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How to successfully increase your fees (without losing clients) with Loren Fogelman
In this interview, Loren Fogelman shares a 5-step process for increasing your fees and having courage when pricing your clients.
Welcome to our Expert Insights series. In this interview, we caught up with Loren Fogelman from Business Success Solution to discuss how accounting firms can increase their fees without losing clients.
Loren shared some actionable insights around value pricing, confidence vs. courage when pricing, and a 5-step process for increasing your fees.
You can watch the interview in full or read the transcript of the conversation below.
Do you mind just giving us a quick introduction, I'd like to hear more about you and your background and how you ended up working with accounting professionals?
I am a sports psychologist turned business coach, and over the years I found that the people I work best with are accounting professionals, helping them with their pricing.
But one of the things that I've seen along the journey for myself as well as the accounting professionals that I connect with is that our education gave us the tools to be able to do what we do for our clients very, very well. It gave us the skill set, it gave us the insights. However, I also noticed that education prepares us to be employees working for somebody else as opposed to employers or business owners, because of that I found that there were three gaps that need to be filled.
One is networking, especially if you're more of an introvert than an extrovert like I am. Number two is how to be able to enrol new clients when you might not like the sales part. And the third part is how to price your services when you don't want to be selling your time. And I've been taking a deep dive into that since I've got into the entrepreneur and business space and along the way, the reason that it's so important is because according to my research, up to 57% of accounting professionals, if not more undercharge for their services and I am on a mission to correct that.
So sticking with the theme of pricing, I know that value is a huge part of pricing and it's often the part that accounting firms struggle with the most. How would you describe the relationship between value and price?
Well, value is actually very subjective. A lot of times when accounting professionals are pricing their services, which is very, very uncomfortable, it's feels like a guessing game. They are doing it from what they value and from their perspective. And the majority of times, their value has always been connected to time because they either got a paycheck or a salary in some way when they first started out working for somebody else. And they just assume that that is how you're meant to be pricing your services, it's the best practice.
However, I want to let you know, you want to step into your client's shoes and look at it from their perspective. It's similar to when you're driving a car on the freeway, you might be passing a lot of cars, or you might have some cars passing you, but they're not all the same. There are some very, very basic small cars that have just the elementary features, they might even still have crank roll-up windows instead of electric windows. And those are the people that just care about getting from their house to their meeting.
And then the majority of cars are going to be mid-sized cars, maybe Volvos will be what you see. And that shows that people want certain features, they want a certain experience, but they also care about safety for their family. And then you're going to have the luxury cars that might be a Tesla, which has a certain status as soon as it drives by you but it also is going to say something about the driver and they might care about the environment as well. So realize that similar to the different cars that are on the highway when you're driving, your clients have different needs and preferences also, and you want to be able to offer options, which are being able to like package your services together, bundling things together to separate your fees on time in order for them to pick what's a best fit for them instead of them just having one option. So I really look at offering packages, which we'll go into a little bit more today probably as the way to start separating your fees from time.
Typically, how do you help accounting firms to increase their prices? What does that look like as a process?
I have a five-step formula called the ultimate pricing blueprint. Basically, if you just follow these five things, then you're going to start to actually earn more, see your bank account grow and enrol high value clients. I'm going to go through all five of them real quickly.
The very first one is knowing who your high value client is because it's not everybody that reaches out to you. Some people are a better fit for what you do, whether personality wise or whether outcomes of what it is that they're looking for when they first reach out to hire you. So realize that you don't need to say yes to everybody. You want to be selective and really choose clients who respect and value what you bring to the table.
The second thing is being able to communicate your value. I found that that is probably one of the most difficult things that happens when you're at network meetings, when you're marketing, when you're putting content on your website, how do you communicate your value so you stand out and you're not competing, you're now being seen as that go-to expert, because what you offer so much connects with what that client has that they want to solve, what their challenge is. So communicate your value is number two.
And then number three is package your services. That's where you bundle several of services together, you have that small or basic package, you have that middle package for most of your clients and then you have the premium package for those VIP clients that always want the luxury experience. So packaging your services allows you to start separating fees and time.
And then number four, which is something we're going to touch on today also is value pricing. How do you actually recognize the value not from your perspective, which is usually based upon costs as well as your time, but from the client's perspective and recognizing what they have to gain from working with you and being able to charge according to that? Because when you do that, you can actually charge two to three times more than how you're probably currently pricing your services.
And then number five is consultation mastery. This is for being able to enrol those clients, having them recognize the value of what you have to offer, not ever, ever having to sell someone again and being able to invite them into working with you if you feel that they are fit for your services. So those are the five steps of the ultimate pricing blueprint. It's ideal client, communicating your value, packaging and services, value pricing, and consultation mastery.
One of the biggest challenges I hear from firms when it comes to this exact topic of pricing is confidence. So what would you say to small firms to help them improve their confidence and get them into the right mindset when having these conversations with prospective clients?
Well, actually what I would say is that pricing, whether you're a solo practitioner or you're part of a legacy enterprise company is the most difficult thing that anybody has to do. And it doesn't take confidence, it takes courage and you want to have the courage to do something even though it's uncomfortable and as you're doing it, you gain the confidence and you're getting the insights as to how to continue doing that better and better. It's similar to really riding a bicycle for the first time. You start out with training wheels and as you get better and you learn to balance then maybe you take one training wheel off and you take them both off and then you learn how to really balance and you get better and better navigating on a bicycle with practice. And this is the same thing, but actually today, I'm going to unpack a formula that you can use if this is something that interests you and you don't have the confidence yet to get started.
You've obviously got quite a lot of experience working with a variety of firms, what would you say is one of the biggest mistakes that even seasoned firms typically make?
Well, I believe that charging by the hour is the biggest mistake. It makes you a slave to your business as far as your experience goes, because you have to sacrifice some of your personal time in order to increase your income. Your clients, when you're charging by the hour see you as a commodity as opposed to an investment, therefore, they're always going to be comparing your rates to somebody else's rates. And the main thing is that when you charge that way, it undervalues your expertise. It totally dismisses your insights or the years of experience, the results that you get because it focuses on the functions, the tasks, the reports that you're doing, as opposed to all those years of wisdoms that you've gained a long time.
So if hourly pricing is the mistake you already mentioned earlier that packaging pricing is the alternative, so how does that work? How do firms build packages of service?
Well, basically what you want to do is really look at all the things that you do for your clients and come up with a list of services. And then what you want to do is really focused on when someone's coming to you, what is the outcome that they want to achieve and which services will help them to achieve that result? So it's very results focused. Basically, it's what I would say is tiers. You're going to have a silver, a gold and a diamond package. And with that one builds upon the other. Everything for the silver is for the price sensitive client, or maybe for the client that has a very small business, they might be starting up, they just need the basics, but they see the value of working with you. And that is what the silver is for. The majority of your clients will actually fit into the gold packages
That's what most of your clients need and maybe there's a little bit more in it as well. So you want to really focus on most of your clients going into that middle or gold package. And then the premium package is the diamond. These are for the clients that want exceptions, they might want more access to you, maybe they want a faster response time, or there are some other things that they're looking for that majority of your clients don't want and they are willing to pay for those essential is for them as well as having a quick response time for you.
So you want to really have that silver, gold and diamond packages, because similar to the cars on the freeway, not everybody is going to be driving the same car, not all your clients are going to be wanting the same needs and if you just offer them one thing they either think about, do they work with you or do they move on to some other option? Whereas when you give them packages, then they started thinking about how do they want to work with you? And even though it's a very subtle difference, it changes the whole experience for them and they just decide which package works best.
Where would you recommend that they start when it comes to transitioning away from the normal, hourly billing model towards a kind of a packaged pricing or a value pricing model?
Well, there's actually nine step process and I actually have a free handout that goes with this, If anybody wanted to grab it here, It shows you how to start packaging your services and how to do the value pricing which I'll go into deeper right now. But it just gives you all of that so you can do it on your own time. Basically, you want to have what I call good, better, and best pricing as you're moving away from charging either a cost and fixed fees or charging an hourly rate. With the good, better, and best, I see it as having the training wheels as you first start to move to value pricing, instead of it's not really fully value pricing, but it gives you a start moving that direction when you don't have the confidence yet
This is what you want to do. You're going to have, like I said, your good, better, and best. Somebody who's going to come to you and they're going to want you to do some work for them. What you're going to do is not calculate it like you normally would, maybe you're calculating your time as well as your course by an hourly rate. You come up with that rate and then what you're going to do is go ahead and multiply it by 1.5. That's your new good rate. You're going to go ahead now and start to offer this new good rate to the next three clients and enroll three clients into this good rate. This starts to build that confidence that people will pay more than your hourly rates, it's higher than what you've been earning before for the same work, no additional work needed and you're starting to realize that people aren't as price sensitive as you thought they were.
Okay, you enrolled three clients into this good rate. Now you're going to have more people coming to you and they're going to start to be higher value clients. What you're going to do now is once again, go ahead and calculate what you would have charged and we're going to go to your better rate. We're going to now multiply it by two. And once again, you're going to be offering people now the better rate category where you're now earning twice what you would have been earning before. And once again, you're starting to get some insights as to how to have a better value conversation with clients wanting to work with you, you're once again continuing to build up that confidence that you can do that, you understand what questions they might have and you're now prepared for them so you have those soundbites when some of those questions come up, they don't tell you off guard as much. Okay, you now have three people now into your better rates and now this is the part that takes courage, not just confidence.
The courage is we're now going to move up to your best rate. Once again, people come into you, you do your normal calculation, you now multiply it by 3X. Now you're earning three times more same work, but you're able to confidently communicate the value, you're able to have them see the benefits of working with you, maybe the outcomes because they no longer have to tolerate this particular challenge any longer you're going to be taking that and giving them peace of mind.
And you are now earning three times more for the same work that you were previously doing before for your hourly rate or your fixed rate. As a result of that, you enroll your three clients, you continue to get insight, you're attracting high value clients to you and over time you might find that your best rate is now going to become your good rate and you go through this process all over again until you get to where your fees are, where you really want them to be. So that's how you start to move from your current pricing into value pricing. And once again, the resource to continue to put those packages together and follow this model is here.
Do you have any action steps for people to follow in terms of moving forward with this?
Well, we've been talking about raising your rates and what I want to really focus on is that there's two things you need to consider. One is your new clients and the majority of my clients actually start out with the new clients because it's easier, they haven't had any experience with them and it's an easy way, you don't get as much pushback. But you also then want to eventually think about your current clients, how do you go ahead and charge these new rates and get your current clients, especially those legacy clients who have been working with you for quite some time up to new rates? And there is actually a process that you want to go through with that. You want to first be able to communicate to your current clients that you are going to be making some changes in your business and you want to be able to let them know about that.
So somehow communicate to them whether it is by email, or regular mail, but however you would normally communicate to them, send them some type of message or letter that you're making some changes in your business model and that it will benefit them and maybe put some of the benefits in the letter about it being easier for them as far as the pricing goes, that you're looking at add on higher customer service and raise the ball with that, but somehow communicate your value.
And then what you want to do afterwards, after you send out that letter is you want to be able to schedule a conversation with your current clients. This is where you now having a conversation with them, whether it's in person, in a virtual meeting, by phone, however you would normally meet with them, letting them know about some of the changes that you're making in your practice, finding out what are some of the things that they want to focus on and achieve for this year and showing them how you can do that by offering them packages and helping them enroll into a new package moving forward.
So you have reached out to them and communicated by some type of letter that you're going to change your practice, the second step is scheduling that conversation and now it's having a value conversation sharing what you're doing. So this is when you're actually meeting with them and during the meeting what you want to focus on like I said, is their needs. What is it that they want to achieve? What are some of the KPIs, the key performance indicators, that they are going to be measuring to see if they've achieved that level of success or not? Why this matters to them? Look at maybe adding in some things that they might be overlooking.
They don't even know that they need these things to achieve that result. And then once again, offer the three options of moving forward and working together, which would be your packages. As you're doing that, you're going to discuss the different package options and this is where you want to be able to come from the place of being a trusted advisor as you're sharing the silver, gold and diamond package, is you want to help them make a decision that's in their best interest instead of one that's in your best interest.
And then the other thing to realize is that people don't like change, this is something new, some people might have questions about it. You want to get ready for some objections so they don't throw you off guard. So think about what is some of the objections that you expect to hear, prepare some soundbites for them, maybe even practice those soundbites so that when they do come up, you know how to answer them and you're not getting flustered or caught off guard or possibly even discounting or shutting down the conversation.
And that is pretty much the steps to bring your old clients up to your new rates is by send them some communication, some type of letter email, or by regular mail, scheduling that conversation, having what I call value conversation, where you're focusing on what their needs are and how you can help them achieve those results, discussing the different options which would be your packages, coming from the place of being a trusted advisor where you're focusing on what's in their best interest instead of yours, getting ready for the objections and being able to handle them confidently. So those are the steps to be able to really get your old clients, including the legacy ones up to your new rates.
So what would you recommend for anybody that's listening or watching to go away and find out more about how they can really increase their income whilst potentially working the same or less?
If you're interested in going ahead and separating your fees from time, being able to start to bundle your services into packages and that sounds like something of interest to you, I have the exact steps on a resource that you can just go ahead and plug and play. So if you want to go ahead and package and price your services in order to be able to double your income working half the time that means making more while working less, then go to businesssuccesssolution.com/package, and you'll be able to get the resource that helps you start to bundle your services together and value price your services as well.