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Repricing existing clients is one of the hardest things to do when growing your firm.
Repricing Existing Clients
We have all been there. We started small, desperately trying to get more clients, and the easiest way to do that is to compete on price. But sooner or later you drown in work for small, unprofitable clients on margins so low that you often don’t even make minimum wages for yourself. You work and work and then one day you get to your breaking point. And you need to look into repricing.
In this episode, Reza Hooda, a popular coach for accountants, will give you some helpful insights into pricing and repricing. Here is what we learned but please listen in as Reza explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Get Me Out Of Here
Once you run yourself into the ground with far too many small unprofitable clients, your first thought will be to get out. You blame the industry. You blame your clients. And/or you blame yourself. But getting out won’t change anything unless you retire. By getting out you just take the lessons you haven’t learned into the next industry, most likely making the same mistakes all over again.
We will play you a clip from Ed Chan in ep 198 in this episode where Ed tells you to change the How and not the What. If you just change the What but not the How, ie. you just change industries or professions, you will just end up in the same position as before.
So you decide to change the How.
The Four P’s
To change the How, Reza Hooda teaches a helpful model of the four Ps to grow your profits and practice.
“Pricing, Positioning, People and Processes.”
Reza Hooda
We will drill deeper into this model in the next episode (ep 371), but for now just note that Positioning and Pricing is what your clients see while people and processes is the machine behind the scene that makes it happen.
So pricing is one of the big points you need to work on if you want to grow your profits and practice.
Pricing
To revamp your pricing you, first of all, need a system. A set pricing structure, ie. a systematic approach to pricing. For example: Your basic individual tax return is x amount of dollars. Bookkeeping and BAS for up to 100 transactions per month is this price. For up to 200 transactions that. And a Div 7A agreement is AUD y.
You then also need a software to easily present those prices to your potential clients. We use Quotient. Reza Hooda swears on GoProposal. Many practices in Australia use Practice Ignition.
The more niche and specialised you are, the higher the prices you can charge.
Repricing
But what about your existing clients? This is the really hard part. Repricing your existing clients. It very much depends on how you got your existing clients.
If you got them on price, you will lose them on price. In other words: If you got them because you were the cheapest, then you will lose them when you are no longer the cheapest. So those clients are really difficult to reprice.
“The clients you win on price, you will lose on price.”
Reza Hooda
But if you got an existing client for a different reason and you just happened to underprice them, then you have a much higher chance of repricing them.
Three Steps
Repricing happens in three steps.
Step 1 – Work out what you should charge.
Look at the perceived value and at your competitors. The more specialised you are, the less you have to worry about competition.
Step 2 – Work out the gap to what you currently charge.
The smaller this gap, the easier it is to reprice a client.
Step 3 – Increase prices.
Increase prices at the annual renewal. Give a reason. And even if your reason is just that you didn’t know what you were doing, that is still an ok reason.
So this is a rough summary of some of the points we discuss in this episode. Please listen in since we really don’t do the material justice that Reza discusses in this episode.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 14 December 2022
Tax Talks spoke to Reza Hooda - Mentor and Coach at Reza Hooda - for more details.
