It’s a common fear but your existing clients will be less price sensitive if you are doing a good job.
Have a look at this example (numbers rounded for simplicity) of how many clients you can afford to lose without impacting your profit:
• You have 100 clients paying £1,000 each so turnover of £100,000
• You make 50% margin so profit of £50,000
• Della comes along and tells you to increase your prices (see the last two weeks for how and why you should do this) by 10%
• You now have 100 clients paying £1,100 each so turnover of £110,000
• Your margin is now 54.5% so profit of £60,000 ie a gain of £10,000 because all your pricing increase is profit
• Some of your clients aren’t happy and 10% decide to leave
• You now have 90 clients paying £1,100 each so turnover has fallen slightly to £99,000
• But your 54.5% margin means that you are still making profit of around £54,000 so you are earning £4,000 more for only 90% of the work. Possible even less work because the price sensitive clients are usually those who are most demanding and often a pain to deal with.
• In this example you can afford to lose up to 16% of your clients and still make slightly more profit
• 84 clients paying £1,100 gives turnover of £92,400 and profit of £50,400 ie £400 more than at the start but for 84% of the work
We’re both viewed as necessary evils.
I was quite shocked when, a few years ago, an old friend told me that she would rather see her dentist than her accountant. As somebody who is terrified of going to the dentist (he’s lovely really) this really made me view myself as an accountant in a different light.
I see myself as an expert who loves to help business owners. Sometimes that’s keeping them out of trouble and other times it can put an enormous smile on their faces. And my dentist probably sees himself the same way.
So I started to think about why I had chosen my dentist and what I could learn as an accountant:
• I choose to pay a little more in the hope of a better service than mere competence. I want somebody to take a little more time to reassure me should I ever need any work done.
• They have a dedicated car park (although I walk as they are opposite my office)
• The receptionist, Belinda, is probably their biggest asset. She always calls 48 hours beforehand to confirm the appointment so there’s never any confusion.
• Belinda is very reassuring with her calm, competent manner. She explains all Covid restrictions clearly as they are constantly changing
• The waiting room is calm and has free Wi-Fi so I can distract myself by checking my emails or messaging a friend while I wait.
• There are calming videos of fish and wildlife, including on the ceiling of each surgery. (I’m not sure what the accountants’ equivalent would be)
• The dentist and hygienist themselves are always friendly and ask about my kids or work; something personal to relax me.
• They take payment as I leave and book in the next appointment.
How much more enjoyable would clients find it if we spent time on creating a welcoming environment in our business? Take a few moments to think about how you interact with clients at every stage.