Minerva Accountants Bristol and Somerset
Fully digital Xero accountants taking the hassle out of your business
If you’re crazy busy all of the time, not just at peak periods, then it is probably because your prices are too low. You can either increase prices to make fewer but more profitable sales or you can raise your prices enough to increase your workforce.
The other way to know that your prices are too low is if nobody ever says “no”. If everybody you quote says yes, or if nobody bounces when they see your prices on your website, then you probably have scope to increase them.
I’ve just received an email from my web hosting company to say that they will be charging me more.
The reason is that two of my websites use software that is about to become obsolete so the hosting company will charge me an extra support fee from 5 February unless I upgrade.
This software has a two year life so I’ve already upgraded it once with the help of the hosting company (Fasthosts provide much better support for the tiny monthly fee that I pay them and they’re lovely to deal with). It’s not too difficult but I imagine that many people just ignore a simple message that their site will be unsupported. This way I have a financial incentive to make sure that I do the upgrade promptly. And, if I don’t, the hosting company get some extra income as they’d probably end up sorting out the mess anyway.
Which reminded me that, although Minerva Accountants is supposed to be a Xero only business, we do have one client using an older cloud bookkeeping software with less functionality. This means that we’re unable to offer as good a service. Of course I justified it to myself at the time but now, with the benefit of hindsight, I realise that I was wrong and should have followed my own advice! So I’m going to offer to help my client to migrate to Xero for a better service or to increase the fee to support an ageing app.
Where have you broken your own rules and regretted the lack of efficiency? Should you correct this even if it means losing the client?
How about joining one of our strategic planning days to streamline your business for 2023?
This year we’re running two (although you can join either one). Fri 27 January will be for any business and Wed 22 February will focus on accountants/bookkeepers. Find out more here.
Did you hear that a lot in your school days? Even though most of the rules seemed a bit, well, stupid? I certainly did!
A few weeks ago, I broke one of my own rules. It was a good rule and there to protect me, but I was doing somebody a favour to help them out. (You’ve probably made the same excuses yourself)
A training company was looking for a speaker at short notice and a colleague recommended me. There was a lot of backwards and forwards to see if I was a good fit which meant that time was even tighter by the time it was all agreed. And then they sent over their terms and conditions for signature which were different from my standard speaking terms in one main respect. There was no up-front payment.
As most of you aren’t professional speakers, I’d better explain that, for a speaking assignment like this, I would spend 2 days learning the material (I usually spend a similar amount of time writing my own) and rehearsing so that everything is flawless without looking over-rehearsed. I spent a day travelling and a day delivering the content and incurred related expenses. 4 days work plus travel and hotel costs.
Event organisers may charge attendees up-front, but they prefer to pay their speakers after the event (Although far too many expect speakers to work for ‘exposure’, but that’s another problem). Event organisers often cancel at short notice if they don’t get enough people signed up which can leave speakers with wasted time and prebooked travel costs. This is simply solved by charging a deposit at the time of booking.
As everything was done at short notice to help out the new client there wasn’t time to negotiate a deposit.
So, I did ALL the work and incurred all the costs before invoicing them at the earliest possible moment and guess what?
They didn’t pay on their agreed date! And they didn’t even bother to let me know why not!
Anyway, several weeks later and after wasting far too much time chasing, I finally got paid.
But I won’t be making that mistake again.
Please learn from my mistakes and get paid up front where possible. At Minerva Accountants our annual fee is all paid by direct debit before the year end. Have a look at your terms and conditions and see if they could be tighter.
And, as far as I know, you are not a charity. So why are you lending clients money by allowing them extended credit or even working for free?
Here are some tips to help you collect money faster:
You work hard so you deserve to be paid.
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:
Before
• You have 100 clients paying £1,000 each so turnover of £100,000
• You make 50% margin so profit of £50,000
After
• 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
But
• 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 fact
• 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
Last week I talked about WHY you need to increase your prices but, less talked about is HOW you go about doing it.
It’s a lot easier to talk about in theory than it is to do in practice.
“Our new prices are …”
“We do not offer discounts”
Also prepare responses to any other potential objections so that you don’t need to think on your feet quite so much.
A lot of business owners avoid increasing their prices, either because they’re worried about losing clients or because they don’t know how to go about it. Even when they know that they need to increase their prices it is too easy to procrastinate (I’m the queen of procrastination, I have all the excuses)
I’ll cover the ‘how’ in separate tips but today I want to talk about why.
We all started our business for a reason which broadly come into one of three areas:
• Profitability
• Build something valuable to sell at retirement
• Better work – life balance
All of these will benefit from having better prices allowing you to earn more money, increase the value of your business, or to earn more in limited time.
But the real benefit to our clients is that we will have time to provide a quality service. To do things properly and not cut corners. And to run a business that will still be around to help them in future years.
When we provide a quality service our clients benefit, they stay with us, and they refer other people to us. It’s a virtuous circle because everybody wins.
To create the business you want you need to charge the right prices.
Welcome to the new year. What have you got planned? Incremental business growth, a better work life balance (how long have you been promising yourself that?) or world domination?
Now is a good time to think about what you want and what that means for your business.
Here are some questions to get you underway with your plan:
1. What do you want your life to look like in 5 years time?
2. How much do you want to earn from your business?
3. How much do you need to earn from your business?
4. How many hours per week/month/year do you want to work in your business?
This will give you some idea of how much you need to earn per hour in your business. Don’t forget that you will need to cover your business costs and taxes too.
A good SWOT analysis will help you to decide how to earn the necessary profit. Look at your strengths, your weaknesses, and any opportunities and threats around you. Covid and potential lockdowns can provide both opportunities and threats to your business to make a plan to eliminate or buffer the formers and to be able to take advantage of the latter.
Take a close look at what you are actually doing. What will you sell and to whom? What problems do you solve?
Now you can start on the details of the plan:
1. Sales plan
2. Marketing plan
3. Staffing – who, when and at what level
4. Technology and other resources
5. Premises
6. Other costs
7. Taxes
If you need a hand with any of this then we’re running a Strategic Planning Day on 19 January. We’ll work through templates together to help you come up with your own plan for your best year yet. Email us to sign up.
Whilst I would encourage people to value price where possible it is often more practical to quote fixed prices.
Here are some of the things to consider when setting your prices for services:
With new clients there maybe a lot of unknowns and they may also take time to set up contracts, software, direct debits etc as well as more general familiarisation. These set up costs need to be covered too.
When I started up each of my businesses I had a dream. Not a huge, Martin Luther King type of dream that would change the world, but a smaller dream of helping business owners while having a decent work-life balance for myself.
I wrote down my vision in one sentence. Nothing complex but just to remind me.
And each time I had to make a big decision I came back to my dream to see whether this particular decision would move me closer to my dream.
But often we make a lot of smaller decisions that mean that our business drifts away from that dream and we just end up with a job that we have to do in order to pay the bills. When I work with clients on our individual or group coaching programmes I encourage then to recapture that dream but also to take actions.
Here are some of the actions that you can take:
You may prefer to do this on your own but, if you want some accountability, then come along to our monthly Flyby sessions (see below). If you would like more proactive input or specific advice from me then try our coaching programmes.