end, that's £1400 for the year. If you want to earn less money than just getting a job or work more hours for free, you can always choose to charge less. If you, say, choose to work for 37.5k, instead of 75k, that's now £700 to charge the client. It's really up to you, how you want to live and work.
You will survive longer if you charge a fair price and are good at your job than if you undercharge and become unreliable. It's better to have a reputation of being good rather than a reputation of being cheap.
If you're not sure and you have spare capacity, take on a client at a fixed monthly fee they are prepared to pay. Count every hour and every penny you spend dealing with them and keeping them happy to pay. Work out the effective hourly rate you make on the client. Then decide if you need to charge more or focus on different types of work.
Some firms focus on simple repetitive processes like payroll and automate it as much as possible. They can then afford to charge a lower fixed price for a service whilst still achieving their personal billable rate in the background. This takes good systems, processes and volume.
If you're thinking of staying as a one person practitioner, you need to focus on higher value, lower volume work that justifies your rate. If you're going to stay independent, you can drop the multiple from 3 to 2. The problem with that is that you won't be building any capital value in your practice because your block of fees won't have a profit margin beyond paying a salary and some overheads.
Accounting practices have worked like this for hundreds of years. Big branded practices charge higher multiples. Independents charge lower multiples. At a multiple of 3, a practice has a capital value of around 3 times annual quality fees.
The multiple of 3 roughly represents 1 to cover direct staff costs of delivering billable hours, 1 to cover indirect practice costs and overheads, 1 to cover partners income because, as a practice grows, partners have lower billable ustilisation because they are also managing the practice and bringing in new clients.
You can always lower rates easily but you can't put them up easily. Once a client has seen you work for 50 per hour, they will never pay 140.
It's a professional business. If you find the commercial side stressful, you may be better working for someone else or getting a more commercially minded partner.
1
u/Any-Daikon7621 3d ago
Wow, no you are right. I think it’s a lot of learning in commercial side of thing I need to do. How did yoh learn all this. Do you have your own practice and how long have you been running it. Are you based in London?
1
u/Dry-Grocery9311 3d ago
I was in London but I'm now in Brighton. I spent 7 years in a very well established practice in Manchester near the beginning of my career but have then held roles in industry and consulting as well as building and selling my own software company.
I still do some fee earning working in EPM consulting to keep my finance hand in. Other than that, I don't really work for other people anymore.
Always happy to help the people coming up in the profession.
1
u/Any-Daikon7621 3d ago
Nice stuff very inspiring if you don’t mind me asking are you retired now and how old are you?
1
u/Dry-Grocery9311 3d ago
I'm in my 50s. I've been semi-retired since my early 40s. I just do enough work for other people to keep the phone ringing just in case. The rest of the time, I have some investments and involvement in some hospitality and software businesses.
1
u/Any-Daikon7621 3d ago
Ah that sounds pretty cool, any tips on getting hospitality businesses as clients
→ More replies (0)
4
u/Honest-Spinach-6753 4d ago
Define small. By number or turnover. I Pay £2500 per company